The End of Flying in Formation
Simply following the well-trodden path of mid-century industrialisers no longer guarantees development. Wither the copycats, long live the reign of the gutsy geese!
Editor’s Note: This is the first article written by one of our GPI Fellows. When they aren’t hard at work at the coal face of sustainable development, we also press gang them into writing articles. We have the wonderful Annemarie Vogelberg to thank for today’s article.
It’s in our nature. We learn from others who’ve gone the way before us. Whether it’s a baby learning to walk, a 17-year-old novice driver sweating at a roundabout, or an ambitious university graduate learning the ropes of how to build a business from the lived experience of their manager.
So goes human nature and so goes economic development. The textbook tells us that as countries move up the industrial ladder from agriculture to manufacturing, certain economic activities would be outsourced to latecomers who strive to replicate the wins of industrialised nations. This phenomenon was coined the “flying geese” model by Japanese economist Akamatsu in the 1930s to describe rapid industrialisation in East Asia, with Japan projected to lead the way as the head goose.
Although countries continue to learn from one another, the road ahead to success is not so clearly predetermined as the flying geese model makes it out to be. The 21st century global political economy increasingly sidelines this “follow-the-leader” master plan. Today’s era rewards gutsy geese, not copycats.
Our first instinct may be to lament that the ladder has been kicked away, whether purposefully or inadvertently. Don’t developing countries already have it hard enough faced with the complexities of international trade rules and volatile global markets?
But not all is lost. Quite the contrary. There is some unrealised potential for developing countries to chart their own course. Something that has historically been denied to most. Here’s what the playing field looks like today and how developing countries can still emerge as winners:
One of the main reasons why the original flying geese pattern struggles to hold today is the organisation of production in global value chains (GVCs). Developing countries must now join existing GVCs, strategically specialise and trade in niche tasks rather than follow the traditional route of building vertically integrated industries and trading finished goods. Here the challenge is to upgrade away from low-value and low-skill segments that retain no local value capture. Making FDI sticky (deeply rooted in a location) rather than footloose (highly mobile) is key. Unlike lead geese that protect their followers from the storm, lead firms control and concentrate high-value segments in established hubs. They create barriers that are difficult for new entrants to overcome, such as advanced infrastructure, intellectual property rights, and skilled labour requirements.
With digitisation and technology marching ever onward, doors are opening to digital and service-based industries. There is potential beyond the frequently cited examples such as Kenya’s M-PESA that promise strategic leapfrogging. Technological progress has gone as far as to stimulate value addition in sectors like agriculture, which traditional development theory would advise to exit asap. Enter industrialisation of freshness: a whole new industry that is reviving fruit exports in South Africa and elsewhere. Its success depends on fruit producers enhancing fruit quality and extending product longevity through research and technological advancements, thereby driving structural transformation through higher value crops. Similar examples include Cassvita, a Cameroonian company that uses technology to increase the shelf life of cassava and Kenyan Synnefa that installs smart greenhouses to improve agricultural productivity. Compressed development is the new norm as latecomers undergo transformation in a much shorter time, skipping or simultaneously navigating development “stages” that used to be much clearer.
Even if countries wanted to follow the lead geese, this is no longer always feasible. Latecomers are fighting for the remaining market scraps and are facing premature de-industrialisation, especially in sight of China’s global manufacturing dominance. This dynamic gives lead firms ample reason to remain footloose, continually seeking cheaper production locations without fostering long-term development in host countries.
But the baby geese should not necessarily be thrown out with the techno optimism bathwater. There are still valuable lessons to learn from the geese ahead. Here are three elements of the old-world order with enduring relevance:
Manufacturing will remain key for job creation and for harvesting the low hanging fruits of catch-up growth from industrialised nations. This is something that the service economy, built on commodification and automation, cannot provide.
State-led direction is more important than ever, recognised by the revival of industrial policies worldwide. Development nowadays requires a major balancing act between promoting employment creation, export earnings, structural transformation into knowledge intensive activities, favourable gender, class and geographic distributions, and a green transition. Developing countries are likely to see a two-speed growth track emerge as governments blend traditional lead geese imitation with new, innovative trajectories.
Regional cooperation and trade for industrial upgrading are just as, if not more, important than before to reduce dependency on lead firms and an unstable geopolitical climate. By overcoming fragmented markets and aligning with local development priorities, this approach fosters regional demand for goods that are not yet competitive globally, such as in manufacturing, while avoiding a race to the bottom through coordinated trade policies.
Undeniably, contemporary latecomers face a completely different set of circumstances to those of rich industrialised nations. It certainly requires innovate thinking to navigate this new ground successfully. But as always, defeat is a choice. By identifying new sectors with lower entry barriers, the gusty geese of today may be the golden goose of tomorrow.