Transcript Number of Indian households, by disposable income, 2004 and 2009

Walking (Stumbling?)
On Two Legs?
Raphael Kaplinsky
Development Policy and Practice,
The Open University
IEA Conference, Pretoria, July 20120
Summary
• Framing conditions for Industrialisation in
SSA
• Forces of disruption:
– Innovation
– The Commodities Boom
• Policy Implications
• The Political Economy of Policy Design and
Implementation
Framing Condition 1:
Changing economic centre of
gravity
?
V
U
“Is this a V recovery or a W?
I think it’s the latter…
(CEO HSBC Bank, Financial Times, 5th Oct 09)
`
Perhaps its an
L
OR, MAYBE
Back to Centre Stage
100
% Share of Global GDP
90
80
70
60
50
40
32
28
24
16
30
10
20
10
25
23
25
0
1
1000
1500
China
7
33
1820
India
3
4
1969
17
2008
24
2030
Framing Condition 2:
Distributional outcomes of rapid
growth in SSA
Global growth and global poverty
World
China
India
SSA
GDP Growth p.a
(%)
199020002000
2008
2.9
3.1
9.9
10.4
5.5
7
2.2
4.9
Living below $1.25
pd (MDG1) (m)
198820071990
2008
1,668
1,329
724
208
414
456
224
355
Framing Condition 3:
Commodity super-cycle and
changing terms of trade
United Nations Conference on Trade and Development (UNCTAD) monthly
average price index, 2000=100 (1960 to October 2011)
500
450
400
350
300
250
200
150
100
50
0
1960
1965
1970
All
1975
Food
1980
1985
Agr Raw Material
1990
1995
2000
Minerals & Metals
2005
Oil
2010
The commodities-manufactures terms of trade
(1949-2008)
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
1949
1954
1959
1964
1969
1974
1979
1984
1989
1994
1999
2004
Disruption in the
innovation trajectory
Inducements to Innovation
• Demand
• Factor prices and character of
infrastructure
• Path dependency and firm trajectories
• Regulatory environment
Forces of disruption to the
innovation trajectory
1. The character of low income markets
Households in '000
Number of Chinese households, by disposable
income, 2004 and 2009
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
<1,000
1,000 2,500
2,500 5,000
5,000 10,000
10,000 - >55,000
55,000
Annual Household Income (US $ Constant)
2004
2009
Compiled from http://www.portal.euromonitor.com
Households ('000)
Number of Indian households, by disposable
income, 2004 and 2009
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
<1,000
1,000 2,500
2,500 5,000
5,000 10,000
10,000 - >55,000
55,000
Annual Household Income (US $ Constant)
2004
2009
Compiled from http://www.portal.euromonitor.com
Forces of disruption to the
innovation trajectory
1. The character of low income markets
2. The global diffusion of innovative capabilities
The global diffusion of innovative
capabilities
• Learning in global value chains
• Global shares of R&D
–(2%-1970, <10%-1990, 24%-2007)
• Education and training
• Growth of large emerging country firms
Forces of disruption to the
innovation trajectory
1. The character of low income markets
2. The global spread of innovative capabilities
3. Radical new technologies allow for distributed
production
– Renewable energy, nanotechnology
Forces of disruption to the
innovation trajectory
1. The character of low income markets
2. The global spread of innovative capabilities
3. Radical new technologies allow for distributed
production
– Renewable energy, nanotechnology
4. New innovators
– Dynamic SMEs in rural areas
– PPP
A poverty-reducing growth path?
Capital
and scale
intensive
Labour
intensive,
small
scale
High wages, low cost of
capital
Large market
vibrant entrepreneurship
Low wages, high cost of
capital,
Small market
Weak entrepreneurship
Inefficient
Efficient
A poverty-reducing growth path?
Capital
and scale
intensive
High wages, low cost of
capital
Large market
vibrant entrepreneurship
Low wages, high cost of
capital,
Labour
intensive,
small
scale
Low wages, high cost of
capital,
Small market
Weak entrepreneurship
Inefficient
Large market
vibrant entrepreneurship
Efficient
A perspective on linkages Hirschman
• Financial linkages
• Consumption linkages
• Production linkages
–Forward
–Backward
–Horizontal
Production linkages in the
commodities sector
Value added
Inside core
Competences
- win-lose
Outside
Mining
Company
core
competences
- win-win
Time
Policy Impact: Speeding and Deepening Linkages
in commodities sector
Value added
Inside core
Competences
- win-lose
Deepening
Speeding up
Shallowing
Outside
Mining
Company
core
competences
- win-win
Slowing down
Time
Determinants of linkages
• Intrinsic
• Contextual
–Ownership
–Infrastructure
–Capabilities – skills and the National
System of Innovation
–Policy
Turning to Policy
The substance of effective policy
design and implementation
•
•
•
•
•
•
•
•
Strategy
Policies
Sanctions backing policy
Policies which don’t contradict each other
Policy capabilities
Policy will
Policy legitimacy
Alignment of key stakeholders
The political economy of policy
design and implementation
• Pro-poor “inclusive” innovation
–TNCs – Fortune at the Bottom of the
Pyramid?
–Large indigenous firms
–“Greedy” indigenous SMEs
• Making the Most of commodities
–May have high entry barriers
–But lost of opportunities for SMEs
So…
• Walking?
• Stumbling?
• Falling?
• Jogging?
• Sprinting?