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The Developing Country Industrialization series
All the posts in one handy list.
“The consequences for human welfare involved in questions like these are simply staggering: once one starts to think about them, it is hard to think about anything else.” — Robert Lucas
On a trip to Turkey in 2018, I read How Asia Works, by Joe Studwell. Despite the fact that it didn’t get everything right, it’s probably the best nonfiction book I’ve ever read. For many years I had had the vague idea that countries that made the transition from poor to rich did more than just liberalizing their economies and opening up their markets; they also seemed to promote exports and manufacturing. But I had read relatively little about the particulars. Studwell’s book opened my mind to a whole new theory of how successful countries develop. I was in turn directed to other books in the same vein, such as The Park Chung Hee Era, MITI and the Japanese Miracle, and the works of Ha-Joon Chang. And I started reading more papers about the idea of developing-country industrial policy as well.
Then in 2019, the right-wing law professor Amy Wax haughtily dismissed the idea that there was technological innovation or science in Malaysia — a target she apparently picked completely at random. Annoyed at this careless attack, I wrote a Bloomberg post about how Malaysia’s embrace of the electronics industry had propelled it nearly to the ranks of the developed nations.
Then sometime in 2021, while putting away my laundry, I noticed that the tags many of my clothes, which just a few years earlier tended to say “Made in China”, now read “Made in Bangladesh”. A quick Google search taught me about Bangladesh’s newfound dominance of the garment industry, as well as its smooth, rapid economic growth. I wrote a post about it, arguing that Bangladesh was successfully pursuing a very traditional path of industrialization.
Two weeks later, I wrote a somewhat tongue-in-cheek Twitter thread, depicting various developing countries arguing about their development strategies (I was a bit unfair to India, as I had just been reading about their late-2010s growth slowdown). That thread, which drew mostly on the ideas of How Asia Works, gave me the idea to turn my Bangladesh post into a whole series of posts, in which I would analyze a bunch of developing countries through the lens of the ideas I had read in Studwell and Chang’s books.
A year and a half later, the series is complete. Here are all the posts, in alphabetical order.
The post that started it all. I mainly talk about Bangladesh’s single-minded focus on the garment industry, and how that success will end up being limited if it can’t diversify.
Dominican Republic (vs. Haiti)
The economic divergence between the two neighboring countries of the Dominican Republic and Haiti is among the most astonishing in the world. Haiti remains trapped in dire poverty, while the Dominican Republic is industrializing rapidly and has reached upper middle income status. In this post I discuss possible reasons for the divergence, rejecting some of the most common explanations, and arguing that the main factor is just Dominican success in focusing on industrial development.
The old Eastern Bloc
This post may or may not belong in the list, as it’s really just an overview of how the economies of the former Warsaw Pact and Soviet Union are doing, growth-wise. But the most important lesson is that all of the Eastern Bloc countries that managed to get into the EU got rich (or close to it), and all of them did it via industrialization rather than resource extraction. That’s an important lesson for developing countries everywhere.
Ghana currently isn’t industrialized; it’s a natural resource exporter. But with better institutions and political stability than other countries in West Africa, it stands a chance at shifting to a development model based on industrialization. And its leaders are trying to make the switch, except when their efforts get derailed by the occasional debt crisis.
The biggest and most important developing country in the world, India saw a lot of rapid growth from various reforms it made in the 1980s and 1990s. But that growth is petering out, and India’s future development depends on whether it can successfully boost manufacturing. In recent years the country has successfully built a lot of infrastructure, but still lags on education. Its industrial policies haven’t been incredibly effective thus far, but they represent a base to build on.
Indonesia is a very interesting case, because it basically de-industrialized — it switched from a manufacturing-based development model to a resource-based one — without suffering a major growth slowdown. But if it wants to do better than middle income, Indonesia needs to switch back to manufacturing again — which it’s currently trying to do.
Jamaica is another fairly well-governed, stable country trying to switch away from a resource-based development model; it’s trying to use special economic zones to become a logistics hub for Latin America and the Caribbean.
Mexico is an interesting case, because it seems to poke holes in the Chang-Studwell theory. Despite good success in manufacturing, exporting, and moving up the value chain, Mexico has very slow growth and can’t seem to progress past middle income. So this is a big challenge for the framework I’ve been using to look at these countries.
Pakistan is one of the world’s most spectacular development failures — mired in poverty, lurching desperately from international loan to international loan in order to preserve a large and growing population living on the edge. In this post, I argue that chronic political instability is preventing the country from investing, which is why it’s being overtaken by other South Asian nations.
The Philippines’ solid but unspectacular growth has sort of flown under the radar in recent years. But its development story looks pretty standard; it’s an electronics exporter, part of the developing Southeast Asian economic supercluster. Hopefully its new President can keep that momentum going.
Poland and Malaysia
Poland and Malaysia are two of the most spectacular development successes since 1990, eclipsed only by South Korea and Taiwan. Both are manufacturing superstars that have climbed steadily up the value chain, and are now on the cusp of developed-country status. And both have achieved this success in part by wooing copious amounts of foreign direct investment — an idea that some proponents of industrial policy look askance at, but which doesn’t yet seem to have hurt Poland or Malaysia. Now the only question is whether they can make the final leap to the ranks of the rich countries.
Turkey was an impressive industrialization success story, until its President decided to embrace the wacky idea that lower interest rates reduce inflation. They do not. As a result, the country is now bogged down in a long-running economic crisis. In order to escape and get growth back on track, it needs macroeconomic stability.
I wrote two posts about Ukraine, which is important for obvious reasons. The first focuses on the country’s economic woes leading up to 2022, while the second deals with the question of how Ukraine can prosper once the war is over. Unsurprisingly, a big part of the reason for Ukraine’s dysfunction is that it ran afoul of would-be conqueror Vladimir Putin; a big part of its success after the war will depend on joining (or otherwise integrating with) the European Union and following in the footsteps of Poland.
Vietnam is the most picture-perfect, archetypical developing country in the world today, treading the classic path of high investment, focusing on manufacturing exports, and moving up the value chain. But it’s reaching an income level where in order to maintain growth, it’s going to build better infrastructure, improve higher education, and develop high-quality companies.
Plans for the next series
Two countries I probably should have included on this list were Ethiopia and Thailand, but both tell fairly sad stories. Ethiopia was on a promising upward path similar to Bangladesh, but got derailed pretty quickly by a massive civil war. Thailand reached middle-income status before seemingly endless political unrest trapped it there. I’ll probably write about these countries in the future, but their stories are highly dependent on politics rather than policy. Also, I didn’t write a post about China, because I’ve written so much about it elsewhere.
Anyway, I’m definitely not done writing about developing countries. I plan to follow up on lots of these countries, looking at them through a broader lens and going deeper on some of their specific policies and challenges.
I also plan to do another developing-country series, looking at countries that are primarily dependent on natural resource exports, and analyzing them through the lens of the Resource Curse. And I’m going to do a series of posts on U.S. states, and how they’ve managed (or failed) to boost growth.