The Covid-19 crisis has led to major disruptions in Global Value Chains. In this episode, Otaviano Canuto answers questions about the impact on the design of post-covid industrial policies and underlines the components that should be considered by policymakers to ensure a quick and sound economic recovery along with a regional integration that plays a role in this new industrial organization scheme.
The growth and productivity performance of emerging market and developing economies since the 2008 global financial crisis failed to repeat the achievements of the previous decade. Besides frustrating expectations that they might become the new growth pole in the global economy, their convergence to per capita incomes of advanced economies has suffered a setback. Nonetheless, the path of policies and reforms to be pursued in that direction remains the same. This is something accentuated by the coronavirus pandemic crisis.
The “middle-income trap” has become a broad designation trying to capture the many cases of developing countries that succeeded in evolving from low- to middle-levels of per capita income, but then appeared to stall, losing momentum along the route toward the higher income levels of advanced economies. We need to approach middle-income countries as being in a complex transition phase between accumulation and innovation-based economies. Individual middle-income country experiences of falling into a “trap” may be approached as cases of lack of or failing performance in footing the bill in terms of appropriate policies and institutions.
In the 1990s and 2000s, the world manufacturing production to a substantial extent moved from advanced countries to some developing countries. This was the result of the combination of an increase of the labor supply in the global market economy, trade opening, and technological transformations that allowed for fragmentation of production processes. As a result, foreign trade expanded, and world poverty diminished. Such trade globalization process stabilized in the 2010s and tends to be partially reversed by the new wave of technological changes.
This book approaches the opportunities and challenges faced by developing countries to raise their per capita income levels during the recent phase of globalization. After dealing with the post-global financial crisis economic landscape in advanced economies, it deals with the windows of opportunity opened by trade and financial globalization for developing countries to climb the income ladder. Domestic preconditions for a developing country to benefit from those windows are then pointed out. China, Brazil, and Sub-Saharan Africa are presented as case studies. The book ends with an assessment of the impact of the coronavirus crisis on the global economy.
South Korea has climbed the income per capita ladder up to high levels, while Brazil may be considered a case of a “middle-income trap”. Such divergence of economic growth performances can be related to their distinctive approaches to global value chains and trade globalization, as well as to domestic accumulation of technological and organizational capabilities.
The growth and productivity performance of emerging market and developing economies (EMDEs) in the last 10 years failed to repeat the achievements of the previous decade. Besides frustrating expectations that they might become the new growth pole in the global economy, their convergence to per capita incomes of advanced economies has suffered a setback. Nonetheless, the path of policies and reforms to be pursued in that direction remains the same.
Otaviano Canuto – A importância da articulação continental para a promoção do desenvolvimento Palestra inaugural - 1º Encontro de Economistas-Chefe dos Bancos de Desenvolvimento da América Latina BDMG, Belo Horizonte, MG, Brasil - 20 de setembro de 2019
This note approaches the relationship between natural wealth and economic growth, using the case of Sub-Sahara African economies as an illustration. Delving into recent World Bank reports, it highlights how a sustained positive correlation between natural capital and GDP growth happens through the transformation of the former into other forms of assets: produced capital, human capital and other intangible assets. Governance features and the quality of macroeconomic policies are of the essence for such a benign trajectory to take place.
The diffusion of knowledge and technology worldwide in recent decades has brought important changes to the global innovation landscape. But those changes could be much more profound if countries created more supportive investment environments.
Multilateral Development Banks (MDBs) have two financing windows, with different terms, dedicated to low- and middle-income countries. Countries are presumed to cross those windows as their income per capita rises, with middle-income countries (MICs) eventually “graduating” to a non-client status once they reach some criteria. However, due to what may be called “middle-income traps”, such progression toward graduation has been limited to a small number of countries. In this paper, we suggest areas where the support by MDBs would yield highest results toward “graduation” of MICs. Item 1 reviews the criteria that have been used to justify graduation, whereas item 2 approaches two ways by which the possibility of “middle-income traps” impeding such graduation has been discussed in the literature. Finally, item 3 proposes an interface between MDBs’ support to MICs and the policy agenda to overcome middle-income traps.
Capital Finance International (Spring, 2019) China’s economic growth has been sliding since 2011, while its economic structure has gradually rebalanced toward lower dependence on investments and current-account surpluses. Steadiness…
This note outlines two different ways in which the concept has been approached since its first use 12 years ago by Gill and Kharas (2007). One has been empirical, where search is made to identify – or deny - breaks or turning points in time-series data exhibiting “growth traps” for middle-income economies. The other one, closer to the way it was originally suggested, refers to the need of policy and institutional change for a country to keep climbing the income ladder after a transition from low levels. Traps are seen as shortcomings resulting from the absence of any of those policy and institutional changes considered key to gearing up the transition from middle- to upper-income levels.
China’s economic growth has been in a downslide trend since 2011, while its economic structure has gradually rebalanced toward lower dependence on investments and current-account surpluses. Steadiness in that trajectory has been accompanied by rising levels of domestic private debt, as well as slow progress in rebalancing private and public sector roles. As the ongoing trade war with the US continues to unfold, it remains unclear at which growth pace China’s rebalancing will tend to settle.
Attempts to submit the World Bank to bilateral agendas or extreme views can only harm and paralyze the hummingbird Last week Jim Yong Kim, president of the World Bank,…