@danielyu I really enjoyed your article. I strongly agree with your premise of the need for wages as one of the primary goals of development. If we want people to live better, happier lives, we need to provide them with opportunities for stable employment. Additionally, I think it is probably worthwhile for people to try to start a manufacturing export business in LMICs, though I’m skeptical that it will actually work. My main considerations are the need for local government industrial policy and that it might be more strategic to work with existing firms rather than starting new ones.
It seems to me that it would be very unlikely for an outsider to succeed at setting up the industrial infrastructure required for even light manufacturing like textiles to really be productive. Do you expect someone to go into a country and invest the required capital in roads, ports, energy generation, and other industrial infrastructure required to successfully export even the simplest of manufactured goods? It seems to me like working with local governments will be critical to the success of any export manufacturing venture. I think this is mostly born out in the East Asian examples you cite, where governments played a key role in creating incentives and subsidising the learning by doing process as firms are able to eventually become globally competitive. I’m unsure that any individual, or especially a venture capital firm, will burn through the time and money needed to increase the organizational capabilities necessary to be globally competitive in manufacturing, which is especially capital-intensive.
Here, I find people like Mushtaq Khan and Stefan Dercon illustrative in what they describe as the best ways to increase the likelihood of export manufacturing firms succeeding. I’ll quote Dercon
“This is not a question of just working with the private sector. Many of the crucial incumbent firms in these settings are too closely connected to the patronage system to be helpful. Alternatively, just focusing on very small firms is no doubt good for the people involved, but it is hardly going to change the elite bargain. A better approach would be to find ways of working with the kinds of domestic private sector firms that could be influential and would flourish if the economy were to shift towards self-sustaining growth. The garment industry in Bangladesh and light manufacturing in Indonesia and Vietnam have thrived on connections with government since the beginning. However, they took up the challenge to compete globally rather than persistently live off protectionism and procurement in return for clientelist payments.”
It seems to me like it would be better for outsiders with expertise in manufacturing or global exports to offer consulting services to already existing firms in LMIC with pre-established connections to local governments and help them grow and gain access to overseas markets. Here I’m also drawing from writing by people like Karthik Tadepalli, writing here https://asteriskmag.com/issues/07/want-growth-kill-small-businesses
I’m very curious what your thoughts are on this and how you see firm dynamics and industrial policy as being key to economic growth in LMIC. Thanks again!
The core reason I lean toward founding new firms is that incumbents in low-productivity equilibria are usually too comfortable within them. They have built local market positions, political relationships, and cost structures around serving captive domestic demand or rent-seeking arrangements with government. Asking those firms to reorient toward globally competitive export production is theoretically possible, but without proof points for why this would be a superior position it is unlikely to be seriously considered. The ambition required to build a globally competitive business is fundamentally a different kind of operator.
On infrastructure: I agree that an outsider parachuting into a country with no enabling environment and trying to build roads, ports, and energy generation is not a viable approach. That is not the model I suggest. The right path is to look strategically at where the ingredients for commercially viable export already exist or are close enough to pull in, and focus pioneering there.
This connects to Dercon’s model of elite bargains: The goal of pioneer firms is not to be the entire industry. The goal is to generate the demonstration effects that shift the elite bargain to crowd-in to building positive-sum industries. This happens once an export pioneer is visibly succeeding: employing workers, paying taxes, earning foreign exchange, returning capital to investors. Exporting and selling to global markets becomes demonstrably viable and hopefully more attractive option than continuing to extract from captive local customers. The firms that broke out in Bangladesh, Vietnam, and Indonesia did not get there through consulting engagements with their pre-existing private sectors. They got there because pioneer firms (often foreign-led, like Daewoo's Desh joint venture in Bangladesh) demonstrated that globally competitive export production was possible, and the local ecosystem then reorganized around that evidence.
@Nithin Coca I really enjoyed your piece on Jakarta's public transport. However, around the time your piece came to press, there was a fatal train crash in Bekasi. The piece itself mentions several other challenges, including the last-mile problem and competition from ride-hailing. While one crash is not a reason for people to avoid public transit, I would wager that people will be more scared to use it given the crash and its high profile. Beyond what you have written in the piece, how should the government attempt create a public transit culture, whereby use is entirely normal and common?
I'm certainly curious to see if the crash has any impact on public sentiment around transit. In Jakarta, at least, it's long been known that motorcycle taxis (ojeks) are quite dangerous and result in a lot of fatalities, so safety has long been a concern.
So far, from what I've heard from contacts in Jakarta, is that the blame is being mostly put on a new electric taxi company with lower standards for drivers that only entered the Indonesian market a few months ago - it stalled on the tracks and caused the accident.
@Charles Kenny do you think emigration is good for basically every country or do you think it is mostly beneficial for low-income countries and could be bad for high-income countries?
Hi Oscar! I think emigration has the most potential impact on emigrant incomes when it is from poor countries and (secondarily) small countries --the first because the potential income gaps are the largest the second because the chance of finding the right fit for your talents is larger in larger countries (few small island states have a thriving automobile or software industry just because they take some scale). I'd also say that lower income countries with a growing workforce but few good jobs, that most need the trade and investment links and knowledge flows that come along with diaspora populations, do usually benefit the most from emigration.
Meanwhile high income countries seeing considerable net emigration rather than flows mostly in and some out are comparatively rare and are usually seeing something weird going on that is probably economic bad news. The US may be seeing net emigration at the moment, for example, and I don't think it is a good sign for the country. More broadly, I think rich countries with low birth rates usually want to be seeing net immigration and if they aren't it is bad for growth. Emigration in and of itself is not necessarily a problem in that it comes along with all of the trade, investment and knowledge generation links, but if it isn't matched by higher immigration, it is often a worrying sign.
Thank you @danielyu for your argument on Africa's potential to scale development by value added exports.
I just have a question about the Africa Jobs Fund's cost effectiveness model. Does it input losses to source countries as a result of skilled labour migration? I think this is very important if we are considering health worker migration from an extrawelfarist perspective.
Which then brings me to @Charles Kenny article on emigration. Thank you for mentioning the safeguards needed to prevent losses incurred by source countries. I fear at the moment, a lot of African countries do not have these safeguards in place and as such, social losses could be greater than individual gains.
Then I have a few reservations on the benefits you described which I feel is too long to write here. I did take my time to talk about them in my Substack commentary here: https://zubecommentary.substack.com/p/eze-jakpas-abroad
Thanks so much for these comments and those on your substack. I do think we need to be careful to assume skilled emigration is always a triple win for movers origin and destination countries and agree strongly we need policies to help ensure that, and you point about the equity benefits of emigration is well taken. But I would make a couple of points on movement of medical professionals (references below). The data for the Philippines suggests that the country has considerably more nurses per capita than you would expect at its income level, with a recent estimate being that the opportunity to migrate encourages nine nurses to train for each one that ends up migrating. And (admittedly two decade old) analysis by Michael Clemens looking at African medical professional migration concluded: "The results presented here fail to detect any negative impact of even massive movements of health professionals out of Africa upon health worker stocks, basic primary health care availability, and public health outcomes in African migrant-sending countries. "
I think the most surprising thing is that Founder Mode is real? I am spending so much time sweating the tiny details and honestly it's really fun.
It's been definitely easier than I expected; particularly, I expected to have a hard time convincing people to contribute to a new magazine, but I've been amazed how willing people have been.
I have a giant list! Saloni Dattani and Jacob Trefethan are the top, but also I'd love to publish some of the writers that got me into global development in the first place - Paul Collier, Samantha Power, and (in my dreams) Amartya Sen.
is there much unmet demand for clinical trial populations? could developing countries that get good at organizing clinical trials use this as leverage to build up research capabilities, attract FDI, get lower drug prices, participate in other links in the supply chain?
there is lots of TB in Latin American prisons. should they trial Far UV and ventilation technologies there to combat TB and other respiratory diseases?
if Iran is able to negotiate better access for their gas to markets like Turkey, Pakistan, Bangladesh, East Africa, and India, should we expect faster development and poverty reduction in these countries?
do third world research centers like Embrapa and Fiocruz foster much of a cluster of private sector "spinoffs"?
is the Cuban pharmaceutical sector truly successful and innovative, or is that mostly false propaganda hype? how many developing countries can emulate that without threatening fiscal solvency?
are there pro-growth policies in wealthy countries that can lower interest rates in dollars, euros, yen etc and make credit cheaper in low-income countries? for instance if shelter inflation in the US is a disproportionate contributor to overall inflation and therefore prompts monetary policymakers to raise the price of credit to attenuate inflation, could policies like allowing more SROs, ADUs, TOD, townhomes lower interest rates for third world sovereign and non-sovereign borrowers (and their export customers)?
in Ecuador we have some dumb NIMBY rules about setbacks, parking requirements, staircase and elevators rules in relatively short buildings in important cities etc. do you think this kind of thing is an important impediment to growth in many parts of the developing world?
if Europe, the US, China, developed East Asia grow faster, ceteris paribus, does that help growth much in poor countries? is a poor country almost by definition a country that doesn't export very much to those markets? are remittances, technology diffusion a lot more important than exports for most of the poorest countries?
how did smallpox eradication become an appealing idea to powerful people? should there be a sexy tabloid about pharma researchers and campaign leaders that glams them up to encourage more GAVI-like endeavours?
The Time Traveling Economist claims mass literacy is very important. I learned to read in large part thanks to newspapers. They appear cheaper to produce than books. I barely see them in Ecuador. Should states subsidize newspapers for students - perhaps with humor columns and short stories or serialized novels and health columns and transit maps/schedules, concert calendars etc?
Should states heavily subsidize meals in schools?
What should I read about whether Duterte's anti-crime efforts succeeded or failed?
do you think China's success in quickly cleaning up air quality in cities like Beijing will be very hard for other developing economies to emulate? what is an example of a development problem that is harder and another that is easier to give us an idea of how hard it is?
congratulations. I look forward to reading more articles in In Development
I imagine some development projects require more study than others, and that study requiring lots of verification and expertise can reduce the velocity of aid execution. Are there some broadly and/or narrowly applicable technologies that are raising the volume and efficacy of aid in general - say LLMS or whatsapp or camera phones - or in specific areas - maybe Lenocapovir being easier to administer than higher-frequency PrEP, or solar panels being easier to put to use at different scales than combined cycle gas plants that need complex engineering and high-caliber customers, say
what do you think of the Malawi Miracle's fertilizer subsidy policies? are we close to technologies that make more natural gas available for fertilizer production, or make meaningfully more fertilizer production from electricity economically viable?
The Jakarta transit article gave me so much hope for my beloved traffic-clogged tropical South American cities. I imagine driver wages account for a lower portion of taxi and mass transit operator expenses in developing countries than they do in rich countries. But buses and taxis seem also to have a bigger mode share in developing country cities than in rich country cities. What effects do you expect from AVs in the developing world? Should we look at rideshare/ AV taxes to fund mass transit?
Is regenerative braking going to make EVs especially useful in the Andes?
Lauren has written interesting articles on electricity pricing in Africa. Do the World Bank's new stances on nuclear and hydroelectric plants stand to make much of a difference? Can solar power installation be a worthwhile make-work program for countries with lots of unemployment, electricity shortages, and messy political economy around construction of new power plants and power lines?
Big stars of poverty reduction like China, India, Indonesia, and Vietnam seem to use a lot of coal. Are there desirable policy changes that could make more coal available to poor countries? When a country like the US figures out how to reduce coal use, does it usually become much cheaper for poorer countries to buy it?
in my middle-income country the 2 dollar sunglasses at the supermarket as well as the four hundred dollar mobile phones are made in China. with China still so efficient at production of low-end goods, is there much opportunity for other poor and middle income countries to gain manufacturing market share in textiles etc?
is there a localized flying geese thing, or like a gravity model of development? if emigration helps source countries a lot, should donors, MDBs etc focus on helping promising countries low and middle income countries that receive lots of economic migrants and border less promising low-income countries? for example South Africa seems to have some interesting industrial capabilities, has a lot of native poverty, and also receives lots of migrants from other poor countries. in that way it may be a better candidate for credit and investment than its neighbors, and bolstering its success may also help its neighbors a lot. is this kind of thing worth development professionals' attention? I also think of India as a manufacturer of generic drugs, fertilizers, and solar panels, and an importer of natural gas, oil, coal, and Himalayan hydro that could become more abundantly available to other poor countries if more investment in nuclear power, solar, mass transit, EVs etc can reduce their import volumes. Egypt is another country with nuclear power on the way, plenty of desert to build solar in, lots of manufacturing, plenty of refugees, and a large fertilizer production industry
are GLP-1s about to be protagonists in a massive public health success story in poor and mid income countries? should we expect benefits for economic growth?
does it help for most everyone in a country to speak the same language? should states, dev orgs try to get Portuguese-dubbed content subtitled in Portuguese in front of audiences for fluency and literacy purposes (English, French, Hindi, Arabic stand out too)?
thank you for working for poverty relief and more happiness!
Just on South Africa and migration, as you say a magnet for migration from the region. The country's emigrants rarely return and net remittances are negative --both a sign of a comparatively weak diaspora community a comparatively large immigrant population for its income level. It certainly isn't leading in using emigration as a growth strategy, for all it is playing an important role in reducing poverty and deprivation in countries to its North.
Thank you for your response. Does this mean that investment / lending / aid for South Africa is likely to spill over into nice remittance incomes for other African countries? Does their experience with nuclear plants, mining, coal-to-motor fuel conversion and other advanced industries make them a more promising candidate for growth-enhancing investments than are some of the countries that send many emigrants to South Africa?
I have a question regarding cash transfers and more broadly the RCT-fication of Development Economics.
Some time ago, Abhijet Banerjee made a comment about a million RCTs as jigsaw pieces (might have remembered this quote incorrectly). Each RCT might not be that useful but together, they can create something huge.
I like RCTs and think the Credibility Revolution has been great. Yet, I also wonder that most economies operate like the Toyota process. Come up with a decent plan, start trying it out and keep constantly iterating. At some point, I wonder if all the RCTs might be trying to create a perfect system from the get-go instead of adapting it. The issues of basically identical RCTs for many regular academics with high cumulative expenditure and giving essentially the same answers we knew might also be a concern. My question is, from a very general perspective, have we gone too far towards the Micro-ification of Developmental Economics?
Cash transfers are great (and the article was a nice read), but would we have something better by combining all the money into a more ambitious project? And on average, how many of these big ideas would actually work?
While each RCT is marginally useful and the big ideas are potentially amazing, how would you all try to allocate funding towards the different categories Development studies?
In Development is "a new magazine dedicated to exploring how progress happens — or doesn’t happen — in the developing world".
This week (May 11-17), the EA Forum is collaborating with the magazine to bring you their first batch of articles[1], along with their authors[2], ready to answer your questions. Lauren Gilbert, the magazine's editor-in-chief, will also be present in this thread to answer questions about the magazine itself.
You can ask questions here in the thread, or on the individual posts.
@Lauren Gilbert is the Editor in Chief of In Development, as well as a non-resident fellow at the Centre for British Progress, the Energy for Growth Hub, and the Roots of Progress Institute. Her writing has appeared in The Economist, Foreign Policy, The Washington Post, Works in Progress, and Asterisk. She has previously been a program manager at Renaissance Philanthropy, a research fellow at Open Philanthropy, as well as a theoretical neutrino astrophysicist.
@Charles Kenny is a Senior Fellow at the Center for Global Development, and the author of Getting Better: Why Global Development is Succeeding and Life, Liberty, and the Pursuit of Utility: Happiness in Philosophical and Economic Thought.
Nithin Coca (@ncoca) is an award-winning, Asia-focused freelance journalist who covers politics, technology, human rights, and environment, across the region, with a focus on cross-border, collaborative reporting. He is currently based in Japan, but was previously based in Jakarta, Indonesia.
Daniel Yu (@danielyu) is the founder of Wasoko, one of Africa's largest e-commerce companies, and now the founding partner of the Africa Jobs Fund, a new program under Renaissance Philanthropy to finance and build African export manufacturing and labor mobility pathways.
Enlli McAleese will join us later in the week, when their article goes live.[3]
This is the third in a sequence of posts taken from my recent report: Why Did Environmentalism Become Partisan?
Summary
Rising partisanship did not make environmentalism more popular or politically effective. Instead, it saw flat or falling overall public opinion, fewer major legislative achievements, and fluctuating executive actions.
Public Opinion...
I think right now EAs might be making a significant mistake by paying insufficient attention to the political realm. As EAs we tend to figure out what’s most impactful for us to work on and focus hard. That’s great! But there are various actions that are ‘non-delegatable’ - the extent to which an individual can do the action is limited (like voting, going to a protest, making hard money contributions to particular campaigns). It might be useful if we were all more in the habit of doing variou...
New Video from AI in Context: The Fall and Rise of Sam Altman
If you want to skip straight to the video, here it is!
AI in Context is excited to be back with our fourth video! For those just hearing from us, we make videos for 80,000 Hours, telling stories about transformative AI...
@danielyu I really enjoyed your article. I strongly agree with your premise of the need for wages as one of the primary goals of development. If we want people to live better, happier lives, we need to provide them with opportunities for stable employment. Additionally, I think it is probably worthwhile for people to try to start a manufacturing export business in LMICs, though I’m skeptical that it will actually work. My main considerations are the need for local government industrial policy and that it might be more strategic to work with existing firms rather than starting new ones.
It seems to me that it would be very unlikely for an outsider to succeed at setting up the industrial infrastructure required for even light manufacturing like textiles to really be productive. Do you expect someone to go into a country and invest the required capital in roads, ports, energy generation, and other industrial infrastructure required to successfully export even the simplest of manufactured goods? It seems to me like working with local governments will be critical to the success of any export manufacturing venture. I think this is mostly born out in the East Asian examples you cite, where governments played a key role in creating incentives and subsidising the learning by doing process as firms are able to eventually become globally competitive. I’m unsure that any individual, or especially a venture capital firm, will burn through the time and money needed to increase the organizational capabilities necessary to be globally competitive in manufacturing, which is especially capital-intensive.
Here, I find people like Mushtaq Khan and Stefan Dercon illustrative in what they describe as the best ways to increase the likelihood of export manufacturing firms succeeding. I’ll quote Dercon
“This is not a question of just working with the private sector. Many of the crucial incumbent firms in these settings are too closely connected to the patronage system to be helpful. Alternatively, just focusing on very small firms is no doubt good for the people involved, but it is hardly going to change the elite bargain. A better approach would be to find ways of working with the kinds of domestic private sector firms that could be influential and would flourish if the economy were to shift towards self-sustaining growth. The garment industry in Bangladesh and light manufacturing in Indonesia and Vietnam have thrived on connections with government since the beginning. However, they took up the challenge to compete globally rather than persistently live off protectionism and procurement in return for clientelist payments.”
It seems to me like it would be better for outsiders with expertise in manufacturing or global exports to offer consulting services to already existing firms in LMIC with pre-established connections to local governments and help them grow and gain access to overseas markets. Here I’m also drawing from writing by people like Karthik Tadepalli, writing here https://asteriskmag.com/issues/07/want-growth-kill-small-businesses
I’m very curious what your thoughts are on this and how you see firm dynamics and industrial policy as being key to economic growth in LMIC. Thanks again!
Thanks Truman.
The core reason I lean toward founding new firms is that incumbents in low-productivity equilibria are usually too comfortable within them. They have built local market positions, political relationships, and cost structures around serving captive domestic demand or rent-seeking arrangements with government. Asking those firms to reorient toward globally competitive export production is theoretically possible, but without proof points for why this would be a superior position it is unlikely to be seriously considered. The ambition required to build a globally competitive business is fundamentally a different kind of operator.
On infrastructure: I agree that an outsider parachuting into a country with no enabling environment and trying to build roads, ports, and energy generation is not a viable approach. That is not the model I suggest. The right path is to look strategically at where the ingredients for commercially viable export already exist or are close enough to pull in, and focus pioneering there.
This connects to Dercon’s model of elite bargains: The goal of pioneer firms is not to be the entire industry. The goal is to generate the demonstration effects that shift the elite bargain to crowd-in to building positive-sum industries. This happens once an export pioneer is visibly succeeding: employing workers, paying taxes, earning foreign exchange, returning capital to investors. Exporting and selling to global markets becomes demonstrably viable and hopefully more attractive option than continuing to extract from captive local customers. The firms that broke out in Bangladesh, Vietnam, and Indonesia did not get there through consulting engagements with their pre-existing private sectors. They got there because pioneer firms (often foreign-led, like Daewoo's Desh joint venture in Bangladesh) demonstrated that globally competitive export production was possible, and the local ecosystem then reorganized around that evidence.