The Quest for Prosperity: How Developing Economies Can Take Off - Updated Edition

by Justin Yifu Lin, Justin Yifu Lin (Preface by)

Overview

Justin Yifu Lin's groundbreaking account of how developing countries can help themselves—now fully updated

How can developing countries grow their economies? Most answers to this question center on what the rich world should or shouldn't do for the poor world. In The Quest for Prosperity, Justin Yifu Lin—the first non-Westerner to be chief economist of the World Bank—focuses on what developing nations can do to help themselves. Lin examines how the countries that have succeeded in developing their own economies have actually done it. Interwoven with insights, observations, and stories from Lin’s travels as chief economist of the World Bank and his reflections on China’s rise, this book provides a road map and hope for those countries engaged in their own quest for prosperity.

Product Details

ISBN-13:	9780691163567
Publisher:	Princeton University Press
Publication date:	10/12/2014
Edition description:	Updated edition with a New Preface
Pages:	360
Product dimensions:	5.50(w) x 8.40(h) x 1.00(d)

About the Author

Justin Yifu Lin is founding director and professor at the China Centre for Economic Research at Peking University. From 2008 to 2012, he served as chief economist and senior vice president of the World Bank. His many books include Demystifying the Chinese Economy and Economic Development and Transition. He is a corresponding fellow of the British Academy, and a fellow of the World Academy of Sciences for the Developing World.

Table of Contents

Prologue ix
An Intriguing Offer x
Strange Childhood Memories from Africa xi

1 New Challenges and New Solutions 1
The Bane of Excess Capacity 3
The Apparent Mystery of Economic Success 5
Taking Einstein's Joke Seriously: A New Structural Economics 8

2 A Battle of Narratives and Changing Paradigms 13
Giving Meaning to One's Life 14
The Evolution of Growth 17
Deciphering the Mystery of Poverty and Wealth 20
Robert Lucas and the Drycleaner's Daughter 26
Explaining Convergence and Divergence 29
Development Thinking: A Tale of Progress, Waves, Fads, and Fashion 33
The Frustrating Search for New Answers 42
The Need for New Strategic Thinking 45

3 Economic Development: Lessons from Failures 49
Viability as the Hidden Ingredient to Economic Success 52
The Political Economy of Dreams and Ignorance 61
"Do Not Look Where You Fell but Where You Slipped" 67
Not Throwing the Baby Out with the Bathwater 71

4 Lessons from Successful Catch-up Countries 76
Squaring the Circle: The Contribution of The Growth Report 78
Recognizing That Some Countries May Have Found the Holy Grail 85
Modern Economic Growth: The Secret of Advanced Countries 97

5 A Framework for Rethinking Development: A New Structural Economics 102
Why Burundi Is Not Switzerland 104
Understanding Economic Development: A Conceptual Framework 108
The Optimal Speed and Sequencing of Prosperity 112
Putting New Wine in New Bottles 117

6 What Would Be Done Differently under the New Structural Economics? 121
Fiscal Policy: Free Airplanes, Railroads, and Bridges? 123
Money to Impoverish—or Money to Enrich 127
Surviving Wealth: Public Revenue Management in Resource-Rich Countries 130
Financial Development: Those Bankers We Love to Hate 136
The Need for Poor Countries to Choose Their Type of Foreign Capital 139
Sorting Out the Paradoxes of Trade Policy 141
Deciphering the Mysteries of Human Development 143

7 Putting the New Structural Economics into Practice: Two Tracks
and Six Steps 147
To Identify or Not to Identify: That Is the Question 149
How to Identify Industries with Latent Comparative Advantages: A Few Principles 154
A Practical Guide for Sequencing Structural Transformation 158

8 The Peculiar Identities and Trajectories of Transition Economies 179
Imaginary Confessions in Heaven: The Politics of Reforms 181
Back to Earth: The Economics of Multiple Distortions 190
Options for Economic Reform: Big Bang or Gradualism? 195
Thriving Transitions: Lessons from China, Slovenia, and a Few Other Countries 201

9 Fostering Structural Change at Higher Levels of Development 209
Fighting Off the Middle-Income Curse 214
Keeping Pace with the Times 221
GIF Principles and Continued Structural Transformation 224
Understanding the Economics of Wealth and Greatness 229

10 A Recipe for Economic Prosperity 234
Understanding the True Nature and Causes of Economic Development 237
Industrial Policy in Action 242
Being Too Cautious: The Greatest Risk of All 246

Glossary 251
Notes 259
References 287
Index 309

What People are Saying About This

From the Publisher

"This is a must-read for anyone interested in the emerging consensus on development policy. Justin Yifu Lin makes a powerful case for a 'new structural economics' grounded in a very persuasive analysis of the evolution of ideas in economics. It will resonate especially well with practitioners familiar with the practical constraints of policymaking in developing countries."—Montek Ahluwalia, deputy chairman of the Planning Commission of the Republic of India

"In this masterpiece, Justin Yifu Lin weaves together 250 years of economic thought with his own wisdom acquired during China's economic rise. He dares to envision the end of world poverty and spells out—thoughtfully, sensibly, and pragmatically—how this can be accomplished. It is impossible for an economist to write a better, or a more important, book."—George A. Akerlof, Nobel Laureate in Economics

"Combining valuable insights from his experience in China, his time as the World Bank's chief economist, and the 2008 financial crisis, Justin Yifu Lin's recommendations for development policy reflect an impressive and unique personal journey."—Kemal Dervis, vice president of the Brookings Institution and former executive head of the UN Development Programme

"The Quest for Prosperity is an important book. Written with verve and clarity, it reflects a deep understanding of global economic issues, and proposes practical solutions that anyone concerned with the plight of the world's poor would be wise to read."—Robert Fogel, Nobel Laureate in Economics

"Justin Yifu Lin's life journey has been one of discovery driven by insatiable curiosity. His invaluable contributions to economic theory and policy in these turbulent times are distinctive because of the sharpness of his observations, his willingness to rigorously test a hypothesis, and his courage to posit emerging views. The Quest for Prosperity builds on his already substantial contribution to development economics. It is a must-read for all policymakers and students."—Trevor Manuel, minister in the presidency of the National Planning Commission of South Africa

"Justin Yifu Lin lays out an innovative framework for understanding the mystery of economic growth, drawing insightful conclusions about the experience of successful economies that should provide important inspiration to developing countries as they seek to expand their comparative advantages and design their own growth strategies."—Ngozi Okonjo-Iweala, finance minister of Nigeria

"Justin Yifu Lin cracks the code of economic development in this extraordinary tour de force—offering a rare combination of personal experience, rigorous analysis, and empirical investigation. His powerful recipe will become an enduring feature of future development efforts."—Stephen S. Roach, former chairman of Morgan Stanley Asia and author of The Next Asia

"Part personal narrative, part sophisticated economic analysis, this important book offers a new approach for accelerating economic development around the world. Justin Yifu Lin's exceptional grounding in Chinese realities and Chicago economics, as well as his extensive experience, shine throughout."—Dani Rodrik, author of The Globalization Paradox: Democracy and the Future of the World Economy

"This is a truly exciting book. Speaking directly to the reader and quoting Lewis Carroll as easily as Simon Kuznets, Justin Yifu Lin proposes a new approach to development economics that makes great sense."—Thomas C. Schelling, Nobel Laureate in Economics

"This book is a tour de force: a seminal contribution to development studies that is engagingly, even entertainingly written. Lin uses words, not statistics, to carry his arguments; and he illuminates abstract ideas with the dicta of people as diverse as Winston Churchill, Deng Xiaoping, and Mick Jagger."—Robert Wade, London School of Economics and Political Science

Editorial Reviews

"Lin . . . makes a case for what he calls a 'new structuralist' approach to economic development. Drawing on the experience of many countries, especially China, he argues for an active role for government in fostering development, not only through the traditional provision of infrastructure and the enforcement of rules but also in identifying and supporting industries that contribute to growth. . . . Lin presents a thought-provoking argument."

Foreign Affairs

"The book is peppered with deep insights from economic thought, practical wisdom, and personal experience, and is easily accessible to policy makers, business leaders, and undergraduates studying development economics."

Choice

"[A] brilliant survey of economic thought on the subject, from Adam Smith through Solow-Swan to Michael Spence's Growth Commission. Thousands of authoritative-sounding economic history essays will be written on the back of it by students smart enough to read it before their professors do. . . . [A]s an accessible summary of how the World Bank . . . thinks about development these days, The Quest for Prosperity is hard to beat. It will quickly find its way on to the course reading lists for development economics master's programmes."—-Howard Davies, Times Higher Education

"Justin Lin, the Chinese economist who was, until recently, chief economist of the World Bank, has written a book that is as remarkable as it is ambitious: its aim is to show the route to economic development. This is ambitious, because it has been the holy grail of economics since its inception. It is remarkable, because he largely succeeds. One does not have to accept everything Lin argues to recognise that he has made an invaluable contribution. . . . Moreover, the book is also excellently written. A book on a subject of the highest importance, which is intelligent, original, practical and thought-provoking, deserves indeed to be read."—-Martin Wolf, Financial Times

"In this book, Justin Yifu Lin, the World Bank's first non-western chief economist, offers a fascinating overview of development thinking since the Second World War."—-Lisa Moyle, Financial World

From the Publisher

In the 1960s, conventional economic thinking was that Africa had “better conditions and opportunities for economic development” than did East Asia. Lin, the chief economist and senior vice president for the World Bank from 2008 to 2012, tackles prevailing shibboleths in this provocative and challenging work. Lin argues that “different countries... require different policy choices to facilitate growth”; indeed, developing nations that progressed industrially and technologically “rarely followed... the dominant development paradigm of the time.” Lin concludes that the Soviet Stalinist model of modernization through industrialization provided a poor precedent for subsequent leaders whose zest for large capital-intensive projects was inappropriate, especially since developing nations rarely have abundant available capital. Lin focuses on the concept of comparative advantage, which indicates that nations should concentrate on “what they can produce best” and trade with other nations that do likewise. He extends this argument by linking a country’s advantage to its factor endowments—the traditional elements of land, labor, and capital, as well as infrastructure. Lin embellishes his conceptual innovations with lessons from failures, successes, and strategies for implementing these ideas. While there is no easy answer to these problems, Lin’s reminder that such development is not a “zero-sum game” suggests that his thoughtful study should resonate among international audiences. (Oct.)

Publishers Weekly

[T]his is indeed a stimulating volume, clearly indicating the author's extraordinary command of the development literature and his equally extraordinary level of motivation in making his case.

Journal of Economic Literature - Gustav Ranis

In this book, Justin Yifu Lin, the World Bank's first non-western chief economist, offers a fascinating overview of development thinking since the Second World War.

Financial World - Lisa Moyle

[A] brilliant survey of economic thought on the subject, from Adam Smith through Solow-Swan to Michael Spence's Growth Commission. Thousands of authoritative-sounding economic history essays will be written on the back of it by students smart enough to read it before their professors do. . . . [A]s an accessible summary of how the World Bank . . . thinks about development these days, The Quest for Prosperity is hard to beat. It will quickly find its way on to the course reading lists for development economics master's programmes.

Times Higher Education - Howard Davies

The most valuable new book I've read this year is Justin Yifu Lin's The Quest for Prosperity. . . . Lin's book is intellectually ambitious. He sets out to survey the modern history of economic development and distill a practical formula for growing out of poverty. It's a serious undertaking: Lin isn't trying to be another pop economics sensation. But The Quest for Prosperity is lightly written and accessible. It weaves in pertinent stories and observations, drawing especially from his travels with the World Bank. He leavens the economics skillfully.

Bloomberg News - Clive Crook

Justin Lin, the Chinese economist who was, until recently, chief economist of the World Bank, has written a book that is as remarkable as it is ambitious: its aim is to show the route to economic development. This is ambitious, because it has been the holy grail of economics since its inception. It is remarkable, because he largely succeeds. One does not have to accept everything Lin argues to recognise that he has made an invaluable contribution. . . . Moreover, the book is also excellently written. A book on a subject of the highest importance, which is intelligent, original, practical and thought-provoking, deserves indeed to be read.

Financial Times - Martin Wolf

In this book, Justin Yifu Lin, the World Bank's first non-western chief economist, offers a fascinating overview of development thinking since the Second World War.
— Lisa Moyle

Financial World

Justin Lin, the Chinese economist who was, until recently, chief economist of the World Bank, has written a book that is as remarkable as it is ambitious: its aim is to show the route to economic development. This is ambitious, because it has been the holy grail of economics since its inception. It is remarkable, because he largely succeeds. One does not have to accept everything Lin argues to recognise that he has made an invaluable contribution. . . . Moreover, the book is also excellently written. A book on a subject of the highest importance, which is intelligent, original, practical and thought-provoking, deserves indeed to be read.
— Martin Wolf

Financial Times

[A] brilliant survey of economic thought on the subject, from Adam Smith through Solow-Swan to Michael Spence's Growth Commission. Thousands of authoritative-sounding economic history essays will be written on the back of it by students smart enough to read it before their professors do. . . . [A]s an accessible summary of how the World Bank . . . thinks about development these days, The Quest for Prosperity is hard to beat. It will quickly find its way on to the course reading lists for development economics master's programmes.
— Howard Davies

Times Higher Education

Here, Lin (founding director, China Ctr. for Economic Research, Peking Univ.; Demystifying the Chinese Economy), a former chief economist and senior vice president of the World Bank, explains here in detail the model he created there for developing economies to achieve success and sustainability. His deep knowledge of global economics helps him identify areas in which there is a need for new strategic thinking and has influenced his take on structuralist economics for developing nations. Within Lin's model, much of the power to make decisions about both capital (e.g., the ability to choose from whom to borrow) and industry (e.g., the ability to encourage certain sectors or businesses) belongs to developing nations. The book is well organized and thus it is easy for readers to find information discussed throughout the book as a whole. VERDICT Lin's use of history and popular culture metaphors make complex economic concepts more accessible to lay readers, especially in his analysis of global economics. This title is highly recommended as a textbook for classes studying developing economies and microlending.—Meghan Dowell, New York

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