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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.
Since the end of the Second World War, prescriptions for economic growth have come and gone. Often motivated more by ideology than practicality, these blueprints have had mixed success on the ground. Drawing lessons from history, economic analysis, and practice, Lin examines how the countries that have succeeded in developing their own economies have actually done it. He shows that economic development is a process of continuous technological innovation, industrial upgrading, and structural change driven by how countries harness their land, labor, capital, and infrastructure. Countries need to identify and facilitate the development of those industries where they have a comparative advantage--where they can produce products most effectively--and use them as a basis for development. At the same time, states need to recognize the power of markets, limiting the role of government to allow firms to flourish and lead the process of technological innovation and industrial upgrading. By following this "new structural economics" framework, Lin shows how even the poorest nations can grow at eight percent or more continuously for several decades, significantly reduce poverty, and become middle- or even high-income countries in the span of one or two generations.
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.
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
Overview
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.
Since the end of the Second World War, prescriptions for economic growth have come and gone. Often motivated more by ideology than practicality, these ...