Must-Read: Michael Spence: Growth in a Time of Disruption

Must-Read: But what does “developing countries must accept the inevitability of changes to their growth models caused by digital technologies. Instead of viewing these changes as a threat, and trying to resist them, developing economies should be getting ahead of them…” mean, concretely, on the ground? Take advantage of digital technologies and platforms (eBay, cellphones, Amazon, FedEx) that provide channels of information capture and dissemination on the one hand and distribution on the other: those are clear complements to what developing economies can do. But how is one to find a niche for one’s workers’ brains-as-cybernetic-controllers that will make the diamonds-water paradox their friend in the enormously productive digital global economy of the future?

Michael Spence: Growth in a Time of Disruption:

Developing countries are facing major obstacles…

…headwinds generated by slow advanced-economy growth and abnormal post-crisis monetary and financial conditions… disruptive impacts of digital technology… set to erode developing economies’ comparative advantage in labor-intensive manufacturing activities…. Adaptation is the only option. Robotics has already made significant inroads in electronics assembly… sewing trades, traditionally many countries’ first entry point to the global trading system, likely to come next…. Supply chains based on the location of relatively immobile and cost-effective labor will wane, with production moving closer to the final market….

Developing countries need to act now to adapt their growth strategies…. The problems in advanced countries–from slow economic growth to political uncertainty–are likely to persist…. Investment, both public and private, remains a powerful growth engine…. It is critical to manage the capital account in a way that protects and enhances the real economy’s growth potential…. A realistic approach to the digital revolution is needed…. Developing countries must accept the inevitability of changes to their growth models caused by digital technologies. Instead of viewing these changes as a threat, and trying to resist them, developing economies should be getting ahead of them….

The distribution of gains from economic growth cannot be ignored…. It is important to establish sustainable growth patterns early on…. Entrepreneurial activity is vital to translate economic potential into reality. Policies that support such activity, such as by removing obstacles to new business creation and enhancing financing opportunities, cannot be left out…