Justin Lin’s ‘Quest for Prosperity’
Former World Bank chief economist Justin Lin has just written a book grandly entitled “The Quest for Prosperity: How Developing Countries Can Take Off” and it’s received rave reviews from the normally thoughtful Martin Wolf of the Financial Times. But if we judge the book solely from Wolf’s review, we must conclude it’s nothing but the regurgitated neoliberalism we’ve come to expect from the World Bank and Lin’s alma mater, the University of Chicago. I’m surprised at Martin Wolf.
Prosperity is indeed a herculean quest under the iron heel of global capitalism, one fully worthy of the greatest of Greek epics. And it seems self evident that mass prosperity will always be but a quest given the reality of a private system of high productivity centered on economies of scale. The very word itself, “private”, captures the essence of the futility, rooted as it is in the Latin “privare” – to deprive. How then does Lin suggest that countries “take off” in their great quest in a world so powerfully controlled by the laws of deprivation?
Wolf tells us that the answer is found in a six step process Lin calls his “growth identification and facilitation framework”. I’ll copy the full six steps below but if you don’t feel like reading it, it’s nothing more than the tired neoliberal export promotion regime, i.e. help local businesses compete, bring in foreign direct investment, scale up domestically successful businesses, expand infrastructure, create special economic zones, offer incentives. Here’s the full quote:
First, choose a country to follow that has a roughly similar set of resources, but about double the real income per head. Then identify tradeable industries that have grown for two decades. Second, if businesses are already active in these activities, identify constraints to further upgrading and new entry. Then act to remove them. Third, where no such businesses are yet active, look for foreign direct investment in these activities. Fourth, look for industries where domestic businesses are already successful and support scaling up: improvements in infrastructure or support for research and development are possibilities. Fifth, where infrastructure and business environments are poor, concentrate activities in special economic zones or industrial parks. Sixth, provide time-limited incentives to pioneering companies.
These are, of course, ridiculously lame ideas, although to be fair there’s really not too much more that can be on the table given the privare nature of the system. One only has to ask why all companies in the world wouldn’t just follow Lin’s “growth identification and facilitation framework” and simply “scale up”. What an idea! Suppose Lin presented this “framework” to a corporate boardroom as his plan to increase profitability – I can just imagine the deafening silence.
But of course the global problem isn’t one of insufficient production and the global solution therefore can’t be simply scaling up or engaging in some zero sum competition for markets. Lin is spouting nonsense and one can’t help but believe he’s smart enough to realize it. The real problem is the mal-distribution that’s an inherent feature of the privare system and that can’t be addressed without fundamentally shaking its very foundations. The World Bank / University of Chicago economists offer us nothing and, as long as we keep listening to them, the quest will never ever be won. And again, I’m surprised at Martin Wolf.