Economist Lawrence R. Klein, in 13th Prebisch Lecture, Cites China, India, Brazil as Examples
The 1980 Nobel Laureate in Economics told an audience at UNCTAD today that nations wishing to climb out of poverty and eventually join the world´s developed countries should concentrate on shifting from primary products and exports to more sophisticated wares - to products with high "value added".
"The world economy is made up of excellent examples of countries that excel in primary products, but their accomplishments in that sector alone would not have been enough to bring them into the grouping of advanced industrial nations", Lawrence R. Klein said in delivering the 2005 Raúl Prebisch Lecture. Klein, who is Benjamin Franklin Professor Emeritus of the University of Pennsylvania, said that for countries such as the Netherlands, Denmark and New Zealand "to have focused alone on their agricultural skills would not have brought them into the top grouping, but the fact that they also can produce a broad span of goods and services for their own consumption and for that of the world at large, through trade, has brought them to positions of high rank on a world scale of material well being".
Klein said China, India and Brazil seemed to be embarked on such a transition. In the lecture, titled "South and East Asia: Leading the World Economy", he said China and India are the locomotives of the current global economy. He described the transformations under way in those nations, noting that these were occurring at a time of intense global economic competition and that each country´s progress had innovative characteristics. He added that both were succeeding in raising millions of citizens out of poverty.
The "China Story", as Klein termed it, was a highly managed "step-by-step gradualism in a one-party environment". Over almost 30 years, a series of economic changes was introduced, beginning with land reform and moving on to special economic zones (with important international trade features); the opening of academic centres (including those offering primary education); the freeing up of small enterprises in manufacturing, retailing, and controlled trade; major improvements in infrastructure; and the introduction of world-class computers, laboratory equipment and electronic communications. All of this, he said, added to a large labour pool that worked for a fraction of the wages paid to workers in industrialized countries and hence attracted huge and increasing amounts of foreign direct investment.
The transition in India started later, Klein said, and has been based more on providing services to offshore clients in such fields as software, business services, and (more recently) medical and health services. The country´s strengthening services sector, he said, has made the nation´s industrial base more stable and helped "smooth out" the fluctuations typical of India´s monsoon-dependent agricultural economy. The shift to a services economy has been possible in part because the country´s citizens excel at speaking and working in English and because many have received scientific or engineering training "in educational institutions built upon their strong British foundations", Klein said. Again he noted that these offshore services are provided at wages that are a fraction of those demanded by similar employees in industrialized countries. A challenge for India will be to use the information technology now flowing in from abroad to expand domestic demand and internally focused economic growth, he said.
"There have been gains in the conquering of poverty in Africa, but not on the impressive scale found in China", Klein said. In Africa, he said, "there is hope for improved economic conditions - not in the near future, on a massive scale - but eventually it can be done."
Klein received the 1980 Nobel Prize in Economics for his work in developing models for forecasting and for economic policy analysis. He has collaborated extensively with UNCTAD over the years, particularly through the LINK programme and in developing the Trade and Development Index unveiled by UNCTAD today.
The Prebisch Lectures, which began in 1982, are addresses by prominent economists and other specialists in the field of trade and development. Past lecturers have included Indira Gandhi (1983), Dani Rodrik (1997) and Joseph Stiglitz (1998). The lectures are named for Raúl Prebisch, UNCTAD´s first Secretary-General, who delivered the first lecture in the series.
