Guest Lecturer Robert Z Lawrence
Albert L Williams Professor of International Trade and Investment Harvard Kennedy School & Senior Fellow Peterson Institute for International Economics

Punuka Annual Lecture 2016
Lagos Nigeria

Introduction: A New Global Environment

  • Challenges:

    • Slow growth in advanced economies.
    • Brics (besides India) all face growth problems.
    • Commodity markets are depressed.
  • Opportunities:

    • Wages rising in China: supply chains are moving.
    • Middle Classes in China and India are growing.


  • Kinds of Growth.
  • Three policies:

    • Tariffs on inputs.
    • Infant Industry Protection.
    • Competitive exchange rates.
  • Implications for Nigeria.

Where does growth come from?

  • Sustainable Growth comes from convergence with the productivity levels (the "technology") that prevail in the rich countries

    • "Technology" is the name for the stock of ideas and knowledge that is available for developing countries to absorb (and disseminate throughout their economies)
  • This stock does not disappear or dissipate when rich countries grow more slowly or when world trade is less buoyant.

    • As long as developing nations follow the appropriate strategies

Wages reflect Productivity!

Where does growth come from?

There is "bad" growth (1)

  1. Foreign borrowing-led growth

    • Examples: countries in the periphery of EU in 1990s, Latin America in 1970s, Iceland, Ireland and Greece in 2000s.
    • Good to the extent that it eases the financing constraint of firms
    • Inevitably comes to an end when capital flows dry up
    • This pattern of growth is associated with current account deficits and the overvaluation of the currency
    • and the booming of the "wrong" kinds of economic activities, which do not promote long-term growth

      • non-tradables such as construction and real estate

There is "bad" growth (2)

  1. Commodity boom-led growth

    • Examples: 19th century, many African (and Latin American) countries in the last decade
    • Not sustainable in the longer term, because of both cyclicality and long-term downwards trend in the commodity terms of trade
    • Also associated with the booming of the "wrong" kinds of economic activities
    • And produces bad politics on top

      • Resource rents and the rentier state
      • Chile a rare example of a country that has (so far) managed resource rents well

... and then there is "good" growth (3)

  1. Structural transformation-led growth

    • From low-productivity traditional products

      • traditional agriculture and informality
    • to modern, non-traditional activities

      • manufacturing, non-traditional export crops, and tradable services
      • Examples: Japan, S. Korea, China, India
    • Based not on (static) comparative advantage, but on producing what countries richer than you produce

      • Associated with "productivist" policies
      • policies that explicitly promote structural change, through removal of constraints on investments in modern activities
      • And through industrial policies, undervalued currencies, financial controls
      • Underpinned by sound macro/fiscal policies
    • This is the only model that generates reliably sustained convergence with income levels in the advanced countries

Example: Manufacturing Share Rises and then Falls

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