Tag Archives: growth

China’s growth – the trade-off investments vs consumption and Japanese lessons

Martin Wolf on the Financial Times  provides an analysis about how China’s growth could slow down and, eventually, end in a bump because of the investments-led growth strategy. There are signals that the investments are lowering their returns and the consumption is growing too slowly in order to fill up the gap. Among the other arguments given by the author, there are the ‘middle-income trap’ and the size of China. I need some expert macro-economist telling me whether the parallelism with Japan is too rash. It is worth for a deep reading!


Innovation and Growth in Africa

During the MIT-Sloan School Africa Business Conference, held the past 1st of April, Mr. Okonjio-Iweala (Managing Director, World Bank) gave a  speech on innovation, in his opinion the main ingredient to spur growth in Africa in the decades to come. Putting voluntarily apart the issue of endogeneity between growth and innovation, the speaker pointed 4 strategic sectors could make the African economy take off once and for all:

  1. Agriculture
  2. Pharmaceutical sector
  3. ICT sector
  4. Arts

‘With these four sectors I have tried to show you what opportunities exist in Africa for growth through product, process, organizational or marketing innovations. And I am sure you would agree with me that there are enormous. But Africa would only be able to benefit fully from these opportunities if the governments create the right incentive framework for innovation.  Africans need the freedom and space to think and innovate. For this to happen the following things must be in place; macro-economic stability, affordable and easy access to capital, openness to trade, the appropriate competition policy laws, a solid intellectual property rights and patent laws regime and an overall good governance regime’ (Okonjio-Iweala).

In other words, institutions and governments have to support the process. Easterly points out aid ineffectiveness and debt insolvency can be explained, ceteris paribus, by instable political elites who discount heavily the future, i.e. the high probability of being suddenly divested of power make them to think about their interests hic et nunc (here and now). Could we transpose the same argumentation for innovation? Which effect will have the Meddle East’s revolutions on the discount rates of the elites to come?

It is for posterity and smart analysts to judge.