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Growth Week at the International Growth Centre

Recently the International Growth Centre (IGC) held its Growth Week conference at the LSE. The DFID-funded centre, led by LSE and the University of Oxford, also has ten offices in developing countries. The conference brought together academics and policy-makers from the ten countries to discuss the drivers of growth, including presentations from IGC country offices on policy issues, and from academics on issues such as trade, investment, agriculture and industrial productivity. 

Overall Growth Week generated lively debate and was a step forward in building the evidence base for informed policy-making. Highlights of the conference included Paul Collier´s discussion of Chinese investment in Africa, where he argued that investment is mutually beneficial. China is Africa´s second biggest trading partner, and its investments dwarf aid volumes to the continent. He suggested that China´s mining investments in exchange for building infrastructure ‘locks’ African countries into replacing the depletion of natural assets with infrastructure, which is conducive for growth and prevents elites from usurping resource rents . Although this may be true, Chinese investment in Africa remains controversial; poor governance has led to poor and untransparent contract negotiation between African governments and Chinese firms, leading to sub-optimal welfare outcomes. The discussants seemed to agree that China needs to become a better development partner for Africa, and that the capacity of African governments must be strengthened so they can negotiate with Chinese firms in the best interests of their citizens. 

An important debate concerned the tensions between rural and urban arenas for growth. Mark Rozenweig and a panel including Paul Romer, John Sutton and Ijaz Nabi, argued that growth in the urban manufacturing sector should be prioritised.  Rozenweig argued that smallholder farmers should be inventivised to sell land to facilitate more efficient large volume agricultural production, which would free up workers, thus allowing them to move to cities to work in manufacturing. Romer and Nabi argued that, despite economic evidence that rural to urban migration is a key driver for growth, politicians seek to prevent urban overcrowding and its associated social problems (which are not insurmountable).

The discussion seemed to assume that people would just leave their ancestrial lands and support networks in rural areas for an uncertain future in cities, which is hardly a risk-averse move. Besides, donors seem to focus more on developing rural infrastructure and employment than on promoting rural to urban migration. ODI work in this area argues that policies to improve rural employment as well as encouraging rural to urban migration are both required. This ODI research goes on to find that investment in basic education, skills, health and early nutrition are required to improve rural employment prospects, and that rural to urban migration can be encouraged through provision of information, improved transport, making rights to public services and protection portable, and facilitating remittances.

In line with findings of recent ODI research on competition issues in developing countries, Chang -Tai Hsieh presented on industrial productivity, arguing that poor countries have too many small and inefficient firms, causing resource misallocation and lower productivity. In contrast, the larger, more efficient firms in developed nations provide economies of scale and scope. The session did not shed any light on what the role of governments should be, however. Should governments have an active industrial policy, or should they simply provide the right enabling environment (a mix of liberalisation and regulatory oversight)? ODI colleagues have also addressed these issues,  for example through work on the nature of state-business relations (SBRs) and the links between SBRs and economic performance. This work could certainly be of interest to practitioners and policy-makers.

Another highlight was Ricardo Hausman’s presentation on the ‘Quiessence Trap,’ where he argued that particular capabilities are needed to  make certain products, which many developing countries may lack. Since progress towards achieving many capabilities simultaneously may be difficult, he argued that the solution was to identify and focus on only those capabilities that will most positively impact a country’s productivity. Although an interesting theory, the policy-makers on the panel noted that it was not clear how to do this in practice.

Overall the conference was informative and showcased different approaches to growth issues. But one question remained unanswered for me, namely: how can cutting-edge academic work be made more accessible to non-academics, and generate directly relevant and practical policy recommendations? One way is to hold conferences to disseminate research findings. But this is insufficient – academic research must be designed and prioritised based on its value in helping to tackle issues that policy-makers grapple with in practice. ODI does this by  providing a bridge between research and practical policy advisory work, adapted to country conditions. Getting this bridging mechanism right is important if it is to effectively inform policy and practice, which in turn lead to economic growth, poverty reduction and the achievement of sustainable livelihoods in developing countries.