INNOVATION, GROWTH AND
STRUCTURAL CHANGE IN AFRICA:
DEVELOPMENT STRATEGIES FOR THE
LEARNING ECONOMY
Innovation Diffusion in Low Income Countries
Growth Research Workshop
London, November 2
Bengt-Åke Lundvall
Globelics Secretariat, Aalborg University
THE STRUCTURE OF
MY LECTURE
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Uneven development of information regarding what is
happening in Africa in respectively material production (the
production system) and knowledge (the innovation system)
Linking structural change to learning and the knowledge
base.
What we do know about growth and structural change in
Africa
Two different interpretations and prescriptions in the policy
sphere.
What we do know about innovation, learning and knowledge
in Africa.
Old and new perspectives on innovation and development
within the research community.
Is there a third road for research and policy?
Managing the openness of national innovation system.
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1.
WHAT WE KNOW AND WHAT
WE DO NOT KNOW
•
We have detailed information on the production and export of
oil and other commodities emanating from the formal sector.
Gives an over all picture of economic growth and structural
change.We know much less about the production taking
place in the informal sector (which dominates and remains
increasing its share in terms of employment).
•
We have only rudimentary systematic information on the
knowledge base of the economy. This is true both for the
formal and the informal sector.
•
•
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Experimental data gathering on standard indicators of STI
supported by Sida and Nepad from 2014.
Formal education data by Unesco are somewhat patchy.
Overviews of policy intentions regarding STI-policy
Perceptions of northern business community in
competitiveness reports
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•
ON THE STRENGTH AND
WEAKNESS OF CASE STUDIES AND
STORYTELLING
• In the absence of systematic data we come to depend on
case studies and story telling regarding upgrading,
learning and innovation.
• Case studies give rich information and they can take into
account specific context and sometimes they can even
produce new theoretical perspectives.
• But if they are not set in a context of systematic data it is
difficult to assess their relevance and validity.
• There is a risk of biased selection of case studies that
support to ideological interpretations and policy
recommendations.
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• In a highly contested field such as development theory
this is highly problematic.
KNOWLEDGE AND LEARNING ARE AT THE
CORE OF DEVELOPMENT IN COUNTRIES AT
ALL LEVELS OF INCOME!
1. Development is a learning process and learning is a
prerequisite for development
2. Learning is an emancipatory process for people and
countries.
3. Structural change is a process where individuals and
organisations learn to do new things and learn to use
new methods.
4. To establish institutions and organisational forms that
support learning is key to development.
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5. But we know far too little about how knowledge creation,
learning and innovation and about how it shapes
structural change in Africa. No or very poor indicators.
WHAT WE KNOW ABOUT
AFRICA’S STRUCTURAL CHANGE
1. A new era of economic growth in Africa?
Since 2000 the continent has seen a prolonged commodity boom and sustained
growth trend. And although growth slowed from an average of 5.6 per cent in
2002–2008 to 2.2 per cent in 2009 . It rebounded strongly to 5.0 per cent in 2012,
despite the global slowdown and uncertainty.
2. But not much too show in terms of development
Yet this impressive growth story has not translated into economic diversification,
commensurate jobs or faster social development: most African economies still
depend heavily on commodity production and exports, with too little value addition
and few forward and backward linkages to other sectors of the economy
3. Deindustrialisation is a major problem
The key challenge for African countries today is how to design and implement
effective policies to promote industrialization and economic transformation.
Despite some gains in manufacturing over the last decade, the continent is yet to
reverse the de-industrialization that has defined its structural change in recent
decades:
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UN ECONOMIC REPORT ON AFRICA 2013
THE DRIVERS OF GROWTH IN THE
LEAST DEVELOPED COUNTRIES
Another important contribution to the disjoint between growth and development comes
from Valensisi and Davis (2011) :
In other words, the pattern of LDC growth in the last decade – be it in terms of
sectoral contribution to GDP, sources of aggregate demand or export
specialization – has largely failed to address the fundamental challenges of
economic diversification and capital accumulation, and was often characterized by
limited inclusivity.
1.
Final consumption expenditure represents the main source of expansion of
aggregate demand.
2.
Limited contribution of gross capital formation to overall demand expansion.
3.
Exports provide a decisive impulse to demand growth while imports of goods
and service – have been growing faster than exports in 38 out of 49 cases.
that implies that in the period analyzed, the net effect of international trade
flows on demand expansion was actually negative for the overwhelming
majority of LDCs.
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With regard to the demand side of the economy, three stylized facts emerge for the
2000‐2009 period
SECTORAL CONTRIBUTIONS TO
GROWTH IN LDCS 2000-2009 AND
EMPLOYMENT
Strong growth in services (informal and low-productive) and
in extractive industries
Decline in the importance of manufacturing and agriculture
as shares of GDP. Net import of food!
In most LDCs the employment elasticity (the job creation
triggered by 1% growth) has become smaller as compared to
the 1990’s
Underemployment and youth unemployment are serious
threats to stability – given the current composition of the
population and the ongoing population growth.
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Falling income per capita for the poorest in Africa – an
increasing share of the world’s poor are in Africa
GROWTH REDUCING STRUCTURAL
CHANGE IN AFRICA
Important contribution by Mc Millan and Rodrik (2011):
1.
A classical pattern in catching up economies is that part of
the aggregate growth reflects that labour moves from low
productive (agriculture) to high productive (manufacturing)
activities.
2.
1990-2005 the contribution from structural change was
positive in Asia but negative in Africa. Labour moved from
more into less productive jobs.
Authors: Our empirical work shows that countries with a
comparative advantage in natural resources run the risk of stunting
their process of structural transformation..
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Structural change, like economic growth itself, is not an automatic
process. It needs a nudge in the appropriate direction, especially
when a country has a strong comparative advantage in natural
resources.
1.
The Bretton Woods Institutions (BWI) (IMF and the World
Bank – often supported by OECD) argue in favor of
strategies of low barriers to trade, full respect for property
rights – including international IPRs - openness to FDI,
unregulated financial flows, making life easy for private
sector enterprises and against sector specific industrial and
trade policy. When these recipees do not give good results
BWI propose more of the same treatmen+’good
governance’
2.
The UN development experts recommend active industrial
policies aiming at making economies more diversified
through import substitution and less dependent on
commodities and natural resources. The fact that there are
few examples of success with import substitution strategies
in Africa is explained by the fact that these strategies were
aborted in Africa after a rather short period.
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BWI VERSUS UN
SAME DATA – DIFFERENT
INTERPRETATIONS
45 African countries are highly specialized in commodity
exports and they have become increasingly specialized in
commodities in the new millenium (Unctad: The State of
Commodity Dependence Report 2014)
1. This observation gives rise to different interpretations:
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1. BWI presents this as an opportunity for African countries
and point to the increasing potential for upgrading through
global value chains offered by commodity production.
2. UN experts present this as a fundamental problem since it
reflects deindustrialisation and stagnation in agriculture.
Hereby undermining future economic growth as well as
stability.
THE KUTSNETZ
DILEMMA
Kutsnetz on aggregation of sectoral growth rates:
1.
New high growth sectors are crucial for long term growth but in the
short term their contribution is limited.
Assume that a new sector constitutes 1% of total national income and that
it grows with 10% per annum – then it would contribute with 0,1% per
annum to GNP.
An increase in growth in the major sectors now dominating the
economy has a major impact upon economic growth in the short
term.
Assume that agriculture contributes with 30 % of national income.
Increasing productivity with 1% in agriculture would then contribute with
0.3% to GNP.
Industrial policy must combine the creation of
new sectors with upgrading the currently
dominating ones, including agriculture.
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2.
WHAT WE KNOW ABOUT THE
KNOWLEDGE BASE IN AFRICA
1. STI indicators are not very relevant and they are scarce
and unreliable in Africa.
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1. Almost no business R&D. Government R&D between 0.1
and 0.5% of GNP. Mainly in Higher education.
2. Innovation takes the form of product quality
enhancement. Internal sources and customers are main
background for innovation. Most innovations were
developed domestic.
3. Bibliometrics show relative strength in relation to medicine
and agriculture. Little intra-regional scientific
collaboration.
We should give high priority to develop complementary
indicators referring to experience based learning – in all
parts of the world – but not least for Africa!
THE RESEARCH COMMUNITY ON
INNOVATION AND DEVELOPMENT
REFLECT A SIMILAR SPLIT
1. Traditionalists (often located in the South) believe that old
development economics is still relevant
Active state intervention to
•
Accelerate capital accumulation
•
With key role for manufacturing
•
Import substitution
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Build stronger national innovation systems
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Building competence on the basis of natural resources.
•
Joining global value chains – learning from global interaction with
multinationals.
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2. Modernists (often located in the North) argue that new
technologies and new patterns in the international division of
labor opens up/requires new development strategies
THE MODERNIST ATTACK ON THE
NATURAL RESOURCE CURSE
1. Historical data show that countries can grow rich on the basis of natural
resources – this is true for the US as well as for the Nordic countries.
YES: BUT THESE CASES INVOLVED AMBITIOUS INSTITUTION BUILDING
AND INVESTMENT IN EDUCATION AND KNOWLEDGE AND THEY TOOK
PLACE IN A RADICALLY DIFFERENT HISTORICAL GLOBAL CONTEXT.
2. There are examples of successful transformation of natural resource
activities into knowledge intensive networks with upstream and downstream
spin off activities.
YES: BUT THERE ARE MORE EXAMPLES WHERE THE NATURAL
RESSOURCE INDUSTRY REMAINED QUITE ISOLATED (Oil and gas in
Nigeria, Algeria and many other countries in Africa).
3. The assumption that terms of trade would always move against natural
ressource based commodities has been falsified.
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YES: BUT THE FLUCTUATIONS IN DEMAND AND PRICES REMAIN
DRAMATIC WITH A DESTABILISATION EFFECT ON THE OVER ALL
ECONOMY
GLOBAL VALUE CHAINS AS
NEW ROAD TO DEVELOPMENT
1. It is undisputable that more and more international trade
takes the form of commodity trade.
BUT: WE DO NOT KNOW MUCH ABOUT WHAT PROPORTIONS
OF THIS BIG AND INCREASING VOLUME OF TRADE THAT
INVOLVES ELEMENTS OF NON-MARKET INTERACTION
BETWEEN CUSTOMER AND SUPPLIER. MUCH OF IT IS EITHER
‘CAPTIVE’ OR ‘PURE MARKET’ ARM’S LENGTH TRANSACTIONS
AND HERE UPGRADING WILL NOT FOLLOW.
2. There are case studies indicating that some of the firms that
become suppliers of multinational firms enhance the quality of
their production processes and their products. (Functional
upgrading, on the other hand, will normally lead to conflict with
the dominant multinational firms.)
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BUT: TO WHAT DEGREE SUCCESSFUL UPGRADING HAS AS
PREREQUISITE LOCAL AND NATIONAL CHARACTERISTICS OR
INITIATIVES IS OFTEN NEGLECTED IN THOSE CASE STUDIES.
UPGRADING DEPENDS ON LOCAL
AND NATIONAL CHARACTERISTICS
1.
Guiliani, Pietrobelli and Rabelotti (2005) analyses upgrading in
connection with local, national and global interaction in Latin
America on the basis of no less than 40 case studies. The analysis
confirms that in order to explain how integration in global value
chains affect upgrading in the firm you need to take into account
the characteristics of regional and national systems of innovation
and especially the firm’s own effort to engage in capacity building.
2.
In Xiaolan Fu, Carlo Pietrobelli and Luc Soete (2011) “the benefits
of international technology diffusion can only be delivered with
parallel indigenous innovation efforts and the presence of modern
institutional and governance structures and conducive innovation
systems.”
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Therefore joining global value chains should not be presented as the
ALTERNATIVE to national innovation, industrial and trade policy.
Nonetheless this seems to be the case currently in Latin America where
BWI successfully are pushing a neoliberal agenda.
IS THERE A THIRD ROAD?
A. It is a good idea to promote innovation and to build competencies in
connection with natural resource based activities – especially agrofood
sectors.
BUT: It is not a sufficient strategy for development!! There is a need to
develop industrial and trade policies aiming at promoting unrelated
sectors (including manufacturing activities) with growth potential and
this requires active industrial policy. No indications in Africa that there
is a ‘natural path’ leading from depence on natural resources to a
diversified economy
B. Enterprises and clusters can use participation in global value
chains to upgrade production processes and the quality of products.
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BUT: It is not a sufficient strategy for development!! There is a need to
develop public policies to build a stronger national innovation system
and local competence and not least to prepare ‘breaking the chains’ (cf.
Korea and Taiwan). Without such policies most firms and enterprises
from low income countries would remain low productive prisoners in
the chain and the over all development impact would be limited.
ON THE NEED FOR NEW TYPES
OF RESEARCH TO AVOID
‘FALLACY OF COMPOSITION’
Modernists tend to refer to case studies showing good
examples of building sectoral innovation networks around
natural resource activities and successful examples of
upgrading in global value chains.
But there are many counterexamples and one cannot draw
conclusions from case studies of single firms and sectors to
aggregate performance of national systems of innovation.
There is a need to develop methodologies that link to each other
national economic development, participation in trade,
openness to foreign direct investment and the strength of the
national innovation system.
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Work by Fagerberg indicates that ‘economic openness’ does not
contribute to explaining ‘catching-up’ while the strength of the
national innovation system has a significant impact. A major
problem is the lack of data on innovation and competence
building in Africa. We are working on that in a new paper.
1.
Non discrimination (gender, youth and ethnic minorities)
2.
A stronger focus upon technical training, engineering and
design
3.
Industrial and trade policy - needs to promote industries
with learning potential through combining protection with
exposure!
4.
Policy learning should be stimulated (cf. Chinese example
1985-2000)
5.
A key issue is to build a strong national innovation system
supporting old sectors such as agriculture as well as new
manufacturing sectors. And not least to ‘manage the
openness’ of the system.
6.
A new global regime for knowledge sharing and knowledge
protection – compensation to LDC for brain-drain and
access to knowledge sharing.
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FOSTERING A LEARNING ECONOMY
THROUGH PUBLIC POLICY AND
INSTITUTIONAL DESIGN
SOURCES ON THE RECENT
AFRICAN GROWTH RECORD
McMillan, M.S. and Rodrik, D. (2011), ‘Globalization, structural change
and productivity growth’, NBER Working Paper no 17143.
Jomo K. S. et al (2012), Globalization and Development in Sub-Saharan
Africa United Nations Press, New York.
Stiglitz, J., Lin, J. and Patel, E. (2013), ‘Industrial policy in the African
context’, World Bank Working Paper, S6633, World Bank.
United Nations (2013), The UN 2013 Economic report on Africa, New
York, United Nations.
Unctad (2013), The least developed countries report, 2012, Harnessing
Remittances and Diaspora Knowledge to Build Productive Capacities,
Geneva, Unctad..
Valensisi, G. and Davis, J. (2011), ‘Least developed countries and the
green transition: towards a renewed political economy agenda’, Merit
Working Paper November 2011.
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Gehl Sampath, P. (forthcoming), Sustainable industrialisation in Africa,
Palgrave Macmillan.
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Thanks for your attention!