Abstract
In his most recent works, Nobel Laureate Joseph Stiglitz postulates that the current economic malaise in the developed countries should not simply be interpreted as the aftermath of the Global Financial Crisis of 2008. He believes that it is the manifestation of economic forces that are much more profound: currently, the developed economies are in the throes of a difficult structural transformation that necessitates a move out of manufacturing, and a concomitant move into the services sector.
Stiglitz likens this necessary, yet still unfulfilled, transition to the first structural change that was required in the 1920s and 1930s when developed economies transitioned out of the agricultural sector and into manufacturing. This historical chapter was extremely painful: in his view, the Great Depression of the 1920s was directly related to the difficulties in completing the first stage of the structural transformation. But once the move out of agriculture was completed, countries enjoyed a period of unprecedented industrial growth and prosperity.
In this issue of the GJEME (4.2, May 2012 issue), all four articles revolve, in one way or another, around the topic of structural transformation. All four articles have a forward-looking, long-term orientation, and are essentially based on one fundamental question: how will, or how should (ideally), a given economy look in one or more generations from now?
There are different and sometimes competing theories as to the trajectories that economies typically travel as they develop, but maybe the most important consideration for emerging market economies is whether there are lessons that can be learnt from the experiences of the developed economies. Even beyond learning from previous experiences, the question is whether there are certain developments that the emerging market economies could even bypass.
Kohli, Szyf, and Arnold examine the question of long-term structural transformation very literally. Their article, “Construction and Analysis of a Global GDP Growth Model for 185 Countries through 2050” presents the construction and analysis of a long-run GDP growth model. The contribution of this model is that it estimates GDP as a function of labor force, capital stock, and total factor productivity (TFP) for 185 countries through 2050 under alternate scenarios. It provides ballpark estimates for a variety of economic indicators, such as real exchange rates, poverty indices, median incomes and percentiles, and the populations of the lower, middle, and upper income classes. It can further be used to model the stocks, accessibility, and investment requirements for 10 infrastructure sectors.
The article by Claudio Loser and José Fajgenbaum is titled, “A New Vision for Mexico 2042:Achieving Prosperity for All.” The basic objective of the article is to identify the priority issues that could influence Mexico’s long-term economic growth path, and to outline a balanced action program necessary to effectively address these issues. It includes reforms and actions that would simultaneously achieve much higher and more inclusive growth, and thus would restore the sense of pride and optimism among Mexicans that has been eroding in recent years. The issues discussed are of such importance that the legacy of the next Mexican Presidency could be determined by the administration’s willingness and ability to implement the article’s recommended agenda.
The next article in the lineup is by Binswanger-Mkhize, Mukherjee, and Parikh. As its title “India 2039—Transforming Agriculture: Productivity, Markets and Institutions” indicates, it looks nearly three decades into the future. It does not provide projections of the future, but rather presents alternate scenarios: an ideal vision of India’s agricultural sector in 2039, based on a growth track that is possible. This visionary, idealized scenario stands in contrast to the “business-as-usual” scenario that is likely to occur if institutional and policy reforms are not implemented. If the ideal growth vision for agriculture is to be realized, the authors ask what then are the requisite building blocks that should be put into place now? The central premise of the article is that Indian agriculture must undergo a fundamental transformation between now and 2039, both on the demand and supply side, by emphasizing higher value outputs, increased productivity, and redefined public and private sector roles. Driving this transformation will be the broader trends in the wider Indian and global economies.
The last article in this issue is entitled, “New Directions for Water Management in Indian Agriculture,” by Richard Ackermann, and should be seen as the companion piece to the previous article on agricultural transformation in India by 2039. It is generally acknowledged that India already has a serious problem where its water resources are concerned; the problem will only become more attenuated as the country develops and the competition for finite water resources increases. In this article, the author proposes a paradigm shift in managing water resources in the future: the debate, Ackermann argues, should not be about whether surface water schemes are preferable to groundwater use, or more generally, how to build new infrastructure to increase water supplies. The fundamental concern should become how to best deliver reliable water services in order to improve agricultural productivity.
I hope that this issue of the GJEME will have provided our readers food for thought in imagining their own visions for structural transformations of the future. I leave you with an old Chinese proverb that succinctly summarizes what we—humanity—must contemplate as we collectively move towards our (interlinked) futures: “Unless you change direction, you are apt to end up where you are headed.”
As always, we look forward to your comments and reactions.