Rethinking Growth: Why Manufacturing Isn't the Only Key

A study referenced in The Economist (March 25), conducted by two highly respected economists (one a former Executive Director of the IMF and one a professor at a US university), has provided a crucial insight into economic development.

The research focused on the growth of five large emerging economies: China, India, Mexico, Indonesia, and South Africa. It showed that sensible investments in their rural economies—particularly in infrastructure like education, rural roads, bridges, markets, refrigeration, and transport—provided a greater return in terms of improving the livelihoods of local people than investment in industry.

Why This Research Matters

This piece of research is of considerable importance because it undermines the current idea that only investment in manufacturing is the key to the growth of economies and of employment.

For poor countries across Africa, the conclusions are all the more important because they support the proposal of those few economists who argue that for rural people everywhere, the future must be in agriculture.

The Debt Trap Facing Poor Nations

Poor countries are stuck. They face the impossibility of diversifying into manufacturing, since they are the last to join the table of industrialisation and cannot diversify. Compounding this, they also have to repay their enormous debts to the international financial community.

These debts, all in repayment to the richest countries that lend via the IMF, the World Bank, or other International Financial Institutions, take huge chunks of their incomes.

In 20 countries across sub-Saharan Africa, these repayments amount to more than the health or education budgets of some of their countries and in some cases more than these two combined.

In other words, the education or health of their own citizens comes after the money owed to the rich world.

Understanding the Rules

These absurd rules that trap the poor countries into ever greater poverty are analysed in full in my book, THE GLOBAL FAMINE GAMES: TOXIC AID, A WEAPON OF WAR, PERVERSE ECONOMICS.