From Aid to Equality
The UN’s 66-Year-Old Virgin
The UN has just announced a big new idea in the war on global poverty, in its just-released Industrial Development Report 2009. In the words of the United Nations Industrial Development Organization (UNIDO) Director General, Dr Kandeh Yumkella, “Our Report represents a major conceptual breakthrough on how to tackle global poverty through sustainable industrial development.” What was the breakthrough idea? Take government action to reap increasing returns to scale to industrial production, to get out of the free market’s “poverty trap” of low-scale industrial production.
The only problem with this major conceptual breakthrough is that it is 66 years old. It was presented in almost the same words in one of the first and most famous articles of development economics, by Paul Rosenstein-Rodan in 1943:
| Paul Rosenstein-Rodan 1943 | UNIDO report 2009 |
| “It is generally agreed that industrialisation of "international depressed areas " …is the way of achieving a more equal distribution of income between different areas of the world by raising incomes in depressed areas ….” | “Industrialization is integral to economic development… [For] the bottom billion, manufactured exports are likely to offer more scope for long term productivity growth than either agriculture or natural resources.” |
| “If we create a sufficiently large investment unit by including all the new industries of the region, external economies will become internal profits out of which dividends may be paid easily.” | “Because they still do not have industrial agglomerations, they are unable to be competitive against countries that have…there is a threshold of competitiveness to be surmounted. Once that threshold is crossed, growth is explosive.” |
| “If the industrialization of international depressed areas were to rely entirely on the normal incentive of private entrepreneurs, the process would … be very much slower.” | “There is an important role for
public action, as purely market-driven processes will yield prolonged stagnation.” |
Professor Rosenstein-Rodan in 1943 can be saluted for thinking of a creative new theory. Today’s authors (such as lead author Paul Collier) seem a bit less creative for recycling the exact same theory, especially after 66 years of experience that contradicted every prediction of this theory. Initially very poor countries like South Korea and more recently China and India had no trouble with industrial growth through market forces, and virtually every attempt at state-forced industrialization has failed. UNIDO endorsed many of these state industrialization attempts in the countries that, as a result of many such failures, Collier now calls the Bottom Billion.
Recyling old failed ideas after 66 years might be another small hint that UN accountability is a wee bit deficient.