Thursday, July 31, 2014

Development recipes (by Ricardo Hausmann)

The other day I read a very interesting article on Project Syndicate (link) by Ricardo Hausmann (Director of Harvard's Center for International Development and Professor of the Practice of Economic Development at the Kennedy School of Government; link).

The title of the article is 'The Real Raw Material of Wealth' and he argues that mineral beneficiation (also referred to as value-added processing, '...the transformation of a primary material to a more finished product, which has a higher export sales value'; see link) is not the (only or best) way to go for developing countries.

...The moral of the story is that adding value to raw materials is one path to diversification, but not necessarily a long or fruitful one. Countries are not limited by the raw materials they have. After all, Switzerland has no cocoa, and China does not make advanced memory chips. That has not prevented these countries from taking a dominant position in the market for chocolate and computers, respectively.
His argument is powerful and he illustrates with excellent examples.  At one point he writes that...
...the more promising paths to development do not involve adding value to your raw materials – but adding capabilities to your capabilities...

Anyone listening in Greece?

(the link to the article is here)

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