The Challenge for International Institutions
Edited by John-ren Chen and David Sapsford
Chapter 4: Global Development and Industrialization
Sanjaya Lall INTRODUCTION Globalization is perhaps the most pervasive and powerful inﬂuence on industrialization today. As the embodiment of technological progress and more open markets, it offers enormous productive beneﬁts to developing countries. Indeed the current advocacy of ‘openness’ is premised on such productive potential. That the potential is real is not in doubt. What is in doubt is how developing countries can best exploit it. One strand of globalization advocacy argues that this is best done by neoliberal policies, a withdrawal of the state from all economic activity apart from the fundamental provision of law and order and basic public goods. In a more moderate version, this strand admits a larger role for the government, but a ‘market-friendly’ one where it does not inﬂuence the allocation of resources at the activity level (it does not, in the jargon, ‘exercise selectivity’). The underlying assumptions of both approaches are that markets are efﬁcient and governments inefﬁcient and that technology ﬂows across countries most rapidly and effectively (in terms of its absorption and use) via free market channels. Neither assumption is justiﬁed. There is a large literature on this subject that will not be reviewed here. The purpose of this chapter is to describe the recent evolution of the industrial economy in the developing world and show that, while globalization is catalysing rapid growth in some countries it is also driving a growing wedge between the (relatively few) successful countries and the (large mass of) others....
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