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Global Development and Poverty Reduction

The Challenge for International Institutions

Edited by John-ren Chen and David Sapsford

At the beginning of the third millennium, underdevelopment and poverty continue to remain critical problems on a global scale. The purpose of this volume is to explore the various ways in which the institutions of the global economy might rise to the challenges posed by the twin goals of increasing the pace of global development and alleviating poverty.
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Chapter 4: Global Development and Industrialization

Sanjaya Lall


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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