"For all its faults, IS promoted rapid structural change. Labor moved from agriculture to industry, and within industry from lower-productivity activities to higher-productivity ones. So much for the inherent inefficiency of IS policies!Good thing I was too lazy to read that IDB report when it came out, because instead of giving you another dose of my ramblings, I could instead bring you Rodrik's far more insightful account. In any case, go check it out, here.
Under WC, firms and industries were able to accomplish a comparable rate of productivity growth, but they did so by shedding (rather than hiring) labor. The displaced labor went not to higher-productivity activities, but to less productive lines of work such as informality and various services. In other words, the WC ended up promoting the wrong kind of structural change."
Thursday, June 17, 2010
Dani "master of development policy" Rodrik has a nice breakdown of a recent Inter-American Development Bank report on productivity changes in Latin America. Discussing the changes in productivity during the years of import substitution and then during the Washington Consensus, Rodrik writes: