How Countries Get Rich

Foreign Policy: Seven Questions: How Countries Get Rich:

Michael Spence: I was surprised by two things. One, how important the global economy is for developing countries both in terms of demand, meaning the size of the market and your ability to expand it once you get a cost position, and also from the point of view of importing technology or knowledge. But the biggest surprise was how important political leadership is in looking at cases of sustained high growth in developing countries. There’s a whole lot of consensus building and picking the right model, getting everybody on board, making deals with stakeholders like labor and business, and a persistent kind of pragmatic approach with imperfect knowledge about how the economy is going to respond to policy. I started out thinking this was a subject that was mainly about economics, and I ended up thinking that was about half of it, but the other half is really political.

"MS: I don’t think there’s any kind of secret. There are certainly common characteristics of the sustained high-growth cases, and they’re described in some detail in the report. I don’t view them as secrets. But we haven’t been able to find a case where, if you avoid the general approach that’s described there—

1. engagement with the global economy;
2. being careful to bring everybody on board;
3. very high savings and investment levels;
4. a stable macro environment and
5. a pretty heavy reliance on the basic characteristics of market allocation, price signals, and stuff; and
6. being willing to put up with rather chaotic microeconomic dynamics

—you can sustain high growth."

A. Michael Spence is Philip H. Knight professor, emeritus, and former dean of the Stanford Graduate School of Business. A senior fellow at the Hoover Institution, he is the 2001 winner of the Nobel Prize in economics.