CIAO DATE: 09/2011
June 2011
Danish Institute for International Studies
For the sake of less developed countries, it is time to adjust the discourses of international development assistance on poverty reduction. History has repeatedly shown that the single most important thing that distinguished rich countries from poor ones is basically their higher capabilities in manufacturing. We have to shift the discussion about ending world poverty back to one about structural transformation of the economy and increasing technological capabilities. A new working paper by Lindsay Whitfield, Project Senior Researcher at DIIS, attempts to do so by reviewing new and old literature explaining why some countries are rich and others are poor. The paper argues countries in the West achieved systematic changes in the production structure of their economies which led to sustainable economic growth and generalized improvements in living standards. Recently developed economies (post-World War II) and emerging economies imitated their economic structures. The process of economic development is characterized by productivity growth. High and rising standard of living is ultimately based on the productivity with which capital and labor are employed. It is not the transition from agriculture to industrialization per se, but a change in economic activities from ones of low productivity to high productivity.
Resource link: How countries become rich and reduce poverty: A review of heterodox explanations of economic development [PDF] - 367K