Assistant Professor at the University of Cambridge • Author of THE FUTURE OF THE FACTORY • Political economy and development economics •
@Dept_of_POLIS
Here's my take on this year's Nobel prize in economics.
I highlight that it exposes how the economics discipline fails to ask critical questions about colonialism, imperialism and the universality of western institutions.
The work by today's winners of the Nobel Prize in economics has been challenged by scholars like Yuen Yuen Ang, Mushtaq Khan, and Ha-Joon Chang. Read them!
Then you will understand that enforcing the North's capitalist institutions in the South does not lead to development.
BREAKING NEWS
The Royal Swedish Academy of Sciences has decided to award the 2024 Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel to Daron Acemoglu, Simon Johnson and James A. Robinson “for studies of how institutions are formed and affect prosperity.”
I just finished reading "The Road to Freedom" by Joseph Stiglitz. It's fantastic.
It's a detailed critique of neoliberalism and the concept of freedom as formulated by the likes of Hayek and Friedman.
If you read only one piece of work by Stiglitz, make it this book.
According to Stiglitz, neoliberal capitalism has made it possible for the wealthy to buy political power.
In turn, this has undermined democratic institutions, contributing to new types of fascism.
"The challenges to democracy have never been greater in my lifetime."
Acemoglu after receiving the Nobel prize: “Rather than asking whether colonialism is good or bad, we note that different colonial strategies have led to different institutional patterns that have persisted over time.”
Please, remind me of all those time colonialism was good.
Elon Musk says he embraces free-market capitalism. I can't think of many people more dependent on state support than him.
He's built his companies on the backs of government subsidies, public technology, tax breaks, government loans, and exclusive government contracts.
I'd like to remind people of this incredibly important paper debunking negative stereotypes about China's rise in Africa.
It finds that Chinese firms in Africa have a positive impact on economic development, capacity building, and innovation.
What does industrial policy look like in practice?
I've put together this taxonomy, aiming to cover the most commonly used industrial policies. It consists of 5 policy areas and 25 policy instruments.
Back in 2010 when I was doing my master's at SOAS, this paper by Robert Wade was the paper that made me really passionate about development economics. I remember underlining almost every sentence.
Dani Rodrik has a new 'trilemma' for the world economy.
According to him, we can only achieve two of the following three at the same time:
1) combat climate change
2) boost the middle class in advanced economies
3) reduce global poverty
It's been an absolute joy reading this book by Eric Helleiner. It provides an impressively rich and diverse intellectual history of neomercantilism, industrial policy, and trade policy. And it's super timely now that trade wars are reemerging. There's no other book like it.
This book completely changed my life.
It was the first book I read during my BA in economics that wasn't a textbook. Not only did it expose me more to development economics but also to 'real-world' economics, debunking the neoclassical models of trade I'd been taught.
The book
Here are three books that challenge the work by last week's winners of the Nobel prize in economics.
In different ways, all these books highlight the shortcomings of the West's model of 'good governance'.
People seemed to appreciate this reading list, so I'm posting it again (with a small update).
It's the 10 key books in the reading list for my course, "Development Economics", which I teach at Cambridge.
I've now made this figure more accurate.
China dominates the entire range of renewable energy manufacturing even more than I initially suggested.
These numbers are astonishing.
Here's an incredibly important segment from one of Mushtaq Khan's papers explicitly critiquing AJR.
This is pretty dark reading, covering not only methodological flaws but also racism and the violent process of settler colonialism.
Link:
I honestly mean no disrespect to my friends in the US when I say this: the US is the prime example of how high GDP does not translate into high living standards.
There are about 50 countries in the world with higher life expectancy than the US, despite the insane amount of money
Controversial question: The US has very high GDP per capita, even among G7 countries. Some of this is higher productivity. But how much is due to inefficiencies, transaction costs, and socially wasteful activity?
US spending on healthcare, finance, higher education, legal
I just finished reading this degrowth hit piece everyone's tweeting about. It's a hugely problematic paper.
Degrowth is not without flaws. But the problem with this hit piece is that it essentially labels the entire degrowth paradigm as 'unscientific' without much evidence.
If I had to choose only one paper to explain the rise of the Asian 'tigers', this would be it. For some reason it's gone under the radar.
It summarises economic development in the East Asian developmental states really well, with respect to both internal and external factors.
If you don't have a background in economics and would like to learn more about it, Ha-Joon Chang's "Economics: The User's Guide" would be my number 1 recommendation.
It's not only an educational book, it's also accessible and fun.
Karl Marx and Adam Smith, despite their differences, approached economics in a similar way.
They both understood that economics is not a value neutral science. According to Marx and Smith, to be an economist is also to be a philosopher.
Development economics has gradually become dominated by the idea that 'microinterventions' will solve global poverty. It's a dangerous idea because, well, it doesn't solve global poverty.
In this article in the FT, David Pilling (
@davidpilling
) criticises this idea really well.
I agree with Milanovic: It's become clear that the West actually wants global inequality, simply because it doesn't want to lose its dominant position in the world economy.
What industrial policy, tariff wars, economic coercion and trade blocs mean is not only a reversal of globalization but recognition that the West is not willing to accept convergence of incomes & lessening of global inequality b/c it sees it as a threat to its dominant role.
Just your regular reminder that the Global South is NOT catching up with the Global North in terms of GDP/income.
In fact, with the exception of China, we are witnessing divergence between the South and North rather than convergence.
The state intervenes in a variety of ways to drive economic development, innovation, and technological progress.
I've put together this table, aiming to cover all such examples of state intervention.
I'm excited to announce that my book, "The Future of the Factory: How Megatrends are Changing Industrialization", will hit the shelves later this year with Oxford University Press.
This is a must-read. A powerful critique of mainstream economics coming from Angus Deaton, a recent Nobel Prize winner in economics who has spent most of his career within the mainstream.
He highlights five major deficiencies of mainstream economics, and they are spot on: the
This is misleading.
Setting the poverty line at $2.15/day (adjusted for purchasing power) is appallingly low. It should be set at around $10/day, maybe even higher.
Even a poverty line as low as $6.85/day reveals almost no reduction in global poverty since 1990.
What many people don't know: recent decades have seen incredible reductions in poverty. The poverty rate has *never before* been this low in human history.
What new data is now revealing: after the setback from Covid, poverty reduction now continues!
Yuen Yuen Ang explicitly disagrees with AJRs theory of institutions and development in the context of lower-income countries.
But she doesn't stop there. She even claims that the West were riddled with 'bad' institutions during their development process.
Congrats to AJR! 🌟 They are brilliant.
But I don't agree with their idealized portrayal of institutions in Western development
It is historically inaccurate, if not ideologized
Thus, not only do they struggle to explain China, they also can't explain why Western economies
The combined revenue of the world's five largest academic publishing houses in 2023: $8.8 billion
The total amount these publishing houses paid their authors and reviewers that year: $0
One of my favourite lectures to deliver is the very first lecture I give at the start of the academic year at Cambridge.
It's titled, "Neoliberalism and Its Global Deployment", and here is the reading list for my upcoming version of that lecture.
What's the greatest obstacle to manufacturing-led development in the Global South?
In my paper just published, I argue that it's power asymmetries in the world economy, not automation or the rise of services.
Read and download the paper for free:
The Economist is missing the point here.
Economic and productivity growth should be seen as means to improve well-being. On this front, Europe is doing much better than the US.
In the Human Development Index, the top 10 are almost all European countries. The US is number 20.
Europe’s economic decline is becoming more painful. In 1995 European productivity was 95% of America’s; today it is less than 80%, which is a big enough gap for holidaymakers to notice.
The continent’s failure to exploit its scale is a problem 👇
Max Roser just published a great article in the New York Times, calling for a new international poverty line.
He suggests a poverty line of $30 per day. Using this line, 83% of the world still lives in poverty.
This is shocking. We are miles away from eliminating poverty.
This is a groundbreaking article by
@jmahumadaf
. For too long, neoliberals have hijacked "freedom". This article introduces freedom as national independence, achieved through state intervention, industrialisation, and breaking free from the periphery.
Industrial policy is increasingly about national security. Terms like 'de-risking' and 'supply chain resilience' have become commonplace.
This has global economic ramifications: we are now firmly in an era of trade wars and zero-sum games.
Protectionism has been essential in almost all cases of successful economic development.
I've written an article in defence of protectionism as a tool for development, especially for lower-income countries.
Dani Rodrik compares the practice of industrial policy to that of venture capital. It's a brilliant comparison, one that I'm definitely going to incorporate into my teaching on industrial policy.
In case you forgot how the IMF distributed its historic $650bn pandemic support package among its member states, I'm happy to remind you:
Low-income countries: $21bn
Middle-income countries: $254bn
High-income countries: $375bn
You can't make this stuff up.
I should also mention Ha-Joon Chang's 12-part online lecture series, "Economics for People", as a great resource for learning more about economics.
Really well-produced, informative, and accessible.
If you don't have a background in economics and would like to learn more about it, Ha-Joon Chang's "Economics: The User's Guide" would be my number 1 recommendation.
It's not only an educational book, it's also accessible and fun.
This article on the "manufacturing delusion" in The Economist gets some things right but many things wrong.
Here's a thread on what I see as the shortcomings of the article. I'm using a lot of evidence from my book, The Future of the Factory, which I'll link in at the end. /1
Right, thread time. My latest for
@TheEconomist
looks at the global
#manufacturing
delusion. As a German, I have some experience dealing with people who fall for it.
Don't be those people. /1
I remember thinking how Graeber's concept of 'bullshit jobs' played out perfectly during the pandemic.
Who were the essential workers? They were definitely not bankers, management consultants, or corporate lawyers.
RIP David Graeber, we miss your insights.
You want to bookmark this:
“The rich world does not truly want incomes to converge between rich and poor, and as such, there is no choice other than total reconstruction of our global economic architecture.”
- Branko Milanovic at NYC Progressive International event
The main problem with AJR is simple: it has led to a factually incorrect belief that certain Western capitalist institutions lead to economic development. An important consequence is that, in some ways, this has allowed the Washington Consensus to survive.
I'm sorry but Norway is not killing it, we're one of the world's largest oil exporters.
We love to portray ourselves as sustainable but our economy is completely dependent on oil.
We're the definition of green hypocrisy.
These numbers are insane.
I know that the US consumes a lot, but I am shocked to see that they account for more than 30% of the world's consumption.
Solutions to the climate crisis have to start with unsustainable consumption in the US.
(chart is via
@adam_tooze
chartbook).
This chart is worrying: Africa's manufacturing base has been eroding.
We need to care about this because industrialisation translates into both economic sovereignty and economic development.
We need to prioritise and support industrialisation in Africa.
The process of settler colonialism and the development of 'inclusive institutions' in AJRs framework involved intense violence — in many cases verging on genocide of native populations.
It's a mystery to me that AJR do not discuss the brutality of settler colonialism.
The Economist suggests that poor countries should liberalise. I'm not surprised. But I am surprised by the article's weak defence of liberalisation.
I would actually draw on the same examples that this article draws on to make a case against liberalisation:
(1) The return of
Africa and the Middle East combined make up only 3% of global manufacturing output.
If we are serious about global development, we need to prioritise the industrialisation of these two regions.
Here's how the IMF is distributing its historic $650bn pandemic support package among its member states:
Low-income countries: $21bn
Middle-income countries: $254bn
High-income countries: $375bn
You can't make this stuff up.
This is a momentous report.
Progressive International has published a program of action for a New International Economic Order.
It's a handbook that sets out how to transform our global economic architecture in the service of peace, justice, and shared prosperity.
What is "freedom" really?
In this excellent paper,
@jmahumadaf
shows how freedom can be understood as national independence, achieved through state intervention, industrialisation, and breaking free from the periphery.
1) My article on industrial policy in Ethiopia, South Korea and Taiwan has just been published in Third World Quarterly! Time for a 🍺.
I believe that the first 50 downloads are free through this link: .
Summary 👇
Some personal news:
I am delighted to be joining the University of Cambridge as a Lecturer, based at the Centre of Development Studies (
@CdsCambridge
) and the Department of Politics and International Studies (
@Dept_of_POLIS
).
Elon Musk's companies have received more than $15.4 billion in government contracts over the past decade.
Yes, this is the man who publicly scorns government intervention and embraces free-market capitalism.
This table sums up the problem with green growth.
We need some green growth, but current demand patterns for metals and minerals to feed the so-called green transition is unsustainable.
The solution is more public transport, not more electric vehicles.
This book is the strongest and most damning criticism of IMF-mandated austerity policies that I've come across.
It shows how IMF interventions in the global South between 1980 and 2019 have decreased the availability of social services, contributed to increasing income
📢 Finally available world-wide:
𝐀 𝐓𝐡𝐨𝐮𝐬𝐚𝐧𝐝 𝐂𝐮𝐭𝐬: 𝐒𝐨𝐜𝐢𝐚𝐥 𝐏𝐫𝐨𝐭𝐞𝐜𝐭𝐢𝐨𝐧 𝐢𝐧 𝐭𝐡𝐞 𝐀𝐠𝐞 𝐨𝐟 𝐀𝐮𝐬𝐭𝐞𝐫𝐢𝐭𝐲
@ThomStubbs
and I document the impact of 40 years of IMF-mandated austerity policies on the Global South.
What do we find?🧵
Today is the publication day of my book, "The Future of the Factory: How Megatrends are Changing Industrialization".
Order it via the publisher's website (OUP):
Order it via Amazon:
Huge congrats to
@nico_grau
for being appointed as Chile's Minister of the Economy in Boric's new cabinet.
Nicolas is also part of Ha-Joon Chang's reading group in Cambridge, and we of course expect him to carve out time for our future meetings! 😉
This is a shocking chart.
The US spends more on health care as % of GDP than other high-income countries but scores far worse on health system performance.
This is a prime example of when more spending (i.e., GDP growth) does not translate into higher living standards.
In case you missed Angus Deaton's powerful critique of mainstream economics earlier this year, here it is.
He highlights five major deficiencies of mainstream economics, and they are spot on.
1⃣The neglect of power structures in economic analyses
2⃣The marginalisation of
Industrial policy can be done in so many ways. Here are 5 of the most commonly used instruments I've observed:
- State-owned enterprises
- Trade policy
- Public R&D
- Long-term financing/lending
- Targeted business support
You may like or dislike it: industrial policy is receiving more attention than ever.
The 07/08 financial crisis, intensifying geopolitical tensions, and supply chain disruptions have all motivated governments to more actively pursue industrial policy.
The IMF is missing the point here.
Industrial policy has never been a magic bullet for economic growth. But without industrial policy, the prospect for economic growth and development is eliminated.
Industrial policy is on the rise, but new research shows that it is not a magic bullet for economic growth. Instead, fiscal policies that support innovation and technology diffusion more broadly—plus basic research—are the answer. Read our blog:
How important is industrial policy? Well, even governments that were ideologically opposed to state intervention used it.
In the 1980s, Reagan protected the US steel industry and Thatcher designed incentives to boost investment in the UK auto industry.
Which sectors of the economy should industrial policy target?
You'll find potential for value added within all sectors. But again and again, research shows that the manufacturing sector has the highest potential for innovation and trade.
NEW 🧵: Should industrial policy target manufacturing or services?
It should target both, but focus more on manufacturing as it remains the backbone of productivity growth and innovation.
Great piece by
@gilliantett
on the return of industrial policy.
But good industrial policy does not shy away from protectionism. The most successful models of industrial policy combine elements of both export orientation and import substitution.
Historically, inflation has been driven by rising wages, government spending and/or more expensive inputs. We are being told that this is the case now, too. This is simply not true. This time around, inflation is being driven by rising corporate profits.
I am so excited to be talking about my new book, The Future of the Factory, in London on 5 December. The event is extra special as it will be hosted at SOAS, my alma mater, by the exciting and recently established Development Leadership Dialogue Institute.
I will be joined in
The rise of China holds an incredibly important lesson for economic development: it's not enough to produce for multinational corporations based in wealthy countries. Ultimately, you have to challenge these corporations.
What a story. Ford CEO Jim Farley travels to China with his CFO in 2023 for the first time since the pandemic. They test drive an electric SUV from their Chinese joint venture partner Changan and suddenly realize Chinese automakers are now ahead of them.
Is automation stealing manufacturing jobs?
My paper, together with Christian Parschau, on the impact of automation on employment / job displacement has just been published in Geoforum.
You can read and download it for free:
Summary thread👇. 1/17
Don't assume that everyone knows what Political Economy is. I once introduced myself as a political economist at a workshop, and the person to my right laughed hysterically, thinking that I was making a joke about being an economist with political opinions.
There is a lot to learn from degrowth, we'd be stupid to dismiss it.
Coming from a 'pro-growth' camp, I meet resistance when I say this. What surprises me about this resistance is that many anti-degrowthers haven't engaged with degrowth literature — they just assume things.
“Markets are in the end political constructs in the sense that they are defined by a range of formal and informal institutions that embody certain rights and obligations”
- Ha-Joon Chang
Today's my first day in a new job at
@LSEIRDept
! I've already received so many warm and welcoming messages from new colleagues, and I'm excited to take on new teaching responsibilities and research projects in the field of international political economy.
Want to join my amazing department at the University of Cambridge? We are hiring for an Assistant Professor in Development Studies (permanent role). We are looking for someone working on Asia, Latin America, or the Middle East in the field of Development Studies, broadly defined.
1) My paper on industrial policy in the era of global value chains (GVCs) has just been published in World Economy.
It’s completely free to read and download (open access):
See below thread for a summary of the paper 👇
Stiglitz makes another important point: economic and political rights are, ultimately, inseparable.
Neoliberalism has led to a downward spiral of declining economic and political freedom for everyone except the rich. In this sense, neoliberalism is antithetical to democracy.
I was once at a panel w/ a well-known trade economist. He/she spoke in very general econ terms about tariffs, protection, industrial policy etc. but when the topic turned to China, he/she transformed from pure neoclassical to pure mercantilist in about 30 seconds.
This criticism of degrowth is problematic.
Degrowth calls for a reduction in energy and resource use in global North, not in the global South. In that sense, you'd expect more scholars in the global North to write about degrowth.
The US is known to preach the virtues of free trade to the rest of the world. But does the country practice what it preaches? Absolutely not.
In my article, "The free trade myth", I show how the US manipulates global markets for economic supremacy.
Industrial policy is receiving more attention than ever.
There are three major reasons for this: (1) more state intervention after the 07/08 crisis, (2) growing geopolitical tensions, and (3) efforts to strengthen domestic manufacturing in the wake of supply chain disruptions.
This IMF blog is missing the point. It implicitly suggests that countries that can't get industrial policy 'right' should be careful about using it.
I'd say that industrial policy is most important in those countries that are struggling to get it right!
The bar to get
I'm happy to share that you can now pre-order my book, "The Future of the Factory: How Megatrends are Changing Industrialization".
Follow this link to pre-order and to learn more about the book:
It remains a mystery to me how so many economists can only think of state intervention in the context of market failures (see excerpt from recent IMF speech below).
Do they not know that the creation, functioning and boundaries of markets are set by states?
For decades, the US has promoted free trade, but do they really practice it?
Spoiler: They don’t. Find out the truth in my latest article, "The Free Trade Myth," and learn how the US manipulates global markets for economic supremacy.
Read it now:
BYD's manufacturing operations are highly automated, yet they create thousands of jobs.
This is in line with evidence elsewhere too. I know it sounds paradoxical, but automation tends to have a net positive effect on job creation.
BYD Thailand plant: 10,000 jobs
BYD Mexico plant: expected 10,000 jobs
BYD Turkey plant: expected 5,000 direct jobs
BYD Hungary plant: thousands of workers
BYD Brazil plants: expected 5,000 jobs
BYD’s EV factories are highly automated. Yet they seem to create thousands of jobs.
Africa 'rising' narratives cannot be taken seriously when the 'rise' is based on an intensification of resource extraction, deepening dependency, increasing inequality and premature de-industrialisation.
Ian Taylor's work still reverberates:
Industrialisation is still vital to economic development but some countries are struggling to reap its benefits.
In this piece for
@ConversationUK
, I look at shifts in the global economy and what they mean for industrialisation and industrial policy.