Dani Rodrik: evaluation

Transcript context

…That seems to make it culture. If you want to talk about culture, let’s open up a big parenthesis and get into that. I don’t know exactly where institutions and organizations and incentives move into a domain where we start calling it culture. Culture is back in economics. I still have to be convinced that it’s actually adding a significant amount to what we learn. Let me get back to the question about manufacturing. One thing I said is that it’s much easier to move technology. If you’ve seen the way that Toyota manufactures cars in Japan or in the United States or in South Africa, it’s more or less the same. That is possible. The second thing, which I think is the microeconomics of why it is that manufacturing is so special is that manufacturing, standard, traditional manufacturing like making cars or garments or toys or wigs, has the feature that you can absorb a lot of very unskilled workers into that. Being a production worker, even in an auto factory, certainly in a footwear factory, doesn’t take a whole lot of skill. That means that you can absorb a lot of people off the countryside in a much more rapid way than you could in a lot of other activities where technology and skill are actually highly complementary. I heard once a Chinese entrepreneur telling me that she was running a footwear factory and she was hiring people from the countryside when the industry was starting. Basically, the only skill that was required to get that thing going was not whether they could read, not whether they were numerate, but basically whether they could do this with their hands. Basic eye-hand coordination is all the skill that was required. You could put thousands of people into these factories. The fact that you can absorb a lot of people, you can increase their productivity threefold, fourfold off the farm by putting them in these factories is an opportunity that very few other economic sectors provide. A third, and I’ll just mention it. A third thing, which is very important in manufacturing, is tradable. You don’t have to develop a whole industrial complex. You can import inputs and then export the outputs. You don’t require domestic demand to take off. You don’t require an economy-wide productivity revolution in order to have consumers to whom you can sell your output. You can simply sell it on world markets. What that means is that it’s enough to develop mastery in one segment of manufacturing at a time. That provides the kind of engine that you need. Compare that with the kind of transformation you need in services where most of the output has to be sold domestically. You need basically everybody’s incomes to grow, every sector to experience a productivity increase so you have a large enough market that you can sell. Otherwise, any service sector that is doing really well eventually is going to experience very rapid terms of trade deterioration domestically. ase so you have a large enough market that you can sell. Otherwise, any service sector that is doing really well eventually is going to experience very rapid terms of trade deterioration domestically. Those things, the transferability of the technology, the fact that it can absorb a lot of unskilled workers — traditionally, this is what’s changing — off the countryside, or out of informality and tradability I think is what makes manufacturing, historically has made it special.…

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