Policy Implications for Developed/Developing Nations Study Guide Flashcards
How does the 2nd unbundling reshape economic policies?
Social, Education, Competitiveness, Industrial, Trade
Social Policy: 2nd unbundling reshape economic policy
- Growth requires changes and changes require political support
- Political support requires sharing of gains and pains of globalization -> especially important as the social contract between labour and technology (or labour and capital/skilled labour) is being tested by the 2nd unbundling
- Today institutions and policies still crafted for 1st unbundling environments with a sector and group focus:
a) Labour unions, industry associations, government departments
b) Economic policies for “sunset” and “sunrise” sectors
Since more individual, harder for everybody to gain at the same time
Capital and labour can be separated at same stage for production
Social Policy: Rethink each type of economic policy?
- Protect workers, not jobs
a) Domestic flexibility may reduce offshoring of jobs
b) Offshoring ultimate flexibility for firms
c) Health coverage, old-age pension flexibility, unemployment insurance, income support - 2nd unbundling suggests typical worker will change jobs/occupations several times in working life
d) Traditional model of staying at a job for 40 years is not typical
Education Policy: 2nd unbundling reshape economic policy
- 1st unbundling globalization
- -Operates slowly (controlled by economic liberalization)
- -Predictable shift to comparative advantage sectors
- -We can see things coming, takes a minimum 5-10 years for change
- Education fosters adjustment and “upgrading”
- 2nd unbundling globalization: unpredictable and sudden
- -Workers will change jobs more frequently
- -Need to acquire new skills. Versatility and specialization are important
Education Policy: Rethink each type of economic policy?
- Learn how to learn, not just learn things
- -Shorter, broader education
- -More focus on retraining and retrain-ability
- Learning a combination of skills (psychology and marketing; computer science and economics; statistics and health science..)
Finding the sweet spot between versatility and specialization
Competitiveness Policy: 2nd unbundling reshape economic policy
- Distinguish carefully between factors of production: internationally mobile and immobile
- Both matter, both contribute to national income, but domestic taxpayers subsidizing something that leaves a nation is less obvious
- Need to think about “stickiness” of factors in addition to positive externalities/spillovers benefits
- Think of productive factors as having two features:
- -Positive spillovers (candidate for government promotion)
- -Stickiness (will actually stay in nation promoting it)
Competitiveness Policy: Rethink each type of economic policy?
- People and skills are the most important factors of production regarding competitiveness policy associated with 2nd unbundling
- Rich, diverse set of skilled workers is both sticky and has positive externalities especially when there is agglomeration of these workers
- Skill-cluster is more than the sum of its parts: there are positive externalities (external economies of scale) -> Agglomeration effects create external economies of scale because there are positive externalities associated with agglomeration effects
- Human capital is also flexible and can adapt to changing demands
Industrial Policy: 2nd unbundling reshape economic policy
- The typical industrial policy of yesterday: promoting manufacturing
- Today, good manufacturing jobs without the manufacturing
- -Servicification of manufacturing implies that the good jobs in manufacturing are with the services related to manufacturing, not with production itself
- -“Compufacturing” implies the need for highly skilled jobs
- Cities are more than ever the engine of growth
Dilemma: do you promote cities because productivity will rise through them OR do you promote regions through re-distributive policies since you do not want these regions to fall behind?
Industrial Policy: Rethink each type of economic policy?
G7 policymakers should:
- Stop thinking manufacturing exports, and start thinking service inputs into manufactured exports
- Stop thinking good sectors, and start thinking about good (service) jobs
- Stop thinking of domestic factories as the industrial base, and start thinking of the service sector as the 21st century industrial base
- Stop thinking of cities as a collection of people, and start thinking of cities as production hubs that nurture rapid recombination of diverse, world-class services
Trade Policy: 2nd unbundling reshape economic policy
- 20th century trade: goods crossing borders; but created under same roof
- 21st century trade: goods/know-how are moving; more individual, countries need to rethink
Trade Policy: Rethink each type of economic policy?
Key rethinks are necessary and based on:
- Intra-factory flows
- De-nationalized comparative advantage
- “Nexus” (=connections, links) of cross-border flows creating a “nexus” of necessary disciplines
Regional trade agreements are more important than WTO since things are more “one on one” rather than “multilateral”
Flying geese vs ying starlings patterns to development strategies
- Old industrialization strategy:
- -Build own industrial base (Korea, Taiwan, US, Germany, Japan)
- -Build a supply chain (e.g. Korea and Malaysia)
- New industrialization strategy: join a supply chain (Thailand) and then “move up the value chain”
De-nationalized comparative advantage
Malaysia focused on “building” the supply chain
Thailand focused on “joining” the supply chain (with Japanese firms in particular)
