In Search of Convergence

A couple of years later, the Chinese company suggested that it take responsibility for procuring the parts. Later, it offered to handle international distribution of the final product. Then it offered to take on redesigning the computer itself. Soon enough, it was no longer clear what IBM was contributing to the arrangement.

Learning to master new technologies and tasks lies at the heart of the growth process. If, while learning, you face competition from those with experience, you will never live long enough to acquire the experience yourself. This has been the basic argument behind import-substitution strategies, which use trade barriers as their main policy instrument. The problem with trade protection is that restricting foreign competition also means preventing access to inputs and knowhow.

Participating in global value chains is an alternative way to learn by doing that is potentially more powerful than closing markets to foreign competition. It enables a parsimonious accumulation of productive capabilities by reducing the number of capabilities that need to be in place in order to get into business.

This strategy requires a highly open trade policy, because it requires sending goods across borders many times. But this does not imply laissez-faire; on the contrary, it requires activist policies in many areas, such as education and training, infrastructure, R&D, business promotion, and the development of links to the global economy.

Some dismiss this strategy, arguing that countries end up merely assembling other people’s stuff. But, as the famous astronomer Carl Sagan : If you want to make an apple pie from scratch, you must first invent the universe.

Ricardo Hausmann, a former minister of planning of Venezuela and former Chief Economist of the Inter-American Development Bank, is a professor of economics at Harvard University, where he is also Director of the Center for International Development.

Copyright: Project Syndicate, 2014.