01 December 2005
WP094 | The East Asian Experience:The Poverty of “Picking Winners”
Abstract
Many leaders in Africa argue that East Asia’s success in economic growth and development is due to special prowess in “picking winners.” That is, the state is assumed to have adequately identified future growth areas and effectively channelled investments into specific firms or industries. We argue, however, that this assessment is not accurate. Even where states have attempted to follow this path, they have frequently made a hash of it. The wrong sectors or firms have been identified. Public monies have been squandered or siphoned off for private enrichment. Instead, the successful East Asian states have focused their attention on consistently creating competitive market environments. They have invested in the hard and soft infrastructure (like road, ports and education) necessary for success in an increasingly globalized economy. It is these types of policies that currently hold out the greatest prospects for growth in Africa.
Abstract
Many leaders in Africa argue that East Asia’s success in economic growth and development is due to special prowess in “picking winners.” That is, the state is assumed to have adequately identified future growth areas and effectively channelled investments into specific firms or industries. We argue, however, that this assessment is not accurate. Even where states have attempted to follow this path, they have frequently made a hash of it. The wrong sectors or firms have been identified. Public monies have been squandered or siphoned off for private enrichment. Instead, the successful East Asian states have focused their attention on consistently creating competitive market environments. They have invested in the hard and soft infrastructure (like road, ports and education) necessary for success in an increasingly globalized economy. It is these types of policies that currently hold out the greatest prospects for growth in Africa.
