Thursday, April 29, 2010

Post-crisis trade recovering (but not fast enough)!

Merchandise trade volume grew in the Q4 2009 in the G7 countries, albeit at a slower pace than in Q3 2009. Though trade volumes and values have recovered since the plunge in Q3 2008 and Q1 2009, their level is still below the pre-crisis levels of mid-2008 (by almost 20 percent lower to pre-crisis level). Import and export volumes from G7 countries rose 3.1% and 3.9% respectively. The more rise in imports by G7 countries, the better is the chance of developing countries benefiting from the trade recovery, assuming that majority of imports by G7 countries come from the developing countries!
 Here is real GDP figures (see the plunge!)

Industrial policy is back: Rodrik

Rodrik argues industrial policy was never dead! Successful economies always used it.

British Prime Minister Gordon Brown promotes it as a vehicle for creating high-skill jobs. French President Nicolas Sarkozy talks about using it to keep industrial jobs in France. The World Bank’s chief economist, Justin Lin, openly supports it to speed up structural change in developing nations. McKinsey is advising governments on how to do it right.

Industrial policy is back.

In fact, industrial policy never went out of fashion. Economists enamored of the neo-liberal

Washington Consensus may have written it off, but successful economies have always relied on government policies that promote growth by accelerating structural transformation.

The shift toward embracing industrial policy is therefore a welcome acknowledgement of what sensible analysts of economic growth have always known: developing new industries often requires a nudge from government. The nudge can take the form of subsidies, loans, infrastructure, and other kinds of support. But scratch the surface of any new successful industry anywhere, and more likely than not you will find government assistance lurking beneath.