What are the Challenges of Economic Growth?

The challenges of economic growth are much altered in different countries. The U.S. and Europe face a convinced set of issues that look very different from the issues confronted in China or India, or the issues confronted in the Americas or in Sub-Saharan Africa.

It would not be astute to shelter all areas of the world with the same meeting. There is a subsection of countries in the unindustrialized world that are rising faster than the rest and are treatment to touch towards the established world, such as Bangladesh, China, India, Thailand, and Vietnam. These countries are poised for growth, so you could say “the check is in the mail.” They just need to keep the growth development going and they face a certain set of challenges in doing so.

By distinction, in Latin America and Sub-Saharan Africa, countries just ended a very fruitful decade of economic growth that was pushed by high commodity prices and cheap access to capital. Right now, development in these regions has slowed down extremely and generating a more dynamic situation successful forward looks much more challenging, because they lack non-resource dynamic export industries that can produce the dynamism that the resource sector no longer can.

So my query would be, “Why does Asia look more promising than the Americas and Sub-Saharan Africa?”

In the financial growing process, countries in the emergent world do not cultivate by making more of the same. In fact, more of the same is not the method rich countries cultivate either. In the process of economic growing, countries change what they do. They change what they’re good at. They evolve their relative benefit. So while Israel used to export oranges, now they export IPOs of high-tech firms. Turkey used to export olive oil. Now they export cars and electronics. They do this because they acquire new productive abilities; they acquire know-how and technology that allows them to do more diverse and valuable things.

Some industries are better stepping-stones than other industries for this process. So if a country is good at producing tea or at oil extraction, these industries don’t naturally prepare it for the next thing. But there’s a much more parsimonious path if you’re moving from garments, to textiles, to toys, to electronics, and to cars, because each new industry can build on the capabilities that were acquired for the previous industry.

To examine which industries are ripe for the next stage of growth in a country we look at how technologically close are those industries to the ones the country now has. We have slow the understanding of all pairs of exported products and we can look at what products a country is already good at and what are the most related products that they have yet to develop. This has already been automatic in an online tool we call the Atlas of Economic Complexity. There you can discover any country and any industry. It is this tool that tenancies me say that the opportunities for further divergence into more complex products are greater in India, Thailand, Indonesia, Vietnam, Mexico and China than in most of South America or Sub-Saharan Africa.

For countries in South America and Sub-Saharan Africa, the industries in which they excel are often lousy stepping-stones for further change, meaning that, they require capabilities that are not easily reallocated towards other industries. For these countries, the challenge is more important. They need policies that more deliberately address the chicken and egg problems that always bedevil the diversification process.

New actions always face this chicken-and-egg problem. A country cannot make wristwatches if it doesn’t have watchmakers. But you don’t want to become a watchmaker in a country that doesn’t make watches. Even if you wanted to become a watchmaker, you wouldn’t have other watchmakers to learn from because nobody is making watches. This requires a government that can play a smart “coordinator” role, which most governments are not set up to do.

So I have faith in that growth strategies need to be focused on classifying new modification opportunities and having an avant-garde government annoying to solve the harmonization disappointments that these face. It is not about relieving for the market but to solve the market failures related with chicken-and-egg problems that are omnipresent in this area. The jobs of the future will be in these new industries directly and in the multiplier effect in the rest of the economy that these industries will have by demanding inputs from others or through the local expenditure of the incomes that they engender.

For many countries in the unindustrialized world, growth is limited by the size and vigor of the industries that can sell goods and services abroad. This requires these industries to be modest enough so that foreigners are willing to buy from them, given that they have so many other options to buy from. The speed at which these activities grow eventually determines the speed at which the whole economy grows.

What’s the challenge?

Will the recent financial crisis and the downturn in the global economy change the shape of capitalism as we know it today and how has the UK been impacted?

Youth unemployment

Definition: “The youth unemployment rate is the proportion of thriftily active young people (aged 16 to 24) that are out of work.”

Reasons for youth unemployment in the UK include:

1) Lack of qualifications
2) Geographical unemployment: Youth unemployment is concentrated in certain areas, particularly where there is a cycle of low achievement.
3) Cultural & Social Factors: Youth unemployment is often highest amongst deprived areas.

NEETs

Neet stands for Not in Education, Employment or Training

§  28% of unemployed 16-24 year olds had been unemployed for over 12 months in January to March 2014.

§  From January to March 2014 975,000 young people in the UK were NEET

§  27% The UK’s highest youth unemployment rate is in the North East region, with over 1 in 4 economically active young people

§  17% The South West region has the UK’s lowest youth unemployment rate, with less than 1 in 5 economically active young people unemployed.

§  Cities with high youth unemployment rates (above 25%) in 2012-2013:

Sources: ONS, 2014, the Work Foundation