Structural change and productivity growth, 20 years later: old problems, new opportunities

IntroductionNearly 20 years ago, ECLAC put forward a proposal for structural change and productivity growth with social equity. At the time, the countries of the region were emerging from the severe crisis of the 1980s, with all its associated difficulties in terms of internal stabilization and external adjustment, and headed into a decade of structural reform which heeded the call of the Washington Consensus. In the midst of perplexity and pessimism regarding the region's prospects, ECLAC espoused a view of the situation that ran counter to the extremely orthodox line of thought that marked economic policy tenets of the time.The idée-force underlying this view situated the region within the universe of developing countries and highlighted the deteriorating situation by using the metaphor of an "empty box" to symbolize the difficulties that the region was having in reconciling growth with social equity. This proposal for structural change and productivity growth was thus aimed at promoting economic expansion and social equity, not sequentially, but at one and the same time.In addressing the issue of economic growth, ECLAC started out by taking stock of the major changes that were then taking place in the world and the way in which they were redefining a recurring theme in its thinking: the generation and propagation of technical progress. It contended that, in order to achieve technical progress and boost productivity, the region's economies had to become more open, but it also drew a distinction between genuine and spurious competitiveness and emphasized the systemic nature of this phenomenon. At the same time, it maintained that the transition to greater economic openness should be gradual, should place priority on exports, and should be underpinned by a stable competitive real exchange rate. Unfortunately, the way in which the region's economies were opened up during the 1990s exhibited very few traces of these essential components of structural change.At the same time, given the absence of social equity, it was important to adopt an integrated view of development. This approach departed from unilateral perspectives according to which economic policies and social policies were two completely different and separate spheres of activity which would, nonetheless, naturally tend to balance each other. ECLAC argued that, without the type of growth that would strengthen the demand for skilled labour and create opportunities for small and medium-sized enterprises, it would be very difficult for the region to increase social equity or achieve a sustained reduction in poverty. This line of thinking clearly accorded preference to policies that would help attain both objectives. Hence the crucial importance of education as the foundation for this attempt to bring about structural change and productivity growth while achieving greater social equity.Throughout the 1990s and the early years of the following decade, ECLAC continued to develop various aspects of this integrated approach to structural change, at times focusing more on economic issues, at times highlighting social considerations, but at all times setting its proposals within the institutional context of the region. At no time did these shifts in emphasis detract from its integrated conceptualization of the development process. In fact, ECLAC has always approached economic, social and institutional issues as an integral set of interacting, mutually conditioning factors. How the relevant measures are organized and how much time is devoted to each dimension are also important factors, however. In recent works, we have stressed the social dimension, which, all the same, has invariably entailed economic and institutional considerations. This has certainly been the case in the documents issued most recently by ECLAC, such as Shaping the Future of Social Protection and Social Cohesion: inclusion and a sense of belonging. In the analysis presented in this volume, we will focus on economic and institutional issues: on the "what" and the "how" of our proposal for bringing about structural change and productivity growth in ways that are in keeping with the times, while remaining mindful of their social dimensions.The pace of the global changes that were discussed in our 1990 proposal has accelerated, and new actors have emerged which have significantly altered pre-existing balances in the world economy in terms of both supply and demand. These events have triggered major structural changes. The time has therefore come to re-examine our views on structural change and productivity growth in the light of new circumstances in order to determine if new opportunities can help to overcome old problems.The countries of Latin America and the Caribbean find themselves in varying positions in terms of competitiveness and learning, and it is on the basis of these positions, in conjunction with their stock of resources and capacities, that they take part in the global economy. Diversifying and developing these positions is the crux of any strategy for structural change and productivity growth. Although such strategies must clearly have national characteristics, closer coordination and greater economic integration among the countries of the region would be of enormous help in achieving greater economies of scale, complementarities and lessons learned.Moving forward with this task within the framework of each national reality will entail mobilizing a broad range of diffuse social energies, and public policy plays a key role in this respect. It is important, first of all, to organize each country's search for a medium- and long-term vision within the global context and catalyse efforts to detect present and future opportunities. Second, it is also crucial to build lasting alliances with the private sector based on reciprocal benefits and commitments that will make it possible to formulate and implement strategies for gradually making that vision a reality and taking advantage of the opportunities that present themselves.All of this requires the formation of a wide-ranging consensus capable of underpinning agreements in various spheres of national affairs. Viewed from this vantage point, the integrated approach to development that is so much a part of the Commission's thinking takes on renewed significance. Although proposals in given areas may be analytically separable, the type of broad national consensus that can make such proposals viable is necessarily multidimensional. In other words, in the fullest sense of the proposal for bringing about structural change and productivity growth with greater equity, social consensus-building must encompass an inseparable whole involving a unified array of agreements concerning growth, social equity and institutional development.Chapter I examines the region's performance in the world economy, along with the opportunities that are opening up for Latin America and the Caribbean in the new global economic environment. An analysis of long-term trends relating to convergence and disparities in per capita GDP is followed by an exploration of economic growth processes and structural changes in the production sector. The discussion then turns to the main changes that have occurred in the world economy from the standpoint of both the organization of production and business models and the appearance of a simultaneous shift towards the massification and stratification of demand at the international level. The final part of this chapter looks at the strengths of the region's economic performance in recent years and at basic lines of action for bringing about structural changes and productivity growth that will enable the countries to deepen and diversify the ways in which they position themselves within the international economy.Chapter II reviews the region's economic and export performance in the past quarter century. It begins by examining macroeconomic trends in the region, with emphasis on the internal and external elements that played a role in the slow, volatile economic growth that characterized the region from 1980 until its performance began to improve in 2003. It then goes on to analyse productivity gains as a growth factor and their close relationship to the dynamics of the production structure. Emphasis is placed on a number of productivity determinants, such as the application of knowledge to economic activities, the diversification of the production structure and the efficiency of service delivery with respect to physical infrastructure. The chapter concludes with a consideration of the way in which exports have helped to promote structural change and drive growth since 1980 through their aggregate contribution, product and market diversification, incorporation of knowledge and the technological externalities generated by trade and foreign direct investment.Technological dynamics in the region and opportunities for improving the performance of companies and the products they export are the main focus of chapter III. A comparison of national R&D efforts and their relative effectiveness is followed by an examination of corporate innovation in various countries of the region and an analysis of its impact on productivity, wages and exports. Obstacles to the further development of process and product innovations are also identified. The unit prices of exports are then used to assess the region's capacity for positioning itself in the international economy more successfully by adding quality to its exports. To this end, the quality of its current exports is evaluated by comparing the prices of goods exported by the region with those of similar goods from developed and developing regions. The region's share of world trade over the last decade, disaggregated by level of quality, is also analysed. Finally, in view of the importance of agricultural goods for Latin America and the Caribbean, a more extensive discussion is offered of the region's position in world (and especially developed-country) markets for these products. In the light of the evidence presented in the course of this analysis, a number of ways of improving that position in terms of export quality are explored.Chapter IV looks at the emerging opportunities for the countries of the region that are associated with multi-purpose technologies. To this end, a techno-economic paradigm is used that employs the shared evolutionary path of technological changes and economic development as a basis for understanding how the region reacts to and engages in the diffusion of these technologies in the economic and social spheres. The implications of information and communications (ICT) technologies are described, together with the elements that must be in place in order for society as a whole, the economic system, infrastructure and industry to adapt to the new processes and products that these technologies engender. The focus then turns to an analysis of the tendencies that are shaping corporate strategies and forms of industrial organization as they relate to the incipient diffusion of biotechnology. Consideration is also given to the efforts required to create a system capable of increasing and directing R&D and human resources in ways that will stimulate the adaptation and absorption of these new technologies.Given the heterogeneity of the Latin American and Caribbean countries' production structures, any analysis of opportunities and challenges requires a sector-by-sector evaluation. This assessment is undertaken in chapter V, which describes the learning processes and technological capacities found in four different sectors which are characteristic, on differing scales of relative importance, of the production structures and international economic integration of the different countries of the region. These sectors are the agroindustrial complex, mining, manufacturing (both those industries left as a legacy by the import-substitution industrialization (ISI) model and exportoriented manufacturing industries) and services. An analysis is then undertaken of the windows of opportunity that are being opened up in each of these spheres of competitiveness and learning by new cross-cutting technological paradigms. In the final section, the opportunities for achieving upgrading in the global value chains of various products are examined.Drawing on the foregoing analysis of opportunities and challenges for bringing about a more dynamic process of structural change and productivity growth, chapter VI explores the strategic modalities that have been adopted by a number of countries outside the region that are regarded as being "success stories". This analysis focuses on determining how these countries have organized public-sector institutional processes relating to the development and implementation of mediumand long-term national strategies within the framework of a public-private alliance. An examination of the various organizational procedures employed by the public sector and its support programmes for promoting structural change, productivity growth and international economic integration serves as the basis for the formulation of 12 "first principles" in this connection. The same parameters are then used to determine where the Latin American and Caribbean countries stand in terms of the creation of a strategic national vision, public-private alliances and consensus. This appraisal suggests that these principles are indeed relevant for a region which needs to deepen and diversify its production apparatus within the framework of today's globalization process.Chapter VII presents a number of concluding remarks and observations dealing with some of the central points made in this document, together with a discussion of opportunities for the region to move forward with a process of structural change and productivity growth that can accelerate the rate of economic expansion and help it to achieve greater social equity.