Marketing for Fashion Retail Brands – CAMPER Case Study
"The Elusive Quest for Growth" book presentation
1. Many times over the past fifty years, we economists thought we had found the
right answer to economic growth. It started with foreign aid to fill the gap
between “necessary” investment and saving.
Even after some of us abandoned the rigidity of the “necessary” investment
idea, we still thought investment in machines was the key to growth.
Supplementing this idea was the notion that education was a form of
accumulating “human machinery” that would bring growth. Next, concerned
about how “excess” population might overwhelm the productive capacity of
the economy, we promoted population control.
Then, when we realized that government policies hindered growth, we
promoted official loans to induce countries to do policy reforms. Finally, when
countries had trouble repaying the loans they incurred to do policy reforms,
we offered debt forgiveness.
Initial text from “The Elusive Quest for Growth”
2. Many times over the past fifty years, we economists thought we had found the
right answer to economic growth. It started with foreign aid to fill the gap
between “necessary” investment and saving.
Even after some of us abandoned the rigidity of the “necessary” investment
idea, we still thought investment in machines was the key to growth.
Supplementing this idea was the notion that education was a form of
accumulating “human machinery” that would bring growth. Next, concerned
about how “excess” population might overwhelm the productive capacity of
the economy, we promoted population control.
Then, when we realized that government policies hindered growth, we
promoted official loans to induce countries to do policy reforms. Finally, when
countries had trouble repaying the loans they incurred to do policy reforms,
we offered debt forgiveness.
5. We don’t care about rising GDP per capita
for its own sake!
6. We care because it betters the lot of the poor and
reduces the proportion of people who are poor!
7. We care because people can eat more
and buy more medicines for their babies!
8. After many years of attempts and international aid
we’ve achieved almost nothing. Why?
9. Where the “aid for investment”
idea initially comes from.
10. Great Depression leads to high
unemployment. Excess of labour
makes machines the binding
constraint on production.
This idea sticks.
11. On the other side, Soviet Union
“success” by industrialization
(through forced saving and
heavy investment in physical
capital) influences Western
economic theories.
12. So in1946, Harod-Domar comes
up with the idea that GDP
growth is proportional
to the share of investment
spending in GDP.
(His purpose was to comment on short-run business but this idea
was later used to explain long-run growth for countries)
13. Poor countries didn’t have
money to invest in capital...
“This financing gap must be
filled in by foreign donors to
help poor countries grow.”
14. “How long it takes for aid to increase
investment and in turn growth?”
This year's aid
→
this year's investment
→
next year's GDP growth
15. Good idea. Let’s check results:
From a list of 138 countries only
in 4 countries the investment
of previous year was related
to growth of current year.
So it wasn’t such a good idea.
19. “The way to increase production
per worker is to increase machines
per worker.”
But as machines per worker increase,
the more machines you add, the less
productivity of each single worker
will increase.
That’s diminishing returns!!
20. It’s the technology, stupid.
Technical progress will avoid
diminishing returns, because each
worker becomes more efficient
thanks to better technology.
Same inputs : bigger output
21. Anyway Solow’s theories were based
on US data, and were never intended
to be applied to other countries,
nonetheless to poor
or developing ones.
But they were.
22. Trying to grow by heavy investment
in physical capital alone was another
useless panacea.
23. So, if investment in capital and the
technologic factors have failed...
It must be the education then...
24. This is how the thinking went...
“The level of education of the overall
population of a particular country
determine its ability to share in world
development, to benefit from the
advancement of knowledge and
make progress itself while
contributing to the education
of others.”
The Secretary General to UNESCO, Federico Mayor.
25. On the other hand...
Creating skills where there exists no
technology to use them is not going
to foster economic growth.
26. The education explosion 1960-1990
An example,
Niger’s secondary schooling
16% in 1960
to 45% in 1990
27. The education explosion 1960-1990
1960,
29 countries with
no college students.
By 1990,
only three countries
had none.
29. What would you do if you lived in a
country where you feel overqualified –
where there are no machines to
apply your knowledge to?
30. The creation of skills in people
will respond to incentives to invest
in the future.
31. Education didn’t work either.
“To increase GDP per capita,
we could try to
decrease population growth.”
Let’s give some cash for condoms.
32. “Population control is the elixir
that would avoid catastrophic
starvation and enable poor
nations to become rich”
33. But the figures show that
food production grew much faster
than population.
So, the “control population” theory
I L !!
was not well grounded.
FA
PIC
E
34. This “aid for nothing” didn’t work.
But it had to be repaid somehow.
35. The developing countries declared
in the 1980´s that they weren’t able
to service their loans
from commercial banks.
Banks would not lend more money.
Without new loans developing countries could not service the old loans!!
36. So, to avert growth collapse,
the World Bank thought they had
a good solution...
“Adjustment Lending”
37. Aid and lending to developing
countries conditional on their
policy reforms.
Instead of aid financing investment,
the new panacea was now
aid financing reform.
61. Matches of skills
Your success depends on the
group you belong to.
This is why high-skilled and
talented people cluster in some
places, namely, NY, London and
the Barcelona GSE
High-skilled workers are more productive
in a high-skilled economy.
62. Leaks of knowledge + Complementary knowledge
+ Matches of skills = Increasing returns
Y
Knowledge, skills, technology
63. Virtuosity
Low knowledge economy Low rate
of return to
investment
in knowledge
No additional
knowledge
Knowledge
increases
and leaks
People prefer
consumption People
over invest in
investment knowledge
No investment
In knowledge Rate of
Return to
knowledge
increases
High rate
of return to
investment
in knowledge
High knowledge economy
Viciousness
67. The role of Creative Destruction
in economic growth
68. The process of economic growth incessantly revolutionizes
the economic structure from within, incessantly destroying
the old one, incessantly creating a new one.
This process of Creative destruction is the essential
fact about capitalism.
Joseph Schumpeter, 1942
73. e.g. Mobile communications are
easily adopted in areas where there
were no landlines.
This process is quick because
there are no vested interests.
(i.e. prior heavy investment)
74. Lack of technological
Governance problems con knowledge
Factors in leapfrogging?
No prior heavy investments: Younger population
less vested interests pro Imitation
75. But some new technologies are
not substitutes to old ones,
they are complementary
Innovation will happen where technology
is already highly advanced.
Some new inventions give new life
to existing inventions.
Technologies may be complementary to skills.
76. The invention
of the
internet would
be useless
without
devices.
77. Technological progress increases
productivity
1960-1992: differences in productivity growth
account for over 90 percent of differences across countries
in per capita growth
78. But there are some barriers
to technological progress.
Heavy investment Network effect
Good governance
Nonappropriability Obsolescense
Vested interests
79. And last but not least,
technological progress also
depends on luck.
85. Governments that mess around
with free market or
macroeconomic stability have
a lower growth because
it lowers the incentives.
86. Other ways governments
can kill growth.
Bad public services increase
investment costs for firms.
Bureaucracy Paperwork in some
countries is a big obstacle to
create new enterprises (and it's
plagued by bribery issues).
87. egg or
chicken
Is the government killing growth or
is the bad situation making the government take
desperate measures?
89. What would you do if every four
years an earthquake destroys
your property and all
infrastructures around
in a matter of seconds after
great effort?
90. Would you have any hope
in the future?
Would you make any
investments?
95. Do not stop from an “alto” of
mexican police.
Decentralized corruption
affects growth to greater extent
than centralized one.
Everyone tries to maximize
his share.
98. Societies unified by a common
culture and a strong middle class
create a consensus for growth.
Growth that includes the poor.
99. A hard-nosed book on the hardest of all problems:
How to get the poorest countries on a path
of sustained growth (Solow)
The WB ... encourages gadflies
like me [Easterly] to find a new job
What do the others say?
Where is Stiglitz?
Every college student who protests against free trade...
should read this book. (Romer)
100. Don’t give up the quest for growth.
The problem of making poor
countries rich was much more
difficult than we thought.
But we have learned something:
The fifty past years is a story
of failed incentives!
We have to find the right
incentives for governments,
donors and individuals!
102. Many times over the past fifty years, we economists thought we had found the
right answer to economic growth. It started with foreign aid to fill the gap
between “necessary” investment and saving.
Even after some of us abandoned the rigidity of the “necessary” investment
idea, we still thought investment in machines was the key to growth.
Supplementing this idea was the notion that education was a form of
accumulating “human machinery” that would bring growth. Next, concerned
about how “excess” population might overwhelm the productive capacity of
the economy, we promoted population control.
Then, when we realized that government policies hindered growth, we
promoted official loans to induce countries to do policy reforms. Finally, when
countries had trouble repaying the loans they incurred to do policy reforms,
we offered debt forgiveness.
