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you need some kind of state ownership in the economy. A famous example of utilizing state ownership for the purpose of economic development is POSCO, the South Korean steel producer, which was set up as a state-owned enterprise in the 1960s. At that time, the World Bank said the country had no competitive advantage in specializing in steel and did not support the idea. The country went ahead regardless because steel was important for developing its manufacturing sector. Today, POSCO is one of the largest private steel companies in the world. OFQ : Speaking of successful industrial policy, do you see a role for artificial intelligence (AI), the so-called fourth industrial revolution, in developing countries? JH: One of the key differences between rich countries and poor countries is that the rich countries are for the most part producers of high tech and poor countries are only consumers. So if we’re simply talking of giving developing countries access to technology as consumers, that’s not going to kickstart a path to prosperity and development. Low-income countries need to become producers too, because the process of economic development is a process of developing technological capabilities domestically. OFQ: One of the most important parts of your book is a topic that is causing both a lot of discussion and misunderstanding, namely degrowth. In times of factory closures and financial stress it becomes an even hotter topic. Could you guide us through it? JH: I’m glad we’re talking about this. Degrowth is about a reduction in resources and energy to bring the
Viet Nam comprises over 2,200 national
enterprises, including 550 large state-owned enterprises (SOEs). Source: World Bank
The output of SOEs as share of GDP in developing countries
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33.7%
29.7% 30%
28%
30
26%
20%
20
13.1% 14%
10
2% 3%
0
Source: Nem Singh and Chen (2017), State-owned enterprises and the political economy of state-state relations in the developing world
OFQ : You already mentioned the role of the state: What role can national development banks play in the industrialization of developing countries and how can multilateral development banks like the OPEC Fund provide additional support? JH: National development banks provide capital to go into risky ventures
that the state sees as important for economic development. You can’t leave it entirely to the market, who is driven by short-term returns. This is partly why development banks have been so important in countries that have developed rapidly and successfully. If you want some kind of control over the direction and over strategic industries,
“Low-income countries need to become producers too, because the process of economic development is a process of developing technological capabilities domestically.”
Jostein Hauge, Assistant Professor, Development Studies, University of Cambridge
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Courtesy of Jostein Hauge
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