Open economy needn't promote growth, change: Rodrick

Political economist Dani Rodrick does not believe all countries with more open economies do well.

To buttress his agruments, the Rafiq Hariri professor of international political economy at the John F Kennedy School of Government, Harvard University, cited Brazil and Mexico.

At a recent CII seminar, he said growth in these two economies, after they switched to globalisation, was just a fraction of the rate in the 1950s, when they pursued import substitution.

He said igniting and sustaining rapid growth would require policies that stimulate structural change on a sustained basis and foster employment in new economic activities that entail higher productivity. Labour had to be moved from the traditional to the modern parts of the economy.

"Those countries that achieve this faster and on an ongoing basis are the ones that grow," he said, while doubting any long-term boost to economic growth from capital inflows or commodity booms.

In this regard, he said manufacturing in India haf the greatest potential to create jobs. Yet, it was among the least productive activities outside agriculture.

This comes even as the Indian government is in the process of framing a National Manufacturing Policy, with an aim to increase the share of this sector to 25 per cent of gross domestic product from the current 16 per cent over the next decade.

The political economist said industrial policy should encourage investments in non-traditional areas and weed out projects and investments that had failed.