A dominant recessive trend and ... main implications of the current technological trajectories

A dominant recessive trend and the
main implications of the current
technological
trajectories
for
industrial policy
Mario Cimoli
1. A dominant recessive trend in global trade/ growth
2. Transformation global economy: new paradigms/ reshoring/space for policies
3. On the “political economy” of “industrial policy”
4. A note on the economists: “errare humanum est,
perseverare autem diabolicum”
A dominant recessive trend in global trade/
growth
World trade grew faster than GDP during most of the postwar
period…
ANNUAL VARIATIONS IN GLOBAL GOODS EXPORTS VOLUMES AND GLOBAL GDP, 1952-2014
(Percentages)
20
15
8.6
7.8
10
6.5
5.4
5.3
3.9
5
2.6
0
-5
European
Community 1957
-10
Fall of the Berlin
Wall 1989
China’s
opening 1978
Exports
Source: ECLAC, on the basis of data from the WTO and IMF.
GDP
Average export growth
2015
2012
2009
2006
2003
2000
1997
1994
1991
1988
1985
1982
1979
1976
1973
1970
1967
1964
1961
1958
1955
1952
-15
…but it lost momentum since 2008-2009
ANNUAL VARIATIONS IN GLOBAL GOODS EXPORTS BY VALUE AND VOLUME, 1992-2015 a
(Percentages)
30
20
10
0
-10
-20
Price
Volume
Source: ECLAC, on the basis of Netherlands Bureau for Economic Policy Analysis (CPB), World Trade Database.
a Figures for 2015 are ECLAC projections.
Value
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
-30
A dominant recessive trend
SELECTED GROUPINGS AND COUNTRIES: BALANCE-OF-PAYMENTS CURRENT ACCOUNT BALANCES, 1997-2015 a
(Percentages of GDP)
2.5%
1.5%
0.5%
Surplus
countries do
not absorb
exports of
deficit
countries
-0.5%
-1.5%
Deficit countries
have to adjust
-2.5%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
China
Japan
Euro Area without Germany and the Netherlands
Latin America without Venezuela (B.R.)
Germany and the Netherlands
USA
Oil Exporting Countries
Source: ECLAC, on the basis of International Monetary Fund, 2015 External Sector Report, Washington, DC, 27 July 2015.
a Figures for 2015 are projections.
Lack of
reciprocity
A deep decoupling between financial and real activities
EXTERNAL FINANCIAL ASSETS a AND SELECTED REAL VARIABLES WORLDWIDE, 2003-2013
(Indices, 2003=100)
240
220
200
180
160
140
120
100
2003
2004
2005
2006
Exports of Goods and Services
2007
2008
Financial Assets
Source: ECLAC, on the basis of data from the IMF, UNCTAD and the World Bank.
a Calculated on the basis of each country’s international investment position.
2009
2010
2011
Gross Capital Formation
2012
2013
World GDP
Internal demand in China has not responded sufficiently
to expansionary monetary policies, similar to developed
economies
The main interest rate tends to zero
Despite QE, inflation does not pick up
China, Eurozone, Japan, United States: policy rates,
2000-2015
(Percentages)
7
China, Eurozone, Japan, United States: inflation rates,
2000-2015
(Percentages)
12
10
6
8
5
6
4
4
2
3
0
-2
2
-4
1
Usa
Area Euro
Japan
Japón
Euro Area
Source: ECLAC, based on data from the Federal Reserve Bank of Sain LouisFuente: CEPAL, sobre la base de datos de Banco Federal de la Reserva de St. Louis,
and Federal Reserve Economic Data and Statitics Bureau of Japan
Usa
2015-02-01
2014-02-01
2013-02-01
2012-02-01
2011-02-01
2010-02-01
2009-02-01
2008-02-01
2007-02-01
2006-02-01
2005-02-01
2004-02-01
2003-02-01
2002-02-01
2001-02-01
2015-01-01
2014-03-01
2013-05-01
2012-07-01
2011-09-01
2010-11-01
2010-01-01
2009-03-01
2008-05-01
2007-07-01
2006-09-01
2005-11-01
2005-01-01
2004-03-01
2003-05-01
2002-07-01
2001-09-01
2000-11-01
2000-01-01
0
2000-02-01
-6
Aggregate demand is less dynamic after the crisis
EURO AREA, JAPAN AND UNITED STATES: CONTRIBUTION OF AGGREGATE DEMAND COMPONENTS TO GDP
GROWTH, 2000-2014
(Percentages)
8
6
4
2
0
-2
-4
-6
Japan
Private consumption
Net exports
Source: ECLAC, on the basis of data from the OECD.
Euro Area
Government consumption
GDP growth
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
-8
United States
Gross capital formation
Since 2009 the Chinese economy is decelerating…
CHINA: ANNUAL VARIATIONS IN SELECTED ECONOMIC INDICATORS a
(Percentages)
Industrial production and retail sales (2010-2015)
GDP (2000-2015)
23
16
21
14
19
17
12
15
10
13
11
8
9
6
7
Industrial Production
Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
Oct-13
Jun-13
Feb-13
Oct-12
Jun-12
Feb-12
Oct-11
Jun-11
Feb-11
Oct-10
Jun-10
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
Feb-10
5
4
Retail Sales
Source: ECLAC, based on IMF, World Economic Outlook Database, April 2015 (GDP) and the National Bureau of Statistics of China (for industrial production and retail sales).
a Figures for 2015 are projections.
Utilization levels have not recovered…
Installed capacity utilization, 1995-2015
(Percentages)
Eurozone
United States
85%
87%
83%
85%
81%
83%
81%
79%
79%
77%
77%
75%
75%
73%
73%
71%
69%
67%
67%
65%
65%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
69%
Source: ECLAC, based on data from Eurostat and the United States Federal Reserve.
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
71%
… the same happens at the sectoral level and excess capacity
sends prices tumbling in China
LEVEL OF UTILIZATION OF INSTALLED CAPACITY
(PERCENTAGES)
World copper refining
Automobile industry in Brazil
90
88
86
84
82
80
78
76
74
72
70
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2002
2001
2000
7
6
5
4
3
2
1
0
-1
-2
-3
-4
-5
-6
-7
2003
CHINA: Annual variation of industrial producer prices 2000-2015 a
(percentage)
Between 2012 y 2015, the region has its worst export performance
in 8 decades
LATIN AMERICA AND THE CARIBBEAN: ANNUAL VARIATION IN EXPORT
VALUE AND VOLUME, 1931-2015
(Percentages)
80
60
40
20
0
-20
-5.8
-23.4
1931
1933
1935
1937
1939
1941
1943
1945
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
-40
Volume
Price
Value
Source: ECLAC, based on ECLAC, “América Latina: relación de precios de intercambio”, Cuadernos Estadísticos de la CEPAL, Nº 1, Santiago, 1976 and data from regional
indices.
Regional exports are projected to drop 14% in 2015, the third
straight year of ever larger declines in their value
LATIN AMERICA AND THE CARIBBEAN: ANNUAL VARIATION IN MERCHANDISE
EXPORTS, 2000-2015 a
(Percentages)
30
20
10
1.0
0
-15.0
-10
-14.0
-20
Volume
Price
Value
Source: ECLAC, based on official figures from the countries’ central banks, customs offices and national institutes of statistics.
a Figures for 2015 are projections.
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
-30
Regional imports will drop 10%
in value
LATIN AMERICA AND THE CARIBBEAN: ANNUAL VARIATION IN MERCHANDISE IMPORTS,
2000-2015 a
(Percentages)
30
20
10
0
-8.5
-1.5
-10
-10.0
-20
Volume
Price
Value
Source: ECLAC, based on official figures from the countries’ central banks, customs offices and national institutes of statistics.
a Figures for 2015 are projections.
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
-30
Intraregional exports fall more than exports
to the rest of the world
LATIN AMERICA AND THE CARIBBEAN: VARIATION IN INTRAREGIONAL AND
EXTRAREGIONAL EXPORTS BY VALUE, 2005-2015 a
(Percentages)
40
30
20
10
0
-12
-10
-20
-23
-30
2007
2008
2009
2010
Intra-Regional
2011
2012
Extra-Regional
Source: ECLAC, based on official figures from the countries’ central banks, customs offices and national institutes of statistics.
a Figures for 2015 are projections.
2013
2014
2015
In 2015, there is a drop in the region’s exports to all its main
trading partners
LATIN AMERICA AND THE CARIBBEAN: VARIATION IN THE VALUE OF EXPORTS TO SELECTED MARKETS, 2014 AND 2015 a
(percentages)
-21
América Latina y el Caribe
-9
-19
Asia (incluida China)
-6
-17
Unión Europea
-6
-16
China
-9
-14
Mundo
-3
-10
Estados Unidos
3
-25.0
-20.0
-15.0
2015
-10.0
-5.0
2014
Source: ECLAC, based on official figures from the countries’ central banks, customs offices and national institutes of statistics.
a Figures for 2015 are projections.
0.0
5.0
Trade with China has lost momentum and exports have fallen
for two years
LATIN AMERICA AND THE CARIBBEAN : ANNUAL VARIATION IN VALUE OF TRADE WITH CHINA, 2008 A 2015
(Percentages)
130
110
90
70
50
30
10
-10
-30
Exports
Imports
Source: Economic Commission for Latin America and the Caribbean (ECLAC ) on the basis of data from the National Bureau of Statistics of China.
Jan-15
Jan-14
Jan-13
Jan-12
Jan-11
Jan-10
Jan-09
Jan-08
-50
For China, the region is relatively unimportant, except as a supplier
of commodities
CHINA: STRUCTURE OF IMPORTS OF GOODS BY REGION OF ORIGIN , 2013
(Percentages )
100
10
4
5
20
28
80
54
66
60
53
63
53
44
40
20
10
2
6
15
0
27
29
14
8
4
Commodoties (32%) Intermediate goods
(29%)
Latin America and the Caribbean
15
Machinery and
equipment (14%)
United States
11
Consumer goods
(10%)
European Union
11
13
9
8
7
7
Goods for miixed use
(9%)
Total
Rest of Asia
Rest of the world
Source: Economic Commission for Latin America and the Caribbean (ECLAC ), based on the database Trade Flows Characterization of the Centre d’Etudes
Prospectives et d’Informations Internationales (CEPII).
Commodity prices: the 40 years that were just 9…
WORLD PRICES OF SELECTED COMMODITY GROUPS, 2000-2015 a
(Indices, 2005 = 100)
LATIN AMERICAN AND CARIBBEAN COUNTRIES: PROJECTED
AVERAGE VARIATION IN EXPORT PRICES, 2015
250
Caribbean (-20%)
200
Central
America (-7%)
150
Venezuela, B.R. (-47%)
Colombia (-29%)
Ecuador (-29%)
100
Brazil (-16%)
50
Peru (-15%)
Bolivia, P.S. (-25%
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0
Paraguay (-11%)
Chile (-13%)
Energy
Non-energy commodities
Agricultural raw materials
Foods
Uruguay (-7%)
Argentina (-17%)
Minerals and metals
Source: ECLAC, based on data from the World Bank, the IMF and The Economist Intelligence Unit.
a Values for 2015 are estimates.
Source: ECLAC based on data from COMTRADE, World Bank, FAO, UNCTAD and the US Departaments
of Commerce and Labor.
Transformation global economy: new paradigms/ reshoring / space for policies / growth
Changes in the approach to industrial policy in Europe and
the U.S.
• Manufacturing is crucial because
– It dominates trade balances
– It is the engine for growth in other sectors
– It fosters technological development: it is over-represented in R&D and
creates local spillovers
– It creates high-wage jobs (In the U.S., the new discourse emphasizes the
importance of industrial employment as a support for the middle class)
– The loss of manufacturing not only destroys jobs but also destroys
innovative advantages
– The relocation of manufacturing is accompanied by the relocation of
high value-added services.
– Not all industries are equally important: some generate more growth and
productivity gains.
Evidence of a paradigm shift in the location of industrial
production
A tendency to stop the out-shoring of some industries (particularly in the U.S.)
explained by:
•The gap in labor costs compared to China has been reduced.
•Technical change towards greater automation reduces the importance of labor costs.
•Transportation costs (energy) and logistics (time) become increasingly important.
•Increased importance of the proximity of production and design to promote R&D
•Changes in the visions of the leading business schools
Some evidence from the U.S. and the UK
•MIT's Supply Chain Forum of Innovation: 33% of firms with overseas production,
considered returning to the U.S., 15% had already made ​the decision (2012).
•Boston Consulting Group: “Made in America, Again. Why Manufacturing will Return
to the U.S.”, 2011
•UK Government Office for Science: “The future of manufacturing: A new era of
opportunity and challenge for the UK”, 2013
China is reducing the imported content of its
exports, specially in high tech products…
SELECTED COUNTRIES: IMPORTED CONTENT IN GOODS
AND SERVICES EXPORTS,
1995, 2005 AND 2011
(Percentages)
CHINA: IMPORTED CONTENT OF EXPORTS BY
SECTOR, 1995, 2005 AND 2011
(Percentages)
40
Total Exports
35
Services
30
25
High-Tech Industries
20
Medium-High-Tech Industries
15
Low-Medium-Tech Industries
10
South Africa
China
India
Russia
Mexico
Brazil
Manufacturing (Total)
Japan
0
Germany
Low-Tech Industries
United States
5
Mining
Agriculture
1995
2005
0
2011
2011
Source: ECLAC, based on data from the OECD/WTO Trade in Value Added (TiVA) database.
20
2005
40
60
1995
80
For China, the region is relatively unimportant,
except as a supplier of commodities
China: Structure of imports of goods by region of origin , 2013
(Percentages )
100
10
4
5
20
28
80
54
66
60
53
63
53
44
40
20
10
2
6
15
0
27
29
14
8
4
Commodoties (32%) Intermediate goods
(29%)
Latin America and the Caribbean
15
Machinery and
equipment (14%)
United States
11
11
13
9
8
7
7
Consumer goods Goods for miixed use
(10%)
(9%)
European Union
Rest of Asia
Total
Rest of the world
Source: Economic Commission for Latin America and the Caribbean (ECLAC ), based on the database Trade Flows Characterization of the Centre d’Etudes
Prospectives et d’Informations Internationales (CEPII).
On the “political economy” of
“industrial policy”
Social expenditure, productivity and income distribution
(Gini)
100000
United States, 38
Ireland, 33.1
Denmark, 25.2
Labour productivity 2011 (2005 Dollars)
90000
Sweden, 26.9
Finland, 26
80000
Australia, 33.4
70000
Hong Kong, 43.1
Canada, 32
Singapur, 44.8
60000
New Zealand, 31.7
50000
Korea, 31.1
40000
30000
Mexico, 47.2
Chile, 50.1
Uruguay, 45.3
20000
Argentina, 44.5
Venezuela, 44.8
10000
Ecuador, 49.3
Colombia, 55.9
Peru, 48.1
Brazil, 54.7
Costa Rica, 50.7
0
0
5
10
15
20
25
30
Social expenditure 2010 (% GDP)
Source: Economic Commission for Latin America and the Caribbean (ECLAC ), based on INDSTAT4 2013, UNIDO; World Development Indicators, World Bank;
COMTRADE; Laborstat, ILO; CEPALSTAT; OECD
35
Social expenditure - Labour productivity
(1990 = 100)
170
160
150
140
130
120
110
100
90
LABOUR PRODUCTIVITY
SOCIAL EXPENDITURE % GDP
Source: Economic Commission for Latin America and the Caribbean (ECLAC ), based on World Development Indicators, World Bank; CEPALSTAT; Laborstat, ILO
Social expenditure - Labour productivity
(1990 = 100)
160
140
120
100
80
60
40
20
0
SOCIAL PROTECTION
EDUCATION
HEALTH
HOUSING AND OTHERS
LABOUR PRODUCTIVITY
Source: Economic Commission for Latin America and the Caribbean (ECLAC ), based on World Development Indicators, World Bank; CEPALSTAT; Laborstat, ILO
Nominal depreciations of several currencies in the region have
not boosted exports
Selected countries: Monthly nominal exchange rate index, January 2000 – July 2015
(indices January 2000 = 100)
Source: ECLAC, based on official figures
Moreover, the region’s trade deficit more than doubles in 2015
as a share of GDP
LATIN AMERICA AND THE CARIBBEAN (SELECTED GROUPINGS AND COUNTRIES): TRADE BALANCES, 20142015
(Percentages of GDP)
3.0
2.7
2.5
2.0
1.6
1.5
1.0
0.7
0.5
0.0
-0.1
-0.5
-1.0
-0.2
-0.2
-0.5
-0.7
-1.2
-1.5
Oil exporters
Mineral exporters
2014
-1.2
Latin American and the
Caribbean
Mexico
2015
Source: ECLAC, based on official figures from the countries’ central banks, customs offices and national institutes of statistics.
Brazil
You remember when most economists said that…
…industrialization should decline
…manufacturing was equal to any other economic activity
…markets were the most efficient mechanisms for allocating resources in open
economies.
Thus, in many countries, industrial policy institutions and instruments were
dismantled
Other dicta:
Growing importance of services / services as the new focus of innovation
Growing share of services in international trade
The financial sector auto-regulates and expands harmoniously
Global value chains, free trade and specialization as substitutes for industrial
policy
Innovation not contingent upon production (different localizations)
China: the only factory, today and in the future
Natural recourses as the base for innovation and growth
Sources of development and innovation
What “others”told
What evidence indicates
•Growing importance of services for
growth and innovation
Services as the new focus of innovation
•Manufacturing is (was and will be…) the
main field of innovation. E.g.
microprocessor, biotech, nanotech, etc.
•Most advanced services are technological
spin-offs of manufacturing (software,
telecoms)
•Growing importance of services in the
trade balance
•Manufactured goods dominate in
international trade
Industrial/ technological policies (1)
What “other” told
What evidence indicates
•No need for industrial policy / firms
and countries are similar
•Upgrading countries’ technological capabilities
requires industrial policies
•Global value chains, free trade and
specialization are substitutes for
industrial policy
•Growing management costs of long global value
chains (changes on the location paradigm)
•The new technological paradigms
lead to “industry maturity”
•New technologies transform all industrial
opportunities (what is mature today,
could be highly innovative tomorrow. The Vernon cycle
is static.)
•Disconnection between innovation
and production (different
localizations)
•Innovation is strongly linked to manufacturing and
other types of production (learning, geographical
proximity, tacit knowledge)
•Abundance economics (prices of new products
decrease, connectivity increases and becomes faster,
acceleration of robot capabilities)
Industrial/ technological policies (2)
What “others” told
What evidences indicate
•No re-shoring of manufacturing:
China is and will continue to be the
only factory of the world
•Countries are not firms, and can lose their
industrial capabilities/ commons
•Static view of production and technology
•New technologies are built upon existing industrial
capabilities
•Risk from global value chains management
•Re-shoring of production in advanced countries
•Natural resources are a basis for
innovation and growth
•There are few activities related to natural
resources that are sources of complementary
assets
Relative profit rates: lock in effects in the production structure
Latin America: Proft rate on assets, weighted average, 2000-2005 y 2006- 2010 a
(In percentage)
Fuente: Comisión Económica para América Latina y el Caribe (CEPAL), sobre la base de datos proporcionados por el Departamento de estudios y proyectos especiales de la revista Améric
economía.
Source: ECLAC, based on the database provided by Revista América Economía.
Technological capabilities
• Require time;
• Are subject to path-dependency, i.e. the evolution of capabilities depends on previous
experience and directions of past learning;
• Complementarities between sectors and capabilities, externalities and increasing returns are
crucial for industry and the economy alike;
• Irreversibility in the building of certain physical and technological assets, which cannot be
abandoned or replaced;
• A critical tacit component that could not be obtained from importing capital goods nor from
manuals or other forms of codified information;
• Countries and firms which are closer to the technological frontier have a growing advantage in
innovation with respect to the laggards.
• Cumulative processes leading to vicious or virtuous cycles explain why some countries move to
a path where learning, production capabilities and institutions interact virtuously, while others
remain in a hysteresis state, e.g., in a low-growth (divergence) trap.
A note on the economists: “errare humanum est,
perseverare autem diabolicum”