Moving to motivate Endogenous growth!

Published in El Pais, 28 Ene 2018

A few days ago, I read that Paul Romer, chief economist of the World Bank left the post after only 16 months. The official reason is a bit unclear but according to some insiders it had to do a great deal with Paul’s disappointment on how the World Bank can bring about change and development.

With this news I first had to remember how my professor of development economics mentioned him for the first time. It was not so much the name that impressed me but more the with him related theory, the endogenous growth theory. For decades several economists were unhappy with growth theories that depended for a great deal on external forces. This theory for the first time took factors such as technology, education, knowledge and innovation into account. In other words, a country’s growth depends and can be influenced by policies which invest in these endogenous factors.

I think in Bolivia and other Latin American countries we have forgotten that it works like that and instead of investing in education, research and subsidies for technological start up companies, we cry and say that we can never beat the Chinese in production, and USA, Japan and Europe will always be ahead with technology.

Twenty years ago, nobody would have thought that China would become an important player on the global manufacturing market, but they managed that with the right policies and incentives. So, let’s stop crying, stop saying we are in a crisis to justify doing nothing. One quote of Paul Romer is: “A crisis is a terrible thing to waste” and it is my opinion, during the hard times we should take advantage to get our feet on the ground, open eyes, get prepared and take action. It is a government’s task to do motivate us to do that but it also depends on us.

In Bolivia there is plenty to do get the growth going. First fix the educational system. The public university system should be a benchmark, but on most careers, it has lost that. If universities, companies and governments do not work together to drive knowledge and technology, big opportunities are lost. And last, to catch up economically, the government should invest in research institutes that really create a multiplier effect for businesses to start-up.

I doubt that Paul Romer, also a successful entrepreneur, is sitting down to cry for losing his job.