A Path to Escaping the Low-Income or Middle-Income Trap

To become a modern, high-income country is a dream shared by all developing countries.

According to the World Bank, between the end of World War II and 2008, among 200 developing economies only South Korea and Taiwan (China) moved from the status of low-income economies to become high-income economies.

Moreover, among the 101 middle-income economies in 1960, by 2008 only 13 had become high income economies.

Mainland China is likely to achieve this success by around this time in 2025.

These statistics indicate that most developing economies, including Namibia, have not been able to escape the low-income or middle-income trap.

This is in spite of half a century of development efforts by the people and governments in developing countries, as well as the support and guidance provided by various multilateral and bilateral development institutions.

FRUSTRATIONS

Potentially, a developing country can grow faster than a developed country and achieve convergence to high-income status.

The failure of most developing countries to narrow the income gap with developed countries is frustrating for developing countries and puzzling for the regional and global development community.

As the economist John Maynard Keynes said, “it is ideas, not vested interests, which are dangerous for good or evil”.

It is no secret that most developing countries’ inability to escape the low- or middle-income trap reflects the failures of existing development ideas and policy design.

Ideas in general are shaped by theories. The applicability of a theory depends on the preconditions of the theory.

LATECOMER ADVANTAGE

Most prevailing theories are generated from the experiences of developed countries and thus embedded in the conditions of developed countries.

A developing country has the latecomer advantage when it comes to technological innovation, industrial upgrading and improvements in hard and soft infrastructure.

However, for developing countries such as Namibia to improve development performance, much more needs to be done with the focus on policy design and doing away with ‘business as usual’.

Instead of just studying theories generated by the experiences of developed countries – which have different preconditions compared to developing countries – it is high time that we, as developing countries, invest effort in interrogating our successes and failures.

This includes designing policies in which modern economic growth is embedded.

In this way, we can help ensure we attain structural transformation with continuous technological innovation and upgrade our industries.

This will raise labour productivity and improve our hard and soft infrastructure, which will ultimately reduce transaction costs.

• • Peya Junior Mushelenga is a national development adviser: National Planning Commission, and a master of public administration; he holds an MBA and a number of economics degrees. The views expressed here are entirely his own.