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Innovation for Pro-Poor Growth
Raphael KaplinskyDevelopment Policy and Practice,The Open University
Freeman Centre, July 17th 2012
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http://en.internationalism.org/ir/133/china/graph3
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“The top 1 percent [in the US] gained 57 percent of the increase in national income between 1977 and 2007…During the four-year period of expansion during the Bush presidency (2002–6), the top 1 percent captured 73 percent of the increase ...
This is not a misprint.”Wade, 2012, Challenge, May-June, p3
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Global growth and global poverty
GDP Growth p.a (%)
Living below $1.25 pd (MDG1) (m)
1990-2000
2000-2008
1988-1990
2007-2008
World 2.9 3.1 1,668 1,329China 9.9 10.4 724 208India 5.5 7 414 456SSA 2.2 4.9 224 355
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Global growth and global poverty
GDP Growth p.a (%)
Living below $1.25 pd (MDG1) (m)
1990-2000
2000-2008
1988-1990
2007-2008
World 2.9 3.1 1,668 1,329China 9.9 10.4 724 208India 5.5 7 414 456SSA 2.2 4.9 224 355
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Global growth and global poverty
GDP Growth p.a (%)
Living below $1.25 pd (MDG1) (m)
1990-2000
2000-2008
1988-1990
2007-2008
World 2.9 3.1 1,668 1,329China 9.9 10.4 724 208India 5.5 7 414 456SSA 2.2 4.9 224 355
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Global growth and global poverty
GDP Growth p.a (%)
Living below $1.25 pd (MDG1) (m)
1990-2000
2000-2008
1988-1990
2007-2008
World 2.9 3.1 1,668 1,329China 9.9 10.4 724 208India 5.5 7 414 456SSA 2.2 4.9 224 355
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HOW DO WE EXPLAIN THIS PRO-RICH GROWTH-TRAJECTORY?
●Globalisation is inherently unequalising●The reserve army of labour -global unemployment – “Planet of slums”●Financialisation●The trajectory of innovation
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HOW DOES INNOVATION FIT INTO THIS AGENDA?
●Both:●Choice of technology●Generation of new technology●Both:●Participation of poor in production●Products meeting the needs of the poor
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WHAT DRIVES THE DIRECTION OF INNOVATION?
●Demand●Prices of capital and labour ●The character of infrastructure●Path dependency and firm trajectories●Regulatory environment
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Capital and scale intensive
Labour intensive, small scale
Inefficient Efficient
Taxonomy of innovation
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Capital and scale intensive
Labour intensive, small scale
High wageslow cost of capital
Large marketVibrant entrepreneurship
Inefficient Efficient
Global innovation patterns, circa 1970
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Capital and scale intensive
Labour intensive, small scale
High wages, low cost of capital
Large marketVibrant entrepreneurship
Low wages, high cost of capital, Small marketWeak entrepreneurship
Inefficient Efficient
Appropriate but not efficient
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?
VU
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“Is this a V recovery or a W? I think it’s the latter…
(CEO HSBC Bank, Financial Times, 5th Oct 09)
`
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PERHAPS ITS AN
L
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OR, MAYBE
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BACK TO CENTRE STAGE
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FORCES OF DISRUPTION TO THE INNOVATION TRAJECTORY
1. The character of low income markets
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Number of Chinese households, by disposable income, 2004 and 2009
Compiled from http://www.portal.euromonitor.com
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Number of Indian households, by disposable income, 2004 and 2009
Compiled from http://www.portal.euromonitor.com
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FORCES OF DISRUPTION TO THE INNOVATION TRAJECTORY
1. The character of low income markets2. The global diffusion of innovative capabilities
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THE GLOBAL DIFFUSION OF INNOVATIVE CAPABILITIES
●Learning in global value chains●Global shares of R&D ●(2%-1970, <10%-1990, 24%-2007)●Education and training●Growth of large emerging country firms
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FORCES OF DISRUPTION TO THE INNOVATION TRAJECTORY
1. The character of low income markets2. The global spread of innovative capabilities3. Radical new technologies allow for distributed production●Renewable energy, nanotechnology
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FORCES OF DISRUPTION TO THE INNOVATION TRAJECTORY
1. The character of low income markets2. The global spread of innovative capabilities3. Radical new technologies allow for distributed production●Renewable energy, nanotechnology4. New innovators●Dynamic SMEs in rural areas●Grassroots innovation●PPP
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Capital and scale intensive
Labour intensive, small scale
High wages, low cost of capital
Large marketvibrant entrepreneurship
Low wages, high cost of capital, Small marketWeak entrepreneurship
Inefficient Efficient
A poverty-reducing innovation path?
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Capital and scale intensive
Labour intensive, small scale
High wages, low cost of capital
Large marketvibrant entrepreneurship
Low wages, high cost of capital, Small marketWeak entrepreneurship
Low wages, high cost of capital,
Large market vibrant entrepreneurship
Inefficient Efficient
A poverty-reducing innovation path?
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FROM SCHUMACHER TO SCHUMPETER ●The diffusion of AT now driven by the market
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Gabon’s Domestic Timber VC
China / EU EU and others
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Gabon: Exports to China and EU-27
Source: FAO ForesSTAT, accessed December 2009
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●Critical Success Factors (1=not important, 5=very important)
Gabon: Buyers’ Standards
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●International regulations and private standards (1=not important, 5=very important)
Gabon: Buyers’ Standards
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SOME EXAMPLES FORM THE CAMEROONS
●Chinese Batteries vs Japanese Batteries●50% of life●33% of cost●Motor cycles●Break down more often●Much cheaper
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SPEEDING IT UP
●Diffusion has a momentum of its own, but●Address market failures●Not just factor prices●Knowledge imperfections●Sweep of standards●Reorienting systems of innovation●Strengthening the role of non-market actors●Redistributing income