MILAN – Over the years, advanced and developing countries have
experimented, sometimes deliberately and frequently
inadvertently, with a variety of approaches to growth.
Unfortunately, many of these strategies have turned out to have
built-in limitations or decelerators – what one might call
elements of unsustainability. And avoiding serious damage and
difficult recoveries requires us to get a lot better at
recognizing these self-limiting growth patterns early on. Here
are some of the items in a growing library of decelerating
growth models. In developing countries, import substitution as a
way to jump-start economic diversification can work for a while;
but, over time, as productivity growth lags and comparative
advantage is over-ridden, growth grinds to a halt. Small, open
economies are naturally somewhat specialized, which leaves them
vulnerable to shocks and volatility. But, in terms of growth and
living standards, the cost of economic diversification, when
implemented by protecting domestic industries fr