Andrew Fischer, Professor of Inequality, Social Protection, and Development at the International Institute of Social Studies (ISS), shared his insights with Het Financieele Dagblad on the challenges facing low-income countries, particularly in Africa. His perspective is clear: low-income countries must shift their focus from liberalization to industrialization to foster sustainable growth.
Slowed momentum
For 25 years, low-income countries transformed the global landscape, lifting many nations from low- to middle-income status. However, this progress is slowing. The World Bank’s Global Economic Prospects warns of shrinking growth rates, mounting debt and rising global protectionism. Without bold changes, vulnerable regions in Africa risk falling further behind.
Fischer critiques the solutions often proposed by global institutions like the World Bank and IMF. 'They continue to urge countries to liberalize their financial systems to attract foreign capital,' he explains. These policies, Fischer argues, create instability and make it harder for governments to chart their economic paths. 'They push governments to implement austerity measures quickly, including cutting agricultural and energy subsidies,' he adds, which he says only fuels social unrest.
Industrialization over services
Some experts propose service sector growth as the future for low-income countries, but Fischer disagrees. He explains that services, like call centers, employ too few people to provide meaningful opportunities for growing populations. Instead, he advocates for industrialization as a way to build local capacity, create jobs and reduce reliance on imports.
For example, 'Africa has vast potential for industrialization,' Fischer says, pointing out that the focus doesn’t need to be on high-tech products. 'With relatively simple technologies, local industries can grow and serve domestic markets.' He also emphasizes the need to build national players rather than handing economies over to international corporations. 'Now that the US and Europe are also embracing industrial policy, it’s easier to talk about this than it was 20 years ago,' he notes.
A path forward
Fischer highlights the importance of creating opportunities for young people in Africa, many of whom work in low-paid, informal jobs. Investing in local industries, he argues, could transform lives and create a foundation for lasting growth. 'Otherwise, these goods will have to be imported. Building local capacity can spark further growth.'
His conclusion is clear: 'Developing countries must move away from liberalization and focus on empowering their domestic industries. That’s the key to sustainable and inclusive growth.'
The full article, in Dutch, is available for subscribers of Het Financieele Dagblad.
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