East Asian Cat or African Cat: Which One Is the Better Mouse Catcher?

Growth led by the export of manufactures has long served as the workhorse model for developing countries. East Asian countries that successfully adopted this strategy rapidly created an industrial base through dint of domestic investment aided by inflows of foreign capital and exploited the opportunities to trade that arose as tariff barriers and transport costs fell starting in the 1960s. Since the turn of the century, an African challenger, Ethiopia, claims to have found an alternative pathway to rapid growth that is led by agriculture and by investment in infrastructure bankrolled by financial assistance from overseas, with exports playing a negligible role. However, a comparison with Vietnam, a closely matched competitor from East Asia, shows that while Ethiopia may have achieved a high GDP growth rate, it lags far behind Vietnam, as is apparent from a host of economic and social indicators. Vietnam’s experience relative to Ethiopia’s suggests that as yet there is no viable alternative to East Asian-style export-led growth with manufacturing as the driver. The search for alternatives must continue.