Economic Growth – Building State Capability

Reflections on LEG 2020 from Tanzania

Guest blog by Abdirehman Ahmad

This is a blog series written by the alumni of the Leading Economic Growth Executive Education Program at the Harvard Kennedy School. 65 Participants successfully completed this 10-week online course in May 2021. These are their learning journey stories.

The course has been useful to understanding many concepts of economic growth. I have been learning new things from the first day to the last.

The key ideas that will be takeaways are:

The PDIA approach to tackling growth challenges. We often think of one-size-fits-all but in this concept, we learnt tailor-made solutions for every problem. Identifying the binding constraint among others.
The idea of breaking down the big problem to smaller problems in a fish bone. Identifying who you need on board in tackling each small problem.
The concept of inclusion among regions and distribution in development in tackling economic growth problems.

Exploring export diversification in Trinidad and Tobago

Guest blog by Lebrechtta Hesse-Bayne

The leading economic growth 2021 course exceeded my expectation. While the course overview gave an idea of what to expect, the tools provided were the icing on the cake. I am taking away from this course the key learnings or applying the Problem Driven Iterative Adaptation (PDIA) approach. This step-by-step process helps you break down your problems into their root causes. One can identify entry points, search for possible solutions, take action, reflect upon what you have learned, adapt and then act again; this was an innovative learning experience.

Practitioners most often think they know the development challenges and try to address them by coming up with solutions. However, the PDIA approach allows you to understand the root causes of stagnating economic growth and manage your growth strategy and the binding constraint. The idea of high bandwidth organization was my second take away. The dynamism of this entity includes representatives from public and private sector organizations interested in addressing growth challenges. Their modality of operation, which provides for consulting stakeholders to determine their challenges, the quick access to decision-makers to respond to the struggles firms are facing to promote economic growth and the learning which takes place when trying to find solutions, was inspiring.

Resiliency and sustainability: Key Takeaways from LEG2020

Guest blog by Mathias McCauley

What are some key ideas/learnings that you will take away from this course?

The initial lectures on the “product space” and “PDIA” were fascinating and valuable to me. Additionally, because of the nature of my organization and the state the region is located in (Michigan), I now believe that the most likely entry point for positive change is located within “acceptance” and “ability,” not “authority.” Beginning with acceptance, my organization and I must (and will) continue framing the issue as critical to the long-term prosperity and health of the region.

Data shows that rural regions like mine are susceptible to the continued decline of wealth without greater integration of a knowledge-based economy, industry diversification, younger workforce, and higher educational attainment. Policymaker and private industry leadership “acceptance” of this will be dependent on the sharing and belief of such information. Then, “ability” can be achieved by creating “acceptance coalitions” of public and private sector institutions that can affect positive change through organizational strategy and policy.

Nine lessons from LEG 2020: Economic diversification of Gabon

Guest blog by Milaine Rossanaly

This course has benefited me tremendously. My background is in business administration so I intuitively understood concepts of growth, productivity, inclusion, binding constraints and others, but this course allowed me to understand them much better. I have a long list of take-aways from this course that I will apply in the future, but perhaps a few highlights are the following:

It is critical to thoroughly diagnose the problem, identify true binding constraints (and not constraints in general) through a systematic analysis and determine entry points. I really like the use of a fishbone diagram to display these causes in a ‘deconstruction’ of the problem.
I enjoyed learning about “high bandwidth organizations”, particularly the case of Costa Rica.
I learnt about the action-learning oriented iterative approach to pursuing a growth strategy, particularly the example of Sri Lanka, which allows an incremental step-by-step approach aiming to invest in building blocks to build legitimacy and political buy-in as we move forward, while drawing lessons at every stage and showing results.
I understood new concepts like latent practices, positive deviance, gap analysis, complex vs complicated problems and the Problem-Driven Iterative Adaptation (PDIA)
I learnt so much from the Korea and Singapore success stories, about the importance and role of leadership and multi-agent leadership structures.
The role of technology in development and the role of knowhow as the slowest form of technology to transfer between individuals, firms, and societies as the limiting factor on economic growth.
I learnt new sources of data such as the wonderful Atlas of economic indicators.
I learnt new ways to measure success in growth strategies, the importance of inclusion+growth indicators in the post-Covid ear that focus on reorganizing the economy to promote productive relationships, good jobs and more.
A few quotes that I particularly liked: “Society knows more, not because individuals know more, but because individuals know different”, “Copying best practice helps you play, but it does not help you compete. Creating gives you the competitive edge.”

I better understood my growth challenge throughout the course of 10 weeks. I deconstructed the problem piece by piece, looked for alternative solutions, identified new actors and agents to involve in the solution, found new data to support the challenge and measure what success would look like and think about an inclusive growth strategy in the post-covid era that focuses on the development of the local economy and strengthening of business services to create employment and generate positive spillovers for the population.

My economic growth challenge was centered on economic diversification in Gabon during this course, but I was recently informed of an upcoming lateral move on July 1 when I will start working on Ethiopia. I will revisit this course and the materials to analyze the growth story of Ethiopia to prepare for my transition. I am really looking forward to it. Thank you.

The course was excellent, professors were incredible, the material was great and very helpful. I wish it was longer!

To learn more about Leading Economic Growth (LEG) watch the faculty video, and visit the course website.

Lack of diversity in Mongolian exports: Effects on employment & productivity

Guest blog by Suzanna Sumkhuu

Over the past 4 years, I have been working at the country’s development policy planning reform, streamlining legislative, institutional and policy mechanisms. On this journey, I have encountered two contrasting views: necessity for strong central planning systems vs abolish the government and leave everything to the market economy. Because Mongolia has such a strong history of central planning under Socialist rule, the public view is also differing. I knew from the get-go that neither absolute form of these contrasting options could deliver on today’s socio-economic and planetary needs. Hence, I have been searching like a nomad for answers that could trigger systemic change in ensuring more inclusive and sustainable development.

Against this backdrop, I came into the Leading Economic Growth program with a growth challenge that I have been exploring for some time now and something that I was planning on making the central line of inquiry for the formulation of the country’s Annual Development Plan for 2022 and conceptualization of the next ten-year development strategy, which I was tasked to lead. My growth challenge was Mongolia’s lack of sufficient non-mineral export products and job creating exports, which mattered because it leads to low levels of employment and productivity.

Developing Economic Complexity in Western Australia’s remote, sparsely populated regional centres

Guest blog by Giles Tuffin

1. Some of the key insights I have learnt include:

Just because your region produces raw goods (like iron ore) doesn’t mean that you should be making downstream goods from it (like steel). The raw goods are available on the open market, and can be easily shipped to your nearest port. On the other hand, cost of transporting manufactured goods is far higher. So you must have a very strong competitive advantage to make it worth producing downstream goods from your raw products.

PDIA is an excellent approach to solving complex problems. Some key insights are: stay focused on the problem, and use it to keep others focused; break down bigger problems into smaller, solvable problems; and start addressing these problems to gain momentum and create authority.

Binding constraints act as a handbrake to development in your region. They should be identified (particularly by looking for the high prices and workarounds they create) and addressed as directly as possible (including via the PDIA approach).

Understanding a region’s ‘sense of us’ is hugely importance to creating buy‑in for policy you create. Without this understanding, you will end up pushing against a people’s culture and get nowhere.

2. Some of the key insights about my growth challenge included:

I initially was targeting creating EC in the regions. As the course progressed, I realized this was not feasible, and focused on creating EC in regional centres (ie. towns with populations over 10,000 people).

Some of the binding constraints I considered included: limited access to export markets; high overheads; limited government support to help businesses become globally competitive; limited ecosystems; and difficulty accessing export markets.

Confirmation that my preferences for doing things informally and quickly, at the middle‑management level, can yield good results (noting that you do need to get proper authority at some point).

3. One of the key things I will use from this course is the creation of Black Belt Teams and high‑bandwidth organisations. Too many bureaucrats in WA only talk to other bureaucrats. Getting out into the field and talking directly with industry is crucial. While we have Regional Development Commissions who do this (particularly with existing industry), there is a lack of focus on engaging with emerging industry.

4. I have a suggestion rather than a question.

PDIA is an excellent approach that can be used in both developed and developing countries. However, I feel that much of the approaches of EC and binding constraints are less useful in developed countries that already have more ‘letters’ and well developed institutions for things like credit, education, public transport etc. This may be because the majority of case studies and deep dives are focused on developing countries (which in fairness is where the majority of the Growth Lab’s work has taken place).

With this in mind, I’d suggest some materials that specifically cover developed countries, including:

How the product space and employment space are likely to look very different for developed countries, because of the higher proportion of people in the services sector (including professional workers) – see diagrams below.
How best to use the product and employment space to look not just for new ‘letters’, but for new innovations that aren’t yet listed in both spaces.
What sort of binding constraints are most likely to apply to developed countries (noting that the approach to finding them remains the same as for developing countries).
Other approaches for fostering global competitiveness.
Any insights from the Growth Lab team that came to WA regarding the differences between developed and developing countries.

5. Thank you for a wonderful course! I’ve learned lots – now to apply it!

To learn more about Leading Economic Growth (LEG) watch the faculty video, and visit the course website.

Tackling limited diversification and decreasing exports in Ethiopia

Guest blog by Yilma Nati Tefsu

I want to start my answer to the final week of this amazing course by saying something different, something that has nothing to do with the question above but a reflection of the many positives I have gotten from this course and the great people I have met along the way. This course has not only taught me the means and tools to tackle my growth challenge but also has introduced me to as a set of like-minded and brilliant people who are seeking change and growth in their own little worlds, whatever shape that may take. Now that we have gotten that out of the way, let me dive into the questions.

Week 1 and Week 2 were a time for me where I struggled with what I know to be key challenges in my country and what the complex and critical challenges are in terms of knowhow/technology and approaches needed to solve the problem. Using this mindset, I narrowed down on were three issues I felt needed to be addressed. These challenges were limited export diversification, constrained Institutional capacity for implementation, and emerging macroeconomic imbalances.

While all three challenges were critical in both the context and how they can be solved using the PDIA approach as a way forward, I also felt that looking at the rock song chart of Professor Ricardo and the Atlas of Economic Complexity Outlook for my country, that limited diversification and decreasing exports (need to identify new sources of growth) was the growth challenge that I needed to focus on.

Panama Embassy official writes about promoting US-Panama trade ties

Guest blog by Franklin Morales, Head of Commercial and Economic Affairs at the Embassy of Panama in the United States.

A few years ago, I became a diplomat of my country in the United States. Over time, I gained more responsibility until I became the Head of the Commercial and Economic Section. I am responsible for investment promotion and building partnerships with the American private sector. Although I had previous experience in partnership building, I realized I needed additional tools to tackle some of the policy challenges I was facing. I wanted to affect change and create public value, but I was uncertain about how to proceed.

Over the last 20 years, Panama has been a success story in terms of economic growth. The country attracted over 150 multinational headquarters, and its income per capita almost tripled in the same period. Although Panama made significant progress in reducing inequality while growing, distribution of income and opportunities remains a challenge in the eyes of most of its citizens and leaders. Furthermore, growth in the last few years has stagnated, bringing a heightened risk of social dissatisfaction. The same risk that has affected other countries in the region. That is why Panama’s leaders want to promote growth through different avenues. Two of those strategies include the Digital Hub Strategy and the Advanced Manufacturing Strategy. Both seek to diversify Panama’s exports to advanced sectors. Although these are not the only efforts in place, they are the ones that relate most to my job.

Recovering better after COVID: Lao PDR

Guest blog by Felipe Morgado

Enrolling in the Leading Economic Growth executive programme at Harvard Kennedy School has been a tremendously enriching experience. I am impressed with the number of key ideas and learnings covered over the past ten weeks across both the theory of economic growth and the practice of leadership in public policy. They will certainly have an impact as I continue to build my career at the United Nations.

As an economist by training, I joined the course already with a solid background in development economics. However, I was eager to learn more about Prof. Hausmann’s work on complexity, product space, knowhow and growth diagnostics. They gave me a fresh perspective on investment, trade and industrial policy – reflecting on past mistakes, and articulating ways to promote sustainable growth as the world seeks to recover from COVID-19.

How Benin can lead post-COVID economic recovery

Guest blog by Thierno Olory-Togbe

As a Principal Legal Counsel at the African Legal Support Facility, I have the opportunity to advise African governments facing inadequate capacities in strategic sectors such as sovereign debt, infrastructure and natural resources. Despite the increased efforts of African governments in improving public sector efficiency, the optimization of benefits from the exploitation of natural resources and economic diversification remain critical to reduce poverty on the continent.

The current COVID-19 pandemic and the resultant global economic and financial crisis have led to major disruptions for African governments in the achievement of their development objectives. This challenge requires practical problem-solving approaches. Hence, my participation to Harvard Kennedy School’s executive course on “Leading Economic growth” was an opportunity to better understand how this could be done from a very practical perspective. It was an opportunity to learn how to use appropriate diagnosis, decision-making and implementation tools.