Written by Adam Fforde
There is a joke, told well by Eddy Murphy at the end of ‘Coming to America’ about a man who orders some soup, calls the waiter, tells him to try it, and when the waiter asks if it is too hot, too cold or whatever and only then spots that there is no spoon, replies ‘Aha!’. Vietnam’s economic miracle, which started in 1992 and took the country from high levels of poverty, loss of the large Soviet aid program and urban food rationing to middle income status around 2009, provokes similar emotions. Why? Because, told to drink the soup with a fork, the Vietnamese economy-as-diner took a spoon out of her handbag. It was rather good soup.
‘The fork’ was the idea that all good economies grow by industrialising, which was doctrine for both Soviet-trained economists and donor officials (especially in the World Bank) in the late 1980s and early 1990s, when the diner sat down to eat. In some ways, it still is the dominant doctrine. I can find NO mention of servicisation in any of the World Bank’s World Development Reports. And there are very few studies out there that look at it. The Vietnamese Communist Party, mired in corruption as it now is, would be capable of squashing growth entirely in most countries, but given that the Vietnamese are trying very hard to keep away from things they want (such as higher incomes) have only managed to push trend growth down to around 6 percent. Small and medium-sized enterprises (SMEs) now pay informal payments to officials at levels about equal to their profits, but as they all pay around the same and, given the entry ticket, it is their talents that seem to determine their fate. Vietnamese SMEs may therefore be about to surprise lots of people; at least, with those levels of informal payments, their recipients are more owners than corrupt officials, which is, like many aspects of that country, creatively surprising.
But the soup needs a spoon. Why? The basic reason is that the Vietnamese economy has servicised. During the economic miracle, “(t)he services GDP share rose, from 38% in 1992 to 43% in 2013. In addition, whilst the share of the broad category ‘industry’ over the same period rose from 23% to 29%, this growth was largely due to increased mining output. In 2013 mining – included in the industry statistical definition – was 12% of GDP yet under 5% in the early 1990s, so that the non-mining ‘industry’ share of GDP fell from around 18% in the early 1990s to around 17% in 2013” [Fforde 2016:12].
Trying to eat soup with a fork is funny; and it costs – think of the investments in export processing zones (EPZs), allocation of credits to support dreams of export-oriented manufactures etc growth. Not to mention private sector investment in training that assumed.
But, the issue is wider. A second paper of mine looked at the global picture. And the better the soup, the better the spoon [Fforde forthcoming]:
Structural change in developing countries’ economies, 1991-2013
Note: Averages are unweighted; data is for individual countries. Growth defined as change in current PPP US GNI dollars. Column C is calculated as a residual. Source: World Bank data (24 November 2015), author compilation.
The table is there, it is clearly ‘soup’, so best eaten with a spoon, though clever people could argue that it is lumpy, indeed so lumpy that really it is a stew, so it is important to keep buying their forks. Getting this paper through reviewers (and it contains data showing that World Bank World Development Reports as well as other literatures ignore servicisation) met statements that structural change is defined as a shift from agriculture through industry to services, and so Fforde is wrong. The editor saved me. A friend at the European Bank for Reconstruction and Development (EBRD) told me recently that he was at an internal conference where the final six dot points included ‘industrialisation!’. Nobody said ‘oops’. As Frank Zappa said, stupidity has a long shelf-life, but happily, the Vietnamese are good at finding spoons. As — according to the Table — are most of the world’s population.
Adam Fforde is a professorial fellow at the Victoria Institute of Strategic Economic Studies, Victoria University in Melbourne, Australia. He has worked extensively as a development consultant to a range of clients, including a stint as an advisor in the Swedish Embassy in Hanoi. He blogs at http://adamfforde.blogspot.com.au/. Image credit: CC by rjabaloslll/Flickr.
Fforde, Adam, forthcoming, Yes, but what about services – is development doctrine changing? Canadian Journal of Development Studies
Fforde, Adam (2016), Vietnam: Economic Strategy and Economic Reality, in: Journal of Current Southeast Asian Affairs, 35, 2, 3–30.