Development Economics
Assignment No.02
Submitted by: Amna Shahzad
Enrolment: 01-155172-004
Class: BSS 7-DS
Date: 22nd November, 2020.
Out-Performers: High Growth Emerging Economies and
the Companies that propel them.
Q1. What makes the out-performers grow faster and consistently?
Answer:
Out-Performers can be defined as countries, which have a high GDP Growth Rate over a
certain period of time, resulting into their dynamic and vibrant development. One of the
primary force behind the high GDP Growth Rate of such countries is the adoption of a Pro-
Growth Agenda, consisting on governmental policies which harness the growth of Private
Firms in the state through Competitive Policies, fostering an increase in the productivity of
the firms, the income of the individuals and the demand for the goods and services produced,
resulting into sustained growth and development in the State.
The Pro-Growth Agenda of the Out-performers gives rise to a cycle of growth, that gradually
accelerates the progression of different sectors of the economy. This is initiated by the
Economic policies put forth by the government, which promote entrepreneurship and
innovation through decreased tax barriers, encourage competition between the locally
operating large firms and promote the accumulation of technology, capital and skills, giving
rise to not only innovation by such firms to deal with the competition, but also their high
revenue generation, contributing to an increased availability of employment opportunities.
Also, this high productivity results in increased labour wages, expansion of the middle class
of the state, accompanied by increased domestic savings which further promote increased
consumption and capital investment in the country, and the high tax revenues collected by the
government in such cases promotes the overall infrastructural development of the state.
Moreover, these large firms, also provide development opportunities to other Small and
Medium Enterprises, encouraging growth in multiple sectors of the economy. In addition to
this, the growth of domestic markets and the expansion of their international footprint
through quality exports of goods and services attracts Foreign Investment to the country,
harbouring more avenues for socio-economic development of the Out-performer, and
resulting into adjacent poverty alleviation in the state.
For instance, the adoption of Protectionist policies by the Indian Government, with the aim to
develop its domestic automobile industry gave rise to innovative and quality production by
companies like Tata, India, eventually expanding to the global markets and giving
unprecedented boosts to the GDP of the state. This also resulted into increased foreign direct
investment in the state and the development of SMEs, promoting avenues for growth,
innovation and entrepreneurship.
This cycle of growth the Out-performers promotes long term and sustained productivity in
the state, enabling the rapid growth of such out-performers, whereas the culture of innovation
established in the highly competitive firms of the out-performers gives them an edge over
global competitors in the market, allowing them to sustain and flourish on Global Economic
platforms.
Q2. What is the role of global integration in this regard?
Answer:
The rise of globalization over the last few decades has resulted into a kind of global economic
integration, with an emphasis on a division of labour among the work economies,
phenomenon like Out-sourcing, along with a shift of production hubs to the East. This has
given rise to a global division of labour, allowing previously excluded countries to possibly
participate and develop themselves in the global markets. Moreover, this global integration,
effectively fuelled by the developing communication technology and growing connectivity
has widened the prospects of previously developing or underdeveloped countries to become a
part of the Out-performing economies.
This is primarily because of the development of communication technology, making it easier
for countries like US to set up their firms internationally, especially in less developed
countries with cheap labour and production costs. When these developed firms start operating
in these less developed economies, it fosters innovation in the domestic markets, along with
providing them easy access to the global markets, easing their path to development. For
instance, the set-up of Call centres by the Western Tycoons in India has not only fostered
innovation and development in India, but has also significantly pushed the development of
similar local enterprises and expertise, serving as one of the factors that enabled it to become
an Out-Performer. Also, the quality of goods and services produced in the out-performers
attracts foreign investors who are in search of profits in newly emerging markets, further
contributing to its GDP and development of human capital.
In addition to this, the highly competitive and innovative nature of firms in the Out-
performers is another enabling factor which gives them a competitive advantage over other
global players, succeeding over other firms in the global market. Also, the rise of global
economic integration, in terms the digitalization and technological innovation has opened
new globally accessible employment opportunities, especially benefitting the skills
professionals in less developed countries, contributing to the GDP of these countries.
In conclusion, global integration positively boosts the productivity of goods, services and
capital accumulation in Out-performers, through enhanced linkages with the global markets,
along with increased avenues of employment and skill development for the human capital of
outperformers.
Q3. Why is Pakistan not included in the league of these out-performers?
Answer:
According to the characteristics of Out-performing economies described in the MGI Report, mainly
consisting of the practice of a pro-growth agenda by countries, with supportive governmental policies
and innovation, but the evident lack of an industrial base in Pakistan, and the lack of appropriate
governmental policies for promoting local production keeps the state in loss. Pakistan’s reliance on its
traditional agricultural economy and high percentage of imports to make up for the deficient
production at home, results into low foreign exchange reserves of the state, low value of currency and
less chances of Foreign Direct investment in the state and therefore, its low value of GDP.
In addition to this, the fact that Pakistan’s economic policies fail to support and encourage its local
production and service sectors keeps them from attaining their true potential and making a place in the
global market, which is one of the prime requirements of becoming an Out-performing Economy. The
fact that the local markets are dominated by a few long-established business tycoons, creating
monopolies that are hard to destruct discourages innovation and market competition in the state. Also,
market regulations which do not support entrepreneurship and innovation further restrict the economic
progression of the state. Moreover, Pakistan’s local economic activities are highly under-documented,
with a large share of the economy being black, and therefore absent from the tax nets of the state and
not contributing to its GDP. This results into low revenue accumulation by the state, which always
tends to be insufficient to cater to the needs of its population, forcing Pakistan to take loans from the
World Bank with difficult return conditionalities, further pushing the state in debt, poverty and
instability. This is also because of an acute lack of true democracy in the state, with its irregular
transitions between Civilian and Military governments, contributing to inconsistent and ill-informed
policy making.
In conclusion, a lack of Pro-growth policies, governmental support to industries, reliance on imports
and foreign aid, and an environment that prefers out-dated traditional mechanisms of operation over
innovative and new solutions, among many other issues pushes Pakistan’s economy down a deeper
hole, keeping its human capital and firms from achieving their true potential.
