Collective know-how “fundamental factor of economic growth” — expert

By Nezar Almutairi

KUWAIT, March 16 (KUNA) — Collective “know-how” is the most fundamental determinant of the economic growth of nations, a world renowned economic expert said on Wednesday.
Director of the Center for International Development at Harvard University Professor Richardo Hausmann made the remarks while delivering a lecture at Kuwait Foundation for the Advancement of Sciences (KFAS).
The lecture, entitled, “Economic Complexity and Secrets of Economic Growth”, aimed to explain widening disparities in global economic wealth, a fact that has befuddled even the most ardent of economists.
Hausmann, the mastermind behind the “Economic Complexity” paradigm, debunked common conceptions about land, capital and labor being the answers to economic growth. “These factors, though important, are not the major contributors to the growth of a nation’s economy,” Hausmann said. Not even education, which he called “another common misconception,” is the key to economic prosperity, Hausmann noted.
“Team know-how is the most fundamental factor that dictates the economic growth of nations,” the economic expert revealed. Attempting to explain significant inequality in global economic wealth, where economies of countries like China have grown exponentially while other nations, particularly, in the African continent, remain mired in sheer poverty, Hausmann employed the “Scrabble” Theory of Development.
The theory, he explained, likens the process of economic development to alphabetical letters, where “bigger networks of people with different know-hows are needed” to usher in economic growth. The theory also pinpoints society as instrumental to honing collective know-how, as “diversity of skills” is required to assemble competent teams. “Better use of this know-how results in more efficient production,” Hausmann added.
Moreover, Hausmann underscored diversification as pivotal to economic growth, pointing to the fact that “rich countries are usually more diversified than poor ones.” He also attributed the wealth of oil-dependent nations like Kuwait, as merely a by-product of an abundance of natural resources.
“Undiversified oil-dependent countries are not likely to attain more economic growth as a result of specialization,” the economic expert said, a bleak prophecy at a time where the country is scrambling to transition the economy into a more sustainable one, due to plummeting oil prices.”Growth is accompanied by diversification, not specialization,” he noted.
Meanwhile, speaking on whether countries should focus on “adding value to their raw materials,” Hausmann described it as “not completely wrong, but castrating.” This approach, he explained, stifles the prospect of diversification. “Adding capabilities to your capabilities is the key, not value to raw materials,” Hausmann said.
With a degree in Engineering and Applied Physics and a PhD in Economics, Hausmann had served as Chief Economist of the Inter-American Development Bank (1994-2000), Minister of Planning of Venezuela (1992-1993) and board member of the Central Bank of Venezuela, as well as Chair of the IMF-World Bank Development Committee.
He has also advised governments in over 40 developing countries, on creating effective growth strategies and development policies. (end) nam