Convergence through Clustering? An Inquiry into Industrial Policy in the Developing World with an Ethiopian Application by Josiah Littlehales

ABSTRACT

This paper considers the relevance and applicability of industrial policy as a tool for economic development for the world’s poorest countries. Recent theoretical breakthroughs in Economic Geography and experiences of East Asian countries have together reawakened the role of government in promoting poor-torich country income convergence. Clustering – the amalgamation of said theory and practice – has been conceptualised from both economic and policy  perspectives in the early 1990s. Yet its consequences are not so clear-cut, and governments across the developing world seem wary of policy implications. Ethiopia, however, has ‘taken the bull by the horns’. Incorporating both a decade of double-digit growth and the extensive policy reforms in a similar time-frame has sparked the attention of academics and policymakers alike. The correlation-causation diagnosis has been met with appraisal and scepticism in equal measures in attempts to measure the effectiveness of cluster policy on economic growth. This essay addresses two prominent clusters in Ethiopia – namely the leatherwear and floriculture industries –, evaluating government policy in said industries. The prospects and lessons learnt both internally for Ethiopia and externally for the developing world are then considered.

JOSIAH LITTLEHALES works as an economist in the United Kingdom’s Department for International Development – a government Ministry seeking to eradicate global poverty. He works for the UK’s representation at the World Bank, particularly on capital adequacy at the International Bank for Reconstruction and Development. Prior to this, he completed his undergraduate studies with an MA (Hons) in Economics from the University of Edinburgh, before studying for a Master in International Economic Policy from Sciences Po Paris, and an MSc. in Economics and Management of Government and International Organisations from Bocconi University.