Can Mexico replicate the Asian Miracle?

The chances that a poor or middle-class country will reach the level of development of the "Asian Miracles" within one, two or three generations are slim.

This is the conclusion of Reda Cherif and Fuad Hasanov, economists at the IMF.

According to his research All the Way to the Top: Industrial Policy, Innovation, and Sustained Growth between 1960 and 2014, only 16 countries achieved this development and some of them achieved it because they were lucky enough to discover oil or join the European Union.

"Miracles," such as Hong Kong, Korea, and Singapore, as well as Japan, Germany, and the United States before them, deviated from standard growth recipes, aimed high, and strove to develop sophisticated industries that were far beyond your technology skills and prior experience. They focused on building robust export-led economies.

The great successes of these economies were the result of business-government partnerships.

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The state intervened to remove market obstacles. Businesses, in turn, innovated, invented, and promised to be accountable for the support they received. The process was a "true" industrial policy, or more specifically a Technology and Innovation Policy.

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Something quite different from the approach followed by Mexico, in which industrial policy has been the absence of policy, on the grounds that subsidies cause inefficiency in the economy.

A clear example of the Government-Business partnership is South Korea, which allowed it to go from being a poor economy in the 1950s, ravaged by war, to being a high-income country with a GDP per capita of $ 27,000 against 10300 from Mexico.

The role of domestic companies was key in the spectacular takeoff of the Asian tigers.

The state supported the development of domestic companies in key industries that required innovation and technology, rather than relying on foreign investment for development.

The "Asian Miracle" depended critically on a technological leap into sophisticated industries.

The current strategies of China (2025) and Germany (Industry 4.0) are clearly in that direction.

The conditions of the global economy are not the same as they were fifty or sixty years ago.

But if Mexico wants to get closer to the possibilities of faster growth that will actually lift half the population out of poverty, it needs to reposition the domestic business at the center of the growth strategy.

A first step is to reduce the cost of formality.