I have been spending some time in South Africa, along with my collaborators Chuck Sabel and Ricardo Hausmann, doing research on industrial policy. We are advising the government on its growth strategy, and this part of our work focuses on generating ideas for policies to stimulate structural transformation in the economy towards higher-productivity tradable activities. So I have been spending my time doing rounds in government offices and talking to firms and entrepreneurs.
On Thursday, our group spent the day with Toyota and one of its local suppliers. This is my second visit to Toyota here, and once again I am awed by the famous Toyota production system (TPS) with its on-going monitoring of output processes, feedback loops, and continuous improvement.
Chuck Sabel has been telling me for some time that our Growth Diagnostic framework is nothing other than the application of TPS principles to the design of economic growth strategies for countries as a whole. Listening to Toyota trainers, the point really hit home this time around. Toyota training manuals make clear how TPS differs from conventional "Western" modes of organizing a manufacturing operation. The former is based on experimentation, gradual but continuous change, identification of bottlenecks, self-correction, group approaches, small investments at the outset but continuous attention and effort. This is to be contrasted to the Western mode, based on top-to-bottom direction, big leaps, large investments, and over-reliance on technology. Not a bad way to describe the difference between the Growth Diagnostics framework, on the one hand, and approaches such as the Washington Consensus or the Millennium Development Project, on the other.