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AbstractEconomic development is a process of continuous industrial and technological upgrading in which any country, regardless of its level of development, can succeed if it develops industries that are consistent with its comparative advantage, determined by its endowment structure. The successful strategy for developing countries is to exploit the latecomer advantage by building up industries that are growing dynamically in more advanced, fast growing countries that have endowment structures similar to theirs. By following carefully selected lead countries, latecomers can emulate the leader follower, flying geese pattern that has served well in effectively catching up economies since the 18th century. The emergence of large middle income countries such as China, India, and Brazil as new growth poles in the world, and their dynamic growth and climbing of the industrial ladder, offer an unprecedented opportunity to all developing economies with income levels currently below theirs—including those in Sub‐Saharan Africa. Having itself been a 'follower goose', China is on the verge of graduating from low skilled manufacturing jobs and becoming a 'leading dragon'. That will free up nearly 100 million labor intensive manufacturing jobs, enough to more than quadruple manufacturing employment in low income countries. A similar trend is emerging in other middle income growth poles. The lower income countries that can formulate and implement a viable strategy to capture this new industrialization opportunity will set forth on a dynamic path of structural change that can lead to poverty reduction and prosperity.Policy Implications
 Industrialization and structural change are the essence of economic development.
 The best way for a developing country to achieve sustained, dynamic growth is to follow comparative advantage in its industrial development and to tap into the potential of advantages of backwardness in industrial upgrading.
 The industrialization in successful catching up countries often proceeds in a leader follower, flying geese pattern.
 The dynamic growth in China and other large emerging markets provide an unprecedented opportunity for the industrialization and dynamic growth in Africa and other low income countries.

It may seem obvious, but three years and counting into the economic crisis we need to say it: An economy that's not growing fast enough will struggle to pay its bills and create jobs. And that's exactly what's happening. Growth in the developing world, while still well above that of advanced countries in 2011, was hit hard by the extreme volatility in international financial markets, which in turn hurt domestic demand in many emerging-market economies and also had spillover effects in terms of capital flows and trade. Meanwhile, the International Labor Organization estimated a 2011 global unemployment rate of 6.1 percent -- that's 203.3 million people out of work. Adapted from the source document.

As strategies for achieving sustainable growth in developing countries are re-examined in light of the financial crisis, it is critical to take into account structural change and its corollary, industrial upgrading. Economic literature has devoted a great deal of attention to the analysis of technological innovation, but not enough to these equally important issues. The new structural economics outlined in this paper suggests a framework to complement previous approaches in the search for sustainable growth strategies. It takes the following into consideration. First, an economy's structure of factor endowments evolves from one level of development to another. Therefore, the optimal industrial structure of a given economy will be different at different levels of development. Each industrial structure requires corresponding infrastructure (both "hard" and "soft") to facilitate its operations and transactions. Second, each level of economic development is a point along the continuum from a low-income agrarian economy to a high-income industrialized economy, not a dichotomy of two economic development levels ("poor" versus "rich" or "developing" versus "industrialized"). Industrial upgrading and infrastructure improvement targets in developing countries should not necessarily draw from those that exist in high-income countries. Third, at each given level of development, the market is the basic mechanism for effective resource allocation. However, economic development as a dynamic process requires industrial upgrading and corresponding improvements in "hard" and "soft" infrastructure at each level. Such upgrading entails large externalities to firms' transaction costs and returns to capital investment. Thus, in addition to an effective market mechanism, the government should play an active role in facilitating industrial upgrading and infrastructure improvements."

Sees a Keynesian type of globally coordinate fiscal stimulus as critical to confronting the global recession, contending that the main challenge is solving the real sector issue of large excess capacity to produce output. Yet, it is argued that this must go beyond traditional Keynesianism to focus on "bottleneck-releasing" projects & to assist developing country stimulus efforts. Adapted from the source document.

SummaryMany transition policies, based on the existing neoclassical economic theories, failed in Eastern Europe, the former Soviet Union, and China. This paper argues that the failure is due to the implicit viability assumption of neoclassical economics. The existing neoclassical economics implicitly assumes that a firm is expected to earn a socially acceptable profit in an open, competitive market as long as the firm has normal management. However, many firms in socialist as well as transitional economies are not viable, that is, they will not be able to earn a socially acceptable profit in an open, competitive market even if they are under normal management because they are in sectors that are inconsistent with their economies' comparative advantages. Under the viability assumption, neoclassical‐based reform policies focus on issues related to property rights, corporate governance, government interventions and other issues that may obstruct a firm's normal management. However, many of these issues are in fact endogenous to the firms' viability problem. Therefore, without resolving the firms' viability problem, such reforms fail to achieve their intended goals. Not only in socialist and transition economies but also in many developing economies there exist many nonviable firms. This paper suggests that the viability assumption in neoclassical economics should be relaxed when analyzing socialist, transition and developing economies.

Many transition policies, based on neoclassical economics, failed in Eastern Europe, the former Soviet Union, and China. This paper argues that the failure is due to the viability assumption in neoclassical economics. Neoclassical economics implicitly assumes that a firm is expected to earn a socially acceptable profit in an open, competitive market as long as the firm has normal management. However, many firms in the socialist as well as transitional economies are not viable, that is, they will not be able to earn a socially acceptable profit in an open, competitive market even if they are under normal management because they are in sectors that are inconsistent with their economies' comparative advantages. Under the viability assumption, reform policies, based on neoclassical economics, focus on issues related to property rights, corporate governance, government interventions and other issues that may obstruct a firm's normal management. However, many of those issues are in fact endogenous to the firms' viability problem. Therefore, without addressing the firms' viability problem, those reforms fail to achieve their intended goals. Not only in the socialist and transition economies but also in many developing economies there exist many nonviable firms. This paper suggests that the viability assumption in neoclassical economics to be relaxed when analyzing issues in socialist, transition and developing economies.