Guest blog by Mark Lea, LEG ’24
I have really enjoyed participating in the Harvard Kennedy School’s Leading Economic Growth 2024 programme, led by Professors Ricardo Hausmann and Matt Andrews, and supported by their wider faculty team. Both Professors shared the theories, tools and frameworks they have developed to help us think about our economic growth challenges and how we can make change happen. However, this is not just an academic, theoretical exercise. Both Professors have extensive, real-world experience of putting these theories into practice, working with governments around the world on their economic growth challenges. Hearing their insights based on these experiences was a real highlight of the programme.
The programme is very hands-on, with each participant bringing an economic growth challenge specific to their context. My challenge was New Zealand’s poor productivity performance. Each week’s assignment would ask participants to apply what they had learnt to their growth challenge. Over the course of 10 weeks, this built up into a detailed picture of the nature of the growth challenge and how you might go about finding solutions to the challenge. This made the programme very relevant and practical to my work context.
Visual metaphors are used extensively in the programme to bring concepts to life. Scrabble letters (representing know-how) were used by Professor Hausmann to illustrate his theory of economic development. How many and which letters each country has explains what products it makes. Those with more letters and more unusual letters can make more complex products. He referred to monkeys swinging from one tree to another in the forest (representing the product space) to show how countries develop by creating new letters to produce new products.
The Growth Lab’s Atlas of Economic Complexity is a wonderful tool that brings this theory to life and provides insights on a country’s current economic complexity and opportunities to develop by becoming more complex. The New Zealand economy has been getting less complex and has not exported any new products in the past 15 years. However New Zealand is on a ‘Stairway to Heaven’ (clearly Professor Hausmann is a Led Zeppelin fan!), suggesting that it should follow a parsimonious industrial policy approach to help businesses jump short distances to nearby products. This was contrary to my expectations as my impression is that New Zealand is much more distant from other products, especially more complex ones, which would suggest taking a strategic bets approach.
Professor Hausmann also introduced us to the growth diagnostics tool, which he co-developed, and how to identify binding constraints to growth. The case studies of where this has been applied gave confidence that this is something participants could use for their challenges. I have not seen this approach used in New Zealand and so this is something that could be tried here.
Professor Andrews shared the steps in the Problem Driven Iterative Adaptation approach to solving complex problems, which he co-developed. This involved constructing and then deconstructing your problem using an Ishikawa/fishbone diagram. Below is the fishbone diagram I constructed for my growth challenge.
The fishbone diagram provides a way to think about potential binding constraints and entry points into solving the problem. Ideally these diagrams should be developed collaboratively by teams asking ‘why’ to home in on the underlying potential factors that are contributing to the problem. These factors then provide potential entry points, especially where there is authority, acceptance and ability to act (the triple A change space). I plan to test these approaches with a wider group of colleagues for my growth challenge.
The question then is where you could look for potential solutions. The starting point is to often look at current practice to understand why this isn’t achieving the outcomes desired (eg reviews or gap analyses) or to external best practice where other countries have solved the problem. New Zealand is no exception, as it often looks to other countries like itself for ideas, using the global comparison indicators like the OECD’s Product Market Regulation index and the World Bank’s Be Ready indicators as a starting point. Of course, context is important as what worked in one place may not work elsewhere. Other places to look for ideas include looking for ‘positive deviance’ or ‘latent practice. The former looks for examples of where businesses have successfully overcome a constraint by working in a different way. The latter are ideas that have not been tried before which could be found through a discovery process with stakeholders.
Another concept we were introduced to was high-bandwidth policymaking and organisations. Again, the use of case studies helped to bring this to life. This covered the role of public goods provision by government to support the development of new know-how and product diversification. It also identified potential ‘agents of change’, such as attracting foreign direct investment and immigration, which can bring in new know-how. This requires extensive and ongoing engagement, such as with existing economic activities or with foreign firms to understand what is needed to improve productivity or to diversify into adjacent products. This is usually underpinned by institutions, such as productivity councils, investment promotion agencies and development banks. For my growth challenge, this is an area where there is scope to spend more time collaborating with domestic firms and foreign investors to understand what ‘letters’ are missing and which public good ‘letters’ could be provided by government.
The final weeks of the programme explored inclusive growth and green growth. For inclusive growth, Professor Hausmann argued that the focus for policy should less about compensating those with low productivity jobs (redistribution) but more about how to include low-productivity workers in high-productivity activities (inclusion). For green growth, Professor Hausmann argued that policy should not just focus on how economies reduce their own emission but also how they can help the world reduce its emissions. This means thinking about how your economy can participate in global green supply chains to support the energy transition. The Growth Lab launched a new app, Greenplexity, at COP29 to help countries think about this.
This is a lot to take in, much of which I am still processing. But if I had to pick one main learning from the programme then it would be this: solving complex problems is a social, iterative and experimental process. It involves collaborating and learning from a broad range of stakeholders to understand the nature of the problem and identify solutions. It means not being afraid to try new things and accepting that some will fail. And if it fails, it means going back to the drawing board to understand why and trying something else instead. This is quite different to the approach often adopted in New Zealand. And given the enduring nature of New Zealand’s economic growth challenge, then perhaps it is not unreasonable to conclude that until New Zealand changes the way it solves complex problems then it cannot expect to solve them. This then would completely change the nature of the New Zealand’s economic growth challenge.
This is a blog series written by the alumni of the Leading Economic Growth Executive Education Program at the Harvard Kennedy School. 47 Participants successfully completed this 10-week online course in December 2024. These are their learning journey stories.