The Ends and the Means of Development

The Innovation Capacity Index (ICI) gives Spain a rank of 29, 1 somewhere between the Baltics and Chile. The rank itself is not bad, and it is not surprising that Spain scores below Sweden, Finland, Switzerland, Taiwan, Japan, Korea, Germany, and Israel, countries with a well established track record of innovation and highly-developed and sophisticated high-tech sectors. What is noteworthy about Spain is that, whereas in 2008, its PPP-adjusted income per capita was US$30,589, that of Chile was less than half (US$14,529) and those of the Baltics ranged from US$17,106 in Latvia to US$20,561 in Estonia. In other words, for its stage of development—a rich industrial country with the world’s 11th largest economy 2 —Spain’s innovation capacity is lagging behind its true potential. What are the factors that have contributed to this mediocre performance? We focus our attention on three: fiscal management, market regulation (including the dysfunctionalities in Spain’s labor market), and educat...

Brazil has taken important steps in recent years to modernize its economy and to lay a stable foundation for sustainable growth. Its ranking of 81 in this year’s ICI, 1 however, is extremely low, given its level of per capita income—US$10,466 on a PPP-adjusted basis in 2008. India, for instance, has a broadly similar ICI rank, but a much lower income per capita of US$2,780. What are the factors which appear to be preventing Brazil from boosting its innovation capacity? We focus our attention on four, all of them fairly central when assessing a country’s ability to create an environment conducive to innovation. Inefficiencies in resource allocation Over the past decade and a half, successive Brazilian governments have done much to improve management of the public finances, at least when measured by the size of the government deficit and the magnitude of the public debt. Brazil had a long history of fiscal mismanagement, and improvements made in this area in recent years have, therefore...