Countries grow not through specialization but through product diversification and exports, argued Ricardo Hausmann at the Kokkalis Foundation's Athens Forum organized on 8 June 2011 in Athens. Prof. Ricardo Hausmann, Director of Harvard's Center for International Development and Professor of the Practice of Economic development at Harvard University, was introduced by Kokkalis Foundation Vice-President Mr. Petros Kokkalis.
In his speech, Mr. Hausmann referred briefly to the history of the Greek economy and attributed the current crisis to an ever-widening current account deficit, due to a development model based on international borrowing, imports and domestic consumption. Keynesian development, he stated, belongs to the past. Under the current financial situation, Greece will not be able to service its debt and restructuring is not a solution for a return to the markets unless a surplus is generated.
Toward this goal, Greece cannot rely alone on industries where it has a comparative advantage, such as on tourism, in order to reverse the debt path it has fallen into. Greece is at a level of income that is above its productive capabilities, so it needs to accumulate productive capabilities by making new products where it can have a competitive advantage, and increase its exports, Hausmann stated.
Hausmann presented comparative research data for countries including Greece, Turkey, and China, which support the theory that first rich countries don't specialize, they diversify, and further, the more countries export the more they grow.
The process of product diversification has a smaller cost if it is done into peripheral products, Hausmann stated. Data show that diversification and ubiquity are negatively related, and that product complexity boosts growth. Hausmann offered a note of encouragement by showing that Greece's current production is in sectors with good potential for product diversification.
In order to start the process of product diversification while supporting its initial cost, Greece needs to activate several of its sources of strength: the Greek Diaspora, a source of human capital that should be used to leverage Greece's capacity to export; crowd-sourcing reform, with a national competition garnering insight on how to hasten the process of export-led diversification; and the creation of a future fund, which should function as a search engine of opportunities and obstacles.