66 structural transformation and rural change revisited
consequences of global change. These are dramatic challenges for the structural transformation of the late developers. The overall productivity gap faced by SSA is about 1 to 5 compared with other developing countries and 1 to 100 compared with OECD countries.24 Such a gap is a major and enduring obstacle to global competitiveness: Even if comparative advantages exist for specific factors (for example, the cost of labor), these are not enough. Competitiveness is not based on production costs alone but includes an economy’s responsiveness to the quality requirements of markets and the volume of product a country is capable of supplying. Thus, although quality requirements are a primary barrier to entry into the production of sophisticated products, the volume of supply determines market share, which is the core indicator of competitiveness. This observation is valid for all sectors of activity, for manufacturing as well as agriculture, and for all countries. Thus, the current context of increasing food demand and high prices is equally favorable to producers around the world, but producers in late-developing countries will have a harder time taking advantage of the new opportunities. They will have to quickly upgrade the quality of their products and increase the supply. If they cannot do this, the new demand will be met by others, and their market shares will suffer. These asymmetries of productivity and competitiveness in the context of an open economy affect the local dimension of structural transformation as well. Trade across any distance was greatly facilitated by the liberalization process and is quicker than ever as a result of modern telecommunications and transportation. A major consequence of this trend is that the strong local linkages among agriculture, industry, and urbanization—which powerfully contributed to the foundations of old economic transitions—are increasingly weakened by the propensity to rely on imports (UNRISD 2010). While imports are often more cost-efficient and timely—a significant advantage—they do not strengthen the local dimension of development. The reliance on imports has resulted in changes in patterns of urbanization in many developing countries, where cities (particularly large ones) often depend significantly on imports rather than on their own resources or the resources of their surrounding regions. This situation has contributed to the dramatic expansion of the informal sector, which acts as a buffer in dealing with the differential between labor supply and labor demand. This process of “informalization” is exacerbated in Sub-Saharan Africa, where a long history of very slow economic growth did not affect the fast pace of urbanization (Fay and Opal 2000). Even without the promise of jobs, cities retained their allure: services, potential opportunities, way of life, and so on. Despite a significant level of heterogeneity in the informal sector,25 it can be characterized as one of low productivity, marked by underemployment, a lack of job security, and low returns.26 These factors contribute to the development
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