The real choice confronting developing countries

Economist Dani Rodrik argues that developing countries should shift focus from manufacturing to services-led growth, as traditional industrial production cannot absorb 1.5 billion low-skilled workers. However, the analysis overlooks how AI is already boosting productivity in labor-intensive services like retail and hospitality without requiring university education, a trend particularly evident in India. This omission challenges Rodrik’s framework for policymakers in Africa and South/Southeast Asia seeking to create mass employment.

BENGALURU—In a recent commentary, Dani Rodrik, one of the world’s leading experts on the economics of trade and development, explains why he became a “manufacturing skeptic” after decades of seeing industrial production as the key to unlocking economic growth. Since traditional manufacturing cannot absorb the 1.5 billion workers “in occupations that neither require university education nor are exposed to the international economy through trade or offshoring,” services-led growth models must take center stage. Expand the opportunities in retail, hospitality, and food service, and middle-class consumption will drive productivity gains. But largely missing from this analysis is the potential for AI-augmented gains in human productivity. Look around the world and you will find AI already quietly increasing productivity in labor-absorbing services in ways that neither require nor assume university education. This trend is especially apparent in India, which offers a path toward reconciling “manufacturing skepticism” with African and South/Southeast Asian policymakers’ per