World Bank Chief Economist Justin Yifu Lin

"One-size-fits-all" economic models no longer work, and economists must re-think what is needed for sustainable growth around the world, the senior vice president and chief economist at the World Bank said Friday at a high-profile conference organized by GWSB students.

Justin Yifu Lin told participants at "Crossroads: The Interplay of Business, Government and the Global Economy" that the global economic crisis and changes in the Middle East and North Africa have prompted a re-examination of development policies and strategies. He said poverty will only be eliminated with long-term sustainable growth around the world -- but governments and economists need to better understand how that growth can be fostered.

"What is the role of [economic] theory?" Lin said. "To help us design better policies in order to change the world. When economic theory cannot explain a phenomenon of why some countries succeed and some fail, or the policy based on the theory cannot achieve its intended goal, then people have to rethink it.

"Old ideas cannot guide us in the current world," he said.

Lin said economic theories that arose after World War II, modified after high inflation marked the 1970s, do not adequately account for how countries today grow and become competitive. Lin is a leading advocate of "new structural economics," which sees economies developing in stages along a continuum. It also argues that government should play a prominent role, especially in facilitating upgrades of industry and infrastructure.

"New structural economics emphasizes that countries at different levels of development have different optimal industrial structures, firm sizes, capital requirements and natural risk," Lin explained. "Therefore, policies should differ accordingly."

He said components for sustainable growth include high savings and investment rates; an open export-oriented economy; and macro stability. New structural economists believe countries must identify and follow their competitive advantage.

Lin noted that the theory is applicable regardless of whether countries have democratic political systems or not.

"The goal is to provide a consistent framework ... that will provide us some new insight into better policy making," he said.