World Bank Sr. Infrastructure Specialist Gerald Ollivier interacts with passengers on the new Wuzhou-Nanning rail line
The first half of the NanGuang railway line opened in mid April 2014. It is one of the six railway projects currently supported by the World Bank in China. It connects the city of Wuzhou to Nanning, two cities located 240 km apart, in the relatively poor autonomous region of Guangxi. The train, a brand new Electric Motorized Unit (see picture below), is clean and modern. It cuts across a highly mountainous terrain, zooming at about 200 kph through many tunnels and bridges.
The economics book that has launched a thousand blog posts, Thomas Piketty’s Capital in the Twenty-First Country, tells a grand story of inequality past and present. One would expect that a book on global inequality would have much to say about development. However, the book has limited relevance for the developing world, and the empirical data he marshals for developing countries is weak.
Piketty’s central story is that convergence in the developed world and slower population growth will leave us with a permanently modest economic growth rate (g). Coupled with a constant return to wealth (r), concentration of capital ownership, and high rates of savings among the wealthy, the low g leads to rising wealth inequality over a longish run—something like the second half of the 20th century.
A low-g future for the developed world is a mostly uncontroversial assumption. (He assumes future GDP per capita growth of 1.2 percent for the U.S.) But Piketty draws conclusions for the world as a whole, and we are a long way from global convergence. As Branko Milanovic noted in his review, catch-up growth could fend off Piketty’s inequality dystopia for some time.
Packing an extraordinary amount of energy in little space, fossil fuels helped propel human development to levels undreamed of before the Industrial Revolution, from synthesizing fertilizers to powering space flight. But alongside energy, they produce health-damaging air pollutants and greenhouse gases.
Today, greenhouse gas emissions are higher than at any time in at least 800,000 years and rising, causing climate changes that threaten to reverse decades of development gains. Disruption of livelihoods, loss of food security, loss of marine and coastal ecosystems, breakdown of infrastructure, threats to global security: these are just a few of the risks identified in recent scientific reports.
In the absence of technology to permanently remove greenhouse gases and restore atmospheric concentration to safe levels, there is only one realistic solution: limiting additional emissions. It is estimated that to avoid the most damaging effects of climate change, over the next few decades we can at most emit a quantity equal to about 20 percent of total proven fossil fuel reserves.
Given fossil fuels’ omnipresence in our economies and lives, leaving them in the ground will have important implications, starting with the value of the very assets.
We all know urbanization is important: Nearly 80% of gross domestic product is generated in cities around the world. Countries must get urbanization right if they want to reach middle- or high-income status.
But urbanization is challenging, especially because badly planned cities can hamper economic transformation and cities can become breeding grounds for poverty, slums and squalor and drivers of pollution, environmental degradation and greenhouse gas emissions.
That’s why it’s important for us to build cities that are livable, with people-centered approaches to urbanization and development. That will allow innovation and new ideas to emerge and enable economic growth, job creation and higher productivity, while also saving energy and managing natural resources, emissions and disaster risks. When the process is driven by people, it can lead to important results, the same way London and Los Angeles addressed their air pollution problems.
Those unfamiliar with the fast growing emerging economies of East Asia are likely to think that governments in these countries let market forces and capitalism roam free, red in tooth and claw. That was certainly my impression before coming to work in the region, and generally that held at the outset of our work by the group of us that wrote a new World Bank report “East Asia Pacific At Work: Employment, Enterprise and Wellbeing” .
The report shows just how wrong we were. We could be forgiven this impression—many of us had come from assignments in Latin America and the Caribbean or in Europe and Central Asia, where the distortions and rigidities from labor regulation and poorly designed social protection are rife, and where policy makers cast envious looks at the stellar and sustained employment outcomes in East Asia.
Well, it turns out that although they came relatively late to labor regulation and social protection, many governments in the region have entered this arena with gusto. We were surprised to find that, going just by what is written in their labor codes, the average level of employment protection in East Asia is actually higher than the OECD average.
- Social Development
- Law and Regulation
- Labor and Social Protection
- Financial Sector
- East Asia and Pacific
- Solomon Islands
- Papua New Guinea
- Micronesia, Federated States of
- Marshall Islands
- Lao People's Democratic Republic
- Korea, Republic of
The New ICP Data and the Global Economic Landscape
The new report of the International Comparison Program published last week promises to invigorate debate about the global economic landscape. In some areas, the report challenges conventional wisdom. In other areas, it reinforces the narrative.
The headline change according to The Economist is the rise of China to potentially become the largest economy in the world by the end of 2014. According to Angus Maddison, the United States’ economy became the largest in the world in 1872, and has remained the largest ever since. The new estimates suggest that China’s economy was less than 14% smaller than that of the US in 2011. Given that the Chinese economy is growing more than 5 percentage points faster than the US (7 percent versus 2 percent), it should overtake the US this year. This is considerably earlier than what most analysts had forecast. It will mark the first time in history that the largest economy in the world ranks so poorly in per capita terms. (China stands at a mere 99th place on this ranking.)
The latest macroeconomic data released by China’s National Bureau of Statistics (NBS) on April 18 suggest that China’s economic growth has moderated in the first quarter of 2014. GDP growth has decelerated from 7.7 percent (year-over-year) in the last quarter of 2013 to 7.4 percent (year-over-year) in the first quarter of 2014.
On a sequential basis, the quarter-on-quarter seasonally adjusted growth slowed from 1.7 percent in Q4 last year to 1.4 percent in Q1 2014.
The deceleration in the first quarter of this year is in line with World Bank expectations (see our latest East Asia Economic Update) (Figure1).
Figure 1: Official growth data on the demand side reflect subdued export growth and a moderation in investment growth. Consumption led growth in the first quarter of 2014, contributing 5.7 percentage points to growth, followed by investment, contributing 3.1 percentage points. Net exports dragged down growth by 1.4 percentage points.
Many economists speculate that the weakening trend in growth may put more pressure on the government to implement more and stronger growth supportive fiscal and monetary policies, following the stimulus measures unveiled recently that include accelerated expenditures on railway construction and social housing, as well as tax breaks for small businesses.
Something Is Changing
Fifteen years ago, the international community designed the Millennium Development Goals, including that of halving extreme poverty, through a process that mostly took place in New York, behind closed doors. A few years earlier, the World Bank had developed the guidelines of the Poverty Reduction Strategy for Heavily Indebted Poor Countries from Washington, D.C. in a similar fashion.
Fortunately, this approach has changed.
Today, the process of identifying and consulting on the post-2015 development agenda has been opened to the general public including, importantly, those whom the goals are expected to serve. In fact, the United Nations and other partners have undertaken a campaign to reach out directly to citizens for ideas and feedback on the issues most important to them in the post-2015 agenda. Those who are formulating the post-2015 goals will no longer need to assume what the poor and vulnerable want: they will have a firsthand knowledge of what their priorities are.
The World Bank Group has explicitly stated that our new goals of eradicating extreme poverty and boosting shared prosperity cannot be achieved without institutions, structures, and processes that empower local communities, hold governments accountable, and ensure that all groups in society are able to participate in decision-making processes. In other words, these goals will not be within reach without a social contract between a country and its citizens that reduces imbalances in voice, participation and power between different groups, including the poor.
|A challenge for Chinese businesses is to re-capture the vast domestic market owing to the recent food scares that have seriously undermined the domestic brands.|
After several high-profile food safety incidents, according to one recent survey, around 64% of Chinese consider food safety as the number one priority that affects their daily lives and requires immediate action by the government.
The Chinese government is taking these concerns very seriously and has launched important reforms in its system of food control. It promulgated a new Food Safety Law in 2009, and created a new food safety authority in 2013 to deal with these issues. These reforms are now rolling out to provincial and local levels. These reforms will eventually affect more than one million state officials, restructure more than a dozen government ministries, and revise more than 5,000 regulations. The reforms will result in a complete overhaul of the food control system and introduction of new global best practice policies for food safety.