A recent EASIN Urban, Transport and DRM Community of Practice (CoP) meeting I attended in Seoul, South Korea was an eye opener in terms of the rapid urban development of the city of Seoul. Considered an East Asian tiger, manufacturing and an export-led economy have made Seoul a global city with neon skylines and the new focus of Asia’s technology boom. A presentation by Seoul Metropolitan Government (SMG), the agency responsible for the city’s urban planning, describes the city as a ‘strategic space for people to reside in since ancient times’. Nevertheless, the city and its urban identity have gone through various transformations – through the Japanese occupation (1910-1945) to restoration after the Korean war (1950-53) to industrialization (1960s-1970s) to development and globalization. In SMG’s words, Seoul is witnessing the ‘environmental and historical awakening as a world city’. Evidence of this was seen in sites I visited to the restored Cheonggyecheon stream and a former landfill converted to Haneul Park.
If you visit the National Museum of Natural History in Washington, D.C., one of the exhibits you’ll come across is a map of the Earth, which shows lights detected by satellites at night. With even a cursory look, it’s clear the lights pick out spatial patterns of urban and economic development. Look at the USA, and you see the coasts are brightly lit, whereas the country’s interior is much less so. Look at the Korea peninsula and you see that whilst South Korea is almost ablaze with light, the North is noteworthy for its almost complete absence of light.
The potential ability of night-time lights imagery to detect spatial patterns of urban and economic development has been known in the remote sensing community since the late 1970s. However, it has only recently been brought to the attention of economists following a paper by Vernon Henderson, Adam Storeygard and David Weil entitled “Measuring Economic Growth from Outer Space.” This paper alerted economists to the strong correlation between a country’s rate of GDP growth and the growth in intensity of its night-time lights, and the fact that the lights represent (for economists) a relatively untapped dataset with global coverage and a time-series dating back more than twenty years.
Bangladesh has turned the political business cycle phenomenon upside down.
Political business cycles are cycles in macroeconomic variables – output, unemployment, inflation – induced by the electoral cycle. This type of business cycle results primarily from the manipulation of policy tools by incumbent politicians hoping to stimulate the economy just prior to an election and thereby improve their reelection chances.
Expansionary monetary and fiscal policies have politically palatable consequences in the short run. When pursued to excess, these very policies can also have very unpleasant consequences in the longer term in the form of accelerating inflation, decreasing savings, worsening foreign trade balance, and long-term expansion of government's share of the GDP at the expense of private consumption and investment. So immediately after the election, politicians tend to “bite the bullet” and reverse course by raising taxes, cutting spending, slowing the growth of the money supply, and allowing interest rates to rise. As a result, the regular holding of elections tends to produce a boom-and-bust pattern in the economy because of the on-again-off-again pattern of government stimulus and restraint to induce an artificial boom at every election time.
Bangladesh’s experience also shows the existence of a political business cycle in GDP growth, albeit with exactly the opposite pattern of boom and bust. GDP growth has consistently declined in each of the last five election years. It happened in 1991, 1996, 2002, 2007 (an election year without election) and 2009 (Figure 1). From the perspective of Western political business cycle theory these growth tendencies appear suicidal for the incumbent. Instead of expanding the economy faster to gain votes, the incumbents appear to be shooting themselves in the foot by allowing the pace of expansion to slow in the election year!
Is this another case of the Bangladesh paradox?
Investments in education could spur economic growth in India (Credit: World Bank)
I had the wonderful opportunity to listen to my former professor Amartya Sen at the World Bank who attempted to answer this very pertinent question in the minds of many today. The fundamental question at the core is why is it that while we rate democracy as the better form of government, it is single party ruled China that has been more successful at bringing more people out of poverty than democratic India? The implications for India are clear; investing in education and health for all its citizens is the best solution for long term growth.
Over the past decade, Africa has been experiencing tremendous economic dynamism and growth: seven of the world’s ten fastest-growing countries are in Africa; the continent’s economic output has more than tripled; and average economic growth is expected to be 4.8 percent in 2013.
This post was originally written for the Collective Solutions 2025 blog, a forward-looking study and collaboration platform to explore how the World Bank and similar multilateral institutions can best support developing countries to meet long-term sustainable development challenges in a post-2025 world. Read more about the study and join the collaboration site here.
I don’t particularly like cities. I’m a country boy. But I have lived in cities for the last 35 years; 10 in Bangkok, 15 in Manila, and 10 in Washington, DC (though DC might be called a town if it were in India or China). In the 1990s, I led work on environmental investments in east and south Asian cities. Most of the cities I worked in were severely “under-infrastructured and under-serviced,” and because many of them are built on coastal zones, this was particularly pronounced when it came to low-lying slums, drainage and sanitation. The heaviest price tag was often for drainage and flood control. During those years, I often wondered if and how the city and country leaders would ever catch up on infrastructure needs with the growing urban populations. Many have done well—while others are in worse shape now because they haven’t been able to meet the human tide.
The world has become relatively less poor in the last few decades. People under conditions of extreme poverty -- that is, living on less than $1.25 per day -- have declined as a proportion of the world population, from 52 percent in 1981 to 22 percent in 2008.
Spare a thought for the economist.
While in the past, people might have resorted to reading tea leaves to figure out what their future has in store for them, these days, at least on economic matters, people turn to the next available economist. But while economists are great at analyzing the past, predicting the future is still a complicated task.
In order to come up with projections, economists look at data. Now, it turns out that economists are often making long-term assessments based on the latest news. Take a look at these growth projections for ten years ahead for Russia, based on polls of economists conducted by Consensus Economics, along with actual growth in the year of the projections (Figure 1). Clearly, while long-term projections are less volatile, the two are correlated – the better the present the better the future, and vice versa. In particular, long-term projections have noticeably nudged down since the crisis.
Figure 1: Actual Growth and 10-Years Ahead Growth
Projections for Russia (percent), 2004 to 2012
This past week, I attended a couple of interesting seminars at the World Bank’s Human Development Forum on how some mineral-rich countries have been able to translate their newfound riches into sustained economic growth, improved living conditions, and better nutrition, health and education levels for their populations.
Around 5000 years ago, the first cities emerged in Mesopotamia and the fertile valleys of the Tigris and Euphrates Rivers. Agricultural surpluses enabled a few people to start specializing in something other than agriculture. The farmer who now had extra grain could trade for a better spear or a winter fur coat. This specialization and the ability to trade goods and services is the basis of urbanization. And, there was enough food that the starving artist didn’t starve completely, so along with trade, culture emerged.
Cities grew at a modest pace until about 1800 when the Industrial Revolution took off in the UK and cities developed at staggering rates. Manchester, for example experienced a six-fold population increase from 1771 to 1831. London went from about one-fifth of Britain’s population at the start of the 19th Century to about half the country’s population in 1851. This rate of urbanization has not let up for the last two hundred years; in fact it is still accelerating. The growth of cities seen over the last two hundred years will now be repeated, but this time in just forty years.