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Global Economy

Quote of the Week: Dani Rodrik

Sina Odugbemi's picture
“The main constraint on the global economy right now is not that it is not sufficiently open. It’s very open. The main constraint is really that the system lacks legitimacy."
 

Dani Rodrik, a Turkish economist and Ford Foundation Professor of International Political Economy at the John F. Kennedy School of Government at Harvard University. He was formerly the Albert O. Hirschman Professor of the Social Sciences at the Institute for Advanced Study in Princeton, New Jersey. He has made significant contributions and published widely to the areas of international economics, economic development, and political economy. He is best known for his work on industrialization, growth policies, and political economy of globalization. His works include Economic Rules: The Rights and Wrongs of the Dismal Science and The Globalization Paradox: Democracy and the Future of the World Economy. He is also joint editor-in-chief of the academic journal Global Policy.

Was the resource boom more akin to a resource curse for Africa?

Sudharshan Canagarajah's picture

The IMF’s Regional Economic Outlook (REO – April 2016) notes that the region’s dependence on primary commodities has increased since the 1980s with nearly half of the countries in the region subject to commodity price fluctuations. These economies, which contribute 70 percent of the GDP of Sub-Saharan Africa are facing a sharp slowdown in real growth, with many also having to undertake large fiscal retrenchments and/or seek balance of payments support from the IMF.

We review the economic performance of Sub-Saharan Africa’s (henceforth Africa) non-renewable resource producers since the early 2000s, the start of the commodity price boom contrasting this with the economic performance of Africa’s non-commodity exporters over the same period. The negative economic impact of the current slump in commodity prices is indisputable, but it is worth asking whether Africa’s non-renewable resource producers realized any tangible benefits from the commodity price boom. Our conclusion is that they did not, at least in terms of real per capita growth. And here’s why.

A rebuttal to the “elephant graph” discussion - or “elephants are tough animals...”

Christoph Lakner's picture

Recently, a discussion erupted over our paper and the so-called “elephant graph”. This graph (reproduced below) is the anonymous growth incidence curve, which shows how each percentile of the global income distribution has grown between 1988 and 2008. The discussion was sparked by a report by the Resolution Foundation’s Adam Corlett. Whether or not this was Corlett’s intention, some commentators have used his results to (erroneously) claim that our empirical results are not robust and/or that the policy implications  drawn from our research are unwarranted  – for example, see this Financial Times article.

Can the middle class really guarantee good governance?

Sina Odugbemi's picture
When social scientists and historians look back on the transformation in the quality of governance that took place in, first, Great Britain and, later, much of Europe in the course of the long 19th century, one explanatory factor often stands out: the rise of a large enough middle class.  What is large enough is, of course, a question of fact, and varies depending on the particular country context. This explanation is often contested, but it has stuck. People refer, for instance, to the revolts against monarchies that occurred across Europe around 1848 as the middle class revolutions. The sense that this explanation makes sense is so strong that when you attend seminars on improving governance in developing countries at some point or the other someone is bound to say: “Let’s be patient folks. Once these countries have a large enough middle class the pressure for improved governance will be unstoppable.”

I write about this now because I have just read an essay by Nancy Birdsall of the Center for Global Development that restates the view with some sophistication. Please see: “Middle –Class Heroes: The Best Guarantee of Good Governance.” The essay is worth reading in full. I am going to focus only on her core case. Key quote:
Having a large middle class is also critical for fostering good governance. Middle-class citizens want the stability and predictability that come from a political system that promotes fair competition, in which the very rich cannot rely on insider privileges to accumulate unearned wealth. Middle-class people are less vulnerable than the poor to pressure to pay into patronage networks and are more likely to support governments that protect private property and encourage private investment. When the middle class reaches a certain size – perhaps 30 percent of the population is enough – its members can start to identify with one another and to use their collective power to demand that the state spend their taxes to finance public services, security, and other critical public goods. Finally, members of a prospering middle class are unlikely to be drawn into the kinds of ethnic and religious rivalries that spur political instability. (Italics mine.)
 

Making South Asian Apparel Exports More Competitive

Ritika D’Souza's picture

Apparel workers in Bangladesh

There is now a huge window of opportunity for South Asia to create more apparel jobs, as rising wages in China compel buyers to look to other sourcing destinations.  Our new report – Stitches to Riches?: Apparel Employment, Trade, and Economic Development in South Asia  –  estimates that the region could create 1.5 million new apparel jobs, of which half a million would be for women. And these jobs would be good for development, because they employ low-skilled workers in large numbers, bring women into the workforce (which benefits their families and society), and facilitate knowledge spillovers that benefit the economy as a whole.

But for these jobs to be created, our report finds that apparel producers will need to become more competitive – chiefly by (i) strengthening links between the apparel and textile sectors; (ii) moving into design, marketing, and branding; and (iii) shifting from a concentration on cotton products to including those made from man-made fibers (MMFs) – now discouraged by high tariffs and import barriers. These suggestions recently drew strong support from panels of academics and representatives from the private sector and government when the report was launched mid-year in Colombo, Delhi, Dhaka, and Islamabad. South Asia is now moving on some of these fronts but a lot more could be done.

Moving up the apparel value chain
Stitches to Riches? finds that South Asia’s abundant low-cost labor supply makes it extremely cost competitive (except for possibly Sri Lanka). But rapidly rising living costs in apparel manufacturing hubs, coupled with international scrutiny, are increasing pressure on producers to raise wages. Plus, countries like Ethiopia and Kenya, who enjoy a similar cost advantage, are entering the fray, and some East Asian countries already pose a big challenge. The good news is that the policy reforms needed to keep the apparel sector competitive would likely benefit other export industries and transform economies (view end of the blog).

#ItsPossible to End Poverty

Christine Montgomery's picture

Ending poverty is within our reach. The percentage of people living in extreme poverty has more than halved since 1990, thanks to the sustained efforts of countless individuals, organizations and nations. 

Show us how #ItsPossible.

The world’s top 100 economies: 31 countries; 69 corporations

Duncan Green's picture

The campaigning NGO Global Justice Now (formerly World Development Movement) have done us all a favour by updating the table comparing the economic might of the largest countries and corporations. Headline finding? "The number of businesses in the top 100 economic entities jumped to 69 in 2015 from 63 in the previous year’ according to the Guardian’s summary.

The last such table that I know of was produced by the World Bank, and became one of FP2P’s all time most read posts (it included cities as well as countries, which made it even more interesting).

People complained that the Bank table compared apples and pears – national GDP and corporate turnover. GJN have tried to do a better job by comparing government revenues (from the CIA World Factbook) and corporate turnover (Fortune Global 500 – ditto). That reduces the country figure – in the case of Argentina, revenues come to about 30% of GDP, generally a higher slice for developed, and lower for poorer countries, and so boosts the relative importance of transnationals. Is that a fairer comparison? Over to the number crunchers on that one.

What skills students in Sri Lanka need to succeed

Yoko Nagashima's picture

How can students in Sri Lanka get the skills they need to succeed  Facebook Live Cover

Recently, the World Bank Education Team on Sri Lanka Higher Education organized its first Facebook Live to discuss how Sri Lanka’s universities can become world class institutions where students acquire relevant skills. More than 50,000 viewers have so far viewed the video and we have received a large volume of follow up questions and comments.

It is evident that there is strong interest among Sri Lankan youth in their education system, particularly the current state and the future of higher education system, as well as their job prospects.
 
The questions raised by Facebook viewers spanned across issues on the need to increase access for higher education, improve quality of teaching and learning at tertiary education institutions, increase relevance of higher education, enhance skills development for employment.
 

FACEBOOK LIVE: Helping Sri Lanka Students Get Relevant Skills for the Global Market


Here’s a sample of questions asked and discussed:
 
  • Learning opportunities in higher education have been significantly increased but higher education enrollment rate is well below comparator countries. How can Sri Lanka increase higher education opportunities?
  • teaching-learning is still one way In majority of Sri Lanka’s higher education institutions: lecturers deliver information and students listen. How can we change our system more towards student-centered learning to get students actively involved in their learning? How can Sri Lanka strengthen its universities’ teaching-learning practices?
  • What are the skills employers most want?
  • How can higher education institutions help students acquire the right skills to succeed in today’s job market?
  • The foundation of higher education is laid during the senior years at school. But after-school tuition classes have invaded school children’s lives. How can we ensure that teachers are doing their role effectively during school hours to prepare children for higher education?

While the team has been working on these very issues for over a decade since the preparation and implementation of the first higher education project in Sri Lanka, Improving Quality and Relevance of Undergraduate Education (2003-2010), followed by an analytical work on the sector, The Tower of Learning: Performance, Peril and Promise of Higher Education in Sri Lanka, and a follow up operation, Higher Education for the Twenty-First Century Project (2010-2016), this was an exciting opportunity to directly engage with the stakeholders through social media as the team is embarking on the next phase of engagement for the higher education sector through the preparation of Accelerating Higher Education Expansion and Development.  

Transformation of the education system is essential to meet the economic and social challenges of a rapidly evolving and knowledge-intensive world.

Sri Lanka has a well-established system of higher education but its expansion is facing major challenges.

Bringing excellence to Sri Lanka’s higher education where students are able to acquire the relevant skills for the global market was one of the main goals of the World Bank supported Higher Education for the Twenty-First Century Project.

The Accelerating Higher Education Expansion and Development Project will aim to expand access to higher education with a special focus on the Sciences, Technology, Engineering and Mathematics which will increase opportunities for young people, including youth from rural and estate sector families, to access better paid jobs.

In addition, it will aim to improve the relevance and quality of priority areas of higher education and increase research, development and innovation products from universities.

The team is grateful to Facebook viewers’ active engagement through Facebook live on Sri Lanka’s higher education and looking forward to the next rounds of discussions.  

 

 

Financial inclusion has a big role to play in reaching the SDGs

Leora Klapper's picture

Scan the United Nations’ 17 Sustainable Development Goals (SDGs). You’ll see inclusive growth, clean water and greater equality, among other objectives. But you won’t see this: Giving people access to savings accounts, loans, insurance and other financial services.


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