Back in 2004, Extractive Industries Review noted that “the overall framework of governance within which Extractives Industries (EI) development takes place will be a major determinant of its contribution to sustainable poverty reduction.” The expert panel called for World Bank Group to do more on governance and transparency of the sector.
In a recent article called “Economic Convergence: The Headwinds Return”, The Economist magazine called the rapid convergence of income levels between developing countries and the United States an aberration. It presented data showing that the difference between income per capita growth in developing countries and in developed countries had peaked around 2008 and had since become steadily smaller. When China is excluded from the calculations, the difference becomes smaller still.
So should we dismiss convergence as a trend whose time is past? I would argue that this would be premature, and that convergence is still a feature of our time. The different conclusion is not because of different data--both of us use the IMF’s World Economic Outlook series for GDP per capita at purchasing power parity terms, and its forecasts until 2019—but a different approach to convergence.
Imagine a world in which we had to eat with long spoons and chopsticks or could not bend our arms to bring food to our mouths... What would we do? How would we eat? The parable of the long spoons teaches us a valuable lesson: focusing solely on ourselves leads to struggle and hardship, but focusing on others gives us the freedom to find new solutions.
The following video from Caritas International's One Human Family, Food For All campaign uses this parable to encourage viewers to consider their own food choices and proactively reduce the hunger of their neighbors. FAO estimates that about 805 million people were/are chronically undernourished in 2012–14, the vast majority of which live in developing countries, where 13.5% of the population is undernourished. However, by working together, investments in agriculture can be made, food wastage can be reduced, and hungry people can be fed.
The 2008-2009 global financial crisis led to a number of large–scale government interventions across the world. These included massive provisions of liquidity, the takeover of weak financial institutions, the extension of deposit insurance schemes, purchases by the government of troubled assets, bank recapitalization and, of course, packages of fiscal stimulus, sometimes of a scale not seen since World War II. Even the IMF, the world’s traditional guardian of sound public finance, came out strongly in favor of fiscal loosening, arguing through its managing director that “if there has ever been a time in modern economic history when fiscal policy and a fiscal stimulus should be used, it's now” and that it should take place “everywhere where it's possible. Everywhere where you have some room concerning debt sustainability. Everywhere where inflation is low enough not to risk having some kind of return of inflation, this effort has to be made".
Source: Getty Images/Sam Edwards.
In Africa, estimates indicate that an annual investment of $93 billion is required to address the continent’s basic infrastructure needs – more than double the current level of investment.
The lack of productive investment of resource revenues, with spending of these revenues often heavily tilted towards consumption, is a critical component of the so-called resource curse, the observation that countries rich in natural resources frequently have slow long-term growth. Following oil or mineral discoveries, as the expectation of increased wealth spreads, pressures to spend typically become hard for politicians to resist, public sector salaries go through the roof, wasteful spending increases, corruption may flourish, hidden foreign bank accounts may be established, and the number of unproductive “white elephant” projects grows.
How can resource-rich countries ensure that a large share of oil, gas, and mining revenues are used for productive investment rather than excessive or wasteful consumption?
International trade has a critical role to play in environmental protection and the effort to mitigate climate change. While it certainly isn’t always framed this way, it is important to realize that increased trade and economic growth are not necessarily incompatible with a cleaner environment and a healthier climate.
If we are going to move away from dirty fossil fuels and inefficient energy processes at a rate necessary to limit the likely devastating results of a warmer planet, then we need enabling policies in place—especially when it comes to trade policy.
That’s why, this week, a group of 14 World Trade Organization (WTO) Members are meeting to begin the second round of negotiations on the Environmental Goods Agreement (EGA)—an effort aimed at liberalizing trade in products that help make our world cleaner and greener.
Cities are becoming the new ecosystems for innovation. Recent studies on venture capital (VC) investment in the United States reveal that innovation is moving from suburbs to downtown areas. Today, San Francisco hosts more VC investment than Silicon Valley and New York – a city where the innovation startup scene was merely anecdotic 10 years ago – has become the third-largest technology startup ecosystem in the United States, with more than US$2.4 billion VC investment in 2011.
This trend is not unique to the United States. Start-ups are surging in other major cities around the world, including London, Berlin, Madrid, Moscow, Istanbul, Tel Aviv, Cape Town, Mumbai, Buenos Aires and Rio de Janeiro, to name a few.
New technology trends have reduced the cost of technology innovation. Cloud computing, open software and hardware, social networks and global payment platforms have made it easier to create a startup with fewer physical resources and personnel. If in the 1990s, an entrepreneur needed US$2 million and months of work to develop a minimum viable prototype, today she would need less than US$50,000 and six weeks of work (in some cases, these costs can be as low as US$3,000). This trend is allowing entrepreneurs to take advantage of cities’ agglomeration effects: entrepreneurs “want to live where the action is,” where other young people, social activities and peers and entrepreneurs are. They look for conventional startup support, such as mentor networks or role models, but also for nightlife, meet-ups, social activities and other potential for “collisions” – a combination best provided by cities.
Vietnam has achieved remarkably high and inclusive GDP growth since the late 1980s. GDP growth per capita increased three-and-a-half-fold during 1991-2012, a performance surpassed only by China. The distribution of growth has been as remarkable as its pace: the bottom 40% of the population’s share in national income has remained virtually unchanged since the early 1990s, ensuring that the rapid income gains got translated into shared prosperity and significant poverty reduction.
GDP growth, however, has been operating on a lower trajectory since 2008. This has led to questions regarding the sustainability of the growth process, and, with it, Vietnam’s ability to bounce back to about 7-8% per capita growth. Analysts have voiced concerns over declining total factor productivity growth and growing reliance on capital accumulation. Moreover, a number of competitiveness issues routinely get raised by private investors, including: a widening skills gap, limited access to finance, relatively high trade and transport logistics costs, an overbearing presence of the SOEs, and heavy government bureaucracy that makes it difficult for businesses to operate in Vietnam.
In introductory macroeconomic class, students learn the theory of the multiplier and many interesting counterintuitive notions such as the paradox of thrift and the balanced budget multiplier based on the multiplier process. Essentially, the multiplier multiplies because one person’s expenditure is another person’s income of which they spend a fraction, which in turn becomes another person’s income, of which a fraction is spent and the process eventually converges with subsequent increments to income getting smaller and smaller.
How does the multiplier process work in reality? The Refugee Migration Movement Research Unit (RMMRU) in Bangladesh has recently completed the first phase of a longitudinal research on the impact of external and internal migration on income and poverty in Bangladesh. The research is based on a survey of 5084 external, internal and non-migrant households from 102 villages. Among others, one of the most interesting is their findings on the impact of external migration on local level development through remittances and expenditure behavior of remittance recipients. Note that since the mid-1970s, Bangladesh has participated mostly in the short-term international labor markets of the Gulf and other Arab countries, as well as South East Asian countries. Over the last ten years, an average 500,000 workers have migrated abroad for work each year. Currently, an estimated 8 million Bangladeshi workers are on short-term migration abroad.
In 2013 the short-term international migrant (STIM) households on average received Tk 251,400 (over $3100) as remittance. The maximum amount received was Tk 4,400,000 and the minimum was Tk 6000. The study found international migration plays a significant role in reducing poverty. Only 13 percent of the STIM households were below the poverty line, compared with 40 percent of the non-migrant households. The survey particularly covered those groups that were either below poverty line, experienced occasional deficits, or ‘break-even’ situations at the time of their first international migration.