May 2012

Let’s Be Pragmatic: My Final Post as World Bank Chief Economist

When launching ‘Let’s Talk Development,’ we thought we would create a platform for encouraging open debate and exchanging serious ideas about economic development and poverty reduction. Looking back at almost two years of open exchanges and vigorous discussion on all sorts of issues, I think we have far surpassed our initial expectations. ‘Let’s Talk Development’ now has a wide and loyal readership and is among the most popular of the World Bank’s blogs.

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Development economics

Socio economic consequences of food price spikes

High food prices, especially when they have increased suddenly and unexpectedly, have been found to hurt many poor people around the world. The Global Monitoring Report 2012: Food Prices, Nutrition, and the Millennium Development Goals (GMR) finds that the food price shock that peaked in early 2011 pushed nearly 50 million people into poverty. On one level, this is not surprising—the poorest people, after all, spend nearly all of their income on food. But on further reflection, this result is not so obvious— three quarters of the world’s poor are rural and the majority of them depend on farming for their livelihoods. The problem is that—unlike farmers in rich countries—many poor farmers in developing countries don’t produce enough food to meet their families’ needs. These net buyers of food are hurt by higher food prices even though they are farmers.

How does Serbia fare on gender equality in the labor market? Did it manage to sustain some of the achievements of the former socialist regime, such as equal access to education opportunities, equal treatment of men and women in the labor law and high employment rates of men and women? The analysis of the recent labor force and enterprise surveys shows that although men and women have similar education levels and enjoy equal treatment in the labor legislation, there are major gender disparities in access to economic opportunities:

The role of the Indian government in helping foster the success of India’s IT industry is a point I disagree with Kalpana Kochhar about. Kalpana, World Bank regional Chief Economist for South Asia, posted a comment disagreeing with my views on the subject on ‘Africa Can Reduce Poverty’. Following is my counterpoint to her:

Last week, I participated in GE’s global conference, ‘Disrupt or Be Disrupted’. The theme of the event was simple. As barriers to entry fall in nearly every industry, no company is safe or immune from being disrupted in a fundamental way. It’s no longer uncommon that industry leaders lose their edge in months, and wither to irrelevance in record time. Unless corporates have the courage to embrace and empower their ‘creatives’ they don’t stand a chance in sustaining their competitive advantage.

India experienced sustained economic growth for more than two decades following the economic liberalization in 1991. While economic growth reduced poverty significantly, it was also associated with an increase in inequality. Jean Dreze and Amartya Sen (2011) argue that Indian economic reform has been “unprecedented success” in terms of economic growth, but an “extraordinary failure” when it comes to improvements in the living standard of general population and social indicators. The contrasting news reports on billion dollar house (Mukesh Ambani’s house at Mumbai) and farmers’ suicides have brought the issue of income inequality to the spotlight for many people. Does the increase in inequality in post-reform India reflect deep-seated inequality of opportunity or efficient incentive structure in a market oriented economy?

The crisis in Greece and the Eurozone has escalated as depositors flee banks in fear not only of the consequences of sovereign default but also of Greece abandoning the Euro. Unfortunately, this development makes the crisis much deeper and more difficult to manage. As we (along with Eduardo Levy Yeyati) highlighted in a VoxEU piece in June 2011, the main risk of the Greek debt crisis was its potential spillover to the banking sector.

Image Courtesy: http://blog.zap2it.com/frominsidethebox/2012/02/grammys-2012-paul-mccartneys-my-valentine-performance.html In his hit My Valentine, former Beatle Sir Paul McCartney sings about a Moroccan vacation where foul weather meant he and his love could not enjoy the vacation and planned sightseeing they had envisioned. Sir Paul was frustrated, until his love said the weather mattered little and they should change their mindset and make the most of it. That advice inspired the opening lyrics of his tune -- What if it rained?/ We didn't care/ She said that someday soon/ The sun was gonna shine/ And she was right/ This love of mine,/ My Valentine -- and taught him a valuable lesson: Complaining about the missing ingredients necessary to achieve any goal is a waste. It is far better to focus on what is already available and make the most of things.

There is a question we often get asked when presenting our new book, Living through Crises. The question is about how the coping behavior described in the book differs from what poor people do to deal with the day-to-day shocks of living in chronic poverty. Based on qualitative, bottom-up research in 17 developing and transition countries, the book describes impacts of the food, fuel and financial crises on the lives of ordinary people and what people do to cope. It talks about the hardships and stresses from living through a period of deep crises; meals that gradually become fewer and less nutritious; people seeking more jobs and working longer hours to make ends meet; how the burden of coping often looks different for women, men, and youth; erratic school attendance and lower quality of care, nutrition and education for infants and children; and the stresses and tensions in family and community life wrought by economic hardships. The book also chronicles the sources of support people could rely upon, often family, friends and informal community groups with the state, NGOs and financial institutions playing small roles at best and being directly unhelpful at worst. The work described in the book helped inform the Global Monitoring Report 2012 and other Bank products.

Policies that aim to improve the position of women relative to men are desirable not only on equity but also on efficiency grounds. While developing countries continue to improve economic opportunities for women, inheritance laws remain strongly biased against women in many societies. When the distribution of inherited wealth is highly unequal, the effect of this disparity on economic inequality is of considerable interest. Parental bequests of material wealth and human capital investments represent central forms of intergenerational transfers that affect long-term development in far reaching ways.

Three years from the deadline for reaching the Millennium Development Goals, two-thirds of countries will not reach MDGs 4 and 5 (child and maternal mortality, respectively). And now the second food price rise in three years is a wake-up call for the development community.

In this context, the Global Monitoring Report 2012: Food Prices, Nutrition, and the Millennium Development Goals examines some of the possible consequences of food price increases, such as a rise in poverty and undernourishment^1. Households cope through a variety of mechanisms, including: eating less nutritious diets and then less food; making more household members work (women and children); and not seeking health care when ill. The most vulnerable (the poor, children, and pregnant women) bear the brunt of these adverse impacts. Moreover, as countries seek to maintain food prices, some increase food price subsidies and cut into other services.

Last year I wrote a couple of posts on coping with information overload using an iPad, one in July and the other in December. The iPad world continues to develop apace, so here's a quick update, this one - as requested - complete with links to the apps.

International development apps

In my last post, I covered three World Bank apps: InfoFinder, which allows you to search in the Bank's documents and reports database, DataFinder which gets you into the Bank's data vaults, and WB Finances which shows you what the Bank is doing in its operational work. The Bank's latest iPad app is the 2012 World Development Report which contains the text of the report plus various additional features. While not an iPad app, the Bank's Open Knowledge Repository is quite iPad-friendly and a great way to search for and access World Bank publications.

Shedding light on and engaging in debate regarding financial inclusion is important and we can now be more informed on the topic thanks to the release last month of the Global Financial Inclusion Database, or Global Findex. With this in mind, I want to react from my point of view as supervisor of the Global Findex project to a recent post by Milford Bateman on The Guardian’s Poverty Matters blog.

Global Findex makes a valuable contribution to our development work, because it means that now researchers and policymakers no longer have to rely on a patchwork of incompatible household surveys and aggregated central bank data for a comprehensive view of the financial inclusion landscape.

It also means debates about financial inclusion can be rooted in more solid facts.

Former Soviet Union leader Joseph Stalin and famous Irish writer Oscar Wilde had very little in common. Yet they agreed on one thing: the importance of ideas in human life. The former once said: “Ideas are more powerful than guns. We would not let our enemies have guns, why should we let them have ideas?” The latter boldly wrote that “An idea that is not dangerous is unworthy of being called an idea at all.” My colleagues who serve as regional chief economists at the Bank -- Shanta Devarajan, Kalpana Kochhar, Indermit Gill -- also agree with me that ideas drive various societal transformations. Nevertheless, they disagree with me on several points, as highlighted in their joint post on Africa Can. We all want to generate and channel the best knowledge on development to policymakers around the world who have been struggling for centuries—if not millennia—to lift their people out of poverty.

Reducing poverty and climbing the ladder to prosperity aren’t easy: From 1950-2008, only 28 economies in the world have reduced their gaps with US by 10 percent or more. Among those 28 economies, only 12 are non-European and non-oil exporters. Such a small number is sobering: It means that most countries have been trapped in middle-income or low-income status. As development economists, we must find a way to help them improve their performance so that our dream of “a world free of poverty” can be realized and they can close the gap with the high-income countries.

Many feared a return of 1930s-style protectionism when recession hit the global economy. But many countries avoided this. In a blog post, co-authored with Meredith Crowley, I focus on US and EU trade policy and discuss how this policy withstood the ‘Great Recession.’ The following is an excerpt from the post which appeared on Vox.

“During the Great Recession, import protection increased around the world (Evenett, 2011). Popular policies included antidumping tariffs, safeguards, and other temporary trade barriers (Bown 2011a,b). Despite this, for high-income economies such as the US and EU, such trade barriers increased much less than initially feared. In this column, we ask how and why.

We will be live blogging and Tweeting during the keynote presentations on both days of the World Bank's Annual Bank Conference on Development Economics (ABCDE) this coming Monday and Tuesday (May 7-8).

Hernando de Soto of the Institute for Liberty and Democracy (Peru) will be speaking on Monday @ 9am (EST) on 'Live, Dead, and Fictitious Capital' and Timothy Besley of the London School of Economics (UK) will be speaking on Tuseday @ 9am (EST) on 'Transparency and Accountability: Interpreting the Evidence.'

We're keen on your receiving your questions, so be sure to send them our way through the World Bank Live platform.

Please also visit the ABCDE 2012 Website for the full agenda, working papers, and other materials. Also, follow us on Twitter @ABCDEwb and use #wblive or #ABCDE to join the live discussion.

Look forward to seeing you online!

Given worldwide concern over jobs, it makes sense that the 2013 World Development Report (WDR) is on jobs. According the ILO, though growth has resumed in some regions, the global employment situation is bleak and shows no sign of recovery in the near term.

The WDR, which is being launched this autumn, will posit that jobs are more than what people earn or what they do at work -- they are also part of who they are. With that in mind, the report will use a jobs lens to look at multiple outcomes associated with jobs – how they contribute to living standards, productivity and social cohesion.

The Global Monitoring Report 2012 reports on the remarkable growth in Official Development Assistance (ODA) over the decade through 2010, despite the global financial crisis centered in high-income donor countries. Net ODA reported to the Development Assistance Committee (DAC) of the Organization for Economic Co-operation and Development (OECD) rose from 0.22 percent as a weighted average of donors’ gross national incomes (GNI) in 2000 to 0.32 percent in 2010 and reached a record high of $127.3 billion in 2010 (at 2009 prices)—very close to the target of $130 billion set at the G-8 Gleneagles Summit in 2005. There is some evidence that international coordination, notably the commitments made at Gleneagles, contributed to the rise in aid disbursements.

May 2012

Let’s Be Pragmatic: My Final Post as World Bank Chief Economist

Socio economic consequences of food price spikes

Women – The Untapped Economic Potential in Serbia

India’s IT industry and industrial policy

Three Kids in a Garage

Caste Disadvantage, or Gender and Urban bias? Educational Mobility in Post-reform India

The Influence of Greece's Debt Crisis on the Banking Sector

Development Economists Can Learn from a Pop Musician

Coping with large shocks: What makes it different?

Importance of Equal Inheritance Rights for Female Empowerment

Why nutrition matters

Yet more on coping with information overload with an iPad

Counting Financial Inclusion and Debating its Merits

The Development Debate: A Rejoinder

How did US and EU trade policy withstand the Great Recession?

Ask Your Questions As We Live Blog From the ABCDE Next Monday and Tuesday

Jobs, Jobs, Jobs: Introducing the WDR 2013

Projected slowdown in aid flows underscores need for enhanced effectiveness

May 2012

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