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June 2012

Global Economy and Development Roundup

Swati Mishra's picture

In the recently released Global Economic Prospects June 2012, World Bank experts warned of long period of volatility. Resurgence of the Euro Area tensions had eroded economic gains of first 4 months of 2012, said the report.  And as the leaders of the 27 European Nations convened in Brussels yesterday to tackle the crisis, it was labeled as the “last chance” summit. The outcome: Up All Night, But Consensus Finally Reached, says a Time.com story. According to the story, published today, “Yet, despite what were described as tense and grinding negotiations, decisions announced early Friday morning appear to represent important steps towards the survival of the embattled euro zone—and in both the short- and long-term context of the crisis.” This much needed move comes at a crucial point and will hopefully have a positive impact on developing countries. However, a lot remains to be done. Following is a sampling of some interesting research and analysis by World Bank as well as others highlighting issues of current import to global economy and development.

Inequality of What?

Francisco Ferreira's picture

More than ten years ago Ronald Inglehart, of the University of Michigan, and his team at the World Values Survey asked thousands of respondents around the world to rate their views, on a scale of 1 to 10, on whether they felt inequality in their countries should go up or down.  The way they phrased the question was that 1 corresponded to full agreement with the statement that “incomes should be made more equal”, whereas 10 stood for “we need larger income differences as incentives for individual effort”.

Chart: Poverty rates fell sharply in the new millennium

Excerpt from “Tracking the MDGs,” GMR 2012.

Poverty and hunger remain, but fewer people live in extreme poverty. The proportion of people living on less than $1.25 a day fell from 43.1 percent in 1990 to 22.2 percent in 2008. While the food, fuel, and financial crises over the past four years have worsened the situations of vulnerable populations and slowed the rate of poverty reduction in some countries, global poverty rates kept falling. Between 2005 and 2008 both the poverty rate and the number of people living in extreme poverty fell in all six developing regions, the first time that has happened. Preliminary estimates for 2010 show that the extreme poverty rate fell further, reaching the global target of the MDGs of halving world poverty five years early. Three regions—East Asia and Pacific, Europe and Central Asia,and the Middle East and North Africa—met or exceeded the target by 2008. More

Monitoring Inequality

Martin Ravallion's picture

Inequality is getting more attention in efforts to monitor development progress. Alongside established measures of poverty and human development there have been calls for monitoring inequality. How should this be done?

We focus here on just one aspect of inequality, though an important aspect, namely the inequality of consumption or income. This is about “inequality of results” not “inequality of opportunities,” which may be more important but is much harder to measure. And there are other dimensions of inequality that matter, such as inequality in access to health and education services.  But this is the obvious place to start.

G20 Needs to Focus More on Growth

Zia Qureshi's picture

This is the central message of a report World Bank staff prepared as an input to the G20 Los Cabos summit held from June 18-19. The summit comes at a precarious time for the world economy. The Euro Area is facing a relapse into recession, with potentially large losses of output with global repercussions if current risks to stability and growth are not addressed forcefully. Recovery in other advanced economies is weak and faltering. Growth is also slowing in emerging economies that have been the drivers of global growth in recent years. Against this background, the Bank report, entitled Restoring and Sustaining Growth, conveys the following main messages:

Aid composition and basic nutrition: Putting money where your mouth is?

José Alejandro Quijada's picture

The latest Global Monitoring Report analyzes the impact of recent food price spikes on the Millennium Development Goals (MDGs), paying particular attention to the negative consequences that temporary food price shocks may have on nutrition.

Nutritional outcomes are directly linked to the MDG on hunger (MDG 1.c) and indirectly to most of the remaining development targets, through its effects on cognitive skills of young children and consequently on human capital accumulation. Unfortunately, progress in fighting undernourishment is considerably lagging across nearly all developing regions (figure 1).

To measure poverty over time, we need to do more!

Luc Christiaensen's picture

The latest World Bank estimates suggest that the percentage of the developing world’s population living below $1.25 a day declined from 52% in 1981 to 22% in 2008. While this indicates that there is still a long way to go in poverty reduction, the progress is encouraging. Moreover, we now also appear to be in a much better position to make such statements. The numbers above, by my colleagues at the Department Research Group, are based on over 850 household surveys for nearly 130 developing countries, representing 90% of the population of the developing world. By contrast, they used only 22 surveys for 22 countries when the first such estimates were reported in the 1990 World Development Report.

Resolution of Systemic Financial Problems – How Should Spain do it?

Asli Demirgüç-Kunt's picture

Systemic financial crises require swift and comprehensive solutions by the government.  In 2008 it quickly became clear that characterizing the U.S. securitization crisis as one of liquidity was inaccurate, and hoping that it would be cured by auctioning off increasingly poorly collateralized central bank loans to distressed firms was futile.  That led to -TARP- a plan to repurchase troubled assets from banks, which quickly evolved into a bank recapitalization plan when it became clear pricing toxic assets was nearly impossible. 

More recently, Spanish banking system has seen its situation worsen, partly because of Madrid’s failure to force an earlier cleanup of bad debts stemming from a real estate bust.  Austerity measures to remedy the region’s debt crisis have since led to greater deterioration of Spanish bank balance sheets, as more and more Spanish businesses folded and homeowners went into foreclosure.  Over the weekend Spain became the largest euro-zone nation to seek an international bailout, and the 17-nation currency area agreed to lend Madrid up to $125 billion for its bank rescue fund.  At this point there is little disagreement that there needs to be a broad-based approach to resolve the Spanish bank insolvency problem, but not as much discussion over the form it should take.

Feeding the poor: shifting food within and across borders

Mohini Datt's picture

While the world’s population doubled in the last fifty years, global food production trebled – especially in the staple grains that form the mainstay of the poor man’s diet.  Yet, over a billion people in the world still go hungry - why?

As the World Bank’s Global Monitoring Report of 2012 shows, it is not that the world as a whole lacks rice, wheat or maize, but produce from food abundant areas does not always make it to food deficit ones – i.e. it is not so much the availability of food that matters as access to it.
Movement of food within a country or across its borders remains hampered by dismal infrastructure and inefficient regulations, and shackled to the dictates of political economy.   Yet, trading food can feed the poor at lower costs and help countries weather shocks to local production.

Justin Yifu Lin receives video accolades, warm farewells

Merrell Tuck-Primdahl's picture

June 1 was Justin’s last day as World Bank Chief Economist and I wanted to share comments from several leading development thinkers and economists (including past Chief Economists) who knew him and appreciated the determination he brought to the position.  Justin’s views were not in the mainstream at the World Bank, but through intellectual persistence, structural economics has re-emerged as a topic meriting debate and discussion among top development experts.

Enjoy the video and feel free to share your views about Justin’s legacy

Are female firms less productive? Findings from the Rural Investment Climate Pilot Surveys

Rita Costa's picture

The potentially deleterious effects of gender disparities on growth and poverty reduction have been receiving progressively more policy attention (reflected, for instance, in the inclusion of the promotion of gender parity amongst the Millennium Development Goals and the 2012 World Development Report). Inequities in labor market opportunities are of particular concern since labor earnings are the most important source of income for the poor in the vast majority of developing countries.
 
Although the vast majority of the poor live in rural areas and rural non-farm enterprises account for about 35-50% of rural income and roughly a third of rural employment in developing countries, relatively little is known about gender inequities in rural non-agricultural labor market outcomes due to data-limitations. This is unfortunate given the proliferation and diversification of rural non-farm activities and their potential to alleviate poverty, especially in countries where the importance of agriculture as an employer is likely to diminish.