Development

Like all fields of socio-economic measurement, there is scope for debate on how best to assess development progress. There is often much to be learnt from such debate.

But the debates are not always politically neutral. Some observers chose only to look critically at data and methods when the results diverge from their political priors. And some try to undermine evidence that does not fit their priors by questioning the motives of those producing that evidence. A generous interpretation might construe this as some “postmodern” approach to data, but on closer inspection it often looks more like a debating ploy to make up for weak substantive arguments.

In an article on a Brookings website, Laurence Chandy and Homi Kharas chide the World Bank for three so-called “contradictions” in its global poverty numbers, including the Bank’s latest update.  Let me look more closely at these “contradictions” in turn.

First, Chandy and Kharas chide the Bank’s team for assuming that North Korea has the same poverty rate as China. I wish Chandy and Kharas good luck in trying to measure poverty in a place like North Korea, with almost no credible data of any sort to work with. I could offer a guess that 80% of North Korea’s population is poor today—roughly the same as China before it embarked on its reform effort in 1978. This would add slightly less than 1 percentage point to our estimate of the “$1.25 a day” poverty rate for East Asia in 2008.

While there is now a consensus that institutions and history matter for understanding development outcomes, the development policy community has largely failed to take the third (seemingly logical) step, which is to recognize that historians—and the discipline they represent—might matter. Historians hardly speak with a single voice or from a unified perspective, but at best their absence from policy discussions leads to lost opportunities to enrich the quality of scholarship and expand the range of policy responses; at worst it results in partisans erroneously or selectively invoking ‘history’ in support of their cause, or to claims (as one of us heard in a recent meeting) that “the history of the Middle East is largely a black box” merely because the methods historians deploy are not always those preferred by economists. Needless to say, it is almost impossible to imagine the reverse situation, namely a prominent policy issue in which there was a consensus that economics matters but that economists were somehow not consulted.

A clear pattern of 'two speed recovery' emerged from the global economic crisis: although the East Asian economies saw a drop of nearly 4 percentage points in their GDP growth to 8.5 percent in 2008 and a further decline to 7.5 percent in 2009, they rebounded quickly to 9.7 percent in 2010. At the same time, however, growth in high income countries fell by 6.6 percentage points during 2008-09, from 2.7 percent in 2007 to -3.9 in 2009. Moreover, these economies are not yet out of the woods given the sovereign debt crises in the Euro Area.  This is one of the many fascinating patterns revealed in the newly updated online version of the World Development Indicators.

What is more striking is that low income countries (LICs) have been resilient during the crises, more so than in the past.  The annual GDP growth rate for low income countries declined less than 1 percentage point in 2008, standing at 4.7 percent in 2009 and quickly recovered to 5.9 percent in 2010.  In particular, Ethiopia, Mozambique, Tanzania, and Zambia have shown robust growth of 6 to 11 percent throughout this period. Similar conclusions were presented in Didier, Hevia and Schmukler April 2011.