In analyzing returns to schooling and in evaluating educational policies, ‘soft skills’ – personality traits like conscientiousness, openness and diligence -- often get under-valued or neglected. This is in part because so much value is placed on standardized test scores in education systems. It’s also because soft skills that are valued in the labor market, in school, and in many other domains are considered too hard to quantify.
With the global recovery slow to pick up speed, the latest World Economic Outlook (WEO) isn’t exactly an uplifting read. However, for those of us with an eye on the developing world there are some bright spots: the low-income-countries (LICs) in Africa, for example, have returned to their pre-crisis growth rates and their economies are expected to expand by a respectable 6.5 percent in 2012.
Despite this seemingly good news, there are some dark clouds on the horizon. The WEO attributes the quick rebound to the fact that the African LICs were, “largely shielded from the global financial crisis owing to their limited integration into global manufacturing and financial networks.” Although limited international exposure is a boon in the short-term, it also signals trouble down the road.
According to Nobel-winning economist Joseph Stiglitz, creating jobs amidst today’s low-demand, high-debt environment is a tall order. It will require viable structural employment policies, unemployment insurance for laid off people, and -- in the case of the US – facing up to the inevitable shift out of the manufacturing sector into services. Stiglitz, who delivered a DEC Lecture at the World Bank on September 26 on ‘The State of the Global Economy: An Agenda for Job Creation’, warned that far more is broken than the banking and financial systems in high income countries. He argues that a lack of aggregate demand is a huge problem that can only be fixed through smart public as well as private investment in education, infrastructure, and innovative technologies to protect the environment. He also described the current phenomenon whereby productivity in manufacturing is exceeding the rate of growth in demand in the sector, which means jobs on factory floors are being shed. In other words, technical change can induce large distributive consequences and lead to long term unemployment. Listen to my interview with him about what can be done to cure our current ills.
Remember the famous joke about an economist who believes so much in rational expectation theory that he would not pick up a $100 dollar bill off the sidewalk under the pretense that if it were actually there someone would have already picked it up? A similar excuse may be invoked to justify why low-income countries that are currently facing high underemployment are not organizing themselves to seize the extraordinary bonanza of the 85 million manufacturing jobs that China will have to shed in the coming years because of fast rising wages for unskilled workers.
Economic development is a process of continuous industrial and technological upgrading in which each country, regardless of its level of development, can succeed if it develops industries that are consistent with its comparative advantage, determined by its endowment structure. As I explained in an earlier blog post for China to maintain GDP growth of nearly 10 percent a year in the coming decades, it must keep moving up the value chain and relocate many of its existing labor-intensive manufacturing industries to countries where wage differentials are large enough to ensure competitiveness in global production networks.
It's important to have an international forum where leading thinkers can exchange ideas about how to reduce poverty and how to promote growth in low income countries. I'm delighted that, since its inauguration 22 years ago, the Annual Bank Conference on Development Economics (ABCDE) has served this purpose by connecting leading thinkers, practitioners, and students. Now more than ever, we need active and constructive debate about job creation, reducing inequality, empowering women, and improving our approaches to human capital formation and training youth. TheDevelopment Economics Vice Presidency that I lead is enthusiastic in its continued support for this forum.
For people to benefit from development and escape poverty, they need to broaden their opportunities. That's why we chose 'Broadening Opportunities for Development' as our overall theme for this year's conference happening from May 30-June 1 in Paris.
Structural transformation is a key determinant of productivity growth and explains two-thirds of the difference between superior East Asian growth and more muted Latin American growth in the past two decades.
Given the multi-speed paths that regions and countries take as they transform, with some succeeding spectacularly and some struggling to compete, it may be time to consider new industrial and labor policies to ensure that a huge swath of the lower middle class in the developing world doesn’t get left behind in the race to compete in today’s unforgiving global marketplace.
Which comes first in the wake of revolution, bread or freedom?
A Reuters reporter asked about this during the embargoed press briefing last Friday to launch the World Development Report 2011: Conflict, Security and Development. What she wondered about was the tough choices of what to deal with most urgently in the throes of revolutions like we are seeing in the Middle East and North Africa.
In other words, should policymakers pay urgent attention to, say, food, jobs and the flow of cash or do justice and political change take precedence?
Countries of the Middle East and North Africa (MENA) are a cauldron of wrenching social change. For years pundits have attributed the region's tense social fabric to relatively high population growth rates, a lack of economic diversity, autocratic governments, and, in many countries, on an over-reliance on oil.
Howard Pack, eminent business and public policy Professor at the Wharton School, came to the World Bank earlier this week to share his views on the question of why MENA countries never came close to the equivalent of an East Asian miracle and how they might get on a more successful economic path.