Microcredit has been in the spotlight lately. This innovative banking program, pioneered by Professor Muhammad Yunus, has created the option for millions of poor people, especially women, to become self-employed entrepreneurs. By empowering women, microcredit has created opportunities to lift countless families out of abject poverty. Clearly, this has been a net gain for society. Yet current criticism of microcredit points to its failure to alleviate poverty, high indebtedness of borrowers, high interest rates, coercive loan-collection tactics, lack of transparency in public fund management, and uncertainty of succession in leadership.
The current food crisis—increasing poverty linked to price volatility and high food prices—have put agricultural growth and food production issues back on the development agenda. Is productivity growth the only way to address the short-run challenge (the food crisis) and longer-term needs (meeting increased demand for food)?
Even though today agriculture is the main source of livelihood for 2.5 billion people, including 1.3 billion smallholders and landless workers, public investment in agriculture in developing countries, as well as the share of agricultural expenditure in total government spending, have been gradually declining since the 1980s. Bilateral and multilateral assistance to agriculture, after an increase in the 1970s, also fell starting in the mid-1980s. It is only in recent years that the World Bank and other aid agencies have increased their lending and boosted their investments. But will these investments be effective? This depends on whether they will have a sizeable impact on agricultural productivity.
South Asia presents a depressing paradox. It is among the fastest growing regions in the world. But it is also home to the largest concentration of people living in poverty. While South Asia is at a far more advanced stage of development than Sub-Saharan Africa, it has many more poor people than Sub-Saharan Africa.
Figure 1: Number of Poor People has increased in South Asia
Source: World Development Indicators, World Bank 2009.
There is a shared sense that globalization has a strong potential to contribute to growth and poverty alleviation. There are several examples of countries in which integration into the world economy was followed by strong growth and a reduction of poverty, but evidence also indicates that trade opening does not automatically engender growth. The question therefore arises, why the effects of globalization have been so different among countries of the world.
A look at changes in the structure of employment in Latin America and in Asia hints at possible explanations for observed differences in the growth effects of trade. Since the 1980s, Asia and Latin America have both rapidly integrated into the world economy. Asia has enjoyed rapid employment and productivity growth, but the consequences for Latin America have been less stellar.
The chart below shows how the pattern of structural change has differed in the two continents. The chart decomposes labor productivity growth in the two regions into three components: (i) a “within” component that is the weighted average of labor productivity growth in each sector of the economy; (ii) a “between” component that captures economy-wide gains (or losses) from the reallocation of labor between sectors with differing levels of labor productivity; and (iii) a “cross” component that measures the gains (or losses) from the reallocation of labor to sectors with above-average (below-average) productivity growth. The underlying data for the charts come from the Groningen Growth and Development Centre.
Children haveing a meal at school. Ghana. Photo: © Arne Hoel/The World Bank
“Food security exists when all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active and healthy life.”
This profoundly important—and seemingly-simple—definition of food security from the World Food Summit of 1996 actually has four elements:
1. Enough food must be available to meet people’s needs.
2. People must have access to the food that is available under normal circumstances.
3. Volatility in production or prices must not threaten this availability, and
4. The quality of food that people consume must be adequate for their needs.
In today’s data-saturated, highly visual and networked world, statistics are used by policymakers, researchers and journalists for just about everything. However, a veritable mix of government officials, economists and statisticians work – often against overwhelming odds - to produce data sets that are, paradoxically, often taken for granted, but also used as gospel in policy discussions.
Earlier this week, the World Bank celebrated the first ‘World Statistics Day,’ where the successes, challenges and future directions for collecting and analyzing economic development-related data were discussed.
The statistics discipline in the economic development field has seen some breakthroughs in the recent past.
Princeton University's Angus Deaton, a panelist at the event, pointed to the 2005 round of the largest international data collection exercise in the world, called the International Comparison Program, which collects internationally comparable price levels. This data set is critical for comparing living standards between countries.
The post on 'Understanding India and China's success' is a nice summary of Professor Bardhan's key messages of ‘Awakening Giants, Feet of Clay: A China-India Comparative Economic Assessment.’ It debunks many myths, but it can not debunk an emerging trend that industrialization is no longer the only route to rapid growth and development".
From Project Syndicate:
|Click here to download the book (pdf).|
China and India are both racing ahead economically. But the manner in which they are growing is dramatically different. Whereas China is a formidable exporter of manufactured goods, India has acquired a global reputation for exporting modern services. Indeed, India has leapfrogged over the manufacturing sector, going straight from agriculture into services.
The differences in the two countries’ growth patterns are striking, and raise significant questions for development economists. Can service be as dynamic as manufacturing? Can late-comers to development take advantage of the increasing globalization of the service sector? Can services be a driver of sustained growth, job creation, and poverty reduction?
One size does not fit all in development policy, as World Bank President, Robert B. Zoellick, emphasized in a recent speech, “Democratizing Development Economics.” The right policies depend on the stage of economic development (amongst other things). What does that mean for the Bank’s overarching objective, a world free of poverty?
|Three construction workers return from a day of work as part of the Rural Roads project to improve access to markets in Rajasthan, India. Photo: Michael Foley|
The Bank’s policy dialogues in poor countries have long emphasized policies to promote economic growth as the main means of fighting income poverty. These include efforts to ensure “pro-poor growth,” such as by avoiding policy biases against labor-intensive production. However, direct redistributive policies in favor of the poor typically get far less attention.
It is not obvious why. Even some very poor countries have high inequality—in fact, some of the highest levels of income inequality in the world are found in poor countries (see the 2006 World Development Report: Equity and Development). And developing countries have redistributive policy options through tax and spending instruments (including cash transfers). There are concerns about trade-offs between equity and efficiency, though it can also be argued that high inequality is an impediment to economic growth. So should direct redistributive interventions play a bigger role?
Poverty in old age is prevalent in a large number of Latin American countries. Universal minimum pensions would be an effective and administratively simple way to substantially reduce poverty among the elder generation.
|Photo: © Charlotte Kesl / World Bank|
Pranab Bardhan, Professor of Economics at the University of California, Berkeley presented at the World Bank last week on his new book, ‘Awakening Giants, Feet of Clay: A China-India Comparative Economic Assessment.’
Examining the Indian and Chinese economies, Bardhan set about debunking commonly held views on the economic drivers in the two countries and also their relationship with the rest of the World. He offered unconventional insights, but also a cautionary note on future prospects.