The World Bank’s classification of economies as low-, lower-middle-, upper-middle-, or high-income has a long history. Over the years these groupings have provided a useful way of summarizing trends across a wide array of development indicators. Although the income classification is sometimes confused with the World Bank’s operational guidelines, which set lending terms and are determined only in part by average income, the classification is provided purely for analytical convenience and has no official status.
Not so long ago, those countries designated as “low-income countries” (LICs) in the World Bank’s World Development Indicators accounted for the bulk of the world’s poor, such as by the $1.25 a day standard. Today many very poor people live instead in what are called “middle-income countries” (MICs). The change seems dramatic. Almost all (94%) of those below $1.25 a day in 1990 lived in LICs. By 2008 the proportion was down to 26%, with the rest in MICs. Andy Sumner attracted much attention to this aspect of how the global profile of poverty has changed in his paper “Where do the Poor Live?.” Amanda Glassman, Denizhan Duran and Sumner dub this emergence of large poverty counts in MICs as the “new bottom billion.”
There has been much discussion about the implications of this change for overseas development assistance (ODA) and development policy more broadly. In particular, there have been calls for concentrating ODA on the LICs, assuming that the MICs can now look after their own poor.
But we need to look more closely at this “LIC-MIC” distinction, to understand why we have seen this change in the global poverty profile, and what relevance it might have for development policy.
eBay, an online marketplace, reduces the effect of distance on international trade by 65%, mainly through a reduction in information frictions that creates trust between market participants. As online markets help overcome market and government failures, the reduction in trade costs is larger where it is most needed: in remote countries with weak institutions that export information-intensive goods.
In the 1990s, many commentators believed that with advances in transportation and communication technologies, geographic distance between countries would soon no longer encumber international transactions. Frances Cairncross (1997) famously predicted the “death of distance”. But despite some anecdotal evidence in support of this prediction, a large number of academic papers has established that distance has been thriving, rather than dying.
Editor's warning: The author wrote this post after hitting his head and suffering some memory loss, and the World Bank cannot vouch for the accuracy of everything reported in it.
It was the perfect finale. In the vast high-tech auditorium of Beijing's International Convention Center, the audience jostled in the queue to pose questions to the final plenary panel of the Second Global Symposium on Health Systems Research.
First came an elderly lady from the Indian subcontinent who asked why the panelists were so old. "How can we address the issues of tomorrow with the experts of yesterday? If we're going to be serious about universal health coverage, we need youth!" The crowd -- mostly young -- signaled their approval. A middle-aged gentleman from South Africa tried to engage the panel on the damages inflicted on world nutrition by the global food corporations. Warming to his theme of corporate neocolonialism, land grabs, and genetically modified foods, he invoked the memory of Lenin. "That's Vladimir Lenin", he explained to the crowd, "not John Lennon." "Vladimir who? John who?" wondered the youthful crowd. The chair, the ever-youthful Lancet Editor-in-Chief Richard Horton, whose favored medium is Twitter, asked the gentleman to keep his comments tweet-length. A young woman from Britain's aid agency, DfID, eventually wrestled the mike from Lenin's apologist, and said what was on everyone's mind. "Richard, Dear Leader.", she urged, "Tell us your thoughts. It's you we want to hear!"
Following is the trancscript of Kaushik Basu's interview with CNBC-TV18, India, which first appeared on www.moneycontrol.com.
In an interview to CNBC-TV18, Kaushik Basu, chief economist, World Bank said the growth situation has to be taken seriously. "I do believe that, for India, there has to be all focus on growth."
Despite the fact that compared to the rest of the world, India is doing well, he said, it has the potential to get right back to 8.5 percent growth. "We have to put all hands on growth and try to get it back again up as quickly as possible," he added.
Q: You have been appointed as World Bank’s chief economist. So, the view from the inside has now changed to the view from the outside, has not it?
A: A little bit. Three months ago, I moved from the heart of Indian policymaking to seeing it from outside.
How do you measure unemployment? By counting the number of people looking for work but unable to find it. However, this measure overlooks people willing to work and not necessarily looking for jobs. In an interesting chart, The Economist illustrates how a broader measure makes unemployment in Europe look even worse.
As debates on the post-2015 framework gear up, a strong view is emerging that the next development framework must aim at finishing the job that the Millennium Development Goals (MDGs) started at the beginning of the 2000s. There are many lessons that the development community has learnt about what worked and what should be improved this time around. A new report by Save the Children published today on the occasion of the second meeting of the United Nations High Level Panel on post-2015 in London, Born Equal: How reducing inequality could give our children a better future, argues that inequality is one of the MDGs’ blind spots that needs to be addressed in the next development framework to accelerate progress towards the MDGs and to deliver the promise to eradicate extreme poverty.
Jobs have been at the center of my life since I took up my own new job as World Bank Chief Economist on October 1. This began within hours of my joining the Bank, when I participated in the press launch of the World Development Report 2013 on Jobs. Following that, my interactions at the Tokyo Annual Meetings of the World Bank and IMF also brought the jobs issue into high relief, with ministers and policymakers from around the world reacting to the WDR, especially in some of my corridor conversations with them.
I have a longstanding interest in labor-related issues, the role of labor laws, and on the impact of privatization on jobs. So I was pleased by the clairvoyance of the World Bank in choosing jobs as the topic for the 2013 World Development Report, much before the Bank knew that it would choose me to be the Chief Economist.
For those of us following the US Election 2012, the words ‘manufacturing’ and ‘jobs’ are hard to miss. Building on that buzz, The Economist recently conducted a debate: “Will manufacturing return to the West?” While the US election is a good ten days away, the decision on this debate is out: Manufacturing will return to the west. Irrespective of the verdict, both the sides – opposing and defending the motion- have provided numerous insights in to the trends that are unfurling in China and US. Read them here.
Inequality, alongside jobs, is the proverbial elephant in the room amidst the US presidential elections. Joe Stiglitz has a new 'Campaign Stops' blog in the New York Times online that draws on The Economist magazine's special series from earlier this month. Stiglitz discusses the perils of underplaying the great divide between the one percent in the US and the middle class. Meanwhile, on the other side of the debate, Kevin Hasset of the American Enterprise Institute along with Aparna Mathur, write in the WSJ that inequality studies that focus mainly on pre-tax incomes are flawed because they overlook transfer payments such as food stamps, unemployment insurance and other safety net programs. Read the article here.