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India's Moral Churning -- Excerpts from August 16 Tata Lecture, Delhi

Kaushik Basu's picture

Revised excerpts from the 16th JRD Tata lecture, delivered in New Delhi, 19 August 2013.

This is a difficult time for the Indian economy. Growth has slowed, with industry shrinking over the last two successive months, wholesale price inflation has risen to 5.8%, and the rupee has been losing value sharply. There is reason to be upset about this and to demand more from policy makers. Yet, as I argue in this lecture, this is not India's biggest problem. The nation's biggest challenge at this critical juncture is a moral and an ethical one. This, for India, is a moment of moral churning. Skullduggery and corruption, cutting across party lines, have been rampant, eating into the moral fabric of the nation, leaving ordinary people befuddled and in despair. This is breeding a corrosive cynicism, leading people to believe that maybe this is the only way to be, that petty corruption and harassment is simply the new normal, whereby we should complain when we are left out of the gravy train and merrily join in if and when we get a foothold on that train. Yes, the economy has not done well over the last year or two. But once we look beyond the proximate causes we will realize that one important factor for the economy not doing well is the corrosion of values like trust and trustworthiness and their concomitant, poor governance.

Did Trade Policy Responses to Food Price Spikes Reduce Poverty?

Will Martin's picture

Food prices in international markets have spiked three times in the past five years: in mid-2008, early 2011 and mid-2012 (Figure 1). The first of those spikes – when rice prices more than doubled – prompted urban riots in dozens of developing countries. It may have contributed even to the unrest that led to the Arab Spring. The most common government response was to alter trade restrictions so as to insulate the domestic market from the international price rise. And the most common justification for that action (tighter export restrictions or lower import barriers on food staples) was that it would  reduce the number of people who would fall into poverty. Not only are food prices politically sensitive, but many poor people are vulnerable to higher food prices, because the poorest people spend a large fraction of their incomes on food.

Maria Montessori and the MDGs

Hans Timmer's picture

Earlier this year, I attended a first-rate workshop on the Post-2015 Development Goals, hosted by Barry Carin (Centre for International Governance Innovation) and Wonhyuk Lim (Korean Development Institute). The event took place in the Rockefeller Foundation’s Bellagio Center on the shores of Lake Como in Italy, a truly idyllic place for productive brainstorms. The groundwork for the workshop was flawless. CIGI and KDI had prepared an excellent report that outlined 11 goals, ranging from inclusive growth and environmental sustainability to security and political rights. The report put flesh on the bones of that skeleton by specifying multiple targets per goal and numerous indicators per target. It is difficult to find something on the post-2015 development agenda that is more comprehensive, more convincing, or more operational.

Friday round-up: Egypt, emerging markets, the great rotation, China's economic data, Bono on capitalism, and the science of delivery

LTD Editors's picture

An Egypt blog in The Economist on 'the battle of fictitious facts' talks about the wildly disparate narratives coming out of Cairo as the streets seeth and the death toll mounts.

Natsuko Waki writes in Reuters about a recovery in developed markets, the 'Great Rotation' out of bonds and flight from emerging markets.

Is China fudging vital macreconomic data? Business Insider Australia covers new research by Christopher Balding of HSBC School of Business at Peking University about how China added $1 trillion to its economy by fudging data.

Growth Still Is Good for the Poor: New paper also looks at shared prosperity

LTD Editors's picture

Incomes in the poorest two quintiles on average increase at the same rate as overall average incomes, according to a new working paper by David Dollar (Brookings Institution), Tatjana Kleineberg and  Aart Kraay. In a global dataset spanning 118 countries over the past four decades, changes in the share of income of the poorest quintiles are generally small and uncorrelated with changes in average income. The variation in changes in quintile shares is also small relative to the variation in growth in average incomes, implying that the latter accounts for most of the variation in income growth in the poorest quintiles. These findings hold across most regions and time periods, as well as conditional on a variety of country-level factors that may matter for growth and inequality changes. This evidence confirms the central importance of economic growth for poverty reduction and illustrates the difficulty of identifying specific macroeconomic policies that are significantly associated with the relative growth rates of those in the poorest quintiles. This reprise of Dollar and Kraay's earlier work also looks at the World Bank's new "shared prosperity" goal by considering the income growth rates of the poorest 40% of the population in each country in addition to looking at the poorest 20%.

How to Avoid Middle Income Traps?

Ejaz Ghani's picture

With Aaron Flaeen and Saurabh Mishra

Many developing countries have successfully made the transition from low-income to middle-income status, thanks to rapid economic growth, but have subsequently got stuck in a middle income trap. A great deal of research has been done on what explains much faster growth in the developing world than in the developed world (Acemoglu et al 2011; Baldwin 2011; Commission on Growth and Development 2008; Rodrik 2013; UNIDO 2011). But little is known about why so few countries succeed in making the transition from middle-income to high-income status (The Economist, 2013). This is a worrying trend and an issue of major concern, especially because the majority of poor people now live not in low-income but in middle-income countries (Chandy and Gertz, 2011; Sumner and Kanbur, 2011). So what is a middle income trap? What should policy makers do?

We have examined these questions in the context of Malaysia, whose structural transformation from low to middle income has made it one of the most prominent manufacturing exporters’ in the world. However, in a competitive global economy, like many other middle-income economies, it is sandwiched between low-wage economies on one side and more innovative advanced economies on the other.

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