A view from Central Europe and the Baltics
Ten years ago this month the European Union expanded to include 10 new members - Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic and Slovenia. It was the largest expansion in the EU's history in terms of population and area, and of historic importance in that it brought into one Union countries that had formerly been on different sides of the Iron Curtain.
Given the Eurozone crisis from which the EU is slowly recovering, it is natural to ask if EU membership has benefitted the 2004 entrants.
A view from Central Europe and the Baltics
A competitive export sector is one of the key engines of a successful transition to high income. Turkish policy makers knew this well, and so they put an increase in export competitiveness at the forefront of their ambitious targets to get the country into the top 10 economies worldwide by 2023. What are the chances of success?
To try and answer this question, the World Bank working closely with Turkey’s Ministry of Economy carried out a Trade Competitiveness Diagnostic (“Turkey Country Economic Memorandum: Trading Up to High Income”), which was just launched in Ankara. The team looked at how Turkey did during the past decade, a period of rapid growth in global trade. It turns out that Turkey did pretty well – its exports during the 2000s grew 15.3 percent annually, twice the average growth in the OECD, 6 percentage points above world trade growth and only 4 percentage points slower than in China. Turkey’s global market share grew by 60 percent (from 0.53 to 0.82 percent) between 2002 and 2009 and is getting close to Turkey’s share of the world population (1.06 percent). At the same time, Turkey increased its export sophistication and improved product quality.
Charles Kindleberger (h/t Gerry Helleiner) asserted that all reviewers can be counted on to say three things about a book: “It isn’t new. It isn’t true. And I would have said it differently.” Notwithstanding their internal contradictions, these statements summarize my thoughts on Bill Easterly’s latest book, The Tyranny of Experts.
It isn’t new. The main point of the book is that the rights of the poor have been systematically undermined, directly by governments, especially authoritarian ones; and indirectly by “experts”, who either prescribe technical solutions that ignore poor people’s ability to come up with their own solutions, or provide legitimacy to these autocratic regimes so that they continue to suppress the poor. Bill illustrates this point with three historical examples—China between the world wars, Africa at independence, and Colombia in the 1950s—where a combination of western (in some cases, colonial) interests and local elites conspired to keep the large majority of poor people poor for a long time. The analytical backdrop to these three case studies is the “debate”—a debate that never took place—between two Nobel-prize-winning economists: Gunnar Myrdal, who advocated government intervention to improve the lot of the poor; and Friedrich Hayek, who believed in protecting the individual rights of the poor as a means of their escaping poverty.
Having looked at some of the ways in which corruption damages the social and institutional fabric of a country, we now turn to reform options open to governments to reduce corruption and mitigate its effects. Rose-Ackerman (1998) recommends a two-pronged strategy aimed at increasing the benefits of being honest and the costs of being corrupt, a sensible combination of reward and punishment as the driving force of reforms. This is a vast subject. We discuss below six complementary approaches.
The New ICP Data and the Global Economic Landscape
The new report of the International Comparison Program published last week promises to invigorate debate about the global economic landscape. In some areas, the report challenges conventional wisdom. In other areas, it reinforces the narrative.
The headline change according to The Economist is the rise of China to potentially become the largest economy in the world by the end of 2014. According to Angus Maddison, the United States’ economy became the largest in the world in 1872, and has remained the largest ever since. The new estimates suggest that China’s economy was less than 14% smaller than that of the US in 2011. Given that the Chinese economy is growing more than 5 percentage points faster than the US (7 percent versus 2 percent), it should overtake the US this year. This is considerably earlier than what most analysts had forecast. It will mark the first time in history that the largest economy in the world ranks so poorly in per capita terms. (China stands at a mere 99th place on this ranking.)
Some 135 countries have constitutional provisions for free and nondiscriminatory education for all. Seventy-three countries guarantee the right to medical services. And 41 countries have either enshrined the right to water in their constitutions or have framed the right in national legislation. All of these actions are aimed at protecting the rights of poor people.
Yet, it is poor people who are losing out on access to these services. In Mali, whereas almost everyone has access to a primary school, and 67 percent from the richest quintile complete primary school, only 23 percent from the poorest quintile do. The percentage completing higher levels of education is in the single digits. In rural India, in the period since the Right to Education act was passed, student learning outcomes in public schools have been declining. Equatorial Guinea, with a per-capita income of $20,000, has a child mortality rate of 118 per 1,000 births, comparable to that of Togo with a much lower per-capita income. As a result of intermittent (or nonexistent) water supply through networks, poor people in South Asia and Africa have to buy water from vendors at 5-16 times the meter rate.