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Convergence or Divergence in Development

Homi Kharas's picture

Community meeting discussing reconstruction of village hit by volcanic eruption The narrative on development economics—the discipline that deals with well-being  in the low and middle income countries where 6 billion people on our planet live—continues to swing back and forth between optimism and pessimism. The United Nations’ High-Level Panel report on the post-2015 development agenda (for which I was the Lead Author) calls for the eradication of extreme poverty by 2030, a boldly optimistic goal. But it also emphasizes that this can only be achieved if we learn from our past mistakes; business-as-usual will not get us there because, despite massive and broad-based progress, too many people are being left behind and too many programs are failing to reach scale, points that pessimists focus on.
 

Finding the right balance between optimism and pessimism is important in setting global goals that are bold and ambitious yet achievable, something we should all be focused on as the conversation heats up on what should replace the Millennium Development Goals. It requires a deep and broad understanding of what is actually happening, of challenges and prospects for poverty reduction and broad-based development. This is why a blog reflecting multiple voices talking about actual experiences, especially voices from developing countries themselves, is so important. If we listen to enough thoughtful people, maybe we can move beyond the theologies of the Washington, Beijing or other development consensus ideas, none of which seem to fit the diverse range of developing countries and our rapidly changing times.

We have to be honest that there is no consensus on development prospects, and there’s much we still don’t know and understand. Sixteen years ago, Lant Pritchett published a highly influential paper, “Divergence, Big Time” in which he argued that backwardness appeared to carry severe disadvantages that generated long-term divergence between the growth in per capita incomes of developing countries compared to rich countries. More recently, Arvind Subramanian has argued exactly the opposite--that since the late 1990s the number of developing countries experiencing catch-up has more than trebled (from 21 to 75 countries) and the rate of average catch-up has doubled from 1.5 percent per year to over 3 percent. He attributes this to “The hyperglobalization of Trade and its Future”. Nobel-prize winner, A. Michael Spence has recently published a book called The Next Convergence that also suggests that rapid, sustained long-run growth is now possible across the developing world. Others, like Kemal Dervis, have discussed parallel phenomena of convergence between countries and divergence within them.

There is already a vigorous debate as to whether the decade-long period that Subramanian and Spence look at is a trend ofthe new millennium or merely an upswing in a long-term cycle that will soon turn down, which Pritchett would argue is more consistent with the historical record. There are limits to the general divergence/convergence debate—too much depends on what individual countries do, their histories and sometimes, plain luck—but I do think it is useful to have an exchange of views as to the role played by domestic policies and institutional changes and global economic conditions and institutions. And to have this exchange of views in a contextualized way across a number of countries so that anecdotes can add up to a persuasive body of evidence. 
 

Comments

Submitted by John Paton on

The one key factor in moving countries forward is good quality education: qualified, trained, housed and paid teachers, decent classrooms with the necessary resources and access by rural and urban boys and girls. Only then will we have healthy, productive populations able to contribute more effectively to economic growth and benefit from it and to hold governments to account.
This will take several generations to achieve - but how many governments would prefer to maintain the status quo so as to reduce criticism, continue their domination and sustain their vested interests? A tough development challenge!

Agreed. But easier said than done. First you have to train teachers and equip them with schools, then you have to persuade them to stay and not migrate, then you have to persuade families that going to school is a good investment. The good news....there has been a massive improvement in basic literacy skills and in secondary and tertiary education in some countries, and although there are concerns about quality the change compared to the past is striking and augurs well for long-term growth.

Submitted by Sylvain Dessy on

Good quality education needs to be defined to better understand the challenge ahead for developing economies. Historically, good quality education simply made beneficiaries trainable, endowing them with basic literary and problem solving skills, and leaving on-the-job training to firms. However, nowadays, firms' relunctance to train their own workers, have shifted the burden of training readily employable workers to education institutions, with some investing in the design of professional programs, often coupled with pre-graduation internships. Mixed results notwithstanding, if that is what what can be referred to as good quality education, then poor countries may have to wait a while longer for their catch up, as good quality education thus defined also means high tuition.

Submitted by Kanono Thabane on

I think that the development process to achieve the MDGs on Poverty should not be driven on the prospect of programs trying to trying to achieve global competitiveness but rather achieving food security and eliminating malnutrition. Once this issues are addressed then growth will be witnessed. This will require on improving the livelihoods of marginalised rural populations as compared to striving for export orientated economies which are competitive globally at the expense of the poor under the banner of creating employment. The day we understand that rural economies which usually boast at least 70 percent of most developing countries are more important than Macro-economies and export orientated Foreign Direct Investment then we would be able to solve the poverty problems in developing countries. In order to solve this problems then it is essential that we understand the main source of rural livelihoods which are mainly based on natural resources and then strive for making them sustainable in a poverty reducing approach. In brief my argument is that we need to localise programs and downscale them from a National level and to a household level and understand the household dynamics which are the main sources of poverty. Responses have to take in question the main sources of vulnerability and one will find that issues like climate change are one of the main contributing factors and the capacity to adapt is limited at a household and National level. Let us improve targeting and downscale social protection then we can start debating the global competitiveness and regional models that work. Let us stop parachuting ideas and adopt a bottom up approach.

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