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It’s not the How; It’s the Why

Shanta Devarajan's picture
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Hardly a week goes by without my hearing the statement, “It’s not the What; it’s the How.”  On the reform of energy subsidies in the Middle East and North Africa, for instance, the discussion is focused not on whether subsidies should be reformed (everyone agrees they should be), but on how the reform should be carried out.  Similar points are made about business regulations, education, agriculture, or health. I confess to having written similar things myself.  And there is no shortage of such proposals on this blog
 
Reforms are needed because there is a policy or institutional arrangement in place that has become counterproductive.  But before suggesting how to reform it, we should ask why that policy exists at all, why it has persisted for so long, and why it hasn’t been reformed until now.  For these policies didn’t come about by accident.  Nor have they remained because somebody forgot to change them.  And they are unlikely to be reformed just because a policymaker happens to read a book, article or blog post entitled “How to reform…”

When Good Is Not Good Enough for 40 Million Tanzanians

Jacques Morisset's picture

Laborer working on an irrigation project. TanzaniaTanzania has undoubtedly performed well over the past decade, with growth that has averaged approximately 7% per year, thanks to the emergence of a few strategic areas such as communication, finance, construction and transport. However, this remarkable performance may not be enough to provide a sufficient number of decent or productive jobs to a fast-growing population that will double in the next 15 years. With a current workforce of about 20 million workers and an official unemployment rate of only 2%, the challenge for Tanzanians clearly does not lie with securing a job. Rather, it is to secure a job with decent earnings.

Beware the Middle Income Trap – Says Who?

Borko Handjiski's picture

Fishing in the Hai River Economic development theorists and practitioners are increasingly using the term “middle-income trap” to describe the situation where developing economies’ convergence to the development frontier comes to a halt once their income per capita reaches a middle-income level. The term is ambiguous: is it a halt in convergence or slowdown in growth, and what exactly is the definition of middle-income? Nevertheless, the concept has been successfully used to create a scare that developing countries are more likely to run out of breath or even give up the race in the middle of the track than to continue catching up with the leading economies. Eichengreen et al. and several IMF economists are among those who provide empirical evidence that the “middle-income trap” is real and that developing countries do get stuck at some low-level equilibrium.

The Rapid Slowdown of Population Growth

Wolfgang Fengler's picture

We are living in a paradoxical time of population growth. In the media, there have been alarming reports asking how the world will be able to deal with a much larger population in years to come. The challenges are real, especially in Sub-Saharan Africa, whose population is expected to double by 2050 and possibly quadruple by 2100. At the same time, we have been experiencing the most rapid decline in global population growth ever.

But how can we reconcile those two facts: a rapid expansion of total population numbers with a fast slowdown of population growth? Here is an analogy from the world of cars: imagine you are driving on a German motorway, where speed limits are notoriously non-existent. You are cruising at 160km/h (100m/h) but soon you cross the border into France, where 130 km/h is the limit. You are still driving very fast, though substantially slower than before. Now you switch to a regional road, driving at 80km/h, and now you slow down further to 50 km/h as you enter into a town. Meanwhile, someone else is still driving at 160 km/h on that Autobahn.

From Paper to Practice: How Easy Is It to Ease Doing Business

Borko Handjiski's picture

A storefront that specializes in nuts The stroke of the pen is powerful indeed; it has led to wars, peace, and lots of other things in between, including changes in a country’s business environment. A large part of what defines the environment for doing business in a country is set in legislation. In many countries around the world, business regulations are more difficult than necessary, and some have taken great efforts to remove unneeded impediments with the aim of stimulating entrepreneurship and investment.

2014: 25 Years After 1989 or 100 Years After 1914?

Martin Raiser's picture

A couple of weeks ago, I was in Warsaw to attend a conference jointly organized by the Polish and Turkish Central Banks (“Polish and Turkish Transitions: Achievements and Challenges Ahead”) on the occasion of 600 years of diplomatic relations between Poland and Turkey. Six centuries of (predominantly friendly) relations is indeed worthy of commemoration, but for our Polish hosts another anniversary was of even greater importance: 25 years ago, Poland was the first country from the former Communist Block to embark on the transition towards democracy and market economy. For Poland and other Central and Eastern European countries that joined it as new members of the European Union 10 years ago, this transition laid the foundation for a remarkable economic, cultural and political revival as Indermit Gill and I have argued in Golden Growth. Indeed, many in Poland would agree with the Economist  that Poland has not had it as good as today ever since it was the preeminent Central European power some 500 years ago.

How Better Protection for the Elderly Could Lower Fertility Rates in Uganda

Rachel K. Sebudde's picture

A typical Ugandan woman gives birth to an average of seven children, far higher than for other countries, including neighboring Kenya and Tanzania. There are many factors that push Ugandan woman to give birth to many children. For instance, low levels of schooling of women in Uganda often result in early marriage and early pregnancy. Inadequate access to family planning services, as well as cultural pressures that reward women for having many children, also contribute to Uganda’s high fertility rates. However, another important reason for Uganda’s high prolificacy is that children are a way of ensuring parents are taken care of after when they retire from active employment and can no longer fend for their livelihood. This incentive is particularly acute due to the fact that the Uganda pension system does not reach the majority of the country’s population. Today, although the elderly are still few in numbers (i.e., less than 5 percent of the population), only 2 percent of them are receiving a pension. Children are therefore perceived as a form of pension to many Ugandans because the majority of the population is not covered by any other system of protection.

More and Better Financing for Development

Homi Kharas's picture

One of the major issues in the Open Working Group’s outcome report on the shape of the post-2015 agenda is the availability and access to financing to allow the goals to be met. There is a great temptation to simply try and calculate the financing needs for each goal and add them up to get the total financing need. Because this approach seems simple, it is appealing to many. The problem is that it is conceptually wrong.
 

Tariffs for Standards?

Hassan Zaman's picture

Bangladesh Duty- and quota-free access for exports to global markets is something developing country trade negotiators have demanded for years.  Few other “stroke-of-the-pen” measures could boost employment and reduce poverty in low income countries in such large numbers. For instance  if the US removed tariffs on Bangladeshi garments – which average around 13%, but for some items are as high as 33% – then exports to the US could rise by  $1.5 billion from the FY13 level of $5 billion, in turn generating employment for at least an additional half a million, primarily female, workers.[1]  Examples of other countries facing US tariffs include Cambodia (12.8% average tariff rate on its exports to the US), India (4.01%), Indonesia (5.73%), and Vietnam (7.41%). Progress in trade facilitation would likely have even greater pay-offs to growth and employment, but these require structural reforms and investments, while the decision to remove tariffs is a simpler, “stroke-of-the-pen” measure.

Africa's McTipping Point?

Borko Handjiski's picture

Three quarters of a century since the opening of the first McDonald’s, the fast food chain operates around 34,000 outfits in around 120 countries and territories across all continents. In Sub-Saharan Africa (SSA), however, – a region of 48 countries and almost a billion people - only South Africa and Mauritius have been able to attract this global food chain.
 
This peculiarity cannot be explained only by the fact that the region is poor. The company has found a market in about 30 countries with GDP per capita of less than US$ 3,000 (in constant 2005 US$) at the time of their first McDonald’s opening. Hamburgers, Cheeseburgers, and Big Macs are also on offer in a dozen of low-income countries as well. When the first McDonald’s opened in Shenzhen in 1990, China’s GDP per capita was less than US$ 500 per person. Of course, Shenzhen’s per capita income was several times higher, but the company has also found a market in Moldova since 1998 when the GDP per capita of the 3 million person country was less than US$ 600 per capita. There are many cities in SSA today that have higher income, population concentration, and tourists than what Chisinau had in 1998; yet they do not have a McDonald’s. As a matter of fact, 22 SSA countries today have higher income per capita than what Moldova or Pakistan had when the first McDonald’s opened there, and 15 of them have higher income per capita even than what Indonesia or Egypt had at their McDonald’s openings (see chart).

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