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Europe and Central Asia

Why Serbia Needs to Start its Export Engine

Dusko Vasiljevic's picture
Also available in: Српски

City square in Belgrade This is the story of a country located next to the largest and most connected economic block in the world, with fairly low labor costs and a relatively well educated workforce. You would expect that country to do well. However, the state of Serbia’s economy is problematic. Today, Serbia’s output is below what it was in the 1980s (in the time of Yugoslavia) and only half of its working age population has a job in the formal sector.

At the heart of Serbia’s problems are two interconnected imbalances, which explain why the country appears to be stuck on its path to prosperity. First, the economy is running on domestic consumption, which was fueled by financial inflows since 2000, while exports remain well below potential. Second, employment is driven by the state, not the private sector, with almost half (45%) of all formal jobs in the government or State Owned Enterprises.

Can the Internet Solve Conflict?

Laura Ralston's picture

Buildings in need of repair Over the past decade there has been growing interest in using the internet and other communication technologies for conflict management and peacebuilding. Two key areas have emerged: (1) using publicly available data on events and social dynamics to monitor and predict escalations of tensions or violence, and (2) harnessing the increased access to the internet and mobile telephones to promote positive peace. In both areas exciting innovations have developed as well as encouraging results.

In the first area, perhaps the most comprehensive information source is Kalev Leetaru’s “Global Database of Society” or GDELT Project that “monitors the world's broadcast, print, and web news from nearly every corner of every country in over 100 languages and identifies the people, locations, organizations, counts, themes, sources, and events driving our global society”. The event database alone covers 300 categories of peace-conflict activities recorded in public media since January 1979, while the identification of people, organizations and locations enables network graphing of connections in media records.

Let’s Talk Convergence

Homi Kharas's picture

The city of Tianjin In a recent article called “Economic Convergence: The Headwinds Return”, The Economist magazine called the rapid convergence of income levels between developing countries and the United States an aberration. It presented data showing that the difference between income per capita growth in developing countries and in developed countries had peaked around 2008 and had since become steadily smaller. When China is excluded from the calculations, the difference becomes smaller still.

So should we dismiss convergence as a trend whose time is past? I would argue that this would be premature, and that convergence is still a feature of our time. The different conclusion is not because of different data--both of us use the IMF’s World Economic Outlook series for GDP per capita at purchasing power parity terms, and its forecasts until 2019—but a different approach to convergence.

Multiple Pathways – How "Why" Matters

Brian Levy's picture

Once upon a time, development seemed straightforward. Sound technical analysis identified what to do– and the rest followed. But experience has taught us that it is harder than that. As Shanta’s recent post signals, there are three competing camps – the ‘whats’, the ‘hows’ and the ‘whys’. I wonder, though, whether in clarifying the differences, we might be missing the chance to learn across these different perspectives?
 
Certainly, the differences are large. At one end are the old-time-religion ‘whats’, who confidently prescribe ‘best practices’ to help countries stay on the right path – and who sometimes turn to the ‘whys’  to identify  the political and institutional blockages to good policies.  At the other end, the ‘hows’ argue that every country is unique, that the crucial knowledge for shaping and implementing policy is local, and tend to be dismissive of  efforts (especially by outsiders) to analyze political and institutional obstacles.
 
My new book, Working with the Grain  tries to steer a middle ground.  The book explores a small number of alternative development pathways that are very different from  each other – with each characterized by a distinctive set of political and institutional incentives and constraints, and thus distinctive options for policymaking and implementation.

Austerity vs. Fiscal Stimulus: A False Dilemma?

Augusto Lopez-Claros's picture

The 2008-2009 global financial crisis led to a number of large–scale government interventions across the world. These included massive provisions of liquidity, the takeover of weak financial institutions, the extension of deposit insurance schemes, purchases by the government of troubled assets, bank recapitalization and, of course, packages of fiscal stimulus, sometimes of a scale not seen since World War II. Even the IMF, the world’s traditional guardian of sound public finance, came out strongly in favor of fiscal loosening, arguing through its managing director that “if there has ever been a time in modern economic history when fiscal policy and a fiscal stimulus should be used, it's now” and that it should take place “everywhere where it's possible. Everywhere where you have some room concerning debt sustainability. Everywhere where inflation is low enough not to risk having some kind of return of inflation, this effort has to be made".

Why Just the Why?

Germano Mwabu's picture

Some Thoughts on Shanta's Anniversary Blog

I have extracted what I find to be the key points in Shanta’s blog post “It’s not the How; It’s the Why” and have commented on them:
 
1. “Bad policies or institutions exist and persist because politically powerful people benefit from them.” 

Bad policies or institutions are bad for those who are excluded from their benefits in the short-run, but they also harm the supposed beneficiaries in the long run. Further careful analysis can corroborate this, and show the long-term harm caused by bad policies to virtually everyone in a particular country.

لا يتعلق الأمر بالكيفية، بل بالسبب

Shanta Devarajan's picture
Also available in: English | Español | Français

انقضى أسبوع تقريبا دون أن أسمع عبارة "لا يتعلق الأمر بالكيفية بل بالسبب."  ففي مجال إصلاح دعم الطاقة في الشرق الأوسط وشمال أفريقيا، على سبيل المثال، لا يتركز النقاش على ما إذا كان ينبغي إصلاح الدعم (يتفق الجميع على ضرورة ذلك) بل على كيفية إجراء الإصلاح.  وتثار نقاط مماثلة بشأن تنظيم ممارسة الأعمال أو التعليم أو الزراعة أو الصحة. واعترف بأني أنا نفسي كتبت أمورا مشابهة.  ولا يوجد نقص في مثل هذه المقترحات على هذه المدونة.
 
فالإصلاحات مطلوبة لأنه توجد سياسات أو ترتيبات مؤسسية قائمة باتت معوقة.  لكن قبل أن نقترح كيفية إصلاحها ينبغي أن نسأل لماذا وُجدت هذه السياسة من الأصل، ولماذا استمرت فترة طويلة، ولماذا لم يتم إصلاحها حتى اليوم.  فهذه السياسات لم تأت مصادفة.  ولم تستمر لأن شخصا ما نسي تغييرها.  ولن يتم إصلاحها على الأرجح لمجرد أن أحد صانعي السياسات قرأ كتابا أو مقالا أو مدونة بعنوان "كيف تصلح..."

It’s not the How; It’s the Why

Shanta Devarajan's picture
Also available in: Español | Français | العربية

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…”

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.

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