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The World Region

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.

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.

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.

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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