The world has become relatively less poor in the last few decades. People under conditions of extreme poverty -- that is, living on less than $1.25 per day -- have declined as a proportion of the world population, from 52 percent in 1981 to 22 percent in 2008. Thirty years ago almost 75 percent of the developing world lived with $2 a day or less, this number is down to 43 percent today.
Private Sector Development
As the Carnival in Brazil kicked off last weekend, Brazilians were ready for a party. They have reasons to celebrate. Despite a lackluster GDP performance in the last two years, unemployment rates remain at record low levels.
Investing more on roads, bridges and schools is an essential part of President Obama's American Jobs Act. If this is important in the current U.S. context, the role of both infrastructure and education in job creation is even more fundamental in developing countries, where there's much more to be done than in the U.S. and other advanced economies.
Why is it that some countries are more developed than others? A country is “less developed” not only because it lack inputs (labor and capital) but because it uses them less efficiently. In fact, inputs are estimated to account for less than half of the differences in per capita income across nations. The rest is due to the inability to acquire, adopt and adapt better technologies to raise productivity. As an engine of growth, the potential of technological learning is huge—and largely untapped. Four global trends have begun to unlock that potential, and are bound to continue.
First, the vertical decomposition of production across frontiers allows less-advanced countries to insert themselves in supply chains by initially specializing in
This is the third in a series of blogs where we take a look at the issues and the countries that will be at the forefront of the development agenda, not now, not next year, but over the next 2 to 5 years—thus, “after tomorrow”1.
There is now a budding consensus on what reduces poverty: it is
The labor market has the unenviable task of not only absorbing the additional workers entering the labor force each year (as a result of population growth) but also dealing with the unemployed workers as economies. The Keynesian view of unemployment is due to lack of aggregate demand while the neoclassical view is that when prices and wages adjust unemployment will come down significantly. In more and more developing countries, long-term unemployment (workers unemployed for over six months) is spilling over into structural unemployment, which the ILO in its several publications underscores as the mismatch between the skills of the unemployed and the demand for skills in the labor markets.
This structural unemployment may arise due to automation in the work place (e.g. need for higher and higher computer skills), rigidities in the labor market, such as high costs of training or in the case of US de-industrialization as manufacturing jobs are continuously lost to
Global GDP growth and as well as GDP growth in each of the regions were lower in 2009 compared to 2007. More specifically, specifically, negative growth rates were observed during 2009 in developed countries & European Union, Central and SE Europe & CIS countries and to a lesser extent in LAC, while the growth rates for East Asia, South Asia, Middle East, North Africa and Sub-Saharan Africa were positive in 2009 but lower than in 2007.
Reflecting this, all regions experienced higher unemployment rates, with the highest being in the developed economies & EU, Central and SE Europe & CIS and LAC economies, which again all had negative GDP growth rates in 2009. The ILO estimates that the global crisis has led to 34 million more unemployed and the World Bank estimates that about 60 million people may have been pushed into poverty.
Productivity is the efficiency in converting inputs to outputs. It is also called TFP (total factor productivity) and measured as a residual – the difference between outputs and a set of inputs (e.g. labor, capital, and intermediate goods, including energy, land and buildings). Measurement problems plague both inputs (e.g. how do you account for quality of labor or capital) and outputs.
To wit, managers with MBAs, flexibility in labor and capital markets, fuel efficiency, relatively higher spending in IT (computers) and R&D, and policies that promote market competition, trade liberalization, deregulation of energy, and encouragement of foreign direct investment that brings in technical progress and leads to learning (catch-up) is shown to contribute to higher productivity. Exporting firms tend to have higher productivity. Inefficient firms can still survive in stable industries where technology is static, and where market competition is limited by a variety of local factors and relationships (e.g. China where the protection is afforded by local governments).
What do we learn from the troubles of Goldman Sachs, British Petroleum, Enron, Satyam, and other modern day corporations? These are the most sophisticated corporations ever formed yet victims of their own governance failures.