Even though “The golden age of finance has now ended,” (Barry Eichengreen in reference to the Great Recession), the golden age of industrialization in the developing world has just begun.
In a recent paper,'Leading Dragons phenomenon: new opportunities for catch-up in low-income countries,' Vandana Chandra, Yan Wang and I have presented evidence on how modern economic development is accompanied by structural transformation from an agrarian to an industrial economy and occurs through a process of continuous industrial and technological upgrading. Since the 18th century, all countries that industrialized successfully in Europe, North America and East Asia had two features in common: one, they exploited their comparative advantage; and two, they leveraged the late-comer advantage to emulate the industrial upgrading patterns of countries richer than them. Except for a few oil exporting countries, no country has achieved a high-income status without industrializing. In general, a change in GDP per capita is strongly and positively correlated with growth in value added in the manufacturing sector (figure 1). If a natural resource- or land-rich country has achieved a middle income status without a large manufacturing sector, it has rarely succeeded in sustaining growth.
This post is part of our Closing the Gap: Financial Inclusion blog series, which shares the views of selected experts and practitioners on different financial inclusion topics.
How do you insure hundreds of millions of small farmers spread over many developing countries? There is no easy answer. Individual insurance would entail assessing crop yields in millions of farms within the short harvest windows – a virtually impossible task. And even if this were possible, costs would be prohibitive and data quality, a significant issue.
Yet the importance of finding a solution cannot be underestimated. First, farmers make up the majority of the world’s poor. With high dependence on rain-fed cultivation, agriculture is risky. Mitigation of those risks is critical to stabilizing the income of poor farmers. Otherwise, a crop failure could erode savings, lead to inability to service crop loans, push farmers into a vicious debt trap as they are forced to borrow from moneylenders and in extreme cases, lead to starvation or even worse.
At the World Bank Spring Meetings last week, there was a very interesting discussion, moderated by Femi Oke, on the topic of “Investment, Infrastructure, and Integrity,” On the panel were a few worthies from the private sector, Karan Bhatia, of General Electric, Peter Solmssen of Siemens AG, and Julio Rojas of Standard Chartered Bank, along with Rashad Kaldany and Janmitra Devan of the World Bank. They were joined by the Minister of Finance of Indonesia, Agus Martowardojo, and the Secretary of Finance of the Philippines, Cesar Purisima.
The issue is a prickly one: How to promote clean business in large infrastructure projects? It is unavoidable for the World Bank, the private sector and governments to be involved in infrastructure, so it is essential that the reputation of the infrastructure sector be tied to integrity. At the same time, the response to corruption has to be pragmatic. The challenge is to figure out the balance and respond appropriately and make “risk-based” decisions, versus “rules-based” decisions. The panelists alluded to the role of knowledge and the open dissemination of knowledge on private-sector business dealings and in government contracting and procurement to spur accountability and governance in this arena. There was agreement that the World Bank’s open agenda would be helpful in pushing this forward.
The panel was asked to share their individual “principles” to achieve integrity.
"There’s little social progress without political progress. Unfortunately, many of today’s young activists are really good at thinking locally and globally, but not as good at thinking nationally and regionally."
David Brooks, New York Times, April 12, 2012.
As part of our focus on results, accountability and openness, the World Bank has developed an electronic version of its Corporate Scorecard, providing a snapshot of the Bank's overall performance in the context of development results. The electronic version of the Corporate Scorecard provides users with easy on-line access to indicators, data disaggregated by regions and countries for selected indicators, time series, and visual data representation. The online Scorecard also includes definitions, sources, and links to supplemental information and other relevant resources.
Though two months away, the UN Conference on Sustainable Development’s Earth Summit, better known as Rio+20, has already been labeled vital, momentous and historic. And while delegates, students and activists have yet to arrive in Brazil, we already know that Rio+20 has the potential to be a “big deal.” It all begs the question, can the people engaging in Rio+20, in-person or remotely, really change the world? My sage and inspiration for answering this question is Margaret Mead who said, “Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.”
Simply, Rio+20 is about being part of that thoughtful group committed to "getting it right" for future generations. The outcome and commitments of the Conference will affect us all, from the farmer in Iowa to the IT specialist in India, and whether you attend the conference or not, your voice can and needs to be heard.
No one said it’s easy to run a randomized experiment!
At the 2012 World Bank Spring Meetings this weekend, government ministers, civil society representatives, policymakers and journalists are talking about how to “Close the Gap” for global inequality.