Inequality is of concern for at least three reasons. First, lower inequality per se is an objective for a decent society. Second, lower inequality improves the efficiency of economic growth in achieving poverty reduction. Third, high inequality impedes growth itself, through its impact on social cohesion and the investment climate.
Throughout this series of posts (1, 2, 3, 4), we have considered two main issues. First, how can evidence and evaluation be shaped to be made more useful - that is, directly useable - in guiding decision-makers to initiate, modify, scale-up or drop a program? Or, as recently pointed out by Jeff Hammer, how can we better evaluate opportunity costs between programs, to aid in making decisions. Second, given that evidence will always be only part of policy/programmatic decision, how can we ensure that decisions are made (and perceived to be made) fairly?
For such assurance, we primarily rely on Daniels’ framework for promoting “accountability for reasonableness” (A4R) among decision-makers. If the four included criteria are met, Daniels argues, it brings legitimacy to deliberative processes and, he further argues, consequent fairness to the decision and coherence to decisions over time.
The first two criteria set us up for the third: first, decision-makers agree ex ante to constrain themselves to relevant reasons (determined by stakeholders) in deliberation and, second, make public the grounds for a decision after the deliberation. These first two, we argue, can aid organizational learning and coherence in decision-making over time by setting and using precedent over time - an issue that has been bopping around the blogosphere this week.
During the recent 7th World Urban Forum (WUF) in Medellin, the talk was not just about the hundreds of millions of people coming to cities—but also the tens of thousands of city managers and local governments who will need to manage cities more effectively to unleash the promise of urbanization. The WBI urban team, together with the Institute of Housing and Urban Studies and UN-Habitat’s Capacity Development unit, convened over 40 partners for a day of reflection on this challenge.
Such a gathering had happened twice before— in preparation of Habitat II in Istanbul (1996), again in the run-up to the third WUF in Vancouver (2006)—and now on the cusp of the next milestone (Habitat III in 2016). It is helpful to consider where we have been and where are we now on this critical (and somewhat slippery) subject, given the 20 years’ worth of perspective in this area.
The results suggest strangely mixed conclusions. In certain ways, poverty trends in Nigeria over the past decade were better than has been widely reported, where a story of increasing poverty has been the consensus. And yet poverty is stubbornly high, disappointingly so given growth rates.
Three facts stand out.
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In 1980, the biologist Paul Ehrlich and business school professor Julian Simon famously wagered on the likelihood of resource scarcity over the coming decade. Based on his expectation that population growth would lead to a rapid growth in demand for basic resources, Ehrlich bet that the prices of five commodity metals would increase; Simon, argued that rising prices incent human innovation and consequently that resource prices should be stable or declining. In the decade that followed, despite population growth of 800 million, the prices of all five commodities chosen by Ehrlich declined and he paid the bet. In July 2011, the investor Jeremy Grantham noted that if the bet had been extended to 2011, Ehrlich would have won – by a lot.
McKinsey Global Institute, a research arm of McKinsey & Company, recently revisited the debate about economic growth and resource scarcity with the release of a major study, “Resource Revolution: Meeting the world’s energy, materials, food, and water needs”. One of the lead authors, McKinsey partner Jeremy Oppenheim, recently visited the World Bank in Washington DC to describe the report’s conclusions and discuss its implications for development strategy, particularly for the World Bank. His presentation captivated a large audience and provoked a lively discussion.
The key findings of the report can be summarized in two categories – challenges and opportunities. The former starts from the projected increase of up to 3 billion more middle class consumers in the next 20 years, driving up demand at a time when finding and extracting resources is becoming increasingly difficult and expensive, while also resulting in enormous environmental pressures.
The good news is the existence of sufficient technically and economically feasible efficiency improvements and alternative technologies to meet nearly 30 percent of predicted demand and offset much of the projected growth. Some of these measures are already identified and well understood, such as improving the efficiency of buildings and irrigation – a “resource productivity revolution”. These measures would, however, not be sufficient to alleviate poverty and avoid global warming in excess of the two degrees Centrigrade widely considered the threshold.
To meet these goals, McKinsey outlines an additional level of ambition with respect to clean energy and carbon sequestration.
If the nation which has bestowed to the civilization such giants as Tchaikovsky and Shostakovich, Tolstoy and Bulgakov could manage its economy as splendidly and robustly as its culture, Russia would be doing just great! Unfortunately, it’s not the case. The resource curse is affecting the economy in a negative way and even more seriously than certain counterproductive habits and mental inertia from the old times of statist, centrally planned economy.
I’m afraid there is not much time left for Russia. If it wants to catch up with the advanced world – and become a true member of the G8 group of developed countries – it must use wisely for investment in restructuring and diversification of its economy the windfall revenue from exploitation of vast natural resources. Otherwise, the process of deindustrialization without offsetting by the nowadays service sector will continue and this great country – with huge potential for fast, durable, and sustainable development – will miss the chance to become one of the leaders of world economy. This decade will decide the fate of Russia for the whole 21st century. And the time runs fast.
Isn’t it a common perception among people that poverty is caused by a lack of resources? Think about it. We see a beggar in the street, and what do we think? We think that he or she doesn’t have enough money to dress well, to eat… to live. We talk about development in poor countries and, what do we think? Well, that some countries don’t have enough resources to achieve the levels of development that they should have. In fact, a lot of initiatives that aim to promote development are related to increasing funding.
Yesterday an exciting panel of committed global experts and international leaders spoke compellingly about the extreme problems faced by countries affected by fragility and conflict, and what can be done. Ngozi Okonjo-Iweala (Managing Director of the World Bank) asked probing questions to the panel of Paul Collier (The Bottom Billion, and Wars, Guns and Votes), Donald Kaberuka (President of the African Development Bank, former Finance Minister of Rwanda), and George Soros (Open Society Institute, Soros Foundation).
I will write a more systematic summary paper later; here I am just trying to capture some memorable points that struck me from the lively discussion and debate.
On the one hand a sense of optimism, that the problems of fragile states can be addressed, the world is much more aware of these problems, and fragility is not a permanent condition, although it will require much more money and greater accountability, as well as strong leadership in the countries themselves.
On the other hand the recognition that helping countries move out of fragility and conflict is a long-term and thankless task, the dynamics of these countries often put them in a downward spiral, and it is essential to take advantage of windows of opportunity when they arise – whether at the end of a conflict or when there is political change (because once the windows are gone they are gone), and then have staying power. Deterioration can occur quickly, whereas rebuilding takes years and decades. Important not to lose hope.
Don’t bypass the state but rather use aid to help these countries build institutions, was a key message of the seminar.
More money for fragile and conflict affected countries (although it is tiny in relation to what has been spent on the global financial and economic crisis) needs to be accompanied by greater accountability. There are promising ideas, some of which have begun to be put into practice, that need to be scaled up and taken farther.