Development Ideas http://www.developmentideas.info Development Ideas is a space for thinkers and practitioners to learn, share and debate about international development – its origins, how it has changed and spread over time, and how it may evolve. Mon, 06 Jun 2016 11:02:32 +0000 en-US hourly 1 http://wordpress.org/?v=4.2.1 What Next for Development Thinking? http://www.developmentideas.info/2016/05/what-next-for-development-thinking/ http://www.developmentideas.info/2016/05/what-next-for-development-thinking/#comments Mon, 30 May 2016 09:51:30 +0000 http://www.developmentideas.info/?p=1294 Read more]]>

The future of development thinking needs to understand the intersections and parallels between ideas and policy, as well as the drivers and trends, that are shaping the development agenda.

One fundamental change concerns the direction ideas flow. In the past, development thinking and research was mainly driven from the West. This is less the case as emerging economies gave rise to a multipolar global economy. Their participation in global policy, and the differing nature of issues they bring to the table, is bringing welcome heterogeneity and experimentalism into thinking on development. The challenge for practitioners is to design research approaches and methodologies, and elaborate concepts and theories, that are relevant to emerging and developing country contexts.

Another factor contributing to this heterogeneity is the declining importance of International Financial Institutions (IFIs) and donors in shaping the development agenda. Development thinking is increasingly driven by internal driven change and domestic resources mobilization. While concepts such as impact investing and strategic philanthropy are still being elaborated, it is clear that the idea of tapping private resources already exercises an influence on the imagination of what is possible in development thought and practice.

The shifting geography of poverty and the vulnerability of divided societies strongly suggest that economic growth alone no longer drives the development agenda. Coping with climate change, demographic transitions, and ungoverned spaces, the emerging development agenda is quite different from what was in the past. Achieving equity, poverty reduction, resilience, social protection and environmental sustainability is beginning to take precedence over economic growth. In the developing world, the increasing levels of horizontal and vertical inequality are pushing a growing emphasis on achieving an inclusive economy. In India, policy thinking is shifting towards pro-equity and inclusiveness in order to solidify recent growth. In Europe, recent crises renewed interest in social protection in order to mitigate the negative repercussions of austerity and unemployment.

There is also renewed interest in the role of human development and the equal participation of women in advancing inclusive growth. Experiences like Japan and South Korea show how investment in education, health, and women’s rights are essential for economic expansion. Yet there is still a significant gap in our understanding of the interplay between culture, discrimination, and participation. Bangladesh’s impressive gains in life expectancy, school enrollment and immunization, attests to the importance of empowering women and girls. Yet more attention (and commitment) is needed to gender within future development thought.

In many ways, development thinking is metamorphosing due to a changing landscape, within shifting opportunities to pursue development and an increased porosity of the social sciences. More attention is now devoted to home-grown solutions and citizen-led efforts empowered in part by a continued expansion in technology. The future of development thought is undoubtedly becoming more open, rich, and diverse.

 

 

 

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A Progressive Logic of Trade http://www.developmentideas.info/2016/05/a-progressive-logic-of-trade/ http://www.developmentideas.info/2016/05/a-progressive-logic-of-trade/#comments Thu, 26 May 2016 12:09:27 +0000 http://www.developmentideas.info/?p=1379 Read more]]> The global trade regime has never been very popular in the United States. Neither the World Trade Organization nor the multitudes of regional trade deals such as the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP) have had strong support among the general public. But opposition, while broad, was diffuse.

The difference today is that international trade has moved to the center of the political debate. The US presidential candidates Bernie Sanders and Donald Trump have both made opposition to trade agreements a key plank of their campaigns. And, judging from the tone of the other candidates, standing up for globalization constitutes electoral suicide in the current political climate.

The populist rhetoric on trade may be excessive, but few deny any longer that the underlying grievances are real. Globalization has not lifted all boats.
Many working families have been devastated by the impact of low-cost imports from China and elsewhere. And the big winners have been the financiers and skilled professionals who can take advantage of expanded markets. While globalization has not been the sole (or even the most important) force driving inequality in the advanced economies, it has been a contributor.

What gives trade particular political salience is that it often raises fairness concerns in ways that the other major contributor to inequality – technology – does not. When I lose my job because my competitor innovates and introduces a better product, I have little cause to complain. When he does so by outsourcing to firms abroad that do things that would be illegal here – for example, prevent their workers from organizing and bargaining collectively – I may have a real gripe.

Sanders has forcefully advocated the renegotiation of trade agreements to reflect better the interests of working people. But such arguments immediately run up against the objection that any standstill or reversal on trade agreements would harm the world’s poorest, by diminishing their prospect of escaping poverty through export-led growth. “If you’re poor in another country, this is the scariest thing Bernie Sanders has said,” ran a headline in the popular and normally sober Vox.com news site.

But trade rules that are more sensitive to social and equity concerns in the advanced countries are not inherently in conflict with economic growth in poor countries. Globalization’s cheerleaders do considerable damage to their cause by framing the issue as a stark choice between existing trade arrangements and the persistence of global poverty. And progressives needlessly force themselves into an undesirable tradeoff.

First, the standard narrative about how trade has benefited developing economies omits a crucial feature of their experience. Countries that managed to leverage globalization, such as China and Vietnam, employed a mixed strategy of export promotion and a variety of policies that violate current trade rules. Subsidies, domestic-content requirements, investment regulations, and, yes, often import barriers were critical to the creation of new, higher-value industries. Countries that rely on free trade alone (Mexico comes immediately to mind) have languished.

That is why trade agreements that tighten the rules are in fact mixed blessings for developing countries. China would not have been able to pursue its phenomenally successful industrialization strategy if the country had been constrained by WTO-type rules during the 1980s and 1990s. With the TPP, Vietnam gets some assurance of continued access to the US market (existing barriers on the US side are already quite low), but in return must submit to restrictions on subsidies, patent rules, and investment regulations.

Second, there is nothing in the historical record to suggest that poor countries require very low or zero barriers in the advanced economies in order to benefit greatly from globalization. In fact, the most phenomenal export-oriented growth experiences to date – Japan, South Korea, Taiwan, and China – all occurred when import tariffs in the US and Europe were at moderate levels, and higher than where they are today.

So, for progressives who worry both about inequality in the rich countries and poverty in the rest of the world, the good news is that it is indeed possible to advance on both fronts. But to do so, we must transform our approach to trade deals in some drastic ways.

The world’s trade regime is currently driven by a peculiarly mercantilist logic: You lower your barriers in return for me lowering mine. This approach has been remarkably successful in promoting trade expansion, but it has little economic justification. Now that the world economy is already very open, “exchange of market access” is causing more problems than it solves.

The time has come to embrace a different logic, that of “exchange of policy space.” Poor and rich countries alike need to carve out greater space for pursuing their respective objectives. The former need to restructure their economies and promote new industries, and the latter must address domestic concerns over inequality and distributive justice. This requires placing some sand in the wheels of globalization.

The best way to bring about such institutional re-engineering would be to rewrite multilateral rules. For example, the “safeguards” clause of the WTO could be broadened to allow the imposition of trade restrictions (subject to procedural disciplines) in instances where imports demonstrably conflict with domestic social norms. (I discuss the specifics in my book The Globalization Paradox.) Similarly, trade agreements could incorporate a “development box” to provide poor countries with the autonomy they need to pursue economic diversification.

Progressives should not buy into a false and counter-productive narrative that sets the interests of the global poor against the interests of rich countries’ lower and middle classes. With sufficient institutional imagination, the global trade regime can be reformed to the benefit of both.

This article was originally published on Project Syndicate (April, 2016) at: https://www.project-syndicate.org/commentary/progressive-trade-logic-by-dani-rodrik-2016-04

]]> http://www.developmentideas.info/2016/05/a-progressive-logic-of-trade/feed/ 0 Can Extractive Industries Promote Development? http://www.developmentideas.info/2016/05/can-extractive-industries-promote-development/ http://www.developmentideas.info/2016/05/can-extractive-industries-promote-development/#comments Mon, 23 May 2016 09:39:50 +0000 http://www.developmentideas.info/?p=1372 Read more]]> I spent the last couple of days at a fascinating workshop at UNU-WIDER on the role of extractive industries in development. Tony Addison, UNU-WIDER Chief Economist-Deputy Director, and Alan Roe, UNU-WIDER Non-Resident Senior Research Fellow and Oxford Policy Management Associate are pulling together a comprehensive new book on the topic, including chapters on just about every aspect of the relationship between extractives industries and development that you can imagine (and several I hadn’t).

The book will, no doubt, be launched with great fanfare next year, but I thought it might be of interest to have a sneak peek at some of the ideas emerging from the work so far. Among the many fascinating papers, six ideas caught my imagination.

Wanted: benevolent dictators (or the near impossibility of ‘slow’ development)

A leading oil economist reminded us that the natural resource curse (the seeming tendency of countries with significant natural resources to grow slower than other countries) isn’t necessarily inevitable. But the list of developing countries that have avoided the curse isn’t an encouraging one (common exemplars are Indonesia, Malaysia, Botswana, and Chile). Spot the common factor?  While it would be unfair to describe all of these countries as dictatorships (at least not now), a key factor for successful exploitation of natural resources would appear to be the ability to go ‘slow’ and apply systematic policies of technological capacity-building over an extended period of time. This is an old idea dating from Hirschman, but now popularized again through the New Industrial Policy of Dani Rodrik, Justin Yifu Lin, and Hausmann and Hidalgo. Alas, the only governments with the time for this are ones with, shall we say a ‘long-term perspective’. As Manur Olsen argued, it is the ‘stationary bandits’ that facilitate development, not the ‘roving bandit’” whose incentive is to steal as much as possible as quickly as possible. This is bad news because the real politics of many developing countries is of the roving bandit sort. Given that we don’t wish to encourage dictatorship, the key question is ‘how does the reality of not being able to “go slow” affect the sorts of policies and institutions that should be put in place to manage the extractive sector?’

Norway as nuisance

An eminent professor of economics led a passionate plea for us to stop telling developing countries to follow the Norwegian model of setting up a sovereign wealth fund. The idea of a SWF is appealing—tying one’s hands to benefit future generations sounds like the sort of Presbyterian thing that my Scottish forbearers would have approved of. But for poor developing countries it isn’t merely politically impossible to set aside a large pot of money and not raid it—if I don’t, the opposition will when they come in power—it doesn’t even make economic sense. This is because certain kinds of investments in physical or human capital will spur future growth (think roads, or education) and potentially stimulate further investment by the private sector. The key thing then is not to stop poor countries spending money, but to ensure that it is spent on something genuinely useful.

How not to manage expectations

During the workshop a senior African economist recounted the experience of Ghana which, upon finding rather modest quantities of oil, went on a major spending spree.  This resulted in double-digit fiscal deficits and a huge increase in debt. The result is that Ghana—now on an IMF programme—is paying far more in interest payments than it generates in oil revenue. Yet Ghana previously had good institutions and a strong track record of macroeconomic management. Does the case of Ghana show how new resource finds can alter political incentives in a way that leads to ruin? Or does it just show that if you are determined to mismanage the macroeconomy you can do so no matter how good your institutions?

From backlog to fracklog

One of the key purposes of conferences is to learn new pieces of jargon, so it was fun to learn about fracklog—the backlog of wells which have been drilled or prepared already for shale oil but which are not producing because of the low price of oil. The implication of this fracklog is that there is a ceiling on the oil price, since, if prices rise to that level, these wells will rapidly come into production stabilizing the price. At least so goes the new conventional wisdom which has always been right in the past …

The race to burn unburnable carbon

It appears that, since the Paris climate change deal, the world has finally noticed that burning all the fossil fuel in the ground might not be such a good idea. Whilst energy efficiency and renewables may be stabilizing the growth of energy use in rich countries, the relentless demand for energy from developing countries begs the question ‘whose carbon gets burned first?’ Ironically, the realistic prospect that there might be future curbs on fossil fuel consumption is prompting those with lots of it to sell it faster while it is still worth something, thereby making it cheaper and encouraging the very consumption we want to stop. The solution, of course, is a higher price for fuel (either by removing subsidies or through higher taxes), but that has the unfortunate effect of burning politicians who prefer to remain unburnable.

Holy holy holy: mining and the integrity of creation

Finally, in a wonderful after-dinner talk, a senior colleague with years of experience working with mining companies and mining communities described his engagement with the Vatican’s ‘Integrity of Creation’ working group. He reminded us that views on mining are, for many people, fundamentally matters of the heart (if not indeed the soul). This suggests that we can only begin to create meaningful dialogue between communities and mining companies when we understand the personal, human fears and aspirations of affected communities and ask mining companies not just how they will minimize impact, but how they will maximize their contribution towards sustainable development.

This article was originally published on the United Nations University WIDERAngle blog (May, 2016) at: https://www.wider.unu.edu/publication/can-extractive-industries-promote-development

 

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Hidden Hand of Amartya Sen http://www.developmentideas.info/2016/05/hidden-hand-of-amartya-sen/ http://www.developmentideas.info/2016/05/hidden-hand-of-amartya-sen/#comments Wed, 18 May 2016 08:09:22 +0000 http://www.developmentideas.info/?p=1369 Read more]]> Some things become clearer with time. In the three years since the publication of “International Development: Ideas, Experience and Prospects” I have come to appreciate the magnitude of an intellectual debt the editors and contributors owe to Amartya Sen. In many ways, his ideas and writing inspired and guided how we understand thinking about development, and how it has evolved. Below are some of the main influences from the over fifty times Sen’s works are cited throughout our volume.

The most obvious influence is the concept of human development, including the HDI and the capability approach. Sen was not alone in pointing out the limitations of GDP as a proxy for measuring development. Yet his writing helped refocus my generation on the ends of human development, rather than the means of income and growth. At its simplest, it is the opportunity for every person to pursue a life that she or he values.

“Development as Freedom” inspired scholars and continues to resonate in a world that struggles to overcoming poverty, inequality, and exclusion.

Sen’s framing of human freedom found particular -and somewhat unexpected- purchase in the field of ICTs for development, as well as debates on innovation as well as internet freedom. His works clearly influenced the authors of chapters on these topics.

A second influence is how expanding freedom and justice are enhanced and created through civil and political life. Building upon Sen’s eloquent definition of democracy as “government by discussion”, the practice of development is a discussion through which society envisions and pursues a better world. Far from being confined to concept and theory (Part II), Sen’s influence is evident in the reflection on the real-life experience (Part III) particularly by the authors on Chile and on the State as a development actor.

After the rapid succession of security, conflict –and now social resilience- dominating development policy, it is refreshing to re-read Sen and Ogata’s writing at the beginning of the 21st century on human security through empowerment. The idea of justice may remain elusive, but continues to play a real role in how people live, and the extent to which they derive satisfaction out of their lives.

A third influence is Sen’s classic contribution on understanding famine, not as a lack of food, but as a failure of entitlements. Harvests and droughts matter, but hunger starts with the limited means by the disadvantaged to procure the food they need. Thinking on entitlements –and how inequality is created– comes out in the chapters on agricultureclimate adaptation, and global health.

The editors and contributors are also indebted to Sen for his championing of gender in development thought. There was an awkward moment at one workshop when our volume was (justifiably) critiqued for not having more women authors and more content on gender inequalities. Amartya’s delayed arrival at that moment changed the energy in the room, and revitalized authors’ attention to how women experience development –and shape it– differently than men.

Looking back, I have a new appreciation for how thinking about development –and the practice it inspired– elaborates, borrows and accumulates ideas. Amartya has deeply influenced contemporary practitioners, yet he readily recognises his own debt to earlier thinkers, including Adam Smith relating individual satisfaction to the happiness of others, Peter Bauer on expanding the range of human choice, and Paul Streeten on enabling people to enjoy long, healthy and creative lives.

In 2005, writing on how does development happens, Sen defined epistemology as “learning from discussion.”  The editors and authors remain indebted to Amartya, his writing and cherished conversations. Moving forward, we aspire to continue the discussion, and spark more of them, to better trace how our ideas evolve and to further contribute to new thinking on development.

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From ICT4D to Digital Development? http://www.developmentideas.info/2016/05/from-ict4d-to-digital-development/ http://www.developmentideas.info/2016/05/from-ict4d-to-digital-development/#comments Mon, 09 May 2016 18:57:34 +0000 http://www.developmentideas.info/?p=1335 Read more]]> As a term, “ICT4D” is a strong and generally positive force.  It acts as a magnet to aggregate knowledge and practice.  It provides a clear and unambiguous tag for searches and material and events.  The “4D” component provides a purpose for activity.  Without it, we would lose more than we gain.

There was the well-meaning but ultimately-disadvantageous attempt to supplant it with “ICTD”, and there has been its fractionation as the field has grown into “M4D”, “HCI4D”, “ICT4E”, etc.  Now there’s the faint whiff of a new(ish) kid on the block: “digital development”.

At the turn of the century, “digital development” showed signs of becoming the chosen term for application of ICTs to development, before ICT4D nipped in from 2001 to squeeze it out.  It had a moment in the sun during the 2000s when it was used to help explain the digital divide.  And now it has received some recent resuscitation.  In 2014, UNCSTD commissioned a report on Digital Development, and USAID set up a Digital Development team as part of its Global Development Lab.  In 2015, the widely-cited “Principles for Digital Development” were launched.  In 2016, it got a cluster of mentions in the World Development Report, “Digital Dividends.”

As a term, “digital development” has plenty going against it: it’s generically ambiguous (searches bring up material on development of fingers and toes); it’s specifically ambiguous (searches bring up material on development of digital devices, or child development of digital technology capabilities); it doesn’t offer a snappy tag or signal; it has no inherent purpose.

Personally, I think it better we badge this “ICT4D 3.0” given the many benefits of the ICT4D label.  (Actually, “ICT4D 2.0” would be better still but I already jumped the gun on that one back in 2009).

Nonetheless, “digital development” is a term with a bit of momentum behind it, and also a sense from recent entrants to the field – admittedly only gleaned from conversations at the WDR2016 London launch – that it is somehow new, and different from ICT4D.  So, at theCentre for Development Informatics, we decided to run with that and see where it got us: holding a brown-bag lunch at which everyone was asked to assume there is some kind of phase change from ICT4D to Digital Development and, given that, to give examples or indicators of that change.

Our summary of the phase change differences is shown in the table below.  A blog is not the place to provide a detailed explanation of the content, but I’ll note some main features:

  • Our bumper slogan was that digital technologies are a tool for development under ICT4D, but will be the platform and medium for development under Digital Development.
  • Digital Development both informs and is informed by a wider sense of phase change from “international development” to “global development” (discussed at a different brown-bag event of which more, perhaps, anon). One particular aspect of this – still a matter of much debate – is that development becomes a universal process, not one restricted to developing countries; a changing geography also seen within the shift in content from MDGs to SDGs.
  • It seeks to incorporate earlier ideas like “Development 2.0” (seen as exemplifying some of the new development models of a Digital Development era) and “ICT4D 2.0” (seen as the innovation worldview that underpins Digital Development).
  • It draws significantly from existing ideas on the network society and internet studies, and seeks to incorporate them into the global development domain. That intersection of digital and development is where most work still needs to be done.  Castells & Himanen recently had a stab at this but it remains a work in progress.  Alongside research into, and examples of, all the elements in the right-hand column, thinking about the digital/development intersection therefore forms the main agenda to take forward.

Summary of phase change from ICT4D to Digital Development

This article was originally published at ICTs for Development Blog (March, 2016) at: https://ict4dblog.wordpress.com/2016/03/30/from-ict4d-to-digital-development/

 

 


 

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Should we be scared of a low growth future? http://www.developmentideas.info/2016/04/should-we-be-scared-of-a-low-growth-future/ http://www.developmentideas.info/2016/04/should-we-be-scared-of-a-low-growth-future/#comments Tue, 26 Apr 2016 10:06:10 +0000 http://www.developmentideas.info/?p=1324 Read more]]> For nearly a century, mainstream economists of all approaches have assumed infinite growth is technically feasible and socially desirable.

The first challenge to this came from a handful of ecological economists – mostly in the second half of the twentieth century. These marginal voices argued that growth has environmental limits and that pursuing infinite material expansion would push humanity against a wall both because of resource depletion (on the input side) and pollution (on the output side).

Since then, whether it is possible to continue to grow the economy forever has triggered heated debates. Some simply argue we can’t. But others say growth can be combined with fewer environmental inputs and impacts, and some think this is a false dilemma altogether.

But post-2008, the economic growth debate has taken a new unexpected twist. Now the idea that developed countries’ economic growth will resume at all is being challenged by the mainstream itself. And this time the “limits” are not just environmental: they are linked to the internal workings of contemporary capitalism.

Has mainstream policy-making failed?

The first bombshell was dropped in 2014 by former Secretary of the US treasury Larry Summers. Summers warned that developed countries should prepare for a prolonged era of little or no economic growth – secular stagnation – because of an excess of savings not being channelled into investment: savings are being hoarded and monetary policy has become ineffective in addressing this problem.

The root of this problem is a lack of sufficient demand in the economy – and this is linked to inequalities: if lower and middle class incomes are growing, they are likely to spend this additional money, creating demand and consumption in the economy.

If, as for the last two or three decades (depending on the country), they are not growing – notably because real wages are stagnant – then economic performance will be sluggish.

Because of the lack of demand, companies have no incentive to invest – despite low interest rates giving them a near-zero cost of borrowing. They know there won’t be additional demand for what they produce to justify their investment.

In short, Summers deems conventional economic policy tools insufficient and thinks developed countries should prepare for a “Japanese” scenario: many decades of very low – or no – growth and high debts.

Or have we reached peak productivity?

In a recent book, Robert Gordon goes even further by taking on one of the key drivers of growth – productivity, our capacity to produce more with fewer inputs as a consequence of technological innovation.

His analysis suggests we shouldn’t expect high productivity growth in the future: contemporary technological developments are considerable, but not compared to the innovations that took place in the 20th century. And the slowdown of productivity growth is supported by data.

Gordon sees this slowdown in productivity combining with other factors: an ageing population, declining labour participation rates and inequalities all act as a constraint on future growth. He concludes that we shouldn’t base policy decisions on the assumption of future high growth rates in the US (and by extension in other developed countries).

What are the implications?

Both hypotheses have very different policy implications.

In principle, Summers’ “secular stagnation” can be avoided through a combination of aggressive public spending (fiscal policy) and massive redistribution of income and wealth.

Redistribution, for example, would mean more demand in the economy because more money would flow to the lower and middles classes, who tend to spend more of their income than the rich. This in turn would prop up investment and growth.

In short, Summers’ “limits” are down to erroneous economic policies: by following a different macroeconomic approach growth could resume.

Gordon’s take, on the other hand, is that the high productivity growth and technical innovation we’ve been taking for granted may in fact come to an end.

It’s not that technology won’t evolve, but that the relative importance of innovation in propping up economic growth has declined and may decline even further. And even if it doesn’t the other headwinds we face will lead to stagnation anyway.

If this is right, then there isn’t a simple macroeconomic fix which could do the trick.

So what if Gordon is correct in that the constant growth era is almost over in the developed world?

Policy-makers often lazily rely on economic growth to be a silver bullet which magically solves all problems: bringing down unemployment, pulling people out of poverty or even reducing debt-to-income ratios. A world of low growth means we need to find much more inventive solutions address these problems.

For example, by drastically reducing working hours and sharing work better between the overemployed and unemployed we could ensure full employment, increasing everyone’s wellbeing.

Tackling inequality could wipe out deprivation and poverty. More redistribution would also increase the income of lower and middle classes – and prevent them from getting more and more indebted just for making ends meet.

A halt to endless pressure for additional consumption could allow us to focus on our collective quality of life and wellbeing, and force us to redefine what societal success actually means.

Finally, less growth in developed countries could bring less pressure on natural resources and fewer emissions. And this would provide more breathing space for developing countries to grow and improve their living standards.

Even if some form of secular stagnation materializes this needn’t be something negative: there are solutions for everyone to prosper in a low growth environment – if we have the political courage to challenge key tenets of the current system.


This article was originally published on NEF (March, 2016) at: http://www.neweconomics.org/blog/entry/should-we-be-scared-of-a-low-growth-future

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Social Sciences and Development Thinking http://www.developmentideas.info/2016/04/social-sciences-and-development-thinking/ http://www.developmentideas.info/2016/04/social-sciences-and-development-thinking/#comments Wed, 20 Apr 2016 12:17:35 +0000 http://www.developmentideas.info/?p=1301 Read more]]>

What are the barriers that hold back social sciences from making a more productive and relevant contribution to a rapidly and continuously changing development landscape?

Over the last three decades, there has been considerable experimentation with unorthodox development formulas with surprising outcomes emanating from emerging economies and the South. Paralleling this was the decline in hegemonic development discourses and the emergence of a plethora of evidence from the different disciplines in the social sciences. The still ensuing debate on what constitutes development, and the alternative pathways that can lead to it, suggests that the explanatory and predictive capacity of the social sciences is under question.

Drawing on lessons from the past, there are a number of barriers that hold back social sciences from making a more productive and relevant contribution to a rapidly and continuously changing development landscape. Foremost is the expectation that economics would offer a universally-accepted development trajectory. Economics exercised tremendous influence over the past half century, focusing attention toward material progress and privileging quantitative analysis, both of which tend to ignore the diversity and complexity of development challenges in the developing world. Questioning the dominance of GDP and the role of the market has re-opened debate on previously resolved matters such as the role of the state intervention and the importance of culture and indigeneity. The recent consensus that “institutions matter” is one step, yet much work is still needed to elucidate regarding how institutions evolve, particularly in distinct contexts.

At the same time, economics encouraged thinking that is pragmatic, empirical and multi-disciplinary. We now consider development as it unfolds in various contexts, rather than assuming stages of growth or universal pathways to social progress. Development thinking was undoubtedly enriched by the frequency with which prominent economists move between academia and public sector, a mobility that ought to be encouraged more broadly across the social sciences. As development increasingly wrestles with the social impacts of economic policy, there is an inevitable opening to perspectives and contributions from other disciplines. Chief economists and central bank governors remain influential, yet even in international financial institutions there is a noticeable shift towards inter-disciplinarity in research and policy advice.

The relevance of the social sciences in responding to public policy varies between the disciplines. By and large, academic silos serve to limit dialogue and inhibit learning among disciplines. For example, we still have a limited understanding of the relationships among education, human development, and economic development. The mismatch between supply and demand of education and the gap between aspirations and educational outcomes in developing countries suggests a limited dialogue between economics, sociology, psychology and policy. ‘Getting it right’ in terms of education, training, and human capital formation requires a more policy-relevant and evidence-based dialogue among these disciplines and the agents of change.

So far, the measurement of the influence of social science is not sufficiently developed to inform our understanding of how to effectively translate a body of knowledge into development thought and practice. While so much evidence, complex insights and knowledge on development is being generated across the social sciences, much remains to be learned about the cause and effect relationship between episodes of economic success-or-failure and the role of good-or-bad advice postulated on development theories or empirical evidence. Here issues of time, space, and politics tend to mediate significantly.

Development is not a single science, but the blend of sciences which together offer insight for understanding a complex world, as well as inspiration for enabling human freedom. Social science offers more to policy and development thought when it is used to foster open dialogue and learning among the disciplines and development actors. Social scientists are rewarded for generating knowledge, but also provide a valuable service by engaging the mechanisms, processes and interlocutors to influence policy and public understanding beyond academia.

Development thinking is moving toward more integrated understanding of how societies change over time, and how to enact such change. Whereas a generation of scholars once addressed hunger through supply and prices, today food security considers changes in farm-level production, mediated through markets and policy, to consequences in individual nutrition and population health. Similarly, whereas development once addressed human wellbeing as the natural consequence of boosting incomes, today we consider the interplay of equity, happiness, and social justice.

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Escape from the World Bank http://www.developmentideas.info/2016/04/escape-from-the-world-bank/ http://www.developmentideas.info/2016/04/escape-from-the-world-bank/#comments Tue, 12 Apr 2016 08:02:01 +0000 http://www.developmentideas.info/?p=1282 Read more]]> The elephants in the room at the annual International Monetary Fund/World Bank meeting in Lima, Peru, were the China-inspired Asian Infrastructure Investment Bank (AIIB) and New Development Bank (or “BRICS Development Bank,” as it was originally called).

Will these new institutions behave like the World Bank or the more conventionally “bank-like” European Investment Bank (EIB)? Above all, will they be vehicles to promote – or, paradoxically, constrain – China’s interests?

The reality is that over the next decade, these new institutions will not be huge lenders. The paid-in capital of each is $10 billion; so, even with an equity-to-loan ratio of 20% (the current floor for the World Bank), each will be able to lend only about $50 billion over the next decade – not chump change, but hardly a game changer – unless they “crowd in” substantial private investment. What matters is that the larger emerging markets are putting substantial capital into institutions that will be dominated by China – an indication of how frustrated they are with the World Bank and the IMF.

The World Bank is like an old ship: in its seven decades, all kinds of barnacles – sticky budgetary accretions and transaction costs – have accumulated on its hull, steadily impeding its speed and performance. In the 2015 financial year, the EIB lent more than twice the amount provided by the Bank, but with one-sixth the staff. Whether measured by flows (loan disbursements) or stock (loans outstanding), the World Bank is massively over-staffed, with a much higher administrative budget than the EIB.

When the Bank was formed, the key governance mechanism was a resident Board of Directors that reported to a Board of Governors – usually finance ministers or equivalent senior authorities from member countries. Over time, new offices proliferated: an Office of Internal Audit, an Independent Evaluation Office, an Inspection Panel, a Chief Ethics Officer, and an Office of Institutional Integrity.

Most of this bureaucratic growth was the result of pressure from developed countries, which timed their efforts with the periodic replenishment of the International Development Association (the World Bank’s window for soft loans). Criticism from well-organized Western NGOs put more pressure on the Bank, deflecting attention from any real structural changes in the institution’s governance. And savvy Bank presidents have known that the best way to deflect political pressure is to add yet more bells and whistles – especially when they are visible and loud.

Around two decades ago, there was an Ombudsman and a World Bank Administrative Tribunal to address internal staff grievances. Now there is a whole paraphernalia of “Internal Justice Services”: the Respectful Workplace Advisers, an Office of Mediation (presumably an Office of Meditation will follow), Peer Review panels, an Office of Ethics and Business Conduct, and an entire Integrity Vice-Presidency. To paraphrase the comedian Fred Allen, “On ships they call them barnacles; at the World Bank, they attach themselves to desks and are called vice presidents.” And, after the last reorganization, there are more than two dozen of them.

Meanwhile, the Bank’s extreme risk-averse culture reflects a rational response to critics who make a huge fuss about every project or program failure. Critics who take failures in commercial projects in stride find the Bank sloth-like compared with the private sector and become indignant when its projects fail. Yet, instead of making the case that risk is intrinsic to economic development and developing a risk-balanced portfolio of projects (and loans priced accordingly), the Bank pretends that it can be infallible. As a result, the best has become the enemy of the good.

Risk aversion has gone hand in hand with skewed institutional priorities, as is evident in the Bank’s budget. In the 2015 financial year, $623 million was allocated to “Client Engagement,” while nearly 1.5 times that amount, or $931.6 million, went to “Institutional, Governance & Administration” (the remaining $600 million, for “Program and Practice Management,” is ostensibly for supporting lending operations). Expenses for the Executive Board alone were $87 million. The Bank loudly proclaims the virtues of research – and then spends almost as much – $44 million – on “External and Corporate Relations.”

Many of the challenges facing the World Bank come from the pressures placed on it by its larger shareholders. Because they refuse to cede power to smaller shareholders, or to allow a substantial increase in resources to meet much greater global needs, emerging economies had little choice but to create their own institutions.

The World Bank will not disappear: there are too many vested interests (including academics and NGOs) eager for a share of other people’s money. But the Bank’s performance epitomizes how even well designed and well-built ships slow down as the barnacles build up, until they must cede the way to newer vessels.


This article was originally published on Project Syndicate (October, 2015) at: https://www.project-syndicate.org/commentary/emerging-economies-development-banks-by-devesh-kapur-2015-10?barrier=true

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Looking Back at Thinking, Policy and Practice http://www.developmentideas.info/2016/04/looking-back-at-thinking-policy-and-practice/ http://www.developmentideas.info/2016/04/looking-back-at-thinking-policy-and-practice/#comments Tue, 05 Apr 2016 12:21:01 +0000 http://www.developmentideas.info/?p=1303 Read more]]> Over the last 50 years, the relationship between development thinking, policy and practice has been marked by paradigm shifts, the rise and fall of dominant discourses and ideologies, and the emergence of new development pathways and actors. These markers and shifts have produced some important lessons learned that can help shape this future relationship in a more constructive and progressive manner. In other instances it has left us with more questions than answers.

Below are three key insights on the relationship between development thinking, policy and practice:

  • No single model

One of the biggest fallacies of development thinking in the past was a misguided approach of applying the same policy prescriptions for different societies and contexts. This constitutes an important lesson learned as countries choose different paths to success, and do hold differing values with regards to what constitutes development. Underscored here is the need for humility among development actors who can hold strong views about how development takes place. For instance, while corruption is widely perceived as negative for development, economically successful parts of the world (including China, Indonesia, and India) have thrived despite an unfinished struggle against corruption. Reflecting on real-life experience reveals that not only do multiple factors contribute to development, but there sequencing can vary and no single one is sufficient condition on their own. Having an open mindset while understanding the specificities of any given society is crucial.

Related to need for specificity is the need to listen to dissenting voices. This is extremely important at times of consensus when overpowering intellectual currents limit the space afforded to critical voices and opposing views. Thinking about development from a model-driven as opposed to specific case study results has also served to misguide development practitioners and the relevance of the advice for policy and practice. The caveat therein is that drawing results on what works and what doesn’t work from aggregate data might be specific to a particular time and place. Care is needed in transferring insights and experiences from one location to another. Caution is required when dealing with generic policy prescriptions based on aggregate data.

  • Mediating role of politics

Development thinking made some notable advances in its understanding of the change in both democratic and non-democratic contexts, and under the influence of both domestic and international politics. Yet the gap between knowledge and action remains mediated by diverse political dynamics and processes.  This can be particularly pronounced in politically complex societies where politics and ideology drive policy-making. Similarly smaller countries are often squeezed between limited capability to act and the constraints of international arrangements and the geostrategic interests of larger powers. Domestic and international politics are instrumental to the relationship between development thinking and practice.

The gap between knowledge and action remains mediated by diverse political dynamics and processes.

Equally important is the role of the political economy of development. Capital, politicians, civil society and diverse actors vie for policy influence across local, national, and global level. New configurations of such actors are shaping development ideas and policy. Furthering our understanding of how this dynamic plays out in different contexts will help us address some of the most salient development challenges of our times.

  • Poverty and the development state

Thinking about development has also been strongly influenced by dramatic changes in the distribution of the world’s poor that no longer only live in poor countries, but also pervasively exist in middle income countries. Bringing back to the fore the role of the developmental state in the literature and debates is increasingly driven by rising poverty levels, as well as market and government failure. Yet, the discussion for/against the role of the state continues to be framed by a tension between its development potential and the pitfall of excessive political control.

Last but not least, there is a need for dialogue amongst disciplines. This need stems from the somewhat lopsided development thinking and approaches followed so far.  Beyond economics, a diverse range of natural and social sciences have a lot to offer to development thinking, including law, history, anthropology, and sociology. In the foreseeable future, development institutions and think tanks will remain important conveners of multi-stakeholder and multi-disciplinary development thinking.

 

 

 

 

 

 

 

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We Need Better Global Poverty Measures http://www.developmentideas.info/2016/03/we-need-better-global-poverty-measures/ http://www.developmentideas.info/2016/03/we-need-better-global-poverty-measures/#comments Tue, 29 Mar 2016 08:32:00 +0000 http://www.developmentideas.info/?p=1289 Read more]]> The challenges of measuring and monitoring global poverty have received a lot of attention in recent times. There have been debates about the Sustainable Development Goals, as well as some more technical debates.

Assessments of progress against poverty at the country level, and most decisions about how best to fight poverty within countries, do not require global poverty measures. Nonetheless, such measures are important to public knowledge about the world as a whole, and they help inform the work of development agencies, including in setting targets for overall progress.

Prevailing poverty measures that use a constant real line do not take account of the concerns people everywhere face about relative deprivation, shame and social exclusion

In a new working paper — Toward Better Global Poverty Measures – Working Paper 417, published by the Center for Global Development I discuss three current issues that are specific to global poverty monitoring, and propose some solutions.

The first relates to one of the main sources of dissatisfaction with prevailing poverty measures that use a constant real line, namely that they do not take account of the concerns people everywhere face about relative deprivation, shame and social exclusion; these can be termed social effects on welfare. To some extent the fact that higher national lines are found in richer countries reflects these social effects on welfare. But the differences in national lines also reflect to some extent more generous welfare standards for defining poverty in richer countries.

Yet we can all agree that we need to use a consistent welfare standard in measuring poverty globally. We need to be reasonably confident that people we judge to have the same level of welfare—the same capabilities for example—are being treated the same way wherever they live. Amartya Sen put the point nicely: that “…an absolute approach in the space of capabilities translates into a relative approach in the space of commodities.” But when we think about how best to do that, we run into the problem that we do not know whether the higher lines in richer countries reflect differences in the incomes needed to attain the same level of welfare, or (instead) that they reflect higher welfare standards in richer countries.

The paper argues that two global poverty lines are needed—a familiar lower line with fixed purchasing power across countries and a new upper line given by the poverty line that one would expect given the country’s level of average income, based on how national poverty lines vary across countries. The true welfare-consistent absolute line lies somewhere between the two bounds. By this approach, to be judged “not poor” one needs to be neither absolutely poor (independently of where and when one lives) nor relatively poor (depending on where and when one lives).

The second problem is an evident disconnect between how poverty is measured in practice and the emphasis given in social policy and moral philosophy to leaving none behind. For example, a 2013 report initiated by the U.N. on setting the new SDGs argued that: “The indicators that track them should be disaggregated to ensure no one is left behind and targets should only be considered ‘achieved’ if they are met for all relevant income and social groups.”  But how do we know if none are being left behind? To assess whether the poorest are being left behind one needs a measure of the consumption floor. Here there is a severe data constraint, namely that a low observed consumption or income in a survey could be purely transient, and so unrepresentative of permanent consumption.

However, I have shown that a more reliable estimate of the consumption floor can be derived from existing measures of poverty under certain assumptions. This can be readily implemented from existing poverty data, and it provides a rather different vantage point on progress against poverty. While the developing world has made much progress in reducing the number of poor, there has been very little progress in raising the consumption floor above its biological level. In that sense, the poorest have been left behind.  Progress against poverty should not be judged solely by the level of the consumption floor, but it should not be ignored.

Finally, the paper reviews the ongoing concerns about the current Purchasing Power Parity (PPP) exchange rates from the International Comparison Program (ICP). (See, for example, the CGD blog post “Global Absolute Poverty Fell by Almost Half on Tuesday“, and the comments on that post; my new paper addresses this debate.) The days are (thankfully) gone when the community of users simply accepts without question the aggregate statistics produced by publicly-funded statistical organizations like the ICP. Recurrent debates about the ICP’s results have been fuelled in part by poorly-understood methodological changes and in part by the ICP’s longstanding lack of openness, notably in access to primary data.

Calculating PPPs that are appropriate for global poverty measurement using ICP price data is not exactly easy, but nor is it the hardest task imaginable as long as researchers have access to the data. There are also options to using ICP prices, although further testing is needed on their performance. Even staying with the ICP, adjustments will be called for, such as to deal with urban bias in the price surveys. Going forward, better price-level comparisons for the purpose of measuring poverty, including sub-national analysis, require re-estimating the PPPs from the primary data. If the ICP is to continue to be a valuable resource, it needs to make public the primary data to facilitate such calculations.

Each of the paper’s proposals for addressing these problems could undoubtedly be improved upon and refined if there is enough agreement that effort is needed to develop better global poverty measures along these lines. That effort is justified if our global measures are to continue to have relevance in global public knowledge, and to international policy making and poverty monitoring.


This article was originally published on the Center for Global Development Blog (September, 2015) at: http://www.cgdev.org/blog/we-need-better-global-poverty-measures.

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