Just back from a trip through Paraguay and Argentina and I came back with mixed feelings. On the one hand, both of these countries have shown impressive growth rates in the last years, helped by high international commodity prices (especially soy). And it is also true that both countries have translated this growth into falling poverty rates which is never as easy a translation as many people believe. Nonetheless, I got the idea when talking to government officials and private sector organizations that they are not using this buoyant growth to really redevelop and transform their economies.
Money has been flowing fast to the southern cone and this has been (extremely) good for many businesses which have grown at impressive rates. Job creation is strong and poverty rates have come down. But these countries may be partying too hard on a commodity bubble (Chile too). If Brazil starts to slow (which seems to be the case) and China can’t reinvigorate growth we might see hard times for these commodity exporting countries. And then the lack of plan will be self-evident.
On the positive side: there has been some interesting policy measures, as Argentina has initiated a successful conditional cash transfer (CCT) program which seems well targeted. And, unlike previous high-growth periods (1990’s), economic growth this time around has come with job creation and poverty alleviation.
It’s true that these are points to be taken into account and recognized. But I feel the situation allows for a deeper more structural change in these economies. There might still be time left on the clock.
These are extremely interesting times. It seems like the precise moment for the world to engage on a development path which includes focus on poverty reduction and the environment (which I feel go hand-in-hand).
But it seems that the problems of the world are changing ever so slightly. The World Bank has just published a report showing that global poverty rates have diminished in the past five years.
The estimates for 2010 are partial but, says the bank, they show global poverty that year was half its 1990 level. The world reached the UN’s “millennium development goal” of halving world poverty between 1990 and 2015 five years early. This implies that the long-term rate of poverty reduction—slightly over one percentage point a year—continued unabated in 2008-10, despite the dual crisis.
This is clearly a good thing and a sign for big hope. These figures have to be celebreated. But more needs to be done, we cannot just stay content because poverty is being reduced and think that the world in business-as-usual state will continue with this trend. Also, once people leave poverty, the challenge then comes to improving the quality of their lives and the conditions at the workplace. Employment creation has been resilient in most the developing world in the past years, but most of these jobs are informal and many of them, in bad conditions. This has to improve and has to be taken seriously.
This problem may be harder to solve and a lot harder to quantify. But international organizations and politicians must meet the challenge.
A very interesting discussion on charter cities versus the concept of architectural driven cities.
In a 2009 TED talk, economist Paul Romer unveiled a “radical idea” for the future of cities. A good city, according to Romer, is built not on street layouts, transit designs, and housing projects, but on good rules. Rules are what predicate Romer’s contentious “charter city” concept, which instructs countries to graft new cities onto unused land and govern them with imported “charters.” Host countries would thereby relinquish their jurisdiction over areas of their unpopulated terrain, and third-party countries would draft charters to govern fledgling cities, thereby attracting citizens to populate and invest in their respective geographies. The charter city par excellence is Hong Kong, a city that can boast a developmental success story that eclipses the stigma of its colonial past.
(…)
Can architecture really be so trivial in the discussion of urbanization? Could it really not matter all that much? Not surprisingly, another approach to city-building — one driven by architects — suggests otherwise. Earlier this year, New York-based architect Meta Brunzema and a team of eight architecture graduate students at Pratt Institute pitched an idea to revive the swath of post-industrial towns hugging the Hudson River in upstate New York. Unlike Romer’s charter city concept, Brunzema’s proposal implies that thoughtful architecture can be an important catalyst for effective urbanization.
What side of the debate are you on? I think these two models are not completely opposite. Some regions and cities thrive more with one model, while other cities have more potential implementing the other. I don’t know if “thoughtful architecture” can be enough to bring effective urbanization in low-income countries.
I’m back in Nicaragua this week and again I’m getting the sense that people and government here are both pretty concerned with environmental impact. More so than in other countries, just by reading the papers or talking with government officials they all express concerns of the environmental consequences that certain actions or policies might have.
Just to put a few examples. The newspaper has a small article every day on the front page on ways to deal with waste, either transforming it into energy or detailing a problem with waste generation in some town. Also, the other day we were discussing with Central Bank officials on ways to improve agriculture productivity and their biggest concern was always to not do anything that would harm the environment. And these were Central Bank officials: environmental protection is way out of their mandate!
Let’s not forget that Nicaragua is the second poorest country in Latin America, after Haiti. So for them to be concerned about environmental impact takes a lot of vision.
These are all good signs I feel. I just hope they have the ability and political will to these type of concerns into practice and to reduce poverty at the same time.
Great op-ed by Rodrik on what he finds to be two diverse visions of “doing development”
The vision for which Kim stands is bottom-up. It focuses directly on the poor, and on delivering services – for example, education, health care, and microcredit – to their communities. This tradition’s motto could be, “Development is accomplished one project at a time.”
The other approach, represented by Okonjo-Iweala and Ocampo, takes an economy-wide approach. It emphasizes broad reforms that affect the overall economic environment, and thus focuses on areas such as international trade, finance, macroeconomics, and governance.
I think one can realy complement from the other. And although they truly are two ways of tackling issues and dealing with development problems, they can go hand-by-hand.
His conclusion:
The field of development policy can and should be reunified around these shared diagnostic, contextual approaches. Macro-development economists need to recognize the advantages of the experimental approach and adopt the policy mindset of enthusiasts of randomized evaluation. Micro-development economists need to recognize that one can learn from diverse types of evidence, and that, while randomized evaluations are tremendously useful, the utility of their results is often restricted by the narrow scope of their application.
In the end, both camps should show greater humility: macro-development practitioners about what they already know, and micro-development practitioners about what they can learn.
Comments
A great blog from Severin Borenstein on oil price and the role of speculators. He believes that oil prices ar not driven by speculator demands, but by other factors.
So why does the speculator story persist? It seems to be in no one’s interest to face the realities of the oil markets, that reliance on oil will leave a big part of our economy out of our hands. Politicians on the right want to drill our way out of this– $2.50 gasoline for everyone! — despite the fact that no credible researcher suggests more domestic drilling will have a significant impact on oil prices. The left doesn’t want to just say “oil is expensive, we need to deal with that reality” so they instead say we can solve the problem by shooting the speculators. Or they blame large U.S. oil companies for driving up oil prices, despite any evidence to support the assertion. On both sides, the domestic politics of oil prices remain stubbornly resistant to the basic facts on which economists of all political persuasions agree.
