Development optimism from Justin Lin: review of ‘The Quest for Prosperity’

‘Every developing country has the opportunity to grow at over 8% a year for 20-40 years, and to get rid of poverty within a generation.’ There’s something very refreshing about listening to East Asian development economists, in this case the prolific Justin Lin, a former World Bank chief economist, launching his new book The Quest for Prosperity, at ODI just before Christmas. The contrast between his can-do optimism and the dark clouds of Eurogloom and Afropessimism could not have been greater. But is he right?

While others in development wonkland are increasingly scathing about blueprints and best practice guidelines, Justin is unabashedly a man with a plan. The book takes his paper on ‘Growth identification and facilitation’, (see my earlier review, and Justin’s reply), and boils his thinking down into what he calls a ‘six point recipe’ for developing country governments.

1. ‘Choose the right target’:  find a country that looks like you in terms of ‘endowments’ – geography, natural resources, markets etc, but that is doing much better, with a per capita income that is, say, double yours. Then imitate it. This is a straight lift from Asian ‘flying geese’ story.
2. ‘Remove binding constraints’: identify which of your own industries look like those in the target countries and find out what’s holding them back (infrastructure, credit, red tape etc). Sort those things out first. Justin draws heavily on Dani Rodrik and Ricardo Hausmann’s work on growth diagnostics.
3. ‘Seduce and attract Global Investors’: Justin goes for Washington Consensus-style openness to FDI, along lines of Bangladesh or Singapore rather than the more protectionist route followed by South Korea and others
4. ‘Scale up self-discoveries’: But he also thinks governments need an active industrial policy to spot and support local innovation and technological upgrading (eg Indian IT or cut flowers in Ethiopia)
5. ‘Recognize the Power and Magic of Industrial Parks’: he won’t make many friends among the trade unions on this one, but (drawing on China and Vietnam), he sees export-processing zones as the best way to overcome dilapidated infrastructure and get exporting quickly
6. ‘Provide limited resources to the right industries’:  a tentative support for an activist industrial policy

What this amounts to is an attempt to mash together elements of the structuralism of the 1950s, the East Asian experience, new thinking from people like Rodrik and Hausmann, and the Washington Consensus of the 1980s, not so much splitting the difference as combining the best bits of all of them. It’s politically cautious, trying to play to both sides of the aisle (for example, he says his recipe is ‘consistent with The East Asian Miracle’, the World Bank’s notorious and largely discredited attempt to rewrite the East Asian tigers as a neoliberal success story).

The ensuing discussion at ODI was pretty critical, although Justin defended his recipe with passion. ODI’s Dirk van de Velde argued that it’s no good having a good recipe if you don’t have any cooks. Justin is much stronger on the economics than the politics, and ‘assumes a tin opener’ in the shape of an effective state both willing and able to implement his recipe. That’s a big assumption. When challenged he is pretty naive on the politics, arguing that leaders will be motivated to do the right thing because they want ‘a good name in history’. Yeah, right.

Kunal Sen from Manchester argued that the political economy of growth accelerations is very different from growth maintenance. Lots of political regimes produce growth spurts followed by busts, very few can keep it going for Justin’s ‘20-40 years’ and we need to understand better why that is.

Sheila Page stressed the limits to imitation: as the technological product cycle grows ever shorter, it is becoming less viable to rely simply on imitation, because the technology will already have moved on by the time you have absorbed the knowledge. No good arriving ten years late with a really cheap fax machine.

What about finance? I wasn’t clear from Justin’s presentation what role he sees for financial integration, given that financial markets are sources of huge volatility, put pressure on economic policy-makers to follow a more free market route, and often don’t lend to the right people (eg small and medium enterprises).

Is this a genuine recipe, or does it always rely on hindsight? I asked Justin if he would have predicted in the 1960s that South Korea had a ‘latent comparative advantage’ in iron and steel. He said yes, but I have my doubts.

Beyond these concerns, I applaud the intention, but worry that the attempt is flawed on two fronts. Firstly, I share the general scepticism on blueprints, and secondly, I’m not sure it’s actually possible to mix and match such opposing schools of thought in this way.

As for the book, it’s very sweetly written, and dotted with great quotes. My favourite is from Einstein, ‘Theory is when you know everything but nothing works. Practice is when everything works, but nobody knows why. We have put together theory and practice: nothing is working, and nobody knows why.’

The state of India – an advocacy masterclass from Amartya Sen and Jean Dreze

Jean Dreze (right) and Amartya Sen (left) are a longstanding partnership that produces brilliant analysis of India’s development path. Their recent piece ‘Putting Growth in its Place’ draws you in with some great questions, and then uses league tables to taunt India’s decision-makers into action – So you think we’re an emerging world power? Think again. We’re at the bottom of the South Asian table on life expectancy, sanitation and underweight and unvaccinated children (and close to the bottom on most other things), and falling further behind with each passing year. It’s ten pages, and worth the read, but here are some highlights:

“Is India doing marvellously well, or is it failing terribly? Depending on whom you speak to, you could pick up either of those answers with some frequency. One story, very popular among a minority but a large enough group—of Indians who are doing very well (and among the media that cater largely to them)—runs something like this. “After decades of mediocrity and stagnation under ‘Nehruvian socialism’, the Indian economy achieved a spectacular take-off during the last two decades. This take-off, which led to unprecedented improvements in income per head, was driven largely by market initiatives. It involves a significant increase in inequality, but this is a common phenomenon in periods of rapid growth. With enough time, the benefits of fast economic growth will surely reach even the poorest people, and we are firmly on the way to that.” Despite the conceptual confusion involved in bestowing the term ‘socialism’ to a collectivity of grossly statist policies of ‘Licence raj’ and neglect of the state’s responsibilities for school education and healthcare, the story just told has much plausibility, within its confined domain.

But looking at contemporary India from another angle, one could equally tell the following—more critical and more censorious—story: “The progress of living standards for common people, as opposed to a favoured minority, has been dreadfully slow—so slow that India’s social indicators are still abysmal.” For instance, according to World Bank data, only five countries outside Africa (Afghanistan, Bhutan, Pakistan, Papua New Guinea and Yemen) have a lower “youth female literacy rate” than India (World Development Indicators 2011, online). To take some other examples, only four countries (Afghanistan, Cambodia, Haiti, Myanmar and Pakistan) do worse than India in child mortality rate; only three have lower levels of “access to improved sanitation” (Bolivia, Cambodia and Haiti); and none (anywhere—not even in Africa) have a higher proportion of underweight children. Almost any composite index of these and related indicators of health, education and nutrition would place India very close to the bottom in a ranking of all countries outside Africa.

So which of the two stories—unprecedented success or extraordinary failure—is correct? The answer is both, for they are both valid, and they are entirely compatible with each other. This may initially seem like a bit of a mystery, but that initial thought would only reflect a failure to understand the demands of development that go well beyond economic growth. Indeed, economic growth is not constitutively the same thing as development, in the sense of a general improvement in living standards and enhancement of people’s well-being and freedom. Growth, of course, can be very helpful in achieving development, but this requires active public policies to ensure that the fruits of economic growth are widely shared, and also requires—and this is very important—making good use of the public revenue generated by fast economic growth for social services, especially for public healthcare and public education.”

Dreze and Sen attack what they memorably brand the ‘unaimed opulence’ of India’s economic path, contrasting it with the much more pro-poor growth path of South Korea and (recently) Brazil. Then they get stuck into the South Asian league tables (see below) and wrap up with an unflattering comparison with China (guaranteed to wind up your typical Indian decision-maker).

All that, and a couple of intriguing asides:

First, some cash transfer scepticism:

“Cash transfers are increasingly seen as a potential cornerstone of social policy in India, often based on a distorted reading of the Latin American experience in this respect. There are, of course, strong arguments for cash transfers (conditional or unconditional) in some circumstances, just as there are good arguments for transfers in kind (such as midday meals for school children).

What is remarkably dangerous, however, is the illusion that cash transfers (more precisely, “conditional cash transfers”) can replace public services by inducing recipients to buy health and education services from private providers. This is not only hard to substantiate on the basis of realistic empirical reading; it is, in fact, entirely contrary to the historical experience of Europe, America, Japan and East Asia in their respective transformation of living standards. Also, it is not how conditional cash transfers work in Brazil or Mexico or other successful cases today.”

And second the news (to me, anyway) that Kerala is no longer alone. Tamil Nadu, and now Himachal Pradesh, are catching up with India’s flagship state on the universal provision of essential services.

[h/t Steve Price-Thomas]

By 2015 Nigeria will have more poor people than India or China

The remarkably upbeat Brookings report on global poverty that Charles Kenny discussed in his recent post has some striking stats.

“Between 2005 and 2010, the total number of poor people around the world fell by nearly half a billion people, from over 1.3 billion in 2005 to under 900 million in 2010. Looking ahead to 2015, extreme poverty could fall to under 600 million people—less than half the number regularly cited in describing the number of poor people in the world today. Poverty reduction of this magnitude is unparalleled in history: never before have so many people been lifted out of poverty over such a brief period of time.”

Methodology: “we take the most recent household survey data for each country, and generate poverty estimates for the years 2005 to 2015 using historical and forecast estimates of per capita consumption growth, making the simplifying assumption that the income distribution in each country remains unchanged.”

Most of the poverty reduction is down to the growth leaps of India and China – by 2015, Brookings reckon that Nigeria will have more poor people than either of the big two. Poverty will be ‘An African problem with fewer big targets.’ (see table and bubble diagram – double click to expand them)

And here’s some more on the $66bn figure I mentioned on Monday: “Providing every person in the world with a minimum income of $1.25/day—in other words guaranteeing the right not to live in absolute poverty—is rapidly becoming feasible. In 2005, supplementing the income of each poor person in the world to bring their daily income up to $1.25 would have cost $96 billion, or 80 percent of the total volume of foreign aid disbursed that year. In 2010, with poverty less widespread and larger global aid volumes, the cost of such a global safety net would be just $66 billion, or slightly more than half of all official aid.

While the logistics of distributing cash to poor populations would not be without challenges, recent advances in biometric identification technologies—such as fingerprint and iris scanning—have greatly expanded the promise of implementing large-scale welfare programs in poor countries. Given the success of many cash transfer programs, significantly scaling up their use to provide a minimum income for all individuals living in poverty might be a fruitful new direction for donors to pursue.” [or governments could use for windfall from high commodity prices, as in Alaska]

The euphoric conclusion: “The new estimates of global poverty presented in this brief serve as a reminder of just how powerful high growth can be in freeing people from poverty. In the span of a decade, the share of the world’s population living in poverty could be cut by two-thirds, the number of countries where more than 1 in 6 people live in poverty could drop from 60 to 35, and 19 countries are poised to eliminate poverty altogether…… The “dream of a world free of poverty,” the oft-ridiculed motto emblazoned at the entrance of the World Bank, is, year by year, coming closer to reality.’

Next task, making sure the environmental impact of all that growth doesn’t undo all the good work…..

Getting Better: Why Global Development Is Succeeding. Review of Charles Kenny’s new book

Getting Better: Why Global Development Is Succeeding—And How We Can Improve the World Even More, published this month, is an exercise in ‘framing’ – trying to shift the way we feel, as well as think, about development and aid. It does it rather well. Two big frames:

1. Lives are getting better everywhere, including in Africa. People are healthier, live longer, lose fewer children, learn to read and write, and have more rights. The negative discourse of crisis epitomised by Tony Blair’s disastrous ‘Africa is a scar on the conscience of the world’ soundbite is factually wrong, as well as patronising and counter-productive in making aid seem like a waste of money.

2. The best way to spend aid is on areas where we know it works. That means encouraging the spread of relevant technologies and ideas. Interestingly, Kenny accepts that we don’t know how to create growth and so advises against it being a focal point for aid. Stick to vaccines and education, much of it delivered by the public sector. It’s a seductive message which reminds me of the speech by Mr and Mrs Gates in London last year, which had me sorely tempted to say ‘forget all that politics and power stuff, let’s just get the vaccines out there.’

Sample quote: ‘Abandoning an excess focus on income as a catch-all of development progress might, in the end, be the best way to achieve more rapid growth in the incomes of the poor.’ Not only that but he’s one of those economists who delights in ridiculing the excesses of his profession, from the ‘conga-line of formulae [required before a paper] is worthy of publication in the American Economic Review’ to their abiding belief that worldwide incomes will converge, despite all the evidence to the contrary. Wonder what his colleagues at the World Bank make of him downgrading the role of growth? Kenny’s a fellow at CGD, on sabbatical from the Bank – hope his job’s still there when he gets back.

As an unabashed polemic, he goes over the top in places (at one point I thought ‘Dr Pangloss, I presume?’ might be a better title), ignoring or dismissing evidence that runs against his views, and skating over holes in the argument. The biggest sleight of hand is on resource constraints (no mention of water scarcity, for example) and climate change, where he dismisses concerns as just another bit of misguided ‘neo-Malthusianism’. On the contrary, there is a pretty overwhelming scientific consensus that they represent a real game-changer – development is going to have to happen differently, North and South, in a resource-constrained world.

I’m caricaturing a bit here – Kenny stresses that the issue is consumption, not population: ‘A doubling of the incomes of the World’s poorest 650 million people would take the same resources as adding a little under one percent to the incomes of the World’s richest 650 million’. Hence his recipe for population control: ‘Sterilize the world’s billionaires first, then move on to a one-child policy for Switzerland, Luxembourg and the US’. But joking aside, he doesn’t pursue the issue.

[Malthus’ writing style is a revelation by the way – I wish development people wrote this well. Check this out:

‘The vices of mankind are active and able ministers of depopulation. They are the precursors in the great army of destruction; and often finish the dreadful work themselves. But should they fail in this war of extermination, sickly seasons, epidemics, pestilence, and plague, advance in terrific array, and sweep off their thousands and tens of thousands. Should success be still incomplete, gigantic inevitable famine stalks in the rear, and with one mighty blow levels the population with the food of the world.’]

And of course, there’s not much in the way of power and politics, which probably falls into both the ‘too messy and unpredictable’ and ‘too hard to measure’ baskets. That matters when it gets to recommendations for what health ministries and others should/shouldn’t do, as there is no discussion of which they might adopt/reject, and what to do about that.

His writing is good ‘pop economics’ – chatty, humorous and at times elegant, praising ‘the beautiful banality of health, learning and security’. He’s also an ace killer fact merchant and a voracious trawler of research and stats – definitely a gold mine for time-starved development advocates.

In passing, ‘Getting Better’ even provides an excellent run-through of the shifting (and frequently circular) tides of received wisdom on growth and development. The resulting picture reminds me strongly of the complexity literature – growth as an emergent property of a complex, tightly interconnected system, which means that it is essentially impossible to predict when and how it will occur (so similar policies in different countries at different times will have completely different outcomes). Sounds about right. Needless to say, Keynes got there first:

“We are faced at every turn with the problems of organic unity, of discreteness, of discontinuity—the whole is not equal to the sum of the parts, comparisons of quantity fail us, small changes produce large effects, and the assumptions of a uniform and homogeneous continuum are not satisfied.”

That was written in 1933 – does that make JMK the unwitting father of complexity theory? (Although there’s usually an Adam Smith quote to trump him.)

On technologies (broadly defined), he stresses the simple stuff: ‘vaccines, boiling water, civic organization, basic education’, and is damning about internet kiosks and other examples of excessive techno-whizzery. He points out that because of the spread of these, a better quality of life can be achieved at a lower level of economic output than in the past, and growth is not the main story in the improvements that do occur: ‘a country that saw absolutely no income growth over the entire century would still have experienced a near two thirds decline in infant mortality over [the last] hundred years.’

Getting Better distinguishes between process and product technologies: ‘Process technologies—institutions—are central to increasing GDP per capita. But the second set of technologies—ideas and inventions—have played the central role in improving health, education and security in developing countries to date.’ And process technologies are much harder to export and transplant, whereas ideas and simple products flow like water around the globe.

The result is that whereas growth is country specific, improvements in human development are largely accounted for by global ‘tides in the affairs of men’ – ideas and inventions etc. ‘All country-specific factors added together can account for only about one seventh of the average change in infant mortality across 68 countries for which we have data between 1950 and 2000. The other six sevenths of mortality change in these countries can be better accounted for by the global pattern of decline.’ In economist-speak, growth is largely endogenous, whereas human development exogenous.

This is not to say that nothing needs to be done – that influx of exogenous ideas and technologies has been propelled by an increased state role in health and education (of which Kenny approves) and legions of healthworkers and social entrepreneurs.

On health he goes further: the evidence suggests that primary care, health education and the spread of ideas (give babies with diarrhoea more to drink, not less) has far greater impact than building hospitals. Kenny thinks the key is boosting public demand for healthcare and education, not just building stuff. Despite record growth, health in China has deteriorated because the country has moved from ‘a system that once provided near-universal access to basic care to one that now provides limited coverage which extends to expensive, often unnecessary, medical techniques—all at seven times the price.’ Sounds a bit like the US…….

That spread of ideas and inventions can be accelerated by social marketing: ‘social marketing programs have shown strong results over the last thirty years in promoting the use of sugar-salt solutions to treat diarrhea, breastfeeding over bottle feeding and the use of contraceptives. A diarrheal disease control program which focused on social marketing in Egypt in the early 1980s saw the number of targeted mothers which recognized the danger of dehydration rising from 32 percent to 90 percent. In addition, within the first year of the marketing campaign, the number of mothers who used oral rehydration solution correctly increased from 25 to 60 percent.’

Finally, he has some neat ideas for how to speed up that flow of appropriate technologies and ideas that drives improvements in human welfare. Why not take the CGIAR global network of public agricultural research institutes and do the same for child mortality, or innovative forms of social marketing?  What about a Global Innovation Bank, which uses advance market commitments, prizes etc (as well as more traditional research funding) to push pro-poor R&D  – sounds like an argument for taking the Gates Foundation into (global) public ownership – globalization rather than nationalization?……

How to use research for influence on climate change and Arab meltdown; why aid donors are losing the plot; green growth v degrowth; Darth Vader on youtube: links I liked

The Washington-based Center for Global Development is great at spotting opportunities for influence, not least by dusting off and recycling previous work in response to events – a key, and often under-used, way of getting research into policy (academics are often too caught up with their next project, and NGOs with their next campaign, to spot opportunities in this way).

The Korean government wants an international ‘Climate Vulnerability Index’ to steer allocation of funding for adaptation? Here’s one the CGD’s David Wheeler made earlier. Any views?

Upheaval in the Arab world? Off the shelf comes CGD’s Arvind Subramanian’s proposals for turning oil revenues into direct cash transfers.

Plus a nice summary of the increasing divorce between geopolitical reality and the assumptions of Western aid donors from CGD’s Todd Moss.

Another of my favourite blogs, Political Climate disagrees with the de-growthers at New Economics Foundation (alas, much more politely than in this previous assault)

Political Climate also looks at how the UK is running to stand still on carbon emissions: ‘As energy efficiency increases, we use part of the savings we make to consume more energy, and overall the impacts of energy efficiency are much less than we think. Despite the fact that the UK economy is almost two and half times bigger than it was in 1970, the UK now uses almost exactly the same amount of energy in total as it did then.’

Any contradiction between those two posts? Discuss.

Finally, it may be entirely irrelevant (at least to international development), but because it’s Friday, a decidedly ‘ah, sweet’ VW ad [h/t Global Dashboard’s Alex Evans, who seems to spend even more time on youtube than I do]

It’s not the best Darth Vader youtube though – that honour belongs to the legendary lego version of Eddie Izzard’s Darth Vader in the Death Star canteen sketch. Click here to start the weekend  in a good mood.

Will the new UN Panel on Global Sustainability have an impact?

The diplomatic circus is full of high level commissions and panels on this and that, most of which deliberate, publish and sink without trace. But the UN’s new High-Level Panel on Global Sustainability, launched this week by Ban Ki-moon, may just be an exception. It certainly has a hell of a job description: ‘finding ways to lift people out of poverty while tackling climate change and ensuring that economic development is environmentally friendly’, according to the UN newswire.

The 21-member panel will be co-chaired by Finland’s President Tarja Halonen and South African President Jacob Zuma. It’s membership is heavily weighted towards current and former political leaders, with as far as I can see, only one private sector representative – the CEO of Research in Motion, the company that makes Blackberries. The only vaguely civil society member, Mexican environmentalist Julia Carabias, was also Secretary of the Environment. It’s also pretty light on academics, though presumably they can be drafted in later (full list of members here). That suggests that its job is more about influencing governments than coming up with any radical new insights, and highlights the welcome lack of overlap with the science-based work of the IPCC.

Over the next two years, the panel will work on a game plan for resolving the tensions between tackling climate change and economic growth (a subject dear to this blog’s heart), which they will present to delegates at the 2012 Earth Summit in Rio de Janeiro. Ban says he has ‘asked the Panel to think big’, so then the question becomes one familiar to anyone engaged in advocacy - how big? If it doesn’t go far enough in challenging received wisdom on the sanctity of growth, it won’t achieve anything, if it goes to the other extreme and starts preaching degrowth, it is unlikely to get a hearing. 
 
As if that wasn’t enough, officials also hope it will help resolve stalled international climate change negotiations and perhaps secure a replacement treaty to the Kyoto Protocol. Anything else you’d like them to do – harness fusion energy? Find a cure for cancer?

What’s really welcome here is the recognition that there is a big picture challenge on the nature of growth that has been sidelined as governments grapple with the aftermath of the global economic crisis. Someone has to lead the thinking on it – let’s hope the Global Sustainability Panel can do so.

Janos Pasztor, the head of Ban’s climate change support team, who will also manage the new panel’s administration, expects it to begin work around the U.N. General Assembly in New York this September. Ban expects a report from the panel to be completed by the end of 2011, in time for him to forward it to UNFCCC negotiations in South Africa  in December 2011 and then to the delegates gathering for the Earth Summit. Fingers crossed.

Can democracies kick the growth habit? A debate with Tim Jackson

Last month I spent an enjoyable hour debating zero growth with Tim Jackson in his back garden, for a slot in the July issue of New Internationalist magazine. Tim is the UK’s first Professor of Sustainable Development (at Surrey University) and author of the excellent Prosperity Without Growth (reviewed here).

We largely went over the ground covered in previous posts on his work: Total global carbon emissions = GDP multiplied by grams of carbon per $ of output. To reduce emissions you either improve the carbon efficiency of the economy (fewer grams per $, known as ‘decoupling’), or accept a reduction in GDP, or both.

But Tim reckons that decoupling growth from carbon emissions at the required speed isn’t going to happen, so if we are to avoid catastrophic climate change, the rich countries will have to move to a post-growth paradigm, not least in order to make room for poor countries to keep growing. The justification for the different approaches in rich v poor countries is that, once you get past a certain level of GDP, growth delivers diminishing returns in terms of well-being.

degrowth in action?

Tim argues that zero or negative growth is not possible in the current system, not least because firms compete to increase productivity, and finance and investment restlessly seek profits based on productivity, and as productivity rises, you have to grow to soak up the newly unemployed. Because of this, growth is like a bicycle – if it stops, you fall off (my analogy, not his). His answer is a broad brush shift away from the emphasis on consumption, and a new model of investment that recognizes environmental constraints on economic activity.

We kicked around some ideas for how this might happen, drawing analogies with other parts of the economy. Carbon accounting systems would have to be developed in a way similar to financial accounting; firms would be required to manage climate risk, for example paying higher taxes on emissions over a certain level.

But what struck me most was when we got onto the political system needed to deliver what is at least in part a war economy, with a centrally agreed figure for total carbon emissions (and usage of other finite environmental goods). Such an economy would require a combination of carbon markets  and hard and soft regulation (eg rationing, prohibiting some kinds of technology, or debt-driven industrial expansion; penalties for excess carbon emissions; mandatory carbon emissions accounting).

Politics becomes far harder in a zero or negative growth economy. In a growing economy, everyone can have a larger slice of pie; in a static economy your gain is someone else’s loss and distributive conflicts are bound to rise. Tim sees growth as necessary for political as well as economic stability under the current system. No wonder that politicians routinely dismiss any talk of limiting growth.

Collective action problems would also abound – if one firm or country decided to go for zero growth, for example by stopping investing in new technologies, but other firms continued to do so, they would rapidly gain a competitive edge and push the others out of business. At an international level you would require enforceable coordination mechanisms to a far higher degree than currently exists – something close to global government, in fact.

Which leaves me with the nagging question, ‘are democracy and individual rights compatible with the ‘managed contraction’ of the economy?’ I was left thinking that the systemic obstacles to zero growth are at least as great as those preventing a drastic acceleration of technologies to decouple production from emissions, e.g. through the launch of 20 Manhattan Projects. And both would require a far higher centralization of power.

My conclusion? A successful long-term containment of climate change will come through a combination of partial decoupling, perhaps driven by big climate shocks, and maybe combined with fragmented shifts to a post-growth paradigm, but it will be very messy indeed and may not look very democratic.

In the end we agreed on an unlikely combination of Sherlock Holmes and Antonio Gramsci – ‘When you’ve eliminated the impossible, then whatever’s left, however improbable, has to be the truth’, and ‘I’m a pessimist because of intelligence, but an optimist because of will’.
 
And as always, it’s far easier to pick holes in other people’s arguments than provide solutions of your own, but it’s important to think through the politics of these kind of big new ideas. I would dearly love to be convinced that zero growth is both achievable and compatible with human rights – over to you.

How important is growth to improvements in health and education? Not at all, says a new UN paper

The first batch of background papers to this year’s big Human Development Report has just been published. The one that caught my eye is by George Gray Molina and Mark Purser. “Human Development Trends since 1970: A Social Convergence Story” crunches a big dataset of Human Development Indicator (HDI) numbers and comes up with some pretty heretical conclusions. It finds that that the links between economic growth and improvements in health, education and life expectancy are not nearly as clear as people often assume (in fact the correlation between economic growth and changes in the non-income components of human development over their period of study is nearly zero). So there’s more to life (and development) than growth – like state action, for example. Here’s the highlights:

“We consider whether trends in human development are different from trends in economic growth. To answer these questions, we assemble a 111 country data set from 1970 to 2005 that makes HDI changes comparable both within and between countries.”

Findings: “There is evidence of poorer countries catching-up with rich countries, particularly with respect to life-expectancy and literacy. In addition, we find that the income and non-income components of HDI change are uncorrelated, thus undermining the common view that they occur jointly.

Only one country (Zambia) experiences a reversal in its human development level over the 35-year period; 110 countries experience advances. Achievements are faster for the pre- 1990 period, and are faster in Asia and the Middle East throughout the whole period. Progress on HDI achievements tends to be literacy-led, while progress in Asia tends to be life-expectancy-led. Improvements in Latin America and Eastern Europe are mixed. These results contrast with the conventional portrait of development progress, largely inferred from the economic growth literature.

We also contrast the top 10 performers in HDI with the top 10 performers for GDP per capita. The exercise highlights the differences between growth-led and HDI-led development. The most rapid improvements in life expectancy and literacy are not occurring in the fastest growing economies of the world. They are occurring in a subset of lower and middle income countries in Asia, the Middle East and northern Africa.

Three results emerge from the second part of the paper, focusing on determinants of HDI trends. First, we find evidence of convergence of human development over time. Does “income matter” as a driver of human development? We find that income is not a significant predictor of life expectancy… the drivers of improvements in health and education differ from the forces that lead to income growth.

Although correlated, we do not find evidence to suggest that human development trends can be explained by factors associated with economic growth…. social factors seem to be driving the aggregate human development story.”

I must admit, I’m a bit baffled by this, given the big literature that says growth is crucial to poverty reduction, and poverty reduction to improvements in health and education – anyone care to try and explain the discrepancy?

[update: seems like I missed another very important finding from the paper - 'changes in gender roles --proxied by female literacy and fertility-- are the best predictors of accelerations in life expectancy and literacy achievement' See comments from John Magrath and George Gray Molina]

Other background papers in this batch are:

Human Development Concepts

• Alkire, Sabina, “Human Development: Definitions, Critiques, and Related Concepts”

• Neumayer, Eric, “Human Development and Sustainability”

HD Data and Trends

• Pineda, José and Francisco Rodríguez, “Curse or Blessing? Natural Resources and Human Development”

HD and Governance

• Pritchett, Lant, “Birth Satisfaction Units (BSU): Measuring Cross-National Differences in Human Well-Being”

• Jayadev, Arjun, “Global Governance and Human Development: Promoting Democratic Accountability and Institutional Experimentation”

• Walton, Michael, “Capitalism, the state, and the underlying drivers of human development”

HD in Europe

• Stewart, Kitty, “Human Development in Europe”

HD in Africa

• Fosu, Augustin Kwasi and Germano Mwabu, “Human Development in Africa”

For  more on the Human Development Report - data bases, blogs etc go here

well-being v ‘growth with equity’: what are the pros and cons?

The process of evolution takes place in three stages: random mutation, selection and replication. It’s not a bad model for how new ideas emerge within a large organization like Oxfam. Every week seems to bring a new idea swirling around in conversations and meetings (mutation). Most of those will fade away but a small percentage will get ‘traction’ (horrible management-speak word, sorry) – that’s the selection part. Eventually, the survivors will find their way into the machinery of planning, allocation of staff and money, work plans etc etc – in other words, replication.

Part of my job is to contribute to the random mutation by chucking in new ideas from the outside world and getting into conversations about them. This week it was well-being, which I’ve been blogging on at intervals for some time, and it led to an interesting discussion on the pros and cons of adopting well-being as an organizing principle for development.

Strengths:
Well-being would reconnect us to the lived experiences of poor people. Some aspects of well-being – things like freedom from shame, humiliation and anxiety, may seem fuzzy to economists and the ‘measurement community’, but they are instantly recognizable to poor people themselves, and anyone who has spent time in poor communities. I also find it much more positive, human and engaging than the rather arid and legalistic language of rights and the ‘rights-based approach’, which can sometimes sound like little more than an endless series of complaints, and yet well-being covers much of the same ground as the rights framework.

Well-being neatly sidesteps the polarized pro- v anti- growth debate (see my scepticism on the degrowth movement). It relegates growth to its proper position as a possible means to an end (enhanced well-being), which functions well in some circumstances and not in others. For example, growth appears to increase general life satisfaction in poor countries, but not in rich ones (see graph).

The official world of statistics and measurement is forging ahead on this issue, developing indicators of well-being and quality of life (see my reports from the recent OECD conference on this). We need to understand and if possible shape that process.

Finally, it moves us on from the old dichotomies of North-South, core-periphery, developed-developing etc. Enhanced well-being is a universal goal, albeit achieved in different ways in different times and places.

So what could be the downsides?
Firstly I worry that the concept is still too broad and fluffy, meaning all things to all people. Let it loose in a large organization and soon everyone would just be working on their own pet subject, but calling it well-being. What would you stop doing if well-being became your guiding principle?

That perception of fluffiness could also see us branded as mere ‘lifestyle activists’ divorced from the hard material realities of development and, in particular, government. Many official institutions are still run or heavily influenced by the orthodox economics of growth, returns on investment, incomes and assets. Those all form important parts of the pursuit of well-being, but the concept itself has less resonance in those circles than more traditional frameworks such as poverty reduction.

Or growth-with-equity. For at least the last ten years, ‘growth with equity’ has summed up what Oxfam seeks from international development. Environmental constraints are leading many to question the ‘growth’ bit – quality v quantity, prioritising growth in poor countries etc, but what about the equity part? At first sight, well-being seems a step backwards on social and economic justice, and downplays the genuine conflicts between rich and poor over resources and power – development is not just about win-wins, sometimes it involves a fight and someone (hopefully not the poor and vulnerable) losing. ‘Wellbeing with equity’ anyone?

Which leads me to my final concern – what would our partners in developing countries make of it? Would they recognize it as a more accurate portrayal of their concerns and struggles, or think ‘oh no, Oxfam’s gone northern hippy and lost its edge (and the plot)’?

Any thoughts?

Degrowth – is it useful or feasible?

Thought I’d check out what this ‘degrowth’ idea is about so went to a public meeting organized by a couple of new economics thinktanks (CEECEC and nef). It was a combination of seriously old school (standing room only; two and a half hours of speeches) and new (the bar was open throughout the event; death by powerpoint).

‘Degrowth’ is the clunky translation of ‘decroissance’, a movement founded by French

Serge Latouche

economist Serge Latouche, whose name was invoked in reverential tones all night. It’s big in France, Italy and Spain (its second major international conference takes place in Barcelona in March) but has yet to catch on in the UK. Based on last night’s presentations, I think it’s likely to stay that way. Speakers struggled to define what degrowth actually means, merely citing a plethora of economic ideas and schools of thought. As for lowly anglo-saxon concerns like ‘what does this mean for my pension/job/house/children?’, forget it.

Instead, the speakers largely replicated the practices of environmentalists and economists everywhere, presenting a series of ‘if I ruled the world’ fantasies which, however clever, did not connect with everyday issues of power or public opinion. Anyone who disagreed with degrowth was either a knave, a fool or both.

I had more serious concerns than the tone of the event, though. Stephen Spratt of new economics foundation blew a rather large hole in the idea when he argued ‘we don’t know how a shrinking economy would work’. It’s all very well to argue that there are objective limits to growth (as I have done elsewhere on this blog), but what would a world of shrinking GDP actually look like? Episodes of ‘deleveraging’ tend to be chaotic and bloody – collapsing companies, rising unemployment and political turmoil – not the carefully managed downsizing envisaged by degrowth.

There are hard economic reasons for that chaos. ‘De-growth is unstable’ as another speaker, the excellent Tim Jackson, author of ‘Prosperity without Growth’, explained. In the modern economy, labour productivity holds the key to success, driven by competition. That means producing more with fewer people. When you do that, either you grow, or unemployment rises. If one firm decides to pursue ‘degrowth’, its competitors will rapidly put it out of business. It makes the economy sound like a bicycle – if you don’t keep moving forward, you fall off.

‘We’re locked into an economic structure that forces us into growth’, Tim concluded, seeing this basic flaw as the reason for the ‘visceral fear’ he perceives in policy makers when he raises limits to growth with them. They know that shrinking economies jeopardise social and political stability.

What to do? Tim argues that yes, everything has to change before anything can change, but that is possible. Institutions and values are always evolving, and have to do so, if we are to escape from the growth trap. He tried to put meat on the bones of this proposition in Prosperity Without Growth, suggesting ‘12 steps to a sustainable economy’, based on changing our economics and investment patterns, investing in people and redistribution, tackling consumerism and respecting ecological boundaries.

But nothing he said seemed to deal with the bicycle problem. In an effort to end the marathon on an upbeat note, he put forward an essentially voluntarist position that ‘desire and capacity to work for change’ are the key. They are necessary undoubtedly, but so is power analysis, understanding where opponents are coming from and how they can be influenced. To worry about the realities of power is not to be defeatist, it is to be serious about change. But those skills seemed pretty well absent in the room, though at least Tim urged people not to portray opponents of degrowth as ‘cardboard cutouts’, but people with genuine reasons for scepticism.

And there was very little interest in developing countries. The occasional bit of misconceived romanticism, arguing that poor communities are all based on reciprocity and love and have no need of base material things (oh dear), and some nods towards redistribution, but nothing about the possibility of rationing growth to enable it to help poor countries, as I have discussed previously. And lots of comfort for the localizers and food miles people who are quite happy to deprive Africa of export markets. Growth was bad, end of story. Sure growth is a dirty and inefficient way to reduce poverty, but at a national or international scale, we know of no alternatives that have actually worked (rather than been dreamt up in academic common rooms).

Oxfam’s ABC to campaigning says that success requires a problem, a solution and a villain. Degrowth has 2 out of 3 – the problem and the villain – but the solution looks very unconvincing right now. As the word itself demonstrates, it is clear what it is against, but not what it is for and still less, how to get there.

So (at least on on the basis of one evening meeting – I haven’t read Latouche yet), it felt like there’s a long way to go before ‘degrowth’ or anything like it looks like a credible proposition. For starters, can any economists out there help with the bicycle problem – is it real or imagined and if real, how can it be got round?

Further Reading: ‘Farewell to Growth’, Serge Latouche; Prosperity without Growth, Tim Jackson; The Great Transition, nef