This is a topic that reaches back to William Easterly’s book, but can be loosely connected to what we covered last night. Maybe it will help in preparation for our (optional) final. Easterly’s book mentioned (essentially discredited) Solow’s model on exogenous growth, which claims the diffusion of technology fuels this exogenous growth. As we discussed, the evidence doesn’t match up with this theory and convergence has not been the case. I recently came across this memo released by the Center for Global Development that applies Solow’s model in a different way: http://www.cgdev.org/content/publications/detail/1424863
In the memo, development economist Charles Kenny suggests that Solow’s model could be adapted to focus on the “diffusion of ‘invented’ technologies and ideas central to the quality of life” rather than economic growth measured by income. This concept grabbed my attention because I think it kind of connects to our discussions on culture-driven development. He mentions that what we’ve seen is global “quality-of-life” convergence, not income or technology convergence. By investing and adding value to things like health and education, we’ve seen important changes in measures like infant mortality rates and school enrollment.
It is not a purely cultural argument, but he definitely emphasizes how these values have been crossing borders. He claims that, while aid to change/strengthen institutions is important, it may be more effective to target quality-of-life improvements that do not initially require income growth
Maybe it’s an idea that even Easterly would sign onto! Maybe. What do you guys think of it?
As my research is focused on sustainable development and weighing environmental concerns in light of development processes in Latin America, I wanted to do a quick post to gauge thoughts on the topic. With global warming causing palpable changes in our environment that will have dire consequences for people, what role should stewardship for the environment play when working to develop a country? For example, Pakistan is a rapidly growing country that will soon hold a huge percentage of the world’s population, but it is already water stressed and global warming will soon exacerbate that problem, making water conservation in Pakistan a critical priority in upcoming years. Typically, I think, care for the environment is eschewed in favor of economic development, even if it comes at a price for the environment. Do you think this is the right tactic? How should one go about balancing the two concerns? How high of a priority should environmental stewardship be in developing countries? I’m interested to know you guys’s thoughts.
Here is an article about how Pakistan’s water crisis will strain both the population and the economy, for your reading pleasure! http://tribune.com.pk/story/231905/pakistans-water-crisis/
I ran across this piece of forecasting that was done by HSBC Global Research.
The forecasting is done based on a model provided by Dr. Robert Barro. Interestingly, however, the HSBC team modified the model specifically to lessen the impact of education on economic growth (see Appendix). I thought this was an interesting example of how corporations look at global economic development and how they package their projections for their customers.
As we are going to be discussing poverty in the U.S. next week I thought I would pass along a bit of information about a program called Southern Partners Fund (http://spfund.org/). This is a non-profit that funds community projects aimed at equality promotion in the rural south through the form of grants to local community groups. My next-door neighbour is heavily involved with the program so if anyone is interested in income inequality in our back yard and has any interesting in getting involved in some way let me know or check out the site and I can arrange to set up a meeting for you.
After our discussion last week, I wanted to learn more about the causes of income inequality in the United States, especially post-1980 with the “Great Divergence.” I have heard a lot about the effects of the divergence and a fair number of prognostications about how our society is on a downward slope because of it, with some articles going so far as to say that income inequality is one of the primary precursors to government overthrow. I wanted to not only find out more about the factors that have contributed to the Great Divergence, but also how these same factors might affect the global economy and how the factors that have worked to keep down the poor in America might also work to prevent underdeveloped countries from reaching that bottom rung on the ladder to development. There are several hypotheses floating around about what caused the divergence and here are some of the main ones:
- Skill-biased technological change
- Immigration of less-skilled workers
- Policy and politics
The idea that globalization has contributed to income inequality in the United States is particularly compelling given our recent discussions on how globalization is also contributing to global inequality between underdeveloped and developed countries. But Paul Krugman says that it isn’t an adequate explanation for the phenomenon occurring in the United States: “Globalization can explain part of the relative decline in blue-collar wages, but it can’t explain the 2,500 percent rise in C.E.O. incomes.” Another interesting idea is that immigration would contribute. Many of the ideas proposed reflect the increasing globalization we’ve seen in recent decades, like talent moving across borders and the influx of unskilled workers from one country to another. However, immigration has generally been found to be an insufficient answer to why income inequality has risen so dramatically in the U.S. recently. Undoubtedly, it’s caused by a combination of several factors. For example, the combination of an increase in technology that requires skilled workers and the failure of the American education system to provide the skilled workers necessary is causing the demand for educated workers to go up and is thus increasing that smaller percentage’s salaries. There has also recently been a shift in both the political system and corporate culture that makes it easier for CEOs to earn more. The advent of lobbying and the decline in unions has contributed to the extraordinary increase we’ve seen in top earners’ salaries in recent years.
While the Great Divergence was brought on by a number of factors, I think that the ones brought up as a result of globalization, like immigration and globalization in general, are less satisfying. While these factors, like the influx of unskilled workers, might play a role, I think the answer lies somewhere in our unique system of government. There are other countries experiencing similar phenomena as a result of globalization, but they are not seeing the same kind of divergence. Our system, with its extensive reliance on lobbying and personal interest, has made it so that Wall St. executives had almost a free hand in running risks with the American economy. I think this is certainly another strong contributing factor. Because I think our unique system and dynamic is partially to blame, there is a limited ability to extrapolate the causes to explain global inequality, but it’s certainly interesting to consider which factors might play a role in both scenarios and, more importantly, how we can improve income inequality here and globally.
I am interested to know whether you see more comparisons than I do between the problems facing the United States and the world in terms of inequality. What might be the main lessons to take from the American experience and apply to the global sphere? Thoughts?
Because I unfortunately had to leave our last class early, I wanted to contribute to the discussion that you all had after I left. Forgive me if I reiterate some of the same things said during class!
Obviously, I think the role of government is one of the major factors that contributes to the economic success of developing nations. Much of our discussion in class has revolved around how to avoid the common corruption pitfall that plagues developing countries and how economic policies are made ineffectual if paired with governmental incompetence and corruption. In this way, I think it’s incumbent upon the government to complement economic policies with supporting governmental policies. More specifically, I think it’s almost always necessary for the governments of developing countries to implement policies that promote economic growth instead of leaving it to the invisible hand.
In his book, Globalization and Its Discontents, Joseph Stiglitz sums this up nicely:
Behind the free market ideology there is a model, often attributed to Adam Smith, which argues that market forces–the profit motive–drive the economy to efficient outcomes as if by an invisible hand. One of the great achievements of modern economics is to show the sense in which, and the conditions under which, Smith’s conclusion is correct. It turns out that these conditions are highly restrictive. Indeed, more recent advances in economic theory –ironically occurring precisely during the period of the most relentless pursuit of the Washington Consensus policies–have shown that whenever information is imperfect and markets incomplete, which is to say always, and especially in developing countries, then the invisible hand works most imperfectly. Significantly, there are desirable government interventions which, in principle, can improve upon the efficiency of the market. These restrictions on the conditions under which markets result in efficiency are important–many of the key activities of government can be understood as responses to the resulting market failures.
I agree that the conditions for the invisible hand to work are restrictive and ought to be bolstered with government participation in the markets. South Korea has been successful in implementing these kinds of policies and there are several countries trying to follow that model, including Bangladesh. Do you all agree that a country like Bangladesh ought to follow this model and create governmental economic policies? In Bangladesh, what do you think ought to be the role of the invisible hand?
I am surprised that we have not had a discussion in class about the recent explosion of attention towards the Kony 2012 campaign being run by the group Invisible Children. For those who have yet to see the video, it is essentially a call to put pressure on the international community, the United States in particular, to arrest the African warlord Joseph Kony. Kony, the leader of the Lord’s Resistance Army, has been under indictment by the International Criminal Court since 2005 for his long record of human rights abuses in central Africa. Among his many human’s rights abuses, Kony is well known for kidnaping children to serve in his army. With that said, I have a few questions to ask everyone about the Kony 2012 campaign, and further the methods used by Invisible Children to bring attention to this issue.
First, do you guys think removing individual warlords will really do much to solve the many problems that face central Africa? Second, Is using the Internet the most effective way to gain support and awareness for humans rights or development issues? Third, is a simplistic and emotional appeal approach the best way to present such a complex situation, and is this approach appropriately “educating” the people who watch this video? Lastly, do you think Invisible Children will be successful in accomplishing their goal to get Kony arrested? I am interested to hear your thoughts on this video.
I just thought I’d bring up a case that I found interesting and see what you all think about it.
Is anyone familiar with Greg Mortenson? Not sure how widely spread his story is but within the outdoor community he’s pretty well known I’m sure some of you have heard of or read his book Three Cups of Tea. Well I read that book a few years back and it really blew me away. Essentially, as the story goes this climbing bum (Greg) almost died trying to climb K2 and was nursed back to health in a local village in the Karakorum region of Pakistan. While there he made a promise to help build a school for that village, which he ended up doing. He then went on to build hundreds of schools around Pakistan and Afghanistan. His major development goal/philosophy is to provide children especially girls with unbiased education and this will help elevate many of the troubles communities in this part of the world encounters (there’s a laundry list of these troubles as we all know from Sen, Easterly, and Sachs). Anyways the book reads like a novel, has really power stories in it, and captured the imagination of a lot of the West. With which the charity Greg Mortenson started has been able to raise huge amounts of money.
The crusher is that in the aftermath of the meteoric rise in fame this success story, there are now stories coming out that argue this whole this is essentially a sham. One of the leading authors in the outdoor world, Jon Krakauer (who you may know from Into Thin Air and Into the Wild) wrote a scathing book about the situation called Three Cups of Deceit. Also, 60 minutes has done piece about the whole thing. The controversy is interesting in itself but I bring it up for two reasons. Firstly, I think it really shows how complicated, ugly, and political the field of development can be even if all the bureaucracy and the politics that accompany government involvement is excluded from the process. Secondly, I guess I was wondering if anyone had any thoughts on this particular case.
Personally, I feel like it is a huge shame. Mostly, because the people that lose out the most are the people who really need help, but also when things like this happen it really makes potential donors skeptical of giving. This has been exasperated in this case by the level of media attention that this case has been given. All the big names have run stories on it, which really does make things worse. I guess the question that I have is how do organizations like Sachs’ Eatch Institute, whose entire development rests on enormous generosity of third party donors, hope to convince these donotes that they are legitimate organizations committed to the work they talk about. This task of breaking through skepticism seems extremely difficult. But even if that is successful an organization also has to convince donors that their efforts will create long-term sustainable growth, and as we all know the field of development doesn’t have a great track record in this area either. Therefore it seems like a history of bad faith actors and ill-thought out plans are conspiring against the would-be developmental saviors.
What do you guys think? I’ve being a bit cynical here to hopefully prompt some optimistic rebuttals.
Development is about achieving goals which differ across states and regions however they all come down to a basic idea which is quality of life. Development is not about economic growth alone but more about what one does with that growth to improve peoples’ quality of life which might include improving access to education, clean water, food, healthcare etc.