↳ Development

May 19th, 2020

↳ Development

Plate Study

STABLE SHOCK

Remittances across contexts

Among the many corona-induced shocks rippling through the global economy is the crash in remittance payments to developing countries. The World Bank predicts that remittance flows will fall 20% this year—a decline of $100b—largely as a result of shutdowns and wage losses in the global north. The politics of remittances are complex: the scholarly literature both touts the positive development effects of countercyclical cash inflows, and questions the effects of a system that supports consumption at the expense of longer-term economic development.

In a fascinating study on remittances from GCC countries—where migrant workers tend to have few rights while making up a large share of the population—FAISAL Z. AHMED looks at the political effects of remittance economies.

"Using duration models of government turnover for a sample of 97 countries between 1975 and 2004, this article demonstrates that the combination of aid and remittance inflows can empower governments in autocracies to survive longer. The link between the effects of foreign aid and remittances on government survival hinges on the fact that these inflows of money constitute forms of unearned foreign income that a government can potentially exploit for nefarious purposes. This is achieved via two channels. In the first, governments direct some foreign aid to finance patronage goods (income effect). In the second, governments respond to shocks in unearned and largely untaxable household income (i.e., remittances) by diverting expenditures from the provision of welfare goods in favor of patronage goods (substitution effect). My findings suggest that domestic political institutions (and the incentives they generate for governments) mediate the impact of aid and remittance inflows on the quality of governance and the endurance of governments in autocracies."

Link to the paper.

  • A 2019 analysis from the Financial Times provides an excellent overview of remittances to emerging market economies. Link. Part of a FT series on remittances, including case studies on Zimbabwe and Nepal, and reporting on the nations attempts to issue "diaspora bonds" to attract the earnings of expatriate workers. Link to the series.
  • A paper by Muhammed Tariq Majeed looks at the effects of remittances on poverty across 65 countries from 1970-2008. Link. Relatedly, a 2015 paper by Phanindra Wunnava et al looks at the impact of financial liberalization on remittances across 84 countries from 1986-2005, and finds mixed results: increased economic freedom in the financial sector has a positive impact, while improved robustness of financial markets has a negative and lagged effect. Link. h/t Alison Oh
  • A 2011 paper by Rui Esteves and David Khoudour-Castéras examines remittances and capital flows in the European periphery from 1870-1913. Link.
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April 21st, 2020

Group Formation

ADVANCE FORMATION

Comparative development and social policy

Among the diverse local and national policy responses undertaken to combat the pandemic in recent months, Kerala's has been notable. Within the broader context of Indian economic development, Kerala's government has a tradition of successful redistributive development policies, sometimes referred to as the Kerala model.

In a 2005 article, MANALI DESAI traces Kerala's unique post-independence record of welfare provision to its experience under indirect British rule. By comparing the trajectory of its policy successes to those of West Bengal, a state with a similar electoral history, Desai strikes a distinctive balance between path dependency and contingency, arguing that "the form and content of welfare policies are shaped by the exigencies of state formation, but political struggles are the decisive determining factors of the former."

From the article:

"In the somewhat meager annals of comparable state action in third world societies, Kerala appears as a clear exception. Despite fierce party competition, a church-landlord coalition, and the imposition of presidents’ rule on two different occasions (in 1959 and 1965), the state has seen an array of policies aimed at redistributing land, and providing education, pension plans, minimum wage legislation, and housing for the poor. There have been few serious attempts at understanding these state actions as a form of historical agency. In particular, an issue that is consistently overlooked is the fact that Kerala’s post-independence policy regime was preceded by significant welfare expansion in the nineteenth century in its two southern princely states of Travancore and Cochin. In part under pressure from the British administration, both monarchies undertook significant land reforms and expanded education and health care. While reforms by princely states were not that unusual in the colonial era, the scale and scope of Kerala’s surpassed its peers.

The extreme nature of the caste hierarchy in Kerala, perhaps the most oppressive across India, meant that Christian missionaries not only found a home in Kerala but fed and even stimulated caste insurgency. In particular, one crucial effect of British rule and Protestant missionary activity was the increased porosity of the state to social (lower caste) demands. Both dimensions of colonial power (colonial power as well as social resistance to this power) destroyed status privileges, primarily those based on caste, to a larger degree than found elsewhere in British India. Early welfare policies in Kerala were implemented in a dependent colonial context and aimed at warding off annexation by the British, but their unintended consequences were to stimulate what they were precisely designed to avoid—radical caste and class movements."

Link to the piece.

  • An edited volume from 2000 looks at the history of Kerala's social policies. Link. (A 1991 exchange in the NYRB between Barbara H. Chasin and Richard W. Franke, and Amartya Sen discusses the nature of Kerala's "exceptionalism." Link.)
  • "This article addresses the welfare state in a global historical context. In the new societies of industrial capitalism, two powerful and opposite interests converged in generating public social policies. It uses the five-part model to ask what lessons, if any, it has for the likely emergence of welfare states in the developing world. It also recognizes the immense variety within the 'global South' and distinguishes the distinctive patterns of risk management within it." A 2010 paper by Ian Gough and Göran Therborn. Link. (Ungated version here.)
  • A 2007 paper by Nita Rudra looks at the applicability of Gøsta Esping-Andersen's welfare state typology in the developing context. Link. And Stephen Haggard and Robert Kaufman's 2009 book provides a comparative account of welfare state development across Latin America, East Asia, and Eastern Europe. Link.
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March 6th, 2020

Phenomenal Works: Nathan Lane

History, empirics, and industrial policy

Nathan Lane is an economist working on political economy, development, and economic history. Assistant Professor at Monash University, he is the co-founder of sodalabs.io, an interdisciplinary research hub for data-driven work in the social sciences.

Lane's research has focused on comparative development, in particular on state-led development patterns, including work on industrial policy in South Korea, the way historical states shape development and political action, and an indispensable look at the challenges of studying industrial policy and how new empirical strategies can overcome them.

Nathan blogs here, and tweets here. Below, his recommendations for Phenomenal Works.

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January 27th, 2020

Preparation

PATTERN MANAGE

Re-thinking industrial policy

Deindustrialization is a global phenomenon taking place more rapidly in middle- income countries than in high-income ones. Despite the global decline of manufacturing employment, "industrial policy" is increasingly salient in research and policy debates. But deindustrialization poses significant challenges for industrial strategy—particularly as it relates to direct state investment in productive capacity.

In a new article, "Industrial Policy in the 21st Century," Ha-Joon Chang and Antonio Andreoni lay the groundwork for a new theory of industrial policy:

"Since the 18th century, the debate surrounding industrial policy has been one of the most important in the political economy of development. We discuss a number of issues which cannot be accommodated within the neoclassical framework and which are also often neglected by evolutionary and structuralist contributions—namely, commitment under uncertainty, learning in production, macroeconomic management, and conflict management. We also address three new challenges for industrial policy makers in a changing world: the global value chain, the increasing financialization of the world economy, and changes in the rules of the global economic system.

Despite differences across countries in terms of their stages and levels of industrialization, their macroeconomic regimes and their political economy settings, the three sets of neglected issues we focus on are and will remain of paramount importance. The need to address long-term grand challenges like climate change calls for massive and coordinated investments in energy systems, production practices and mobility. The achievement of these global transformations still depends on micro-level structural changes in productive organizations and government interventions in creating new worlds of production as well as managing industrial and social restructuring."

Link to the piece.

  • "Industrial policy can no longer be about industry or manufacturing per se. As the world economy turns increasingly towards services, it is clear that we will need a conception of industrial policy that addresses the need to nurture and develop modern economic activities more broadly, including but not limited to manufacturing." Karl Aiginger and Dani Rodrik's introduction to the special issue of Industry, Competition, and Trade. Link. In the same issue, Nathan Lane presents a "New Empirics of Industrial Policy." Link.
  • In Industrial and Corporate Change, Mario Pianta, Matteo Lucchese, and Leopoldo Nascia assess the post-crisis industrial policies of the European Union and examine the potential for more active public investment policies in the years to come. Link.
  • John Waterbury's extensive comparison between the industrial strategies of Nasser and Sadat. Link. From 1993, Hajoon Chang on the importance of state intervention in the "political economy of industrial policy in South Korea." Link.
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January 9th, 2020

Phenomenal Works: Alice Evans

Four books and papers on the 'despondency trap'

Alice Evans is a Lecturer in the Social Science of International Development at King's College London, and a Faculty Associate at Harvard's Kennedy School. She is writing a book on “The Great Gender Divergence”, which explores why European countries rapidly drew closer to gender parity over the twentieth century. This builds on a decade’s research on how societies come to support gender equality, and why rates of progress vary across the world. Evans has also studied how to improve workers’ rights in global supply chains: demonstrating synergies between export incentives and domestic labor movements; as well as corporate accountability. She runs a podcast, Rocking Our Priors, which is an excellent source of engaging and rigorous interviews with social scientists, and she tweets here. Below, her selections for Phenomenal Works.

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November 22nd, 2019

Development and Displacement

The effects of big development initiatives

Infrastructure lies at the heart of development. From transportation and telecommunication networks to electrical grids and water pipelines, large-scale infrastructure projects play a pivotal role in the global development landscape. (In 2015, infrastructure spending totaled $9.5 trillion or 14% of global GDP). Infrastructure development also holds political significance.

Both historically and in the present, state investment in resource generation in the Global South has been a cornerstone of national movements for economic independence. But while infrastructure development projects generate jobs and drive long-term growth, the economic gains are often unevenly distributed. The burden of development weighs heavily on individuals and communities who are forced to leave their homes to make way for these large-scale projects.

In the development literature, this phenomenon is referred to as development-induced displacement and resettlement (DIDR)—individuals and communities being forced to leave their place of residence and abandon their land due to development initiatives. Some accounts estimate that 200 million people were displaced by development projects over the last two decades of the 20th century, and the current scale of DIDR is estimated to be around 15 million people per year. People displaced by development projects fall into the broader category of Internally Displaced Persons (IDPs)—a United Nations designation for "persons or groups of persons who have been forced or obliged to flee or to leave their homes or places of habitual residence as a result of armed conflict, internal strife, and habitual violations of human rights, as well as natural or man-made disasters involving one or more of these elements, and who have not crossed an internationally recognized state border." In the case of DIDR, resettlement—if any occurs—is often inadequate, leaving migrants impoverished and disempowered. Unlike refugees that cross international borders and are under the protection of international law, internally-displaced persons remain within the jurisdiction of their own government—vulnerable to the same lack of protection that caused their displacement. Urban, transportation, and water supply projects account for the majority of displacements—between 1986 and 1993, 80 to 90 million people were involuntarily displaced by these three types of infrastructure development projects alone.

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September 3rd, 2019

Eye Machine

IMPLICIT FAVOR

The failures of research on fin-tech and poverty alleviation

Last week, we considered how social and political standards can pressure climate scientists to under-report their findings, introducing an underestimation bias into published climate research. In a recent thread, Nicholas Loubere examines the development buzz around mobile money, showing how similar factors can serve to exaggerate the findings of academic studies.

In a new article quoted in the thread, MILFORD BATEMAN, MAREN DUVENDACK, and NICHOLAS LOUBERE contest a much cited study on the poverty alleviating effects of mobile money platforms like M-Pesa. The criticism rests largely on grounds of omission: the study, they argue, ignores the closure of nearly half of microenterprises opened with M-Pesa, the jobs and incomes lost with the introduction of new businesses into fragile markets, the burgeoning debt accrued through digital loans, the overwhelmingly foreign ownership of M-Pesa and its profits, and the wealthy networks composing its primary users. Methodologically, it had no control group, used a small sample size, and overlooked the potential for reverse causality.

Why was a potentially flawed study so well regarded? According to Bateman, Duvendack, and Loubre, it's in part because its results told researchers and policymakers what they wanted to hear. From the article:

"The rapid popularization of fin-tech as a developmental solution is premised on the continued prominence of microcredit and the broader concept of financial inclusion. The microcredit movement was established and validated in the 1980s on overblown and ultimately false claims that providing small loans to groups of poor women was a panacea for global poverty reduction—claims that were especially associated with Dr Muhammad Yunus. Empirical justification came from an impact evaluation undertaken in Bangladesh by then World Bank economists Mark Pitt and Shahidur Khandker, which claimed that microcredit programs had significant beneficial results for impoverished female clients. For many years, Muhammad Yunus used Pitt and Khandker’s findings to successfully ‘sell’ the microcredit model to the international development community, generating a consensus that the microcredit model was the most effective way to efficiently provide enormous benefits to the global poor."

Link to the article, and link to a blogpost in which the authors outline their key findings.

  • "Kenya’s new experience of debt reveals a novel, digitized form of slow violence that operates not so much through negotiated social relations, nor the threat of state enforcement, as through the accumulation of data, the commodification of reputation, and the instrumentalization of social ties." Kevin P. Donovan and Emma Park report on the consequences of mobile debt for poor borrowers. Link.
  • In an article from 2017, Loubere "examines examples of exploitation, fraud, instability, and extraction related to expanded digital financial coverage in contemporary China." Link. At Bloomberg, David Malingha compares credit markets in Asia with those of sub-Saharan Africa. Link.
  • "This article claims that to bring finance back to serve the real economy, it is fundamental to (a) de-financialize companies in the real economy, and (b) think clearly about how to structure finance so that it can provide the long-term committed patient capital required by innovation." Mariana Mazzucato on governments' role in ensuring that finance serves public ends. Link.
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April 6th, 2019

Exploding Bowl

REMUNERATE EXPANSE

Social reproduction and basic income proposals

The most visible discourse on universal basic income focuses squarely on the labor market. Unconditional cash transfers are understood above all as a potential policy solution to wage stagnation, rising inequality, and labor displacement. This framework, which responds to rising income inequality in general, can be construed as a response to the decline of the family wage.

In a 2017 paper published as part of a forum on UBI in Global Social Policy journal, PATRICIA SCHULZ discusses uncompensated care work and enumerates the ways a basic income could signal a departure from forms of social protection tied to the gendered wage and its analogs in safety net programs:

"In industrialized countries, work organization, labor legislation, and social security systems developed progressively based on the model of the male breadwinner. Therefore, as most social security systems are based on contributions linked to remunerated work, the inferior income of women, their restriction to part-time jobs, as well as the interruptions in their careers due to care responsibilities will directly impact the level of social protection they can expect in case of old age, disability, illness, and so on, as well as expose them to dependency on a partner and/or the welfare state. It remains a huge political challenge to overcome the resistance against delinking social protection and remunerated work, even when the latter tends to become more and more uncertain.

A UBI would be the continuation of previous efforts to ensure that every person has a right to basic economic security, everywhere on the planet, women as well as men."

Link to the report.

  • The 1960s-70s saw a major surge of advocacy and policy thought surrounding access to existing safety net programs, much of which was driven by the National Welfare Rights Organization. Linkto NWRO chairperson Johnnie Tillmon's 1972 manifesto on welfare and women's work, which includes a call for a "guaranteed adequate income," and link to historian Felicia Kornbluh's 2007 book on the movement. Economist Toru Yamamori's research sheds light on feminist movements in the UK and Italy that posed basic income as a solution to discriminatory practices of welfare agencies. Link. (Link also to Frances Fox Piven and Richard Cloward's 1966 article on the gaps in American safety net programs and the possibility of a guaranteed income.)
  • There is much ongoing debate within feminist literature about how a UBI might impact the gender division of labor. Some theorists, including Ingrid Robeyns, caution that compensating unpaid care work risks diminishing the political will of women to advocate for more fundamental changes to their social position. Link. Others maintain that a UBI will incentivize men to play a larger role in social reproduction, thereby leveling power dynamics within heterosexual households.Link, link.
  • For a more thorough argument in favor of basic income, the late feminist economist Aisla McKay has written extensively on the potential impacts of the policy for gender equity and a reconfiguration of citizenship. Link to an article on basic income and social citizenship, and link to her 2005 book The Future of Social Security Policy: Women, Work, and a Citizen’s Basic Income.
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March 23rd, 2019

Instruction

LONE LADDER

On the history of protectionist development and trade policy

There is renewed debate around the merits of protectionism and free trade, spurred by political rhetoric from the left and right in the US, and in Europe and Latin America. Active disagreements over the consequences of free trade date back to policies promoted in the 50s and 60s, a period during which many newly-decolonized countries undertook an import-substitution-industrialization (ISI) model of development. Popularized by Argentine economist Raul Prebisch, ISI was a development strategy which advocated a prolonged period of state investment in manufacturing and infrastructure prior to trading in the global market. Subject to extensive criticism, it was thought to have been discredited in favor of the Washington Consenus throughout the late-70s and early 2000s.

Beginning most notably with Hajoon Chang’s Kicking Away the Ladder, however, a growing number of economists have come to question the viability of the Washington Consensus as a development model, both historically and in the present. In a 2017 article, AREGBESHOLA R. ADEWALE lends further evidence to these critiques. Using the World Bank’s Development Indicators, he develops a model which tests the relationship between ISI policies and industrialization in the BRICS (Brazil, Russia, India, China, South Africa). His model finds a strong and consistent correlation between economic growth and ISI policy:

"The analyses confirm the short and long run relationships between growth and ISI’s measurable indicators, in a chronological manner that supports import substitution in the short run and exports promotion in the long run… A conclusion can thus be drawn, both from literature and econometric estimations, that the ISI macroeconomic policy defies the self-defeating prophecy levied against it by the institutions of the Washington Consensus."

Link to the paper.

  • Dani Rodrik’s 2011 book, The Globalization Paradox, offers a detailed overview of the distributional consequences of free trade both domestically and globally. Chapter 8 of the book presents a compelling vindication of ISI policies: "Even where ISI underperformed, it often bequeathed industrial capacities that would later prove very helpful." Link to the book, and link to an earlier blog post in which Rodrik takes Mexico as a case study for the potential benefits of ISI.
  • "This special issue is an attempt to advance a production-centred agenda focusing on the real dynamics of productive organisations and ecosystems, with the emphasis on their transformation and innovative renewal in mature economies." Hajoon Chang introduces an issue of the Cambridge Journal of Economics. Link.
  • John Waterbury’s The Egypt of Nasser and Sadat provides a rigorous evaluation of the transition from state- to market-led development in Egypt from the 50s and into the 80s. Link.
  • "I find that regions in the French Empire which became better protected from trade with the British for exogenous reasons during the Napoleonic Wars (1803-15) increased capacity in mechanized cotton spinning to a larger extent than regions which remained more exposed to trade.” Réka Juhász tests the economic impacts of protectionism through a natural experiment. Link.
  • An excellent new paper by Nathaniel Lane surveys new empirical research examining industrial policy. Link.
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September 29th, 2018

Catastrophe Theory

MIDDLE WAGE

Questioning the great transition into a "global middle class"

Economist STEVE KNAUSS, in a new paper published by the CANADIAN JOURNAL OF DEVELOPMENT STUDIES, examines the "myth" of the global middle class and the claim that the $2/day measurement tells us anything substantive about poverty and inequality around the world.

"On the defensive in recent years, advocates of globalization have taken to highlighting achievements in developing countries, where globalization has supposedly pulled the majority out of poverty and catapulted them into the swelling "global middle class" remaking our world. This article provides a critical look at this interpretation. Carefully reviewing the global income distribution data behind such claims, it presents original calculations that generate new stylized facts for the globalization era.

The global income distribution approach does potentially have much to offer in terms of revealing the complexity of these changes, but in order to do so, greater attention and resources should be devoted to deepening our knowledge of the socio-historical changes underpinning the new realities of class formation and how they relate to the observed changes in global incomes. Instead of, or in addition to, constructing groups according to income thresholds, or national/global based deciles, ventiles or percentiles, more research should start from the other end, identifying national and global groups based on similarities in class formation and then attempting to trace such trajectories through the global income distribution."

Link to the article, and link to an ungated manuscript version. Jason Hickel comments:

"The question is: does their new petty income from the informal sector compensate for their loss of rural land, livestock, etc? It is not clear that it does. Therefore, we cannot say that this is a straightforward narrative of 'progress'—at least not in all regions."

Link to Hickel's thread.

  • Development economist Morten Jerven with a 2010 paper diving into the metrics question in the context of poverty in Africa: "The article therefore concludes that it is futile to use GDP estimates to prove a link between income today and existence of pro-growth institutions in the past, and recommends a searching reconsideration of the almost exclusive use of GDP as a measure of relative development." Link.
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