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OutreachP U T T I N G K N O W L E D G E T O W O R K F O R D E V E L O P M E N T A P R I L 2 0 1 1
D E V E L O P M E N T
Mary McNeilFounding Editor editorial Board
SwaMiNathaN S. aiyarEconomic Times of India • New Delhi • IndiaMichael coheNNew School University • New York • USAPaul collierOxford University • Oxford • UKJohN GaGePartner, Kleiner PerkinsJoSePh K. iNGraMPresident, The North-South Institute CanadaKwaMe KariKariExecutive Director, Media Foundation for West Africa • Accra • GhanaVira NaNiVSKaDirector, International Centre for Policy Studies • Kiev • UkrainePePi PatroNCatholic University • Lima • PeruJ. roBert S. PrichardGovernor, Canadian Unity Councilrafael raNGel SoStMaNNMonterrey Tech University System Monterrey • Mexico
Development OUTREACH is published three times a year by the World Bank Institute and reflects issues arising from the World Bank’s many learning programs. Articles are solicited that offer a range of viewpoints from a variety of authors worldwide and do not represent official positions of the World Bank or the views of its management.
JoSé-MaNuel BaSSatExecutive Editor
JohN P. didierSenior Editor
JuNKo SaitoManaging Editor
Moira ratchfordPublication Design
World Bank Institute Sanjay Pradhan, Vice President The World Bank 1818 H Street NW Washington, DC 20433, USA www.worldbank.org/wbi www.worldbank.org/devoutreach
ISSN 1020-797X © 2011 The World Bank InstituteThis magazine is printed on recycled paper, with vegetable-based inks.
aBout thiS iSSue
Some assert that development has been a clear success. others may argue that it has failed. Some say that it has reduced poverty levels, but that the global number of poor has grown; or that it has raised incomes but increased inequality. and the debate goes on.
the fact is that development is a complex business. and it takes time. it means integrating the multiple dynamic systems of economics, finance, politics and culture, and shaping policies that crisscross and sometimes collide. add to this recipe the ambiguities of human behavior, brittle eco-logical endowments, and random acts of nature, and the task of develop-ment becomes even more daunting. Globalization has generated enormous opportunities but at the same time created countless new challenges. Policymaking is hard. Growth is fragile.
But we continue to learn. we know that policies must not be imposed top-down, but rather gently shaped to fit each country’s need. we have seen that economic elites and academics do not have a monopoly on truth and that directives are not discourse—nor do they constitute a consensus. that people matter and that they must feature in the development debate—as citizens, not subjects.
that people who are living their own social and economic realities often know a great deal about how to make them better. their knowledge and experience are to be valued and applied and, thanks to current technology, can usefully be shared across borders.
creativity and innovation are keys to economic productivity. the best ideas often come from unexpected sources, and trading knowledge and ideas can lead to socioeconomic transformations. we know too that young people are the future and that their education will help unleash the trans-formative power of knowledge—but not without jobs to put that knowledge to work.
we have learned that markets are, well…, markets and not magic. insti-tutions, both public and private, have roles to play in organizing people and resources to achieve equitable results with efficiency and integrity.
we know also that there are many things we don’t know: how often have we disavowed “the magic bullet”? But the point is to keep learning. this is-sue of Development Outreach offers some current thinking on development policymaking as we attempt to clear new pathways to growth, equity, and human dignity.
José-Manuel Bassatexecutive editor
A P R I L 2 0 1 1 1
V O L U M E T H I R T E E N N U M B E R O N E A P R I L 2 0 1 1
GUEST EDITORIAL PathwayS to deVeloPMeNt: what we know and don’t knowRaj Nallari
froM the BloGoSPhereDevelopment 3.0 by Shantayanan Devarajan
aS a Matter of fact... 16 things you didn’t Know about africa
iN the NewS Interview with John Quiggin, author of Zombie Economics
what if we’re Not NoNGoVerNMeNtal orGaNizatioNS (NGoS)? the opportunities ahead for international development NGosDr. Kent Glenzer
deMyStifyiNG SucceSS: the new structural economics approach Justin Yifu Lin
BeiJiNG coNSeNSuS or waShiNGtoN coNSeNSuS: what explains china’s economic success? Yang Yao
educatioN for educatioN . . . or for SKillS? Eric A. Hanushek
why areN’t childreN learNiNG? Abhijit V. Banerjee and Esther Duflo
technology and labor ProductivityDale Jorgenson and Khuong Vu
citieS oN the Prowl Tim Campbell
the GreeNiNG of deVeloPMeNt Carlo Carraro and Emanuele Massetti
iNduStrializatioN aNd the laNd acquiSitioN coNuNdruM Pranab Bardhan
the PoliticS of deVeloPMeNt Brian Levy
ParticiPatory deVeloPMeNt recoNSidered Ghazala Mansuri and Vijayendra Rao
ParticiPatioN MaKeS a differeNce: But not always how and where we might expect John Gaventa
deMoGraPhicS aNd deVeloPMeNt Policy by David E. Bloom and David Canning
deVeloPMeNt with a huMaN face by Archbishop Njongonkulu Ndungane
SouNdiNG Board
BooKShelf
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1 26
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D E V E L O P M E N T O U T R E A C H2
A P R I L 2 0 1 1 3
PATHWAYS TODEVELOPMENT
By raJ NallariWhat We Know and Don’t Know
D E V E L O P M E N T O U T R E A C H4
Development is
about improving
people’s lives
through economic,
social, political,
and technological change. It is
a transformation that certainly
requires incomes to grow but it is
also about reducing poverty and
inequality, building individual
skills, having access to social
services, and raising the quality
of life. And economic growth and
development both depend on
distributive politics—how society
deals with vested interests and
social conflicts. New priorities
are emerging as development
economics reviews its track record
over the 20th century.
We now know that early consulta-
tion with stakeholders and involving
beneficiaries in implementation are
central to successful policymaking as
the contributors to this magazine’s
Sounding Board feature have asserted.
In a recent speech, World Bank pres-
ident Robert Zoellick advocated a new
approach to development economics
and indeed to development lending it-
self, one that is more cooperative and
experience-based while less restricted
to “elites.”
In our interview on his book, Zom-
bie Economics, John Quiggin questions
the relevance of some longstanding
economic beliefs sorely called into
question after the crises of recent years.
He proposes some new directions for
the 21st century. And do we need a
Development 3.0 as Shanta Devarajan
suggests, where communication tech-
nologies enable civil society to engage
in monitoring and correcting govern-
ment failures?
MiXed reSultS
SiXty yearS of development experi-
ence tells us that the pathways to devel-
opment are varied, guided by different
visions, different strategies, and differ-
ent definitions of progress. If sustained
growth is the measure, then progress
has also been mixed. Between 1990 and
2008, the developing economies have
grown nearly twice as fast on average as
the developed countries. But over the
past six decades, only a dozen countries
have sustained their growth for twen-
ty years or more because of frequent
shocks, redistributive conflicts, and dif-
ficulty in sustaining reform efforts over
time.
The number of people in developing
countries who live in absolute poverty
(less than $1 a day) dropped from 40
percent of the population in 1981 to
18 percent in 2004 (Ferreira and Raval-
lion 2008). The largest reductions have
been in China and India, countries with
high growth rates; the smallest in the
countries of Sub-Saharan Africa. But
inequality has been on the rise world-
wide (Ferreira and Ravallion 2008; and
Firebaugh and Goesling 2007). Clearly,
the benefits of development have not
yet reached the neediest.
MarKetS VerSuS State: a falSe dichotoMy
oVer the PaSt SeVeral decadeS, eco-
nomic theories have espoused various
systems of resource allocation, ranging
from free market to state intervention
and centrally-planned systems. The col-
lapse of the Soviet Union and various
crises in other state-controlled econo-
mies in the 1990s prompted develop-
ment thinkers to return to the Wash-
ington Consensus with its policies of
economic liberalization, privatization,
and macroeconomic stabilization pro-
grams. This yielded mixed results and
considerable controversy. A number
of countries, however, had successfully
applied mixed models of government
SPecial rePortS
I T ’ S N O T O N LY A B O U T G R O W T H .
A P R I L 2 0 1 1 5
intervention in otherwise fundamen-
tally market-based systems of resource
allocation.
Yifu Lin in his essay proposes an
alternative pathway to economic devel-
opment, describing a proactive role for
the state in promoting selected indus-
trial policies—a role that complements
market mechanisms and compensates
for negative externalities. Yao Yang’s
article attributes China’s recent suc-
cess to its embrace of certain features of
the Washington Consensus reinforced
by constant experimentation. Is there
a synthesis of Washington Consensus
and Beijing Consensus that could serve
as a model for a given set of developing
countries?
Key SucceSS factorS
we KNow that the upper middle- and
high-income countries have grown
mainly because they have become more
productive.
Most researchers believe that sus-
tained long-term growth is a function
of the quantity and quality of the fac-
tors of production (labor, capital, land,
energy) all of which contribute to total
factor productivity (TFP). Successful
developers have, to varying degrees,
emphasized five objectives in their pur-
suit of growth, with a view to increasing
total factor productivity:
creating a learning economy ■ that
values skills, ideas and technology,
and lays the foundations for do-
mestic innovation. This includes the
schooling and vocational training
systems, tertiary education, research
by universities and public institutes
and by domestic and foreign busi-
nesses, and the harnessing of digital
information using state-of-the-art
information and communication
technology (ICT). The important
research findings of Dale Jorgenson
and Kuong Vu show that labor pro-
ductivity can be enhanced by invest-
ing in human capital and ICT. In
this context, Eric Hanushek’s essay
argues that improving the quality of
education is a priority that requires
not only qualified teachers, but also
a combination of local autonomy
for setting teacher salaries, com-
bined with accountability through
testing by a central agency. Abhijit
Banerjee’s and Esther Duflo’s work
with randomized trials describes a
complex education system of inter-
connected incentives, behaviors, and
choices involving parents, teachers,
and students.
Stimulating entrepreneurship and ■
organizational efficiency. Where
entrepreneurship is weak, innova-
tion and technology adoption is
slow. Entrepreneurship must be
complemented by strong manageri-
al skills to keep the businesses going
and to make the best use of existing
as well as frontier technologies.
Promoting competition and open- ■
ness. Trade openness (as opposed
to protectionism) is associated with
higher growth and the adoption of
new technologies. Public ownership,
procurement rules, local regulations
and standards, labor market rules
affecting entry and exit of firms,
and financial market constraints,
can dampen competition if they are
not carefully designed or controlled.
Regional integration is enhanced by
open borders and regional transport
networks but the cost of doing busi-
ness is a constraint.
Building effective institutions. ■ In
complex modern economies, gov-
ernments must craft an institutional
infrastructure to implement their
long-term strategies. Institutions,
such as the legal system or gover-
nance mechanisms in the public and
private sectors, need to consider the
interests of both labor and the busi-
ness community (Bhagwati 2010),
and to strengthen the administrative
capabilities of the state to formulate
and implement policies and service
delivery programs. Pranab Bard-
han’s essay, for example, emphasizes
the need for creating land markets
as a means of transferring land from
lower-productivity farming to the
higher-productivity manufacturing
and services sectors, especially in
densely populated countries such as
D E V E L O P M E N T O U T R E A C H6
India and China. At the same time,
he highlights the need for fair treat-
ment and involvement of the dis-
placed farmers.
M ■ anaging urban systems that take advantage of agglomeration econo-mies and positive spillover effects to other parts of the economy. De-
velopment relies increasingly on the
urban sector which is much more
productive and innovative than
the primary or rural sector. Urban
populations will continue to grow
and urban gross domestic product
(GDP) already accounts for between
60 and 80 percent of total GDP. In-
dustry gravitates to urban centers
and there has been a correlation
between urbanization and develop-
ment (Polese 2005). But, over the
past twenty years, research shows
that the composition of industrial
production and the size of cities are
interrelated and can raise produc-
tivity through agglomeration and
scale economies. Tim Campbell’s
essay describes the search for and
exchange of knowledge and innova-
tive ideas that goes on among fast-
growing cities in the North and the
South.
. . .aNd other coNSideratioNS
loNG-terM SuStaiNaBle Growth and
development also depends on other fac-
tors. For example, population growth
is negatively correlated to per capita
income levels and its growth across
countries. One of the main challenges
is to productively employ working-age
people. To do so requires public policies
that invest in health, education, and la-
bor thereby promoting more rapid eco-
nomic growth (see the article by Bloom
and Canning). In contrast, the growth
of aging-populations that is occurring
in many countries places a burden on
public budgets and curtails productiv-
ity. What are the best social safety nets
for the elderly and the vulnerable?
Energy is another factor that af-
fects sustainable “green” growth. Car-
raro and Massetti in their essay show
that higher growth creates higher per
capita energy consumption, which if
unchecked could lead to higher carbon
emissions and global warming. To re-
duce carbon emissions to zero over the
A P R I L 2 0 1 1 7
next two decades, research and devel-
opment spending on new technologies
will have to increase fivefold, which in
turn requires carbon pricing and per-
haps some government funding to sup-
port research.
Although we know a great deal
about the role of public budgets and
finance in development, we can’t seem
to avoid periodic fiscal and financial
crises. There are many questions that
still need to be answered: What are the
limits to globalization–that is, the free
movement of capital, labor, goods and
services across countries? What is the
optimal regulation of finance? Of utili-
ties? How does one manage economic
booms and busts? What is the policy for
affordable housing?
uNderStaNdiNG the SocioPolitical laNdScaPe
eVery Growth and development pol-
icy has an economic and social dimen-
sion as well as a political dimension.
As Daron Acemoglu (2010) observes:
“There is increasing recognition that in-
stitutional and political economy factors
are central to economic development.
Many problems of development result
from barriers to the adoption of new
technologies, lack of property rights over
land, labor and businesses, and policies
distorting prices and incentives. Typically
policymakers introduce or maintain such
policies to remain in power or to enrich
themselves, or because politically power-
ful elites oppose the entry of rivals, the
introduction of new technologies, or im-
provements in the property rights of their
workers or competitors.”
Affluent individuals or groups, pri-
vate firms, or oligarchs attempt to “cap-
ture the state,” that is, to shape the laws,
public policies, rules, and regulations
to their own advantage. This shap-
ing may be done by private firms, rich
elites, ethnic groups, or the military. In
countries where the state is highly cap-
tured, all or most institutions may be
affected: parliament, political parties,
the executive including ministries and
public enterprises, judicial courts, and
key bureaucracies
Kent Glenzer’s essay underscores
the need to accelerate development
through international development
NGOs (IDNGOs), as well as through
social entrepreneurs, philanthropists,
and corporate social responsibility.
Levy’s essay on the intersection of poli-
tics and institutions speaks to the need
to tailor policy interventions to the so-
ciopolitical context, moving away from
“best practice” to “best fit.”
Mansuri and Rao assess participa-
tory approaches to development and
find that decentralization of resources
and more authority to local govern-
ments can lead to experimentation and
innovation and, under the right condi-
tions, improve the welfare of the many
and not only the few. In response, John
Gaventa’s piece argues that participa-
tion takes many forms and that we
need to think more broadly about what
makes it work, where, and why.
Finally, Archbishop Njongonkulu
Ndungane appeals for a steady focus
on the most important development
objective: “…promoting the common
good, building a just world fit for all the
inhabitants of our planet.”
The pathways to development are
narrow and winding and all too often
blocked by political obstacles. Suc-
cessful development depends not only
on good policies but also on domes-
tic political dynamics that under ideal
circumstances should be highly sup-
portive or at least neutral. This issue of
Development Outreach highlights some
of the current research on a few of the
key issues that will shape the future of
development.
Raj Nallari is Manager of the Growth and Competitiveness Practice at the World Bank Institute.
referencesAcemoglu, Daron. 2010. “Theory, General Equilibrium, Political Economy and Empirics in Development Economics.” Journal of Economic Perspectives. Forthcoming.
Baghwati, Jagdish. 2010. “Running in Place on Trade.” Project Syndicate 7/20/2010: http://www.project-syndicate.org/.
Ferreira, Francisco H.G., and Martin Ravallion. 2008. “Global Poverty and Inequality: A Review of the Evidence.” World Bank Policy Research Working Paper 4623. Washington, DC: World Bank.
Firebaugh, Glenn, and Brian Goesling. 2007. “Globalization and Global Inequalities: Recent Trends.” In The Blackwell Companion to Globalization, ed. Ritzer, George, Malden, MA: Blackwell Publishing.
Polese, Mario. 2005. “Cities and National Economic Growth: A Reappraisal.” Urban Studies 42(8): 1429–1451.
D E V E L O P M E N T O U T R E A C H8
I gave a lunch talk at a recent conference of civil society
and technology people organized by the Tech@State
folks at the U.S. State Department. I thought I’d share
it more widely.
in the old days—that is, the 1950s and 1960s—development was about correct-
ing market failures. Influenced by the
“big push” theories of economists
like Rosenstein-Rodan, post-war
Keynesian economics and the
apparent success of the Soviet
Union, policymakers in develop-
ing countries saw the role of gov-
ernment as providing public goods
(bridges, roads and ports), addressing
externalities (protecting “infant industries”) and
redistributing income to poor people (by, for instance, keep-
ing food prices low). Donors supported these countries by fi-
nancing some of the public goods—a bridge, say. Knowledge
assistance consisted of helping to identify the market failure,
and then designing the “optimal bridge.”
the incentives of poor-country politicians and rich-country donors were aligned. Politicians could take credit for correcting market failures—government was doing what it was supposed to do—while donors could make sure their money was well-spent. thiS waS deVeloPMeNt 1.0.
Starting in the 1970s, it became clear that these government interventions were not delivering the intended results. Pro-
tected industries were so insulated from world markets
that they never produced efficiently (the Morogoro shoe
factory in Tanzania never exported a single pair of shoes).
Roads were built but not maintained to the point that they
were not passable. Low food prices led to food shortages
and increased poverty in rural areas. In correcting market
failures, we created a set of government failures: well-inten-
tioned interventions that fail to deliver the intended results.
to rescue these economies from distress, donors made their financial assistance “conditional” on governments’ reversing these policies. the previously harmonious relationship began to fray. Politicians resisted—mostly because their friends and family were benefiting from the distorted policies—and complied half-heartedly—often blaming the donors when things went awry. and knowledge assistance focused on estimating the costs of the previ-ous interventions (as if the only thing standing in the way was the politician’s lack of knowledge about these costs). you MiGht call thiS deVeloPMeNt 2.0.
today, although many of the egregious distortions have been re-moved, we find ourselves still faced with government failures, but in a more insidious form that directly hurts poor people. Many of
the failures are in infrastructure, education, and health—the
sacred cows of government intervention. Correcting them
invites the criticism that we are trying to undermine govern-
ment, harking back to the days of conditionality.
A classic example is water tariffs. Subsidized or free water
leads to water scarcity. Politicians, who control the utilities
through these subsidies, ensure that the scarce water goes to
neighborhoods where their clients live. Poor people mean-
while have to pay 5 to 16 times the meter rate to buy water
from vendors. But no politician can run on a platform of rais-
ing water tariffs (even if it will help the poor) and hope to
get elected. Other examples include absenteeism of teachers
in public primary schools—25 percent in India, 27 percent
in Uganda. Or the leakage of public funds in health—that
reaches a staggering 99 percent in Chad.
these government failures do not happen by accident. rather, they arise from two kinds of imperfections in the public sector (much like market failures arise from imperfections in the private sector). • Whentheydon’tusemarketincentives,governmentshavedif-
ficulties in monitoring and enforcing performance by frontline service providers. the result is absentee teachers, clinics with-out drugs, impassable roads.
froM the BloGoSPhere
DEVELOPMENT 3.0excerpted from the “africa can...end Poverty” Blog http://blogs.worldbank.org/africacan
By Shantayanan devarajan
A P R I L 2 0 1 1 9
“...why don’t donors (including the World Bank)
use technology to have the beneficiaries monitor
and supervise development projects?”By Shantayanan devarajan
D E V E L O P M E N T O U T R E A C H10
• Asecond,morepervasive imperfection is in thepoliticalsys-tem. even in democracies where the median voter is poor, poli-ticians who advocate anti-poor policies (such as some of the government interventions above) continue to get elected. one reason is that politicians are able to control the flow of informa-tion to the electorate, convincing them to vote for policies that are, in fact, not in their interest. in the water tariff example, politicians run on a platform of maintaining free water—and get re-elected.
In this situation of government failure, the traditional in-
struments of financial and knowledge assistance are not very
effective. Politicians will resist conditionality, and refuse the
financial assistance if it could lead to electoral defeat. Provid-
ing financial assistance without conditionality makes it easier
to continue with distorted policies. Reports about the costs
of distortions are of little value (not to say irritating) to the
politician who is the cause of the distortions. Even if he is
not the cause—and is instead a reform champion—then by
definition he already knows the costs. The reports are still of
little value.
So what can we do? Our understanding of government fail-
ure has coincided with two other developments. One is the
rise of civil society’s voice in public discourse. The second is
the technology revolution in poor countries. There’s a mes-
sage here. Can we use technology and the voice of civil society
to address these government failures?
rather than imposing conditions, we can empower poor people to monitor service providers. with some 80 percent of africans hav-ing access to a cell phone, it is not difficult to have parents (or the students themselves) send an SMS message if the teacher is not in school, or there are no drugs in the clinic or the purported road maintenance program is not happening. this could do more for helping governments and donors get value for money than all the fiduciary controls we put in place. While we are at it, why
don’t donors (including the World Bank) use technology to
have the beneficiaries monitor and supervise development
projects?
We can also use technology to alleviate the information
problem. Rather than writing reports on the costs of distor-
tions (and whispering them in the Finance Minister’s ear), we
could disseminate these results—in digestible form—to poor
people through their cell phones. Get the information out
about who benefits from infrastructure subsidies, which dis-
tricts have the highest teacher absentee rate, etc. This is infor-
mation about poor people’s daily lives; they should be the first
to receive it. As better informed voters, they may then start
voting for politicians who advocate in their interest. Going
further, why not prepare these reports in collaboration with
poor people? After all, the analysis is about them.
each year, the world Bank produces a world development re-port. while there is an extensive consultation process with the draft, the report is essentially written by a core team of Bank staff. why not produce the report like wikipedia, and invite the whole world to write it? as one of my colleagues put it “then it will be the world’s development report.”
aNd a fittiNG SyMBol of deVeloPMeNt 3.0.
Shantayanan Devarajan is the Chief Economist of the World Bank’s Africa Region.
A P R I L 2 0 1 1 11
D E V E L O P M E N T O U T R E A C H12
T H I N G S Y O U D I D N ’ T K N O W
7
only 5.7 percent of births in ethioPia are attended by skilled personnel compared to 98.4 percent in MauritiuS.
6
16
caPe Verde receives the highest net official development assistance (oda) per capita: $438.20.
NiGeria receives the lowest: $9.50.
4
the highest connection charge for a
business phone is $366.60 in BeNiN.
the lowest is in GhaNa at $0.70.
8
in two thirds of SSa countries, only one or two products are responsible for 75 percent or more of the country’s total exports.
3
the percentage of parliamentary seats held by women is highest in rwaNda with 56.3 percent, and lowest in São toMé aNd PríNciPe with 1.8 percent.
youth literacy (ages 15-24) is highest in GaBoN at 97 percent and lowest in BurKiNa faSo at 39.3 percent.
5
the largest population in Sub-Saharan africa (SSa) is 151.3 million in NiGeria.the smallest is 0.1 million (100,000) in SeychelleS.
1
total trade as a percentage of gross domestic product (GdP) is the highest in SeychelleS: 283.4 percent and lowest in ceNtral africa rePuBlic: 37.5 percent.
2
aS a Matter of fact.. .
Source: African Development Indicators, World Bank, 2010. A P R I L 2 0 1 1 13
A B O U T
in Sierra leoNe, 3 persons per 1,000 are internet users. in SeychelleS, where there were 212 computers per 1,000 people for the
period 2005-2007, 371 in every 1,000 people are internet users. 15
in SoMalia, 29 percent of the population has access to a safe source of water.
in MauritiuS, access is 100 percent.
14
A F R I C Ain chad, 37 percent of children who start first grade make it to the fifth grade, versus 99 percent in MauritiuS.
12
the percentage of firms that indentify corruption as a major constraint to doing business was highest in côte d’iVoire at 75.0 percent, while the lowest is in GhaNa with 9.9 percent.
11in Sierra leoNe 272 out of every 1,000 children die before the age of five.in SeychelleS, the number is 13 per 1,000.
13
9
in côte d’iVoire it takes 16.6 days on average to clear customs on direct exports, compared with 3.8 days in GaBoN. imports, on the other hand, take 31.4 days to clear customs in the rePuBlic of coNGo, compared to 4.4 days in leSotho. 10
South africa has the highest carbon dioxide emissions: 414,649 metric tons, while coMoroS has the lowest: 88 metric tons.
in South africa there are 924 mobile phones per 1000 people.
in eritrea there are 22 per 1000 people.
16
D E V E L O P M E N T O U T R E A C H14
iN the NewS
A P R I L 2 0 1 1 15
Q: You argue in Zombie Economics that certain long-held
economic beliefs no longer apply, and that they have in fact
contributed to the recent crises, but they nevertheless are still
walking around like zombies. While many would agree with
you, others may feel that the zombies still serve us well and
should be kept alive. What would you say to these advocates?
A: At this point it is necessary to compare the experience of
the Keynesian social-democratic period, from the 1940s to
the 1970s, with that of the market liberal period, the 1970s to
the 2000s. Both applied models that seemed to work for an
extended time and both also ended in crisis.
In the postwar golden age, the experience of the leading
economies was very different from today: full employment
was sustained for decades on end, social equality was greater
than at any time before or since, and economic growth rates
were higher than at any time before or since.
But the Keynesian-social democratic period ended in the
crisis of the 1970s, indicating that the model was not perfect.
Now that the market liberal model has also produced a
systemic crisis, any reasonable comparison would suggest
that the market liberal model has not served us well–except
for the very wealthy.
It is true that, during this period, developing countries
such as China and India have done very well. But the same
was true during the postwar boom for Japan, Southern Eu-
rope, and many other countries that were poor in 1945; and
they used a wide range of economic models.
Q: Could simply killing the zombies and replacing them
with alternative economic theories for the 21st century
prevent another crisis? If so, what would you call this new
economics?
A: This crisis differs from the Great Depression, when
Keynes presented the General Theory, and from the stagfla-
tion of the late 60s and early 70s, when Milton Friedman of-
fered both a convincing analysis and a plausible alternative.
In this case, there is no ready-made solution.
In Zombie Economics, I make a number of suggestions re-
garding the way forward, including the use of realistic rather
than idealized models of individual behavior, attention to
historical evidence, and a focus on real-world relevance even
at the expense of theoretical rigor. But these suggestions do
not amount to an alternative economics. Perhaps what is
most important is “humility instead of hubris.” That is, given
the spectacular failure of the theories and policy approaches
that were dominant for the past thirty years, economists
should be more willing to admit fallibility and more open to
new ideas.
Q: There are many factors other than economic theories
and policies that affect people’s lives: for example, good and
bad political and corporate governance including corrup-
tion, access to technology, and environmental quality, to
name a few. What is the role of economics in this broader
context?
A: Economics has something to say about all these issues.
But economists need to be more open to insights from
other social sciences, and more willing to admit that social
sciences, including economics, are shaped by history (more
like evolutionary biology) rather than being purely deductive
(like pure physics).
Q: You mention the need for realism (vs. rigor), equity (vs.
efficiency), humility (vs. hubris). What are your thoughts on
the role of development organizations including the World
Bank in shaping the future of development by adopting
these qualities? And do they have a role to play in putting the
zombies to rest?
A: As regards development, the biggest lesson is probably
the importance of equity. The experience of the last 30 years,
particularly in the U.S., shows that it is possible to produce
reasonably strong growth in measured GDP while not gener-
ating a sustained improvement in living standards for much
of the population. So, it is evident that GDP growth alone is
not a reliable measure of economic performance, and that it
is necessary to look at such variables as the change in median
household income and in the income of the poorest deciles
of the population.
Zombie Economics: How Dead Ideas Still Walk Among Us. John quiggin. New Jersey: Princeton university Press. 2010.
John quiggin is an australian economist and professor at the university of queensland. he has also held academic positions at the australian National university and James cook university. Best known for his work on utility theory, quiggin is among the top 500 economists in the world according to ideaS/rePec. quiggin authors an australian blog, and is a regular contributor to crooked timber. he also writes a fortnightly column in the australian financial review.
D E V E L O P M E N T O U T R E A C H16
WHAT IF WE’RE
NONGOVERNMENTAL ORGANIzATIONS (NGOS)
By dr. KeNt GleNzer
The Opportunities Ahead for International Development NGOs
NOT ?
A P R I L 2 0 1 1 17
oxfam and other members of tcktcktck, an alliance of 250 NGos, showed support to Kyoto with a “photo booth” where delegates were asked to pose together with “Kyoto.”
D E V E L O P M E N T O U T R E A C H18
This conjuncture of contradictory
trends puts IDNGOs in an odd posi-
tion. On the one hand, our long-stated
poverty mission is being stripped away.
Developing country governments are
putting stricter rules in place to control
their activities, and Southern partners
are more vocal about IDNGO ineffi-
ciencies and patronizing procedures.
On the other, a new generation of ac-
tors is on the rise–social entrepreneurs,
philanthropreneurs, social venture cap-
italists–and taking aim at spaces long
monopolized by IDNGOs.
This is a classic learning moment,
a moment in which we can re-imagine
the NGO sector. To do this, we must
capitalize on four opportunities.
oPPortuNity 1: PuSh BacK at NarrowiNG defiNitioNS of SucceSS
if the 1980s can be categorized as
“the NGO decade,” the 2000s may well
come to be known as “the interven-
tion epoch” of randomized controlled
trials. Spurred by dismal results from
four decades of post-independence
development projects, provoked by
the desire for efficiency and scale, and
catalyzed by the Center for Global De-
velopment’s report Why Won’t We Ever
Learn: Improving Lives Through Impact
Evaluation, major international donors
have turned to increasingly narrower
technical interventions amenable to
experimental designs, quantification,
and attributable causal pathways. Their
laudable goal is to uncover more ef-
ficient policy-relevant technical fixes
that developing world governments
can massively scale up. But these nar-
row fixes institutionalize blindness to
the realities of power, supporting
“… only those programmes claim-
ing to deliver easily measurable results
rather than to support transformative
processes of positive and sustainable
changes in people’s lives…many devel-
opment practitioners cynically comply
with the performance measurement
demands, often with a nod and a wink
from a sympathetic bureaucrat equally
despairing of what is now required….
The methods demanded of us to be
more accountable are actually having
the effect of our becoming ever less
responsible for seriously enquiring of
ourselves how we can most usefully
contribute to transformative social
change and be held accountable for our
actions in that respect.”2
This new concern with proving nar-
row relationships between interven-
tions and outcomes–misleadingly la-
beled impact by many–deploys certain
forms of social science rigor to alleviate
poverty’s symptoms.
IDNGOs need to both support this
shift and push back at it. There is an
important niche for approaches like
randomized controlled trials, but IDN-
GOs should cede the narrow, technical,
X causes Y world to others. We should
push, more strongly, for a new social
market–and additional resources–that
focuses not on symptoms but on root
causes of inequality and injustice, on
context, and on comparative cases of
structural change. This entails strategiz-
SPecial rePortS
International development
NGOs (IDNGOs)* have
both flourished and been
objects of cogent critique
over the past twenty years.
The populations and budgets of
IDNGOs continue to grow even as
concerns about accountability,
quality, and cost persist.
Meanwhile, major inroads have
been made on reducing poverty,
driven not by official development
assistance (ODA) but by market
forces. This economic growth
comes with widening inequality,
civil strife, and “...escalating
discrimination and persecution
of members of vulnerable
groups—often racial, religious
or ethnic minorities, but also
women, members of indigenous
communities, children, persons
with disabilities, and other
vulnerable groups that lack the
political power in their societies
to defend their own interests.”1 The views expressed in this article are the author’s and do not reflect Oxfam America’s organizational policies or official perspectives. *IDNGO, while still a fuzzy category, specifies more closely the population of international NGOs that this article is interested in; that is, those that engage in development programs and projects in developing countries, either directly or through local partners.
A P R I L 2 0 1 1 19
ing, investing, and acting within long-
term time frames. Such work calls for
10 to 15 year investments—or more—
in specific sites, with refutable theories
of change, and deep understanding of
context. IDNGOs need to enlist social
scientists, historians, and other unusual
disciplines to measure such changes.
oPPortuNity 2: MultileVel coalitioNS that BridGe well-KNowN differeNceS
focuSiNG oN root cauSeS of poverty
and injustice means that IDNGOs need
to build mission-driven, multilevel co-
alitions that act at community, national,
and international levels simultaneously.
Such strategies combine technical in-
terventions that address symptoms in
the short term with policy advocacy,
constituency building, and opinion
shaping over a decade or more.
But this requires IDNGOs to un-
learn and relearn a few things. We have
to unlearn the fixation on attribution—
perpetuated by symptom-focused proj-
ects—because no single IDNGO can
do this kind of work alone. We have to
unlearn, also, ways of communicating
achievements and obstacles to boards
and other important stakeholders. And
we have to learn that fostering social
transformation requires a multiplicity
of skills over time, a variety of financial
resources, and more egalitarian rela-
tionships between international and lo-
cal NGOs. Yet this is difficult:
“Coalitions are essential to civil society
organizations seeking to influence events
beyond the ordinary scope of small, eco-
nomically limited, locally-based actors.
But building trust and understanding
across gaps of wealth, power and cul-
ture does not come easily to civil society
leaders, who are more accustomed to
influencing those who share their values,
aspirations and expectations. Learning
to build bridges across major social, po-
litical and economic differences is pivotal
to gaining that influence.” 3
The most central change is to ask
not “what does my organization do and
how do I prove it to my stakeholders?”
but rather, “with whom do we need to
join forces and resources and how, to-
gether, will we tell our impact story?”
This approach flies in the face of 2000s’
accountability discourse–and emerging
procedures from watchdog organiza-
tions like Charity Navigator–which fo-
cuses on the effectiveness of individual
agencies.
oPPortuNity 3: Structurally reiNVeNt dowNward aNd lateral accouNtaBility
coalitioNS that StaNd the test of time
and that achieve results beyond the
grasp of any one member require trust.
They require a safe space for critical
discussions of performance. And they
require honesty. Unfortunately, project
and competitive bidding modalities in-
strumentalize collaborations between
us, making the creation of such trust
and honesty more difficult. IDNGOs
need to take advantage of the current
conjuncture—reduction in global pov-
erty combined with radical increases in
inequality and human rights abuses—to
advocate for changes in the ways proj-
ects are developed and implemented,
ways we have all known about for two
decades but which always get marginal-
ized. But more interestingly: we need to
promote entirely new ways of measur-
ing relationships between partners, and
between partners and poor people.
One of the most promising of these
is Keystone Accountability’s work on
constituency voice. Borrowing from
J.D. Power and Associates, Keystone
adapts customer satisfaction meth-
odologies from the private sector and
deploys them among collaborating
partners and eventually, we in Oxfam
America hope, between partners and
the poor. The goal is to build an objec-
tive and comparative database against
which organizations can benchmark
themselves, and which equips partners
and the poor with information about
whom they are working with. The con-
stituency voice approach deliberately
takes the power to define success out of
IDNGO hands, injects anonymity into
mutual performance reviews; and treats
trust, honesty, and coalition effective-
ness as accomplishments over time, as
learning processes. Making such meth-
odologies a requirement—like general-
ly accepted accounting principles—for
all donor and IDNGO efforts would re-
sult in a structural transformation that
no amount of good intentions will ever
achieve. 4
oPPortuNity 4: aNSwer the queStioN, “what if we areN’t NGoS?”
NGos teNd to Stay in a very small room
of the international resource mansion,
a room called ODA. In 2007, ODA to-
taled around $103 billion, while private
capital flows to developing countries
iNterNatioNal deVeloPMeNt NGoS continued on page 31
D E V E L O P M E N T O U T R E A C H20
DEMYSTIFYING SUCCESS
A P R I L 2 0 1 1 21
DEMYSTIFYING SUCCESS The New Structural Economics ApproachBy JuStiN yifu liN
D E V E L O P M E N T O U T R E A C H22
It took a Scottish moral
philosopher with no
training in economics
to set the course of
modern economics and
challenge researchers to answer
what is arguably the most
fundamental question in public
policy, namely: what is the
recipe for growth, job creation,
and poverty reduction?
Indeed, since Adam Smith offered
his theory of wealth creation in 1776,
economists have behaved like detectives
in mystery novels, imagining theories,
exploring hypotheses, examining facts,
tracking evidence, and following leads.
They have had some successes and
many disappointments. Most progress
has been made in identifying systemic
differences in institutions and policies
between high-growth and low-growth
countries. But what really works in
policy making remains left to conjec-
ture. In fact, more than 200 years after
Smith’s seminal work, economic growth
is still a “mystery” to many, and an “elu-
sive quest” to others—to quote Elhanan
Helpman and William Easterly.
what the clueS tell uS
we haVe aN iMPortaNt clue: prior to
the 18th century, it took about 1,400
years for the Western world to double
its income. In the 19th century, the
same process took about 70 years, and
only 35 years in the 20th century. That
dramatic acceleration in growth rates
came about with the transformation
of agrarian economies into modern
industrialized societies. This intriguing
trend has led us to recognize that con-
tinuous structural change prompted by
industrialization, technological inno-
vation, and industrial upgrading and
diversification are essential features
of rapid, sustained growth. The pace
of structural transformation and the
rapid growth path followed by a small
number of countries such as Brazil,
Chile, China, India, Korea, Malaysia,
Mauritius, Singapore, or Vietnam have
been impressive. In those nine coun-
tries, several hundred million people
have been lifted out of poverty in the
space of one generation. On the other
hand, the apparent inability of many
other countries to escape the poverty
trap is puzzling. These lower-income
countries are home to more than one-
sixth of humanity—they count as the
bottom billion, a term coined by Oxford
economist Paul Collier. The mystery of
diverging country performances, es-
pecially during the second half of the
twentieth century, persists.
a loSS of faith
the GloBal criSiS has fundamentally
undermined our faith in free markets,
and revived the belief that both the gov-
ernment and the private sector play im-
portant roles in successful economies.
We now have a unique opportunity to
rethink economic development—and
economic theory and practice in gen-
eral—and to reassess how the govern-
ment and the private sector can shape
the industrialization process.1
To do so, we need to understand
why and how some countries have
been able to succeed where others have
failed. The lessons of history, theory,
and practice can all help us understand
the ingredients of economic success.
how did they Get there?
iN the PoSt-world war ii era, only
thirteen economies have achieved an av-
erage annual growth rate of seven per-
cent or higher for 25 years or more. The
Growth Commission, headed by Nobel
Laureate Michael Spence, found that
the most important common feature
of these 13 economies is that they were
able to tap into the potential advantage
of backwardness—that “they imported
what the rest of the world knew and
exported what it wanted” (World Bank
2008, p. 22). Lessons from these suc-
cess stories can help other developing
countries that are currently struggling
to eradicate poverty and narrow the in-
come gap (Lin and Monga 2010a).
SPecial rePortS
A N E L U S I V E Q U E S T.
A P R I L 2 0 1 1 23
the adVaNtaGe of BacKwardNeSS
the firSt leSSoN is that continuous
technological innovation is key to sus-
tained economic growth in any econo-
my (Lin 1995). And this is where devel-
oping countries may have the advantage
of backwardness (Gerschenkron 1962).
In advanced high-income countries,
technological innovation and indus-
trial upgrading require indigenous in-
ventions supported by costly and risky
research and development (R&D), as
their technologies and industries are
leading global development. Moreover,
the institutional innovation required
to foster the development of new tech-
nologies often entails a costly trial-and-
error, evolutionary process.
In the process of upgrading or di-
versifying into a new sector, a develop-
ing country can borrow technology and
the supporting social and economic in-
stitutions from advanced countries. In
doing so, it has the potential of reduc-
ing the costs and risks of innovation
and growing at an annual rate several
times that of high-income countries.
To tap that potential, the country’s in-
dustrial development needs to be con-
sistent with its comparative advantages
so as to be competitive in both domes-
tic and international markets. A well-
functioning market system is a precon-
dition since the market will ensure that
prices reflect the relative scarcity of the
factors of production (land, labor, and
capital), which in turn guides firms into
industries that are consistent with the
country’s comparative advantages. The
country will grow fast, produce a large
surplus (profits), accumulate capital
rapidly, and quickly upgrade its endow-
ment structure and industries.
a MarKet-PluS SolutioN
at the SaMe tiMe, a smooth industrial
and technological upgrading process re-
quires simultaneous improvements in
soft infrastructure such as educational,
financial, and legal institutions, and in
hard infrastructure such as telecommu-
nications and transportation. These im-
provements will enable firms to reduce
their transaction costs and become the
lowest-cost producers (Harrison and
Rodriguez-Clare 2009). But no single
firm can afford to take on all these in-
frastructure initiatives; and spontaneous
self-coordination among many firms to
meet these challenges is unrealistic.
The task requires collective action,
or at least coordination, between infra-
structure service providers and indus-
trial firms. In fact, the government itself
must initiate or proactively coordinate
these changes. In addition, industrial
upgrading and diversification requires
that certain firms act as first movers. If
they fail, they bear all the costs of their
decisions; if they succeed, they are usu-
ally followed into the marketplace by
competitors, and quickly lose the eco-
nomic rents and rewards that they ex-
pected as first movers. Because of the
above asymmetry in the expected cost
and gain for the first movers and the in-
formation externality created by them,
the government must provide incen-
tives to encourage them.
the New Structural ecoNoMicS
aS we re-eXaMiNe sustainable growth
strategies for developing countries af-
ter the global crisis, we need to pay
special attention to structural change
and its corollary, industrial upgrading
and diversification. The new struc-
tural economics (Lin 2010) proposes
a framework that complements earlier
approaches. It takes the following prin-
ciples into consideration:
firSt, ■ an economy’s structure of fac-
tor endowments (the relative abun-
dance of the factors of production)
changes as it moves from one level
of development to another. There-
fore, its optimal industrial structure
will also be different at different lev-
els of development, requiring a cor-
responding level and mix of hard
and soft infrastructure to support
its operations and transactions. For
example, the United States had to
update its financial and legal system
when it evolved from an agrarian
economy to an industrialized one
in the 18th century. The dynam-
ics of hard and soft infrastructure
was even more notable in the 19th
century when railroads were built to
accommodate the needs of increas-
ingly large firms, and sophisticated
new regulations had to be adopted
to guide interstate commerce.
SecoNd ■ , each level of economic
development is a point on a con-
tinuum from low-income agrarian
to high-income industrialized, not a
dichotomy of two stages: poor ver-
sus rich or developing versus indus-
trialized. This is why industrial and
infrastructure upgrading targets in
developing countries should not
necessarily be the same as those of
high-income countries.
third, ■ at each level of development,
the market is the main mechanism
for allocating resources. However,
history and economic theory sug-
gest that although markets are in-
D E V E L O P M E N T O U T R E A C H24
dispensable in allocating resources
to the most productive sectors and
industries, government interven-
tion—through the provision of
information, coordination of in-
frastructure improvements, and
compensation for externalities—is
equally indispensable in helping
economies move from one level of
development to another. This up-
grading entails large externalities
that affect firms’ transaction costs
and returns to capital investment.
Thus, the market is necessary but
not sufficient, and the government
needs to play an active role.
The evidence that suggests the ben-
efits of government involvement may
not be enough to validate an idea that
has long been mired in controversy.
Many economists who believe that
government intervention is indispens-
able for structural transformation may
still oppose a proactive public sector
role in industrial upgrading and diver-
sification. The main reason for their
opposition is the lack of a framework
for industrial policy making. But we
can derive some guiding principles by
drawing on the theories of compara-
tive advantage and the advantage of
backwardness, and by analyzing some
industrial successes and failures.
fiNdiNG a Pathway
the New Structural ecoNoMicS ap-
proach suggests a user-friendly six-step
framework to help policy makers iden-
tify and facilitate growth paths (Lin and
Monga 2010b):
firSt, ■ identify those tradable goods
and services that have existed for a
period of about 20 years in dynami-
cally growing countries that have
similar endowment structures but
with a per capita income that is
about double their own.
SecoNd, ■ among the industries on
that list, identify those that have at-
tracted domestic private firms and
try to pinpoint:
any obstacles that may be pre-•
venting them from upgrading
the quality of their products,
or
any barriers that may be dis-•
couraging other private firms
from entering.
This could be done using value-
chain analysis or the Growth Diag-
nostic Framework suggested by Haus-
mann, Rodrik, and Velasco (2008). The
government can then implement poli-
cies to remove the constraints at home,
and carry out randomized controlled
experiments to test their effectiveness
in eliminating the constraints before
scaling those policies up to the national
level.
third, ■ some of the identified indus-
tries may be new to domestic firms.
The government could encourage
firms in the higher-income coun-
tries identified in the first step to in-
vest in these industries, since those
firms have the incentive of relocat-
ing their production to the lower-
income country so as to reduce
labor costs. The government could
also set up incubation programs to
assist the entry of private domestic
firms into these industries.2
fourth, ■ unexpected opportunities
for developing countries may arise
from their unique endowment and
from technological breakthroughs
around the world. Developing
country governments should there-
fore pay close attention to successful
discoveries and engagement in new
business niches by private domestic
enterprises and provide support to
scale up those industries.
fifth, ■ in countries with poor infra-
structure and unfriendly business
environments, special economic
zones or industrial parks can help
overcome barriers to firm entry
and foreign investment. These can
create preferential environments
which most governments, because
of budget and capacity constraints,
are unable to implement for the
economy as a whole in a reasonable
timeframe. Industrial clusters could
also be encouraged.
SiXth, ■ the government can com-
pensate pioneer firms through time-
limited tax incentives, cofinancing
of investments, or access to foreign
exchange. To avoid rent seeking and
the risk of political capture, these
incentives should be limited both
in time and in financial cost, and
should not be in the form of mo-
nopoly rent, high tariffs, or other
distortions.
Policy makers in all developing coun-
tries could take this approach to help
their economies follow their compara-
tive advantages, tap into the potential
advantage of backwardness, and achieve
dynamic and sustained growth.
Justin yifu lin is world Bank chief economist and Senior Vice President, development economics.
A P R I L 2 0 1 1 25
references
Akerlof, G. A. and R. J. Schiller. 2009. Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism. Princeton, N. J.: Princeton University Press.
Basu, K.. 2011 [forthcoming]. Beyond the Invisible Hand: Groundwork for a New Economics. Princeton, N.J.: Princeton University Press.
Gerschenkron, A. 1962. Economic Backwardness in Historical Perspective, a book of essays. Cambridge, Mass.: Belknap Press of Harvard University Press.
Harrison, A. and A. Rodríguez-Clare. 2010. “Trade, Foreign Investment, and Industrial Policy for Developing Countries,” in D. Rodrik, ed. Handbook of Economic Growth, Vol. 4.
Hausmann, R., D. Rodrik, and A. Velasco. 2008. “Growth Diagnostics,” in N. Serra and J.E. Stiglitz, eds. The Washington Consensus Reconsidered: Towards a New Global Governance. New York: Oxford University Press, pp. 324–354.
Krugman, P. 2009. “How Did Economists Get it so Wrong?” New York Times Magazine, September 2.
Lin, J.Y. 2010. “New Structural Economics: A Framework for Rethinking Development.” Policy Research Working Paper no. 5197. Washington D.C.: World Bank.
Lin, J. Y. 1995. “The Needham Puzzle: Why the Industrial Revolution Did Not Originate in China.” Economic Development and Cultural Change, 41, (2), 269–92.
Lin, J. Y., and C. Monga. 2010a. “Growth Identification and Facilitation: The Role of the State in the Dynamics of Structural Change.” Policy Research Working Paper no. 5313. Washington D.C.: World Bank.
Lin, J. Y., and C. Monga. 2010b. “The Growth Report and New Structural Economics.” Policy Research Working Paper no. 5336. Washington D.C.: World Bank.
Katz, J. 2006, “Salmon Farming in Chile,” in V. Chandra ed. Technology, Adaptation, and Exports: How Some Developing Countries Got It Right. Washington, D.C.: World Bank, pp. 193-223.
Monga, C. 2009. “Post-Macroeconomics: Reflections on the Crisis and Strategic Directions Ahead.” Policy Research Working Paper no. 4986. Washington D.C.: World Bank.
Rhee, Y.W. 1990. “The Catalyst Model of Development: Lessons from Bangladesh’s Success with Garment Exports.” World Development, Vol. 18, No.2, pp. 333–346.
Stiglitz, J. 2009. Freefall: America, Free Markets, and the Sinking of the World Economy. New York: W. W. Norton & Co.
World Bank. 2008. The Growth Report: Strategies for Sustained Growth and Inclusive Development. Washington, D.C.: World Bank.
endnotes
1 Stiglitz (2009), Akerlof and Schiller (2009), and Krugman (2009) have questioned some of the fundamental tenets of mainstream economics, most notably the assumption that competitive markets are sufficient to create strong business incentives, and wealth creation, and to ensure efficient outcomes. Monga (2009) and Basu (2011) suggest that economics move beyond the boundaries of methodological individualism because all economic systems rely on social norms and beliefs.
2 Bangladesh’s vibrant garment industry is an example of a new industry starting from foreign direct investment—in this case, Daiwoo, a Korean manufacturer, in the 1970s. After a few years, enough knowledge transfer had taken place and the direct investment became a sort of “incubation.” Local garment plants mushroomed in Bangladesh, and most of them can be traced back to that first Korean firm (Rhee 1990). Chile’s successful salmon industry is an example of incubation by the government. Fundación Chile, a public sector firm, set up the first commercial salmon-farming operation in the country in 1974 and demonstrated that salmon farming could be successful in Chile. This industry expanded rapidly to the private sector and in size and complexity after the 1980s (Katz 2006).
D E V E L O P M E N T O U T R E A C H26
B E I J I N G CO N S E N S U S OR WASHINGTON CONSENSUS
By yaNG yao
What Explains China’s Economic Success?
A P R I L 2 0 1 1 27
D E V E L O P M E N T O U T R E A C H28
China’s remarkable
economic growth is
often attributed to
strong government
intervention that
can mobilize large amounts of
resources to clear any bottleneck
to growth or institutional
change. This approach is
often referred to as the Beijing
Consensus (BC) as compared
to the Washington Consensus
(WC): the former being a
model of authoritarianism
and heavy state involvement
in the economy, the latter
a model of neoliberal and
market-oriented doctrines. But
these characterizations are
inaccurate.
VariatioNS oN a theMe
iN JoShua raMo’S original formula-
tion published in 2004 by the U.K.’s
Foreign Policy Centre, the BC is defined
by three principles, none of which nec-
essarily requires strong government in-
tervention:
institutional innovation, ■
equitable and sustainable develop- ■
ment, and
self-determination. ■
Over the last 30 years, the Chinese
economy has moved progressively to-
ward the market doctrines of neoclas-
sical economics as summarized by John
Williamson in his formulation of the
WC. These include:
prudent fiscal policy, ■
economic openness, ■
privatization, ■
market liberalization, and ■
the protection of private property. ■
China has been extremely cautious in
maintaining a balanced budget and keep-
ing inflation in check. Programs aimed
purely at redistributing economic re-
sources have been few, and transfers from
the central government to the provinces
have generally been dominated by infra-
structure investment. The country is the
world’s second largest recipient of foreign
direct investment after the United States;
and more than 80 percent of China’s
state-owned enterprises have been priva-
tized or transformed into publicly listed
companies.
BiG BaNG or eVolutioN?
what’S uNique is the way China has
applied the WC. Implementing the
WC requires substantial institutional
change and policy reform, whereas de-
veloping countries are usually charac-
terized by rigid institutions that impede
the function of the market. A big-bang
approach to reforms is usually politi-
cally impractical or prohibitively costly.
China’s gradual one-step-at-a-time ap-
proach has been more successful. So if
there is a Beijing Consensus it refers to
the way China shaped its institutional
and policy reforms to make the Wash-
ington Consensus work in the Chinese
context.
the BeSt May Be the eNeMy of the Good
the chiNeSe eXPerieNce has yielded a
number of lessons for other developing
countries.
firSt, institutional efficacy is more important than institutional purity.
The recent development economics
literature points to the importance of
institutions for economic growth. But
institutions are effective only if they
provide the right incentives to align the
personal interests of economic and so-
cial agents with the interests of society
at large.
In this case, first-best institutions
may be ineffective because they often
require drastic changes in the incentive
structure which may be detrimental to
and alienate the major stakeholders.
Admittedly, adaptation which implies
compromises with political and social
realities, can result in lower efficiency.
This may simply be the cost of success.
Adaptation properly applied can mo-
tivate the stakeholders to buy into the
reform, which is a key success factor.
SPecial rePortS
A P R I L 2 0 1 1 29
what’S iN it for Me?
But chiNa alSo offerS many ex-
amples of institutional adaptation that
improved efficiency.
the township and village enterprise (tVe) played a key role in china’s in-dustrialization in the 1980s. TVEs were
nominally owned by local governments
but in effect managed by private entre-
preneurs. So although their ownership
structures were unclear, they did offer
strong incentives to both entrepreneurs
and local officials to improve economic
efficiency. They helped entrepreneurs
circumvent the adverse political con-
straints at the time and generated local
government tax revenues and econom-
ic growth.
the dual-track price system imple-mented between 1985 and 1994 is an-other example. This system assigned
two prices to a single good, one for
planned quotas and the other for market
transactions. In this case the efficiency
losses came in the form of corruption:
because the planned prices were much
lower than the market prices, the offi-
cials who controlled the quotas could
take advantage of the price differential
to make money (arbitrage). However,
the system provided powerful incen-
tives for state-owned enterprise (SOE)
managers to produce more output for
the market while protecting weak SOEs
from failing in the face of market com-
petition. This was important to win
support for reform from the larger part
of the society. In addition, the system
prevented hyperinflation which was
plaguing other transition economies.
the carrot or the SticK
SecoNd, government officials need to be motivated.
The role of government in econom-
ic development was highlighted in the
World Bank’s influential 1993 report
The East Asian Miracle and echoed in its
recent 2008 Growth Report. Although
both explored how government can
usefully take action to remove bottle-
necks to economic growth, they spent
little time on how to motivate govern-
ment officials to take those actions.
In China, government officials are
motivated in two ways.
First, promotion of government
officials is strongly based on merit,
especially their contributions to eco-
nomic growth. This is quite different
from performance evaluation based
on accountability, which requires gov-
ernment officials to follow preset rules
or be punished. Although this kind of
negative incentive exists in China, posi-
tive incentives for innovation and per-
formance leading to economic growth
are more prevalent. So far, the positive
effects of this system have outweighed
the negatives.
Second, public servants benefit di-
rectly from economic growth:
those in more prosperous regions ■
enjoy much higher salaries than
workers assemble solar-powered vehicles in weifang. designed and manufactured by a chinese company, the vehicle can run 120 to 150 kilometers under normal driving conditions on a full charge with speeds of up to 48 kilometers per hour. it has attracted its first batch of export orders from countries including Germany, the united States, and Norway.
D E V E L O P M E N T O U T R E A C H30
those in less developed regions,
different government departments ■
can offer different levels of income
and welfare, with departments that
are directly involved in managing
economic activities enjoying better
treatment, and
some provinces provide bonuses to ■
officials in subnational governments
for generating more tax revenue.
Politically, many of those practices
are regarded as extra-legal. In China
they are considered practical ways of
harnessing the inevitable forces of hu-
man nature.
Fiscal decentralization, too, has
helped motivate subnational govern-
ment officials. As one of the most fis-
cally decentralized countries in the
world, China’s subnational government
revenue accounts for 45 percent of total
government revenue and subnational
spending accounts for 77 percent of
total government spending. Decentral-
ization turns local government officials
into strong stakeholders in local eco-
nomic growth. In addition, fiscal de-
centralization has created a construc-
tive competition for resources among
local governments, inducing them to
improve services, local infrastructure,
and other aspects of the business envi-
ronment.
reduciNG elite caPture
third, insulation from special interests.Government officials should be im-
mune to conflicts of interests and pres-
sure from special interest groups which
in many developing countries often de-
rail institutional and policy reforms.
Because Chinese society has been
relatively equal, the government faces
less pressure from powerful inter-
est groups. The primary interest is in
promoting long-run economic growth
which helps ensure better incomes for
society as a whole.
Another strategy has been to search
for so-called Pareto-improving re-
forms: when no one is made worse off
and at least one person is made better
off. When reforms drastically change
the distribution of wealth or power in
society, the government must take a
stand and address challenges from the
less favored. Pareto-improving reforms
make it easier to mobilize broad public
support.
a hoPeful future
iN deScriBiNG eaSt aSia’S growth
experience, political scientists have pro-
posed the concepts of autonomous states
or developmental states, where the state
plays a role in macroeconomic planning.
But they are strong concepts because they
require that the state have certain intrin-
sic qualities. Ultimately, they lay the bur-
den on having visionary and committed
leaders. The Chinese experience has taken
a different approach. It treats the govern-
ment as made up of of rational individu-
als who need to be motivated to work for
the common good of society. Based on
this belief, a wide range of institutional
arrangements have been established to
incentivize government officials to be-
have as if they were disinterested when
they face conflicts of interests in society.
Although China’s application of the
Washington Consensus may be coun-
try specific, it contains a key principle
that others can learn from: namely, a
volitional pragmatism featuring con-
stant experimentation with a defined
objective to improve on the status quo.
Nothing is taken as permanent or per-
fect: the future is always envisioned as
better than today and incentives are
crafted to make that vision a reality.
Yang Yao is a Professor and Director of the China Center for Economic Research at Peking University in the Peoples Republic of China.
When reforms
drastically change
the distribution of
wealth or power
in society, the
government must
take a stand and
address challenges
from the less
favored.
A P R I L 2 0 1 1 31
totaled around $325 billion5 and remit-
tances $240 billion.6 These last two fig-
ures are likely underestimates. At best
IDNGOs tend to compete for far less
than 10 percent of all capital flows that
affect poverty, inequality, and injustice
in developing countries.
We need to think more deeply
about the other 90 percent. Corporate
social responsibility is a low-leverage
approach. We need to think differ-
ently, and bigger. For example, more
consistently influencing the basic rules
of Wall Street might pay huge divi-
dends. So too might helping multina-
tional corporations understand how
their supply chain and local policies can
benefit poorer and more marginalized
populations. Influencing governments
to unrig rules, regulate capital flows that
can severely impact the poorest, and be
more transparent about private sector
contracts and distribution of profits are
all things that merit greater attention.
And we need to probe for counterintui-
tive hybrids: is there a cross between a
hedge fund and a social justice organi-
zation, and if so, what is it? Where is the
intersection between trading commod-
ity futures and social justice? Can non-
profits help for-profits—themselves
working under restrictive and terribly
short-term metrics—find new ways to
reach the poor that is good for growth,
and good for equality, such as helping
to test low-margin products like crop
or weather index insurance for Sub-
Saharan farmers? Working with inter-
national capital, and understanding
capital markets, are not standard core
competencies among IDNGOs. They
probably need to become so.
Dr. Kent Glenzer is Oxfam America’s Director of Learning, Evaluation, and Accountability. He can be reached at [email protected].
endnotes
1 Bureau of Democracy, Human Rights, and Labor. 2009 Human Rights Report: Introduction. U.S. Department of State. http://www.state.gov/g/drl/rls/hrrpt/2009/frontmatter/135936.htm.
2 Rosalind Eyben. “The Big Push Back!” Posted on 11 October 2010 on Harvard
University’s Hauser Center blog. http://hausercenter.org/iha/2010/10/11/the-big-push-back/.
3 L. David Brown and Jonathan Fox. “Transnational Civil Society Coalitions and the World Bank: Lessons From Project and Policy Influence Campaigns.” The Hauser Center for Nonprofit Organizations and The Kennedy School of Government. Harvard University, October 2000. Working Paper No. 3.
4 See www.keystoneaccountability.org.uk.
5 Hudson Institute. “Executive Summary: A Comprehensive Guide to the Sources and Magnitude of Global Giving to the Developing World.” The Index of Global Philanthropy and Remittances 2010. Center for Global Prosperity. Washington, D.C.
6 Dilip Ratha, Sanket Mohapatra, K. M. Vijayalakshmi, Zhimei Xu. “Migration and Development Brief 3.” Development Prospects Group, Migration and Remittances Team, November 29, 2007. Washington, D.C.: World Bank.
iNterNatioNal deVeloPMeNt NGoS continued from page 19
D E V E L O P M E N T O U T R E A C H32
EDUCATION FOR EDUCATION...
A P R I L 2 0 1 1 33
Countries in the
developing world
were led to believe
that education
would put them
on the path to becoming
modern economies—and they
responded enthusiastically.
Education for All was a powerful
message that has led to a
veritable transformation of
schooling throughout the world.
School attainment (the years of school-
ing completed by individuals) expanded
dramatically. But many countries did not
reap the promised rewards of economic
success. While this has puzzled many, and
has led to skepticism about the role of hu-
man capital development, the solution to
the puzzle is evident. School attainment
frequently expanded without a commen-
surate increase in achievement or cognitive
skills, leading to unsatisfactory economic
outcomes. Ensuring that schooling en-
hances cognitive skills will require different
policies and institutions.
SKillS VerSuS Seat tiMe
iNVeStiNG iN huMaN caPital is good
policy, but execution has often been
faulty. Too frequently, students have
spent time in schools, but have not
learned what their counterparts in de-
veloped countries learned. As a result,
they have not become competitive in
the world economy. Take Peru: 60 per-
cent of students get at least nine years of
schooling, yet only 20 percent of these
reach the basic skill level of developed
countries. Or Ghana, where 37 per-
cent of students get at least nine years
of schooling, but only one in seven of
these reach the basic skill level of devel-
oped countries.1
It turns out that it is the skills that
count. National growth rates are closely
linked to achievement, and only if addi-
tional years of schooling lead to higher
achievement will those years be pro-
ductive.
Most policy makers cannot conceive
of education without achievement. Af-
ter all, schooling is about learning, and
more schooling must lead to some im-
provement—this is just common sense,
they say.
deMaNdiNG quality
there iS, howeVer, mounting evi-
dence to the contrary. High-quality
studies of demand-side programs in-
cluding fee reductions for students,
conditional cash transfers, and school
nutrition programs show that these
initiatives tend to increase school at-
tendance and attainment without in-
creasing learning (Hanushek 2008).
The problem is that these programs
are directed solely at school attendance
with no consideration of what goes on
in the schools.
On the other hand, when a school
program emphasizes achievement, such
as Kenya’s scholarship program for girls
(Kremer, Miguel, and Thornton 2009)
which has the right incentives in place,
learning does increase. Programs that
emphasize education for all while ig-
noring the quality dimension do not
serve the underlying purposes that mo-
tivate them (UNESCO 2005).
SuPPlyiNG quality
while deMaNd-Side approaches are
important, there is no doubt that the
supply of high quality schools is the
main constraint: indeed, demand-side
policies are unlikely to work if schools
do not provide the right kinds of learn-
ing experiences.
Formulating policies that ensure
high-quality schools has been difficult.
A policy maker’s first instinct is often to
expand resources:
reducing class sizes, ■
increasing the qualifications of ■
teachers,
providing additional administrative ■
support, and
generally sending more funds to ■
schools.
But research from both developed
and developing countries has consis-
tently shown that resource policies, by
themselves, are unlikely to lead to the
desired achievement outcomes. Per-
haps surprisingly, resource constraints
SPecial rePortS
OR FOR SKILLS? By eric a. haNuSheK
D E V E L O P M E N T O U T R E A C H34
SPecial rePortS
are not the most significant challenge
facing schools.
it’S aBout the teacher
the MoSt coNSiSteNt reSearch find-
ing is that teacher effectiveness is the
main determinant of high achievement.
This finding may not in itself be par-
ticularly surprising; more instructive,
however, is that effective teachers are
not always the most experienced, the
better trained, the more educated, or
the better paid. In fact, it has been im-
possible to identify the characteristics
of good teachers—those who produce
large learning gains in their students.
Because the characteristics of good
teaching are not well-described, it is im-
possible to identify and regulate the skills
and approaches that make for a good
teacher. This finding is important, be-
cause a common school improvement
is to require more qualified teachers. But
without a solid understanding of the
teacher attributes, experience, or train-
ing that lead to better performance in the
classroom, it is impossible to set qualifi-
cation standards for effective teachers.
autoNoMy, accouNtaBility, aNd choice
the alterNatiVe to reGulatioN is
to create incentives that will induce
schools to seek out effective teachers
and programs. Incentives, here, means
providing rewards (either extrinsic
or intrinsic) for better achievement
or, conversely, punishment for poor
achievement.2 Specifically, institu-
tional policies that establish test-based
accountability, that introduce school
choice and competition, and that pro-
vide for local autonomy in decision
making have been found to enhance
student outcomes.
Over the last two decades, many
countries have introduced account-
ability into their schools. The most
celebrated are the “league tables” in
the U.K. and the federal legislation un-
der No Child Left Behind in the United
States. Other countries have also start-
ed assessing student performance as
a basis for rewarding and penalizing
schools. Early evaluation of these pro-
grams points to their positive impacts
on student achievement.
These kinds of accountability poli-
cies can also be used to provide learning
incentives for students. In the previous-
ly mentioned Kenyan scholarship pro-
gram, students responded to rewards:
achievement rose when they were
promised a grant for further schooling
if they scored well on tests. Similarly,
Bishop (2006)) shows that promotion
and graduation standards for students
can directly influence performance.
Giving parents and students choices
about which school to attend can pro-
vide another set of incentives: as par-
ents select schools that provide better
learning opportunities, they put pres-
sure on the other schools that do not
attract large numbers of students.
Clearly, the power of choice depends
on the range of opportunities available,
and having a healthy and competitive
market is important. Further, because
the value of these incentives depends
on parents systematically choosing
high-quality schools, a good system of
student testing and accountability will
provide information on which to base
their selection.
fiGure 1: autoNoMy coMBiNed with accouNtaBility iNcreaSeS achieVeMeNt
Note: Performance relative to least effective policy (that is, school autonomy without central exams).Source: hanushek and woessmann (2011), based on woessmann (2005).
80
70
60
50
40
30
20
10
023.7
0.0
76.2
55.5
School autoNoMy oVer teacher SalarieS
Math PerforMaNce
ceNtral eXaMS
Noyes
No
yes
A P R I L 2 0 1 1 35
Establishing autonomy of decision
making at the school level is important
because local decision makers know the
specific schooling challenges that they
face and the local capacity to respond to
these challenges. At the same time, lo-
cal decision making must give priority
to achievement, otherwise local schools
might simply pursue policies that make
life more comfortable for school person-
nel, for instance. Here, again, account-
ability policies must feature prominently.
For example, the figure shows that letting
local schools set salaries actually lowers
achievement if there is no central test-
ing, while the combination of local salary
autonomy and accountability yields very
large gains in student performance.
Schools can provide the essential
cognitive skills that lead to a country’s
long-run economic growth, but simply
providing more resources without pay-
ing attention to incentives is unlikely to
lead to better performance.
Eric A. Hanushek is the Paul and Jean Hanna Senior Fellow in the Hoover Institution at Stanford University and a member of the Koret Task Force on K–12 Education.
references
Bishop, John H. 2006. “Drinking from the Fountain of Knowledge: Student Incentive to Study and Learn—Externalities, Information Problems, and Peer Pressure.” In Handbook of the Economics of Education, edited by Eric A. Hanushek and Finis Welch. Amsterdam: North Holland: 909–944.
Hanushek, Eric A. 2008. “Incentives for Efficiency and Equity in the School System.” Perspektiven der Wirtschaftspolitik 9, Special Issue: 5–27.
Hanushek, Eric A., and Ludger Woessmann. 2011. “The Economics of International Differences in Educational Achievement.” In Handbook of the Economics of Education, Vol. 3, edited by Eric A. Hanushek, Stephen Machin, and Ludger Woessmann. Amsterdam: North Holland: 89–200.
Hanushek, Eric A., and Ludger Woessmann. 2008. “The Role of Cognitive Skills in Economic Development.” Journal of Economic Literature 46, no. 3 (September): 607–668.
Kremer, Michael, Edward Miguel, and Rebecca Thornton. 2009. “Incentives to Learn.” Review of Economics and Statistics 91, no. 3 (August): 437–456.
UNESCO. 2005. Education for All: The Quality Imperative, EFA Global Monitoring Report. Paris: UNESCO.
Woessmann, Ludger. 2005. “The Effect Heterogeneity of Central Examinations: Evidence from TIMSS, TIMSS-Repeat and PISA.” Education Economics 13, no. 2 (June): 143–169.
endnotes
1 See Hanushek and Woessmann (2008) for the underlying discussion of the role of cognitive skills and for discussion of skill levels in developing countries.
2 The international evidence comes largely from developed countries but does include some developing countries that have participated in international testing; see Hanushek and Woessmann (2011).
D E V E L O P M E N T O U T R E A C H36
A P R I L 2 0 1 1 37
WHY A R E N ’ T C H I L D R E N L E A R N I N G ?By aBhiJit V. BaNerJee aNd eSther duflo
D E V E L O P M E N T O U T R E A C H38
We are five
years away
from 2015,
the year
when the
Millennium Development Goal of
universal education is supposed
to be achieved, and the school
attendance numbers do look
good. In many parts of both East
and West Africa, and almost all
of South Asia, school enrollment
has grown rapidly, with primary
school enrollment now exceeding
90 percent in many areas
(UNESCO 2009).
So why areN’t we celeBratiNG? The problem is that the children are
in school, but they are not learning. In
India, for example, nearly 60 percent of
children in grade 4 cannot read a sim-
ple story at grade 2 level, and 76 percent
cannot do simple division (Pratham
2005). In neighboring Pakistan, 80
percent of children in grade 3 cannot
read a grade 1 paragraph (Andrabi et
al. 2009). In Kenya, 27 percent of grade
5 children cannot read even a simple
paragraph (Uwezo 2010).
What’s keeping children from learn-
ing? Or to reverse the question, what
enables them to learn? In this article, we
offer a reading of the recent evidence,
primarily but not exclusively from ran-
domized trials, that, we hope, contrib-
utes to an answer.
the firSt SteP iS ShowiNG uP
eNSuriNG that childreN have access
to schools and actually spend time there
does matter. The data clearly show that
children who spend more time in school
have better life outcomes (for example,
Duflo 2001, Spohr 2003). The trouble
is that while being enrolled is obviously
a necessary condition for this, there are
many reasons why enrollment by itself
may not translate into much more ef-
fective schooling. The school year in
India is only about 140 days, and each
school day often lasts only 3 hours. By
contrast, children in most OECD coun-
tries spend between 180 and 200 days
in school, with longer school days of 6
to 8 hours.
...aNd teachiNG
MoreoVer, being in the classroom is
less useful if the teacher is not there.
In 2002 and 2003, the World Absentee-
ism Survey of six countries, led by the
World Bank, concluded that in Bangla-
desh, Ecuador, India, Indonesia, Peru
and Uganda, teachers miss one day of
work out of five on average, and the ra-
tio is even higher (one in four) in India
and Uganda. Their data from India also
find that teachers who are in school do
not necessarily teach—they read the
newspaper, drink tea, or chat with their
colleagues. Overall, teachers spend less
than half the time they are supposed to
be teaching actually doing so (Chaud-
hury et al. 2006).
iNceNtiVeS helP
there iS Not eNouGh PreSSure on
teachers to teach. When such pressure
is brought to bear, they do teach more,
and students’ test scores improve, sug-
gesting that students can indeed be
taught (something teachers often ques-
tion), and that teachers know how to
teach (something education experts,
who tend to insist on the need for train-
ing, sometimes doubt). A randomized
evaluation in nonformal schools in
Rajasthan, India found that linking
teacher compensation to attendance,
by verifying attendance with objec-
tive impersonal means (such as photos
taken with tamper-proof date and time
stamps), was effective. Teacher absenc-
es fell by half, from 42 percent to 21
percent. And, students learned more:
test scores rose by 0.16 standard de-
viations, and children were 50 percent
more likely to pass the exam allowing
them to join formal schools (Duflo et
al. 2010a). Another evaluation in India
found that basing teacher pay on stu-
dent performance was highly effective
at improving student learning (Mu-
ralidharan and Sundararaman 2009).
In Kenya, teachers hired on short con-
tracts, under supervision by the school
committee, were much more likely to
be present then regular teachers, and
their students had higher test scores
than those of regular teachers, even
though the contract teachers had no
prior teaching experience (Duflo et al.
2010b).
SPecial rePortS
A P R I L 2 0 1 1 39
PriVate SchoolS do Better, But Not By a huGe MarGiN
aNother way to looK at incentives is
to compare children in private schools
with children in government schools. In
Colombia, students who won a lottery
for a private school voucher were 15
percent more likely than losers to attend
private school, and scored significantly
higher on a standardized test (Angrist
et al. 2002). In Pakistan, students in pri-
vate schools increase average achieve-
ment by 0.25 standard deviations each
year, compared to students in public
school. Self-selection is obviously an is-
sue here, but Sonalde Desai and others
try to deal with it by comparing siblings
in India who belong to the same family.
They found that, compared to their sib-
lings in public schools, primary school
age children attending private school
score 0.31 standard deviations higher
in reading and 0.22 standard deviations
higher in arithmetic. This likely re-
mains an overestimate of the impact of
private school in India, if parents send
the most able children to private school
or if they provide them with other ad-
ditional inputs.
The net effect of private school is
thus not that much higher than the
effect of improving incentives in the
NGO (nongovernmental organization)
schools in Rajasthan. Indeed, part of
the effect of private school may be due
to the fact that private school teachers
attend school more often: using the
effect of teacher attendance estimated
from the Rajasthan study combined
with the estimate from the World
Bank’s study on absenteeism that pri-
vate school teachers in India are 8 per-
centage points less likely to be absent
than public school teachers in the same
village, it is possible to account for
roughly half to a third of the estimated
overall gain in test scores from private
schooling just by virtue of the fact that
private school teachers are more likely
to be at work. The rest may be the result
of teacher effort while in school, or bet-
ter pedagogy.
But iNceNtiVeS are oNly Part of the Story
iN the 2000s, Pratham, a large NGO
in India, trained balsakhis (children’s
friends) to provide remedial education
to the lowest performing 3rd and 4th
graders in Vadodara and Mumbai mu-
nicipal schools. Balsakhis were mostly
local high school girls with a week’s
training who were paid a relatively
low salary of 1,000 Rupees per month,
($62.50, at purchasing power parity).
D E V E L O P M E N T O U T R E A C H40
A P R I L 2 0 1 1 41
The primary focus was to teach basic
literacy and numeracy skills to students
who were lagging behind. After one
year, these students’ test scores were a
very large 0.6 standard deviations high-
er than those of similarly low achieving
children in comparison schools (Baner-
jee et al. 2007), and students initially at
the bottom of the class scored a whole
standard deviation higher in the pro-
gram schools.
Another evaluation of a Pratham
program measured the results of a vol-
unteer teacher program in Jaunpur,
India, where school attendance is only
50 percent. More than 60 percent of the
children aged 7 to14 could not read and
understand a simple, first-grade level
story. Pratham recruited and trained
local volunteers in 65 randomly select-
ed villages to conduct evening “camps”
for two months. The volunteers typi-
cally had a high school education and
received only a week of training, but the
children benefited from these camps. A
year later, children who initially could
not read anything were 60 percentage
points more likely to decipher letters
than children in comparison schools.
Those who initially could already deci-
pher letters were 26 percentage points
more likely to be able to read and un-
derstand a story (Banerjee et al. 2010).
In another program, in Bihar, In-
dia, government schoolteachers re-
ceived special training from Pratham
to conduct summer school, focusing
on basic skills. Participating children
showed large learning gains. On aver-
age, they tested 0.2 standard deviations
higher than children in the compari-
son group—comparable to the private
school effect—even though the sum-
mer school program lasted only four
weeks and less than one in five children
participated in the program, so the ef-
fect on those who did would have to be
five times larger or about one standard
deviation(JPAL, 2009).
A fourth study, also with Pratham,
shows that even children who have
mastered the basics can benefit from
these types of programs though the ef-
fect may be smaller. In Bihar, India, an-
other supplemental education program
was targeted at all children, including
those who could already read. Pratham
provided educational materials and
trained volunteers to use them. The
evaluation suggests that children who
were taught by these volunteers saw
large gains as well (0.15 standard devia-
tions in math and 0.16 in language for
children in grades 3 to 5) [JPAL 2009].
However, when Pratham trained gov-
ernment school teachers in these tech-
niques, rather than volunteers, and the
teachers were asked by the government
to use these techniques during the reg-
ular school year, we see no evidence of
similar gains.
it’S PuzzliNG
firSt, MaNy of theSe GaiNS seem
large relative to the gains from private
school. Why don’t the private schools
adopt Pratham-style pedagogical tech-
niques to improve their performance,
since it takes only a week’s training?
Second, why do government school
teachers use the Pratham techniques
during the summer, but not during the
school year? Third, why did parents and
children not respond more enthusiasti-
cally to the offer of Pratham’s remark-
ably effective remedial programs? In
Jaunpur only 8 percent of the children
(13 percent of those who could not
read) attended the evening remedial
sessions. With the summer schools, the
corresponding number was 18 percent.
educatioN aS a lottery
we ProPoSe a Very SiMPle theory
to account for all of this, which we call
the education-as-lottery hypothesis.
Surveys of parental aspirations suggest
that the average semieducated or un-
educated parent sees education mainly
as a way to secure a government or
other salaried job. For this reason, they
think that education is only worthwhile
if their child can get through the gate-
keeping public exams that restrict access
to these kinds of jobs. All the evidence
suggests that they are probably wrong.
That is, while the evidence suggest that
the return to an extra year of educa-
tion in developing countries is more or
less constant, parents believe that the
returns are concentrated at the higher
levels of education: in Morocco for ex-
ample, parents believe that each year
of primary education increases a boy’s
earning by 5 percent, but each year of
secondary education by 15 percent.
The pattern was even more extreme
for girls: parents believed each year of
primary education was worth almost
nothing, 0.4 percent. But each year of
secondary education was perceived to
increase earnings 17 percent. As a re-
sult they believe that education is much
more of a lottery than it really is.
Several implications follow from
this hypothesis:
Given the winner-take-all nature of
education, it is very important to identify
the child who has the best chance of be-
ing a winner as early as possible and put-
ting all the resources behind him or her.
D E V E L O P M E N T O U T R E A C H42
This is the child who gets sent to private
schools, and we often see parents refer-
ring to her as the only smart child in the
family. In Pakistan, children perceived by
their parents as more intelligent are four
times more likely to be enrolled in private
schools (Andrabi et al. 2009, p. 100). In
Burkina Faso, a study found that adoles-
cents were more likely to be enrolled in
school when they scored high on a test
of intelligence, but they were less likely
to be enrolled in school when their sib-
lings had scored high. The result is that
many children (perhaps a majority) get a
signal from their parents relatively early
in their lives (the private school/public
school choice, for example, often happens
at the primary school level) that they are
likely to be unsuited to education. It is
no wonder that after this, many of them
are mostly going through the motions in
school, waiting for when they can drop
out. This would explain why, for example,
child attendance rates in India are 70 per-
cent, worse even than teacher attendance
(ASER 2005).
This tendency to pick winners early
and focus on them would explain why
parents are not very excited by remedial
education. If their child needs remedial
education, they feel, he is probably be-
yond help.
Because parents are focused on the
lottery, it is no surprise that the edu-
cation system gets designed to reflect
those preferences. Since the bet is on the
highest performing children, the focus
in class is always to cover the whole syl-
labus even if the average child is totally
lost. Think of those fourth graders who
cannot read but get geography and his-
tory and science thrown at them. The
whole system conspires against them
on this—India’s Right to Education
Bill makes finishing the syllabus a legal
requirement. In Kenya, providing ad-
ditional textbooks benefited only those
students who were already at the top of
their class since the textbooks were far
too advanced to be useful to the rest of
the children (Glewwe et al. 2007).
This explains why teachers do not use
the Pratham techniques in class, since
those techniques focus on helping the av-
erage child master the basic concept bet-
ter and distract from “finishing” the sylla-
bus. On the other hand, during summer
school, they were there explicitly to help
the children to catch up and therefore
willing to do what Pratham suggested.
What is true for government
schools is probably even more so for
private schools, which depend for their
existence on pleasing the parents. Why
would we expect them to use techniques
that are meant for the average child?
the eVideNce for our hyPotheSiS?
a Study By traNG NGuyeN is highly
consistent with this view. She finds that
in Madagascar some parents consider-
ably overestimate the return to educa-
tion and some substantially underesti-
mate it, though on average they get it
about right. However, they dramati-
cally overestimate (by a factor of two)
the chance that those who graduate
A P R I L 2 0 1 1 43
from school will get a government job,
making education more of a lottery
(Nguyen, 2008).
Nguyen also finds that when par-
ents who underestimate the returns are
given information about actual returns
to education, their children perform
much better: their test scores improved
by 0.37 standard deviations. An earlier
study by Jensen also finds that in the
Dominican Republic giving students
information about the returns to edu-
cation reduced the chance of dropping
out (Jensen, 2010b). More recently, a
randomized evaluation in three North-
ern States in India (also by Jensen)
found that once parents became aware
of the high-paying jobs available to
educated young women through a re-
cruitment drive for call centers, they
were more likely to keep their daugh-
ters in school. In other words, this
convinced them that investing in their
daughters was a better lottery ticket
than they thought (Jensen 2010a). On
the other hand, interestingly, this study
also found that in response to the drive
parents reduced educational invest-
ment for boys they wanted to keep with
them on the farm, and they increased
the education of boys they wanted to
send to the city.
A more indirect but compelling piece of
evidence comes from a randomized evalu-
ation of a tracking program in Kenyan gov-
ernment schools. Extra teachers were hired,
and classes were split to allow for smaller
class sizes. Some randomly selected classes
were divided into a more advanced and a
less advanced class based on the children’s
performance, while other classes were split
at random—what is sometimes called
tracking. Children in the tracked classrooms
(both those in the advanced and the less ad-
vanced class) learned more than children
in classes that were split without tracking,
and these gains persisted even one year af-
ter the program ended and all the students
were put back in the same class (Duflo et al.
forthcoming). The children in the less ad-
vanced tracked classes benefitted presum-
ably from the fact that, although the teacher
was probably still teaching to the top of the
(new) class, they were now nearer the top.
what doeS thiS MeaN for educatioN Policy?
a ProPer aNSwer to this question
goes beyond the scope of this article. A
few remarks however seem warranted.
First, there is now huge pressure all over
the world to hire more teachers, but if
we are right, just cutting class size with-
out changing pedagogy will not work.
This is indeed what was found in India
in the 1990s (Banerjee et al. 2005), and
also in Kenya more recently (Duflo et
al. 2010b).
Second, because the long-term incen-
tives are distorted by the assumption of
a lottery, creating short-term rewards for
educational success are all the more im-
portant. A program in Kenya that offered
girls who scored in the top 15 percent of
an exam a scholarship for the next year
worth about twenty dollars, not only got
the girls to do much better but also put
pressure on the teachers to work harder
(to help the girls), which meant that boys
did better too, even though there was no
scholarship for them (Kremer et al. forth-
coming). A computer-based teaching
program that rewards successful learning
by allowing kids to play games, should
also work well in this environment, be-
cause, apart from everything else, it is a
way to create short-term incentives. This
is in fact what was found in Vadodara,
where a program that allowed pairs of
children to play math learning games for
two hours a week generated gains of 0.39
standard deviations, and those gains were
obtained at all levels of the distribution of
test scores (Banerjee et al. 2007).
The ultimate solution, however, has
to involve a wholesale attitude shift by
everyone in the system from parents to
educators. The good news is that if this
shift takes place, very large gains can
follow.
Abhijit V. Banerjee is the Ford Foundation International Professor of Economics at the Massachusetts Institute of Technology (MIT). Esther Duflo is the Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics at MIT. Both authors are founders and directors of the Abdul Latif Jameel Poverty Action Lab (J-PAL) at MIT.
references
Andrabi, Tahir, Jishnu Das, Asim Khwaja, Tara Vishwanath, and Tristan Zajonc. 2009. “Pakistan Learning and Educational Achievement in Punjab Schools (LEAPS): Insights to Inform the Education Policy Debate.” Washington, D.C.: The World Bank.Angrist, Joshua, Eric Bettinger, Erik Bloom, Elizabeth King, and Michael Kremer. 2002. “Vouchers for Private Schooling in Colombia: Evidence from a Randomized Natural Experiment.” The American Economic Review, December: 1535–1558.
Banerjee, Abhijit, Rukmini Banerji, Esther Duflo, Rachel Glennerster, and Stuti Khemani. 2010. “Pitfalls of Participatory Programs: Evidence from a randomized evaluation in education in India.” American Economic Journal: Economic Policy 2 (1): 1–30.
D E V E L O P M E N T O U T R E A C H44
Banerjee, Abhijit, Shawn Cole, Esther Duflo, and Leigh Linden. 2007. “Remedying Education: Evidence from Two Randomized Experiments in India.” Quarterly Journal of Economics 122(3):1235–1264.
Banerjee, Abhijit, Suraj Jacob and Michael Kremer, with Jenny Lanjouw and Peter Lanjouw. 2005. “Moving to Universal Education: Costs and Trade offs” (mimeo). Cambridge, MA: Massachusetts Institute of Technology.
Chaudhury, Nazmul, Jeffrey Hammer, Michael Kremer, Karthik Muralidharan, and F. Halsey Rogers. 2006.”Missing in Action: Teacher and Health Worker Absence in Developing Countries.” Journal of Economic Perspectives 20(1): 91–116.
Chou, Shin-Yi, Liu, Jin-Tan, Grossman, Michael and Ted Joyce. 2010. “Parental Education and Child Health: Evidence from a Natural Experiment in Taiwan.” American Economics Journal: Applied Economics 2(1):33–61.
Desai, Sonalde, Amaresh Dubey, Reeve Vanneman and Rukmini Banerji. 2009. “Private Schooling in India: A New Landscape.” India Policy Forum Vol. 5: 1–58. Suman Bery, Barry Bosworth and Arvind Panagariya, eds. New Delhi: Sage.
Duflo, Esther, Pascaline Dupas, and Michael Kremer (forthcoming). “Peer Effects, Teacher Incentives, and the Impact of Tracking: Evidence from a Randomized Evaluation in Kenya.” American Economic Review. See also NBER Working Paper. W14475. Cambridge, MA: National Bureau of Economic Research.
Duflo, Esther, Pascaline Dupas and Michael Kremer. 2010. “Pupil-Teacher
Ratio, Teacher Management and Education Quality” (mimeo). Cambridge, MA: Massachusetts Institute of Technology.
Duflo, Esther, Rema Hanna, and Stephen P. Ryan. 2010. “Incentives Work: Getting Teachers to Come to School” (mimeo). Cambridge, MA: Harvard University and Massachusetts Institute of Technology.
Duflo, Esther. 2001. “Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from an Unusual Policy Experiment.” American Economic Review 91(4): 795–813.
Glewwe, Paul, Michael Kremer, and Sylvie Moulin. 2007. “Many Children Left Behind? Textbooks and Test Scores in Kenya.” NBER Working Paper. No. 13300. Cambridge, MA: National Bureau of Economic Research.
J-PAL South Asia. 2009. Evaluation of Pratham’s Read India: July 2009 Report to Bihar Government. www.povertyactionlab.org/south-asia.
Jensen, Robert. 2010a. “Economic Opportunities and Gender Differences in Human Capital: Experimental Evidence for India.” NBER Working Paper. W16021. Cambridge, MA: National Bureau of Economic Research.
. 2010b. “The (Perceived) Returns to Education and the Demand for Schooling.” The Quarterly Journal of Economics 125(2): 515–548.
Kremer, Michael, Edward Miguel, and Rebecca Thornton. “Incentives to Learn” (forthcoming). Review of Economics and Statistics. Cambridge, MA: Massachusetts Institute of Technology Press.
Muralidharan, Karthik and Venkatesh Sundararaman. 2009. “Teacher Performance Pay: Experimental Evidence from India.” NBER Working Paper 15323. Cambridge, MA: National Bureau of Economic Research.
Nguyen, Trang. 2008. “Information, Role Models and Perceived Returns to Education: Experimental Evidence from Madagascar.” MIT Working Paper. Cambridge, MA: Massachusetts Institute of Technology.
OECD (Organisation for Economic Co-operation and Development). Key Indicators on Development. www.oecd.org/document/55/0,3746,en_2649_37455_46349815_1_1_1_37455,00.html.
Pratham Annual Status of Education Report. 2005. Final edition. scripts.mit.edu/~varun_ag/readinggroup/images/1/14/ASER.pdf.
Spohr, Chris. 2003. “Formal Schooling and Workforce Participation in a Rapidly Developing Economy: Evidence from ‘Compulsory’ Junior High School in Taiwan.” Journal of Development Economics 70(2): 291–327.
UNESCO (United Nations Educational, Scientific, and Cultural Organization). 2009. EFA Global Monitoring Report: Overcoming Inequality: Why Governance Matters. www.unesco.org/new/en/education/themes/leading-the-international-agenda/efareport/reports/2009-governance.
Uwezo. 2010. “Are Our Children Learning? Annual Learning Assessment, Kenya 2010.” http://www.uwezo.net.
A P R I L 2 0 1 1 45
worldwide, labor has become nearly twice as productive over the last 20 years— and even more so in the developing countries, with asia in the lead.
labor productivity is critical to economic success; and productivity growth has three main sources:
caPital deePeNiNG:• the increase in capital per worker, with ict particularly important. capital deepening requires improving the business environment to enhance investors’ confidence and make investment opportunities more attractive.Growth iN laBor quality:• the increase in the proportion of workers with high levels of education and experience, and total factor ProductiVity (tfP) •Growth: reorganizing production processes using more and better technology and management.
Policies to boost productivity growth must be strategic and must foster simultaneous improvements in all three areas. this means:
investing in human capital and •improving technology for better access to information,making education more accessible •and affordable, and investing in ict as a strategy of •choice for boosting economic growth and competitiveness.
Note: Most of the policy options are adapted from oecd (2008). the authors use the “+” sign to express their own judgment of the expected effect of each policy option:
+ + + = strong effect+ + = significant effect + = some effect
how ict Policy coNtriButeS to laBor ProductiVitycoNtriButeS to…
PolicieS caPital deePeNiNG
laBor quality
tfP Growth
ict iNfraStructure, especially broadband such as internet access
+ + + + +
coMPetitioN aNd reGulatioN to improve quality and reduce costs of ict products and services
+ + + + ++
e-GoVerNMeNt for transparency, efficiency, and effectiveness. for example, e-procurement.
+ + + + +
ProMote ict-eNaBled SerViceS aNd coNteNt deVeloPMeNt to foster ict use across sectors, organizations, and households for better decision making*
+ + ++ ++
ProMote ict-eNaBled SerViceS aNd coNteNt deVeloPMeNt to foster technology diffusion to business*
++ + + + +
ict for educatioN such as online courses and other distance learning
+ + + + +
educatioN for it deVeloPMeNt aNd MaiNteNaNce
+ + + +
techNoloGy aNd laBor ProductiVity
Source: dale Jorgenson and Khuong Vu (2010). “Potential Growth of the world economy.” Journal of Policy Modeling, 32: 615–631.
* Government ict policy should follow market principles and encourage the participation of the private sector as much as possible. enhancing the benefits that users can reap from ict-enabled services and products is more effective than providing them with subsidies.
D E V E L O P M E N T O U T R E A C H46
CITIES ON THE PROWLBy tiM caMPBell
A P R I L 2 0 1 1 47
CITIES ON THE PROWL
D E V E L O P M E N T O U T R E A C H48
Cities in the modern
world are beginning
to share some
features with
the city-states
of millennia past. Now, as
then, cities are important,
even critical, to economic
development. Unlike the walled
cities that harbored flourishing
trade in medieval Europe, today,
cities by the thousands all
around the world are looking
outward in search not of silk
and spices, but rather sources
of finance, global talent, and
most of all, good ideas. But
the search for knowledge isn’t
always easy.
a few weeKS aGo, my colleague Neal
Peirce chided the short-sighted carping
of voters who see in mayoral travel only
junkets, even if they are for purposes of
study. My recent research for a forth-
coming book shows that the 500 larg-
est cities on the planet travel often, on
the order of thousands of study visits
annually, and they visit a wide range of
host cities which are selected carefully,
so that visitors can acquire valuable
knowledge to speed up improvements
back home.
Not oNly for the rich
a SurVey of 50 larGe citieS around
the world revealed that cities visit re-
peatedly and continuously every year,
often more than 10 times per year. They
tend to choose visit partners that are
like themselves, the rich tend to visit the
rich, Stockholm visits London, London
visits New York. But the poor—cities
like Ho Chi Minh City, Vietnam; Dakar,
Senegal; and Tabriz, Iran—visit rich
and poor in equal shares. And though
visitors often select similar-sized hosts,
even the megacities more frequently
visit their cousins in the one to five mil-
lion population range than their sister
megacities. Perhaps something about
that moderate city size enables new-
comers to get their arms around the
whole thing in a short time.
SMart citieS
they Go BecauSe in a globalized econ-
omy, cities need to work harder to make
a living. They no longer have the pro-
tections of trade regimes and the com-
forts of regional isolation. In today’s
world, money moves fast, even faster
than trade deals, and cities have learned
that they must keep up with their prin-
cipal competitors—other cities. If they
want those inward investments, cities
must strive to be on top of their game.
They have to make an attractive place
for global talent and to deliver well-
connected and efficiently functioning
infrastructure.
why do they Go?
But alSo, city leaders go because they
have short terms of office and they
know that learning from others is
cheaper and less risky than pursuing
untested ideas that may end up in false
starts. Good practices from successful
cities offer shortcuts. Cape Town and
Buenos Aires drew on the waterfront
renewal experience of Baltimore and
London. Da Nang took lessons from
Japan in conversion and regulation of
urban land. Regional centers in Ra-
jastan in the north of India are follow-
ing lessons of infrastructure expansion
and business readiness that their peer
cities developed in central and south-
ern India. Amman, Jordan is studying
the many experiments in decentralized
governance from other parts of the
world, even outside the Middle East.
City-to-city exchange was ranked by
survey takers as by far the most effec-
tive way to learn. Visitors can actually
see how things work.
what do they learN?
half of the citieS taking part in the
survey were reformers (by their own
reckoning, they have made “many signifi-
cant reforms”), and they have distinct in-
terests compared to other cities. Reform-
ers showed most interest in transport and
know-how in fostering local economic
development. The search for transport
solutions reflects the well-known spread
SPecial rePortS
A P R I L 2 0 1 1 49
of Curitiba’s bus rapid transit (BRT) sys-
tem to other cities in Brazil, then to Bo-
gota, Colombia, and on to Mexico City.
Currently BRT is reaching Asia. It is also
why dozens of other cities, Portland is a
good example, visit Amsterdam and Co-
penhagen: visitors see demonstrated in
those northern European cities the power
of integrating all forms of movement—
walking, bicycles, automobiles, busses,
and trams—into a single transit system.
The nonreformers in the survey are
those that had made few or no reforms.
Their priorities were spread more or
less evenly across a spectrum of topics,
including finance, urban planning, ur-
ban renewal, and basic utilities. Perhaps
the reformers feel they had this ground
already covered. Both reformers and
nonreformers are concerned with the
big and growing question for all cities
on the planet: how to govern sprawling
metropolitan areas. Cities on the prowl
for answers to the metro puzzle are un-
likely to return home fully satisfied.
Great idea! Now what?
acquiriNG New KNowledGe is only
half the battle. How the knowledge
is validated and applied to problems
back home is a whole other drama. Our
research has also discovered individ-
ual styles in the way cities handle new
knowledge.
Trust and a learning environment
seem to be the main ingredients in the
alchemy of internal processing that is
needed in a city to adapt knowledge
successfully to local circumstances.
Seattle’s Trade Development Alliance
(TDA) has developed this understand-
ing and internalized the practice of re-
lationship building into its study tours.
The TDA involves a range of business,
government, and independent leaders
in each and every mission. Over nearly
20 years of missions and many repeat
participants, the TDA has achieved a
measurable degree of bonding among
its civic leadership.
truSt aMoNG PeerS
leaderS iNterViewed in a half doz-
en cities over the past 18 months also
point to trust and bonding. These are
the key elements in adapting “import-
ed” knowledge to solve problems. Even
though they may not know it, smart
cities create comfort zones of informal,
internal networks of trust. One man-
agement guru calls this zone the “ba,”
a climate conducive to exchange of
shared values. With the right climate,
civic leaders are able to reach consen-
sus, and their reactions and policy ini-
tiatives have greater coherence and are
achieved more speedily.
Our research shows that the prowl-
ing of cities is continuous, it is grow-
ing, and the arrangements for visits
are becoming more sophisticated, with
many nongovernmental organizations
(NGOs) popping up to help match
cities up, much like a dating service
matches couples. A wise policy envi-
ronment and enlightened public sup-
port could help cities create the right
conditions for innovation, even while
they are on the prowl.
Tim Campbell is Chairman of the Urban Age Institute in Washington, D.C.
This article is adapted from the author’s new book Beyond Smart Cities—How Cities Network, Learn, and Innovate, forthcoming in January 2012 from Earthscan Publications, Ltd.
See related papers and articles at www.urbanage.org.
Bus rapid transit (Brt) system in curitiba, Brazil.
D E V E L O P M E N T O U T R E A C H50
SPecial rePortS
THE GREENINGOF DEVELOPMENT
Solar energy is used to light a village shop in Sri Lanka.
By carlo carraro aNd eMaNuele MaSSetti
A P R I L 2 0 1 1 51
N O G R O W T H W I T H O U T E N E R G Y .
Economic
development
increases the
demand for energy.
This is true for
countries at all income levels,
although as economic growth
progresses, the demand tends
to increase more in the low- and
middle-income countries than
in high-income ones. But energy
remains a key ingredient for
economic growth at all stages of
development.
with 5.4 BillioN PeoPle living in low-
and middle-income countries—out of
a global population of 6.5 billion—en-
ergy demand will very likely continue
to grow at a fast pace for many years to
come. Figure 1 shows how energy use
and gross domestic product (GDP) per
capita were related, in different groups
of countries, from 1960 until 2005.
This large increase in energy con-
sumption will pose immense challeng-
es as the world seeks to gain access to
energy sources, achieve energy security,
and arrive at solutions to the inevitable
negative environmental consequences:
especially global warming, which will
increase if the amount of carbon diox-
ide emissions per unit of energy (the
carbon intensity of energy) does not
decline sharply.
what aBout the eNViroNMeNt?
we See Very little differeNce be-
tween the carbon content of energy
in high-income and low- and middle-
income countries. The carbon intensity
of energy has decreased on average by
only 0.5 percent per year in high in-
come countries, and remained stable
in low- and middle-income countries
until the recent rapid expansion of
coal burning power plants in emerging
economies. So that, overall, there was a
global increase between 1998 and 2005.
Economic models confirm that without
the right policies the current trend will
likely persist. Figure 2 shows past and
future trends of carbon emissions in
relation to different stages of economic
development. (EMF22 2009; Clarke et
al 2009).
A middle-of-the-road projection
shows that total primary energy sup-
ply will increase by 80 percent by 2050,
and CO2 emissions per capita will rise
to five times higher than the targets set
at the G8 Summit in L’Aquila in 2009.
So the historic pattern that links emis-
sions to economic development ur-
gently needs to be reversed. The fight
against global warming will require no
less than a revolution in how we use en-
ergy (energy efficiency) and in our mix
of energy sources (reducing the carbon
intensity of energy).
creatiNG New toolS...
oNly a Shift to climate-friendly tech-
nologies, prompted by the right in-
centives, will change the relationship
between emissions and economic pros-
perity. Several recent studies show that
although better energy efficiency would
at first lead to cheap emissions reduc-
tion, the carbon intensity of energy
must eventually fall to nearly zero if the
goal is to cut total emissions by 80 per-
cent or more. In particular, the power
sector would have to adopt an optimal
mix of carbon-free electricity genera-
tion technologies: wind, photovoltaic,
nuclear, and coal power plants with
carbon capture and storage—in differ-
ent proportions according to techni-
cal feasibility and political constraints.
Electric cars and second generation
biofuels are the most attractive options
to reduce emissions in the transport
sector (Bosetti et al 2009).
...aNd PayiNG for theM
our StudieS haVe ShowN that we need
to invent new tools to remedy the global
warming problem, otherwise the cost of
stabilizing emissions at safe levels will
D E V E L O P M E N T O U T R E A C H52
SPecial rePortS
be extremely high. Carbon taxes or cap-
and-trade systems can help by putting
a price on the damage that emissions
cause to society, thereby discouraging
emissions and making alternative en-
ergy sources relatively more economi-
cally attractive. We believe the price of
carbon should be uniform in all sectors
and countries so that emissions are re-
duced and not simply relocated; cred-
ible in the long-term in order to trigger
a change of expectations and invest-
ments in the present since investments
in the energy sector are typically long
term and highly dependent on expec-
tations about future prices and policy
scenarios; and consistent over time to
trigger the right expectations.
SuBSidiziNG a Greater Good
iN SoMe caSeS, subsidies may need to
complement carbon taxes or cap-and-
trade programs. Large-scale projects in
the energy sector are costly and might
require a partnership among several
governments. Public sector support
may also be needed to finance projects
with social returns that are higher than
monetary returns or when uncertain-
ties on the return to investments might
not be resolved by price signals.
In these cases, governments will have
to support research and development
(R&D). An easy solution for financing
R&D subsidies would be to use revenues
from carbon taxes or from auctioning
emissions permits. Recent estimates show
that in the early years, about 75 percent
of carbon revenues would be enough to
cover all additional expenditure in clean
energy R&D by OECD economies. In
later years, the share would decline to a
modest 5 percent, mainly because the
carbon price will increase substantially
over time as a result of the increasing
stringency of the greenhouse gas (GHG)
stabilisation target (Bastianin, Favero and
Massetti 2010).
There is concern that expanding in-
vestment in energy R&D will crowd out
R&D investments in other sectors. We
believe that these concerns are justified
in the very short run, but in the long
term we expect that it will adjust as a
larger supply of scientists and labora-
tories will be attracted into the R&D
market (Carraro, Massetti and Nicita
2009).
ShootiNG for the MooN
the traNSitioN to a high level of R&D
investments in clean energy needs to be
fast. Our estimates show that to drive
the cost of GHG mitigation down to a
minimum level, R&D spending would
have to jump from 0.02 percent of glob-
al GDP to about 0.12 percent within a
few years. This fast expansion of R&D
spending is challenging not from a fi-
nancial point of view but because of the
speed of the transition to a new equi-
librium. An enormous but not unprec-
edented effort is needed. In the 1960s,
for example, the NASA Apollo Space
Program used US$ 98 billion over 13
years (around US$ 7.5 billion per year).
Investment at the peak of the program
was 0.4 percent of national GDP. Only
this level of commitment can win the
global warming challenge.
No free luNch
the reSearch fiNdiNGS presented in
this article clearly show that economic
growth and energy consumption are
tightly intertwined: higher affluence
Note: historical data from the world Bank. energy use (kilograms of oil equivalent per capita). high-income economies are those in which 2008 gross national income (GNi) per capita was $11,906 or more. GdP per capita, market exchange rates, constant 2000 uS$.
6,0001979
5,000
4,000
3,000
2,000
1,000
05,0000 1,0000 15,000 20,000 25,000 30,000
ener
gy u
se p
er c
apita
(k
g of
oil
equi
vale
nt)
GdP per capita1960-2005 (constant 2000 uS$)
fiGure 1: ecoNoMic deVeloPMeNt aNd eNerGy uSe at the GloBal leVel
world
high income
low & Middle income
A P R I L 2 0 1 1 53
levels are generally characterized by
higher per capita energy consumption.
Meeting the growing needs of large
developing countries for cheap and se-
cure energy sources is in itself a daunt-
ing task. But the real challenge is to
minimize the negative environmental
effects that doubling energy consump-
tion will cause, particularly global
warming. Only large-scale technologi-
cal change can de-link emissions and
economic prosperity.
Our analysis shows that R&D
spending in new energy technologies
should increase at least five-fold in the
next two decades if we want to drive
energy emissions to zero. A credible,
long-term, consistent carbon price ap-
pears to be the best tool to move invest-
ments toward clean energy research;
but in certain circumstances govern-
ments may need to step in and support
research with public funds. In the face
of tight public budgets, policy makers
would only need to use a fraction of the
carbon taxes or revenues from the auc-
tioning of emissions permits to finance
innovation.
Carlo Carraro is Professor of Environmental Economics and President of the Università Ca’ Foscari Venezia. He is also Chairman of the Scientific Advisory Board of the Fondazione Eni Enrico Mattei.
Emanuele Massetti is Senior Researcher at the Fondazione Eni Enrico Mattei and at the Euro-Mediterranean Centre for Climate Change ([email protected]).
This article is based on research being carried out by the Sustainable Development Programme at the Fondazione Eni Enrico Mattei and by the Climate Impacts and
Policy Division of the Euro-Mediterranean Centre for Climate Change, with financial support from the Italian Ministry of the Environment and the European Commission-funded PASHMINA project.
references
Bastianin, A., A. Favero and E. Massetti. 2010. “Investments and Financial Flows Induced by Climate Mitigation Policies.” FEEM Working Paper no. 13.
Bosetti, V., C. Carraro, E. Massetti, A. Sgobbi and M. Tavoni. 2009. “Optimal Energy Investment and R&D Strategies to Stabilise Greenhouse Gas Atmospheric
Concentrations.” Resource and Energy Economics, 31(2): 123–137.
Carraro, C., E. Massetti and L. Nicita. 2009. “How Does Climate Policy Affect Technical Change? An Analysis of the Direction and Pace of Technical Progress in a Climate-Economy Model.” The Energy Journal, Special Issue. Climate Change Policies After 2012, October 2009, 30 (Special Issue 2): 7–38.
Clarke, L., J. Edmonds, V. Krey, R. Richels, S. Rose and M. Tavoni. 2009. “International Climate Policy Architectures: Overview of the EMF 22 International Scenarios.” Energy Economics, 31(2): 64–81.
EMF 22. 2009. Energy Modeling Forum 22: Climate Change Control Scenarios. Stanford University. http://emf.stanford.edu/research/emf22/.
1.3
1.2
1.1
1.0
0.9
0.8
01960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004
inde
x of c
arbo
n in
tens
ity o
f ene
rgy
(bas
e 20
05)
world high income low & Middle income
Note: authors’ calculations from world Bank development indicators. high-income economies are those in which 2008 GNi per capita was $11,906 or more.
fiGure 2: carBoN iNteNSity of eNerGy index, Base 1975
D E V E L O P M E N T O U T R E A C H54
By PraNaB BardhaN
AND THE LAND ACQUISITION CON U N D R U M
I N D U S T R I A L I z A T I O N
A P R I L 2 0 1 1 55
The development
economics
literature cites
several barriers to
industrialization:
low savings, ■
weak domestic demand ■
or export prospects,
lack of access to credit, ■
marketing, infrastructure,
an educated labor force,
or technological support
structures,
excessive government ■
controls,
coordination failures, ■
and so on.
uNtil receNtly, few development
economists believed that acquiring
enough land to start factories (or to
build the infrastructure to support
them) presented much of a problem.
But particularly in densely populated
areas, this has now become a major
bone of contention between farmers
and those who need land for commer-
cial and industrial uses and for mining,
or when the state tries to acquire the
land on their behalf. In high-growth
densely populated countries like China
and India this has quickly become a
politically explosive issue, sometimes
leading to social unrest and violence.
More thaN ecoNoMicS
thiS May Be SurPriSiNG since in
countries like China and India agri-
cultural productivity is so much lower
than that of manufacturing, mining,
and much of the service sector. There-
fore, transferring land to those alterna-
tive uses could generate a large surplus,
from which the new users could amply
compensate the farmers while retain-
ing much of the surplus for themselves.
Theoretically this seems like a win-win
situation. So why is it so contentious in
reality?
the wolf at the door
iN Part, because farmers in poor
countries are often suspicious of the
intermediaries involved in land trans-
actions—commercial developers and
their touts, or government officials
who may apply eminent domain laws
to requisition the land, are suspected
of grabbing much of the surplus. The
history of poor countries is filled with
examples of forcible dispossession with
little compensation, reneged prom-
ises of resettlement, and defrauding by
middlemen and contractors. In China
I N D U S T R I A L I z A T I O N
D E V E L O P M E N T O U T R E A C H56
SPecial rePortS
this issue is heightened by the fact that
farmers have no land ownership rights,
only user rights, and so they are much
more vulnerable to arbitrary decisions
made by local officials in collusion with
commercial developers.
ProtectiNG a way of life
SoMe farMerS also worry about dam-
age to the local environment resulting
from the mines, dams, and polluting
factories—damage from which the
market price of land will not compen-
sate them. In educationally backward
communities the farmers fear that their
children will not be qualified for the
newly created jobs that will be filled
mainly by outsiders. They do not want
to let go of the only secure asset they
have—their land—in exchange for a
lump-sum cash compensation which is
not only inadequate, but will soon be
frittered away; and their banking habits
and facilities are often too underdevel-
oped for them to make prudent invest-
ments. There are also cultural ties to
ancestral land and to a pristine way of
life based on it, which they know will be
spoiled by the dislocations and uncer-
tainties generated by the new commer-
cialization of the area driven mainly by
outsiders.
what’S worSe thaN BeiNG eXPloited...
iN reSPoNSe, NGO’s (nongovernmen-
tal organizations) and environmental
activists often organize resistance move-
ments among the farmers. But in their
romantic activist ardor they often for-
get that the centuries-old status quo of
low productivity and poverty consigns
these farmers to a life of misery. As the
famous British economist Joan Robin-
son once quipped: what is worse than
being exploited is not to be exploited
at all. One way to escape the low-pro-
ductivity trap of traditional agriculture
is to produce new high-value labor-
intensive farm products such as fruits,
vegetables, and livestock products. But
these require large investments in cold
storage, refrigerated transport, retail
marketing chains, and so forth which
in turn require large amounts of capital
from outsiders. Surveys in India have
shown that the overwhelming majority
of farmers’ children want to leave agri-
culture, since a growing population is
causing productivity per person to de-
cline. While development has become
a dirty word among many activists,
there is no general alternative; but the
processes can be made more inclusive
and the outcomes of development can
be made more humane.
the leSSer of two eVilS
So aSSuMiNG that some amount of
land has to be acquired for nonagricul-
tural and commercial use, how can the
poor benefit most from the transfer?
Those who are against state acquisi-
tion of land often believe the process
should be left to the market, with the
state intervening only when recalcitrant
farmers in contiguous plots “hold up”
the land transfer that has been agreed
by a large number of willing sellers to a
buyer looking for a compact land unit.
They say that the intervention of the
state prevents farmers from getting the
fair market price they might through
bargaining with the buyers. They think
this is much cleaner than the messy po-
litical process where all kinds of third-
party interests stick their fingers in the
pie.
But this market process can also
be unfair and costly. It’s unfair to the
farmers, because the numerous unco-
ordinated small sellers are no match for
the bargaining power of large corporate
buyers, and they often face intimida-
tion and strong-arm tactics by the land
mafia who will try preemptive buying.
For the corporate buyer, the transac-
tion costs of dealing with thousands
of small sellers (particularly in densely
populated areas) are large, even apart
from the hold-up problem referred to
earlier. So the state has to be fully in-
volved in the transfer process, but its
usual high-handed or corrupt tenden-
cies should be held in check by stronger
political accountability mechanisms at
the local level.
Show Me the MoNey
oNe of the MaiN ProBleMS of land
acquisition by the state in China and
India is inadequate compensation. In
India, under the old Land Acquisition
Act of 1894, compensation is based on
some multiple of the recent value of the
land. But everyone knows that the land
value will in the near future increase
many times, and the seller will not
benefit from this appreciation, whereas
neighbors or fellow villagers whose land
is not being acquired will. One solution
is for the state to offer sellers a two-part
compensation package: a minimum
lump sum related to the recent average
market value of the agricultural land,
and an annuity (a monthly pension as it
were for the farmer’s retirement) from
A P R I L 2 0 1 1 57
a trust fund where some shares of the
new company are vested. This fund will
collect shares from all the companies in
the country that buy land, so that risk is
pooled and the fund cannot be brought
down by any single project failure. The
fund should be independently and pro-
fessionally managed, like pension funds
in many countries. For poor farmers, a
stream of annuity payments is much
better than one-off cash payments
which, as we have mentioned, are often
frittered away. Given the large produc-
tivity gap between the agricultural and
nonagricultural use of land, a reason-
able annuity may not drain much of the
revenue surplus from the new land use,
at least not in the long run. In projects
where the land is acquired mainly for
public infrastructure, a betterment levy
on nearby land may be contributed to
the trust fund. In the case of mining
projects, the mining rights should be
auctioned in a transparently competi-
tive bidding process, and the proceeds
also deposited in this trust fund.
The state should also provide train-
ing and skill-formation programs
for those giving up their land—just
promising them jobs in the new proj-
ects, irrespective of qualifications, as is
sometimes proposed, is unfair to the
employers and inefficient for the econ-
omy. It is also imperative for the state
to arrange compensation schemes and
welfare payments for the other, often
poorer, stakeholders like sharecroppers
and landless wage workers, who are
usually bypassed by the market pro-
cess.
...aNd the watchdoG
wheN GoVerNMeNt officialS are in-
volved in land transactions the scope for
arbitrary decision making and corrup-
tion is large, and the land issue can turn
into a political football among rival po-
litical parties. Therefore, the whole pro-
cess of land transfer, including admin-
istering compensation and annuities
and resettlement has to be handed over
to an independent quasi-judicial au-
thority or regulatory commission. This
agency needs to be insulated from the
day-to-day political process but sub-
ject to periodic legislative review. The
commission would regularly hold local
hearings where all parties can present
their cases and grievances.
Although land acquisition is a sticky
issue on the path to economic devel-
opment, there are ways of adequately
compensating the farmers and peas-
ants, and involving them in a broad-
based participatory process so that
the transfer is voluntary and relatively
friction-free.
Pranab Bardhan is Professor of Economics at the University of California, Berkeley.
farm land bordering iron and steel giant iSKor’s Vanderbijl Park refinery in South africa.
D E V E L O P M E N T O U T R E A C H58
A P R I L 2 0 1 1 59
THE POLITICS OF DEVELOPMENT
By BriaN leVy
D E V E L O P M E N T O U T R E A C H60
The numerous
tectonic shifts
that have shaken
the foundations of
the development
paradigm over the last half-
century have had far-reaching
implications for development
policy formulation and
implementation. In the 1980s,
we recognized the limitations of
investment finance as the path
to poverty reduction, which then
led to a focus on policy reform.
Acknowledging the limits of
policy reform, we moved on,
first, to building institutions
and, more recently, to the role
of politics. The implications
for development policy making
are profound—and only partly
understood.
Institutions are the formal and in-
formal “rules of the game” within which
development takes place. So a decade
ago we began to think that the answer
was “good governance” institutions. We
thought that institutional reform was
akin to engineering. Because the insti-
tutional characteristics of capable and
accountable states are well known (see
Box), we thought that the challenge
was straightforward: to redesign all fac-
ets of the governance system because
strengthening each part was necessary
for the performance of the whole. “A
chain,” went the reigning metaphor, “is
only as strong as its weakest link.” This
became the “best-practice” approach to
governance reform.
BeSt Practice, or wiShful thiNKiNG?
But PoliticS MaKeS the equation
considerably more complex. Achiev-
ing best-practice means working back-
wards from a predefined end state. But
politics—including stakeholders and
their power, incentives, skill, and capac-
ity to organize—gets in the way and
inevitably shapes the dynamics of re-
form. A country’s economic, social, and
political institutions cannot be re-engi-
neered from scratch. A country starts
from where it is, and evolves through
search and learning. Changes in one
part of the system call for adaptations
in other parts, in an ongoing process.
Effective policy making works with
rather than against a country’s grain as
it nudges forward this often nonlinear
process.
Moving away from the best-prac-
tices model requires a different way
of thinking about policy formulation
and implementation. The reality is that
many countries lack the institutions
and capacities to implement otherwise
desirable policies; or the policies may
threaten the leaders’ power or the po-
litical stability. So the craft of policy
making is about finding entry points
that are feasible and that advance the
development agenda, at least to some
degree.
how to do it—a traJectorieS aPProach
SiMPly SayiNG that the answer is “coun-
try-specific” is not very helpful. For eco-
nomic policy reform, Hausman, Rodrik
and Velasco’s (2006) binding constraints
SPecial rePortS
SoMe characteriSticS of traNSPareNt aNd accouNtaBle StateS
predictable decision ■
making and implementation
oversight mechanisms ■
that guard against arbitrariness and ensure accountability in how resources are used
public officials committed ■
to social goals, including the efficient provision of public services
a political process ■
that is broadly viewed as legitimate
the protection of ■
property rights.
A P R I L 2 0 1 1 61
framework can help. For governance re-
form, we offer a new trajectories approach
typology (Levy and Fukuyama 2010).
This approach distinguishes between two
sharply contrasting paths to good gover-
nance and growth, based on a country’s
experiences and current socioeconomic
position. Within each of these trajecto-
ries, countries can be in the early, middle,
or later stages of developing sophisticated
institutions and organizations. (North,
Wallis and Weingast 2009) Knowing
where a country fits in this model can
shed light on how to approach reforms.
The table summarizes the two tra-
jectories and presents their political
features, governance challenges, and
principal governance risks. We can see
that the governance risks and challeng-
es are very different in each.
the doMiNaNt State traJectory
iN thiS traJectory, coordination
among elites is relatively straightfor-
ward. Rulers base their claim to legiti-
macy on an implicit promise that their
decisions will serve the broader long-
run public interest. If they are success-
ful, development will generate an in-
creasingly sophisticated economy and a
wealthier, more empowered citizenry—
which in turn leads to rising pressure
to create institutions that can support
the increasing economic and politi-
cal competition. Examples include the
East Asian “tigers,” Ethiopia, Tunisia,
and others. The Republic of Korea,
for example, has gone from poor to
rich—and from closed to open—along
this trajectory. How? Rapid growth
produced a strong private sector and
a strong middle class that demanded
more sophisticated and responsive po-
litical and economic institutions.
But failure is at least as likely as suc-
cess: if a dominant party promotes only
its own narrow interests; or when person-
alized leadership becomes increasingly
self-seeking and predatory. Many exam-
ples exist, such as the former Zaire and
the Philippines during the Marcos era.
the coMPetitiVe clieNteliSt traJectory
iN the alterNatiVe PatterN, the com-
petitive clientelist trajectory, elite groups
compete for power through elections.
Where public institutions are already
strong—normally in middle- and high-
income countries—elections can be
organized around different visions of
suitable public programs (platforms).
But where public institutions are weak,
elites may, in return for continuing sup-
port, promise to direct public resources
to favored clients rather than com-
mit to governing for the public good.
(Keefer and Khemani 2005). Bangla-
desh, Albania, and Zambia and, histori-
cally, Mexico (Haber and others 2003)
demonstrate that competition and cli-
entelism can attract private investment.
But sustaining forward momentum is a
high wire act: decision making is con-
stantly contested; and narrow interest-
seeking and even individual corruption
are ubiquitous. Conflict continually
threatens to spiral out of control. But as
long as the momentum of continuing
growth can be sustained, an expanding
private sector, middle class and civil so-
ciety will continue to reshape interests,
incentives, and alliances, thereby feed-
ing a groundswell for further rounds of
institutional improvement.
aliGNiNG actioN with “reforM SPace”
SuStaiNiNG forward MoMeNtuM and
avoiding the ever-present risks of re-
versal depend on prevailing political
taBle: GoVerNaNce StructureS aNd the StaGeS of deVeloPMeNt
traJectory
doMiNaNt State coMPetitiVe clieNteliSM
Structural featureS how the distribution of state power is organized
how government makes decisions
a dominant party or leader
coordinated across government units
competitive among parties
“Just enough governance” muddling through
froNtier GoVerNaNce challeNGeS
how to evolve toward a more competitive polity and economy
how to strengthen the capacity of state institutions
PriNciPal GoVerNaNce riSKS
dominance becomes increasingly self-serving and predatory
institutional decay
couNtry eXaMPleS Mozambique, ethiopia, uganda, Vietnam, tunisia, republic of Korea
Bangladesh, Kenya, zambia, albania, india, Mauritius, costa rica
D E V E L O P M E N T O U T R E A C H62
and institutional factors. The best ap-
proach is to find ways of working with
the grain. The figure shows a number of
engagement options, ranging from be-
ing more modest in policy reform op-
tions, to small-g initiatives that enhance
accountability at a micro-level, to far-
reaching big-G governance reforms.
Their feasibility depends on the “space”
for reform.
“JuSt eNouGh” Policy reforM
a firSt-BeSt policy proposal presup-
poses a government with the ability and
will to pursue the public good. But this
is often not the case because (as in some
examples of the dominant state capacity
trajectory) leaders have narrower goals,
or perhaps because (as in the competi-
tive clientelist trajectory) coalitions suc-
ceed in blocking certain options. So
we would choose policy options that
do not confront directly the interests
of powerful existing stakeholders who
want to sustain the status quo. Though
such options are generally not the best,
they can achieve short-term gains, and
potentially lay the groundwork for
more far-reaching reforms down the
road. Promotion of export processing
zones rather than systemwide trade
liberalization is an approach taken by
Korea, Taiwan, Mauritius, and many
others.
SMALL-g reforMS
eVeN where Political leaderS may
not be accountable for delivering re-
sults, there may nonetheless be oppor-
tunities for small-g initiatives such as
creating strong, unambiguous incen-
tives for stakeholders to foster partici-
pation in and oversight of the provision
of public services. Examples include
parental participation in schools; com-
munity oversight of local health clinics
or road maintenance projects; coali-
tions of businesses and middle-class us-
ers of urban water, electricity, and other
utility services seeking agreements with
utility providers on how to improve
services; and the independent oversight
of public procurement practices.
In the short run, small-g initiatives
can yield significant benefits. To give just
one example: A Ugandan community-
based monitoring project that provided
residents in each of fifty communities
with comparative information on how
their village fared in the area of child
mortality—and that spelled out all the
health services to which each village was
entitled—brought about a 33 percent
overall reduction in child deaths in the
space of a single year (Bjorkmann and
Svensson 2009). Viewed from a longer-
run perspective, the potential impact
may be broader still. Initiatives such
as these give people voice in their deal-
ings with government officials, thereby
encouraging the shift from “subject” to
“citizen.”
orcheStratioN
ORCHESTRATING stakeholders for policy
reform focuses on upstream rather than
downstream processes. In contrast to
approaches that work around incum-
bent stakeholders, the aim here is to
pull those who have a stake in reform,
and other advocates of change, into
the discussion to build momentum for
more far-reaching reform initiatives.
Multistakeholder engagement is more
likely in the open environment of the
competitive clientelist setting than in the
dominant state capacity alternative—
although, even in the latter, reformist
leaders sometimes encourage stake-
holder orchestration as a way of in-
fiGure: the SPectruM of reforM SPace
“incremental” approaches adapting design given existing reform space
“transformational” approaches seeking to expand reform space
feasible policy reform
“Small-g” governance reforms
orchestrate stakeholders for
policy change
“Big-G” governance reforms
A P R I L 2 0 1 1 63
ducing more conservative officials to
embrace reform. The Philippine pro-
curement law was reformed by building
a broad coalition of champions from
civil society, church and youth groups,
and the private sector.
BIG-G reforMS
So what aBout the most ambitious
end of the spectrum: big-G governance
reform to strengthen national institu-
tions that hold government to account
such as elected legislatures, the judi-
ciary, centralized auditing authorities,
ombudsmen, a free and vigorous me-
dia, and the like? In the early stages of
development, leaders are unlikely to
accept big-G institutions that will limit
their discretionary powers. It may be
that this conflicts with their legitimiz-
ing claim that they will use their unlim-
ited power to pursue national develop-
ment goals single-mindedly, or perhaps
for more venal reasons. Results have
been uneven. More hopeful however
for big-G institutions is that sustained
economic development can set in mo-
tion deep-seated socioeconomic chang-
es that will, in time, create the kinds of
with-the-grain pressures for better per-
formance and enhanced accountability
which will create an upward spiral, vir-
tuous circle of change.
Brian Levy is Head of the secretariat responsible for implementing the World Bank Group’s Governance and Anti-Corruption Strategy.
references
Bjorkmann, Martina and Jakob Svensson. 2009. “Power to the People: Evidence from a Randomized Field Experiment on Community-Based Monitoring in Uganda.” Quarterly Journal of Economics 124, May: 735–69.
Haber, Stephen, Armando Razo, and Noel Maurer. 2003. The Politics of Property Rights. New York: Cambridge University Press.
Hausman, Ricardo, Dani Rodrik, and Andres Velasco. 2006. “Getting the Diagnosis Right: A New Approach to Economic Reform.” Finance and Development, March, pp. 12–15.
Keefer, Philip, and Stuti Khemani. 2005. “Democracy, Public Expenditures and the Poor: Understanding Political Incentives for Providing Public Service.” World Bank Research Observer. Vol. 20, no. 1, pp. 1–27.
Levy, Brian and Francis Fukuyama. 2010. “Development Strategies: Integrating Governance and Growth.” World Bank Policy Research Working Paper no. 5196. Washington D.C.: World Bank.
North, Douglass C., John Wallis, and Barry Weingast. 2009. Violence and Social Orders. New York: Cambridge University Press.
child sleeping in makeshift quarters, Ghana.
D E V E L O P M E N T O U T R E A C H64
A P R I L 2 0 1 1 65
By Ghazala MaNSuri aNd ViJayeNdra rao
D E V E L O P M E N T O U T R E A C H66
Over the last
two decades
development
policy has
touted civic
participation as a magic bullet
for solving problems at the
local level—from improving
livelihoods, to selecting
beneficiaries for public
programs, providing housing
after earthquakes and floods, or
improving village infrastructure.
The thinking is that involving
village or urban civic
communities in decision making
will improve accountability,
reduce inequality, and
ultimately alleviate poverty.
Note: This article draws heavily on
Localizing Development: Does Partici-
pation Work by Ghazala Mansuri and
Vijayendra Rao, forthcoming from the
World Bank in 2011.
Over the last decade, the World Bank
alone has allocated over $50 billion dol-
lars to local participatory projects, and
other multilateral agencies and bilateral
donors have together allocated a great
deal more, although specific numbers
are hard to come by.
the Search for Voice aNd accouNtaBility
the two MaiN wayS of fostering local
participation are: community based de-
velopment efforts and the decentraliza-
tion of resources and authority to local
governments.
Community Based Development
supports efforts to bring villages, urban
neighborhoods, or other household
groupings into the process of manag-
ing development resources without
relying on formally constituted local
governments. Designs for this type of
aid can range from community-based
targeting—in which communities se-
lect the project beneficiaries—to com-
munity-driven development, where
beneficiaries are involved to varying
degrees in project design and manage-
ment. Advocates for community devel-
opment believe that it enhances the ca-
pacity for collective action, builds social
capital, and strengthens the ability of
the poor to have control over decisions
that affect their lives. Consequently, it is
claimed that community development
improves the capacity of beneficiaries
to hold local governments accountable
thereby empowering the poor, improv-
ing the delivery of public services, and
increasing access to credit and liveli-
hood opportunities.
Decentralization refers to efforts to
create village and municipal govern-
ments, and strengthen them on both
the demand and supply sides. On the
demand side, decentralization strength-
ens citizens’ participation in local gov-
ernment by, for example, instituting
regular elections, improving access
to information, and fostering mecha-
nisms for deliberative decision making.
On the supply side, it is believed to en-
hance the ability of local governments
to provide services by increasing their
financial resources, strengthening the
capacity of local officials, and stream-
lining and rationalizing their adminis-
trative functions.
diSilluSioNMeNt with ParticiPatioN
uNfortuNately, policy decisions on
local participatory development have
historically been driven by fads, rather
than analysis. Passionate advocates
spark a wave of interest followed, after
a few years, by disillusionment which
gives ammunition to centralizers who
engineer a sharp reversal. In time, the
negative fallout from centralization in-
vigorates the climate for local participa-
tion. There have been, at least, two such
waves after World War II and, if current
trends continue, we may be in the early
stages of another centralizing shift.
Advocates, and the vicissitudes of
fashion, are perhaps unavoidable, but
they need to be supplemented if not
surmounted by a better informed and
analytically grounded debate.
a tarNiShed SilVer Bullet
ideally, local development policy
should be determined by a thought-
SPecial rePortS
A P R I L 2 0 1 1 67
ful, and contextually sensitive, diag-
nosis of the interrelationship between
civil society, markets and government.
In particular, it should be informed
by an understanding of civil society.
Much of the current policy literature,
particularly at the local level, seems to
ride on the assumption that solutions
to market and government failures
lie with civic groups—such as village
communities, urban neighborhood as-
sociations, credit groups, or producer’s
cooperatives. Rarely, is much thought
given to the possibility of a “civil soci-
ety failure”—that effectively organizing
groups of people to act in a way that
solves market and government failures
is itself subject to problems of coordi-
nation, asymmetric information, and
pervasive inequity—with attendant
problems of capture, free-riding and
low capacity.
Civil society failure can be broadly
thought of as a situation where collec-
tive participation operates in such a
manner that it results in a net reduction
in social welfare. This could happen be-
cause of a group’s inability to act collec-
tively. Or collective action could occur
in a well-coordinated but dysfunctional
manner that reduces the welfare of the
average citizen: think of an organized
fringe group that uses terror and vio-
lence to further its extremist ends at
high social cost.
BoNdiNG aNd BridGiNG
Such failureS can be broadly classi-
fied into bonding failures and bridging
failures. Bonding failures are internal
to the group and have less to do with
the state or markets: for instance, when
the elite within a village capture public
resources for private gain, when a com-
munity is unable to devise equitable
and efficient rules for the management
of common property, or when group
interests degenerate into persistent
intergroup violence. Bridging failures
occur when citizens are unable to or-
ganize themselves to correct for market
and government failures that have a di-
rect bearing on their lives: for example,
a community’s inability to hold service
providers and local officials account-
able for the quality of public services or
resource allocation decisions.
MaNy ShaPeS aNd SizeS
thiNKiNG aBout development policy
as taking place at the intersection of
market, government and civil society
failures, helps determine when civic
participation may or may not be the
best solution. The answers depend
heavily on the socioeconomic context
since interactions between civil so-
ciety, markets, and governments are
fundamentally conditioned by social
structures and histories that vary from
community to community, even with-
in a country or region. A policy that
works in one village may fail miserably
in another. And, perhaps ironically, ef-
fective collective action is influenced
by a cooperative infrastructure that is
provided by a strong state. It is not at
all clear that strong governments are
created by the presence of a strong civil
society. Rather, it is a chicken-and-egg
problem that does not lend itself to easy
answers. Similarly, while empowering
civic groups may often lead to good out-
comes, it is not true that civic empow-
erment is superior, in every instance,
to a purely market-based development
strategy, or a strategy that strengthens
the role of central bureaucrats. So the
decision about whether, when, and how
to promote local participation should
be made with an understanding of the
tradeoffs involved in moving decision
making to local communities—in a
particular country or region of a coun-
try, and at a particular time.
This leads to some key questions:
What makes participation work or ■
fail?
Do large sums of money for com- ■
munity groups empower the poor,
or enrich the elites?
How can we reduce civic inequality ■
and elite capture?
How can we strengthen the capacity ■
for collective action and build social
capital?
While reliable information on many
of these questions is still quite thin,
some broad patterns are emerging.
what’S the eVideNce?
deceNtralized PoVerty reduction
programs have been only marginally
more successful at targeting beneficiaries
than centrally managed ones, and there
is little evidence that they reduce pov-
erty significantly. However, local public
goods such as roads and drinking water
facilities provided through participatory
mechanisms are often of better quality,
and public services, such as schools and
community health centers function bet-
ter. The outcomes vary enormously, how-
ever, with the more unequal, poorer, less
literate, and more remote communities
generally faring much worse. Note that
these are precisely the circumstances in
which we might expect significant civil
society failures.
D E V E L O P M E N T O U T R E A C H68
Nonetheless, there appears to be
some intrinsic value to participation:
people are generally happier when con-
sulted, which may attest to the trans-
formative role of participation. We can
conclude little about this, as yet, since
most studies measure change in collec-
tive capacity quite poorly. The evidence
we do have, shows that participation
has little effect on the exercise of voice
or on community organized collective
action outside the participatory proj-
ect. Instead, some evidence points to a
decline in collective activities outside
the needs of the project.
the NewS iS Not all Bad
thiS iS Not to Say that there are no in-
stances of success, far from it. However,
successful cases tend to bring together
a set of conditions, whether through
deliberate and thoughtful policy and
design or simple good fortune, that
are not the norm for most participa-
tory development projects. Often these
are cases where community capacity,
as measured by education levels and
management experience, for example,
is high, inequality and absolute poverty
levels are low and government functions
reasonably well. This is hardly surpris-
ing. In most developing countries, low-
er tiers of government have much less
administrative or monitoring capac-
community at Shreeshitalacom lower Secondary School in Kaski, Nepal.
A P R I L 2 0 1 1 69
ity and communities most in need of
development programs are also likely
to be the least advantaged in terms of
resources and capacity. Inequalities of
wealth and power are also likely to be
more salient at the local level. Theory
suggests that decentralizing resource
allocation under such conditions can
reduce resource use efficiency, exacer-
bate horizontal inequities, and increase
rent-seeking by the locally powerful.
ProGraMS fail BecauSe...
Capture and corruption by local ■
elites is commonplace, whether par-
ticipatory projects operate within
or outside the ambit of local gov-
ernments.
Cookie-cutter rules like community ■
cofinancing are made into central
tenets of participation. Community
willingness to contribute to proj-
ects has long been seen as evidence
of the value that the poor place on
specific public goods and services,
as well as a signal of sustainability.
Most decentralized programs also
require local cofinancing, whether
through user fees and project con-
tributions or budget allocations by
local governments. This has little
basis in evidence, however. What
little evidence we do have, suggests
instead that cofinancing can reduce
coverage of the poorest, particularly
when individuals or communities
need to self-select into the program,
or when eligibility thresholds are
also decentralized. The proportion-
ally greater financial burden placed
on poorer localities, communities,
and individuals can also serve to
exacerbate horizontal inequities, in
so far as otherwise equally poor in-
dividuals or communities get lower
levels of benefits simply because
they reside in poorer areas. Com-
munities often have little capacity to
ensure bottom up accountability.
Local government officials often ■
have less experience than the center
with managing resources, and tend
to have weaker administrative ca-
pacity; and not surprisingly, poorer
areas also tend to have weaker local
governments.
Community participation projects ■
require more documentation and
adherence to rules imposed from
the outside. These can be challeng-
ing for communities with low lit-
eracy levels.
They require the ability to evaluate ■
budgets and monitor the actions of
local elites, service providers and
political agents, all of whom have
a far greater capacity to conceal in-
formation or to coerce compliance.
One could argue that the design of
participatory programs makes at
least some elite involvement, if not
elite dominance, inevitable.
Donor funded participatory projects
also come with best practice designs, ac-
companied by unrealistic timelines and
cookie cutter metrics of success, which
often serve only to reduce accountabil-
ity and stifle innovation and experi-
mentation. These problems are greater
when project implementers are also
weak, operate outside the ambit of gov-
ernment oversight, and face little po-
litical competition at the local level. In
such cases, dependence on donor funds
makes implementing agencies upward-
ly accountable to their financiers rather
than downwardly accountable to the
communities they serve. This can also
lead to some communities being over-
served to the neglect of others since
short timelines induce implementers to
funnel resources to communities which
have already been organized, have bet-
ter capacity, are located more conve-
niently, and so forth.
ProGraMS Succeed BecauSe...
So wheN doeS localizing development
work? The evidence suggests that de-
centralized outcomes are most pro-
poor when:
Mechanisms for downward ac- ■
countability have been well thought
out and have teeth.
There is a strong center capable of ■
setting eligibility criteria, building
local capacity, as needed, and ef-
fectively monitoring local resource
allocation decisions.
Projects emerge from local experi- ■
mentation and innovation rather
than best practice implants.
Efforts are made to activate civic so- ■
ciety by creating incentives, such as
audits and performance-based re-
wards, or by building the communi-
ty’s capacity to observe and sanction
through the provision of informa-
tion or training, particularly where
inequities are entrenched.
Ghazala Mansuri and Vijayendra Rao are Lead Economists in the World Bank’s Poverty Reduction and Equity and Development Economics Groups.
D E V E L O P M E N T O U T R E A C H70
PARTICIPATION MAKES A DIFFERENCEBut not always how and where we might expectBy JohN GaVeNta
A P R I L 2 0 1 1 71
indian grassroots activists, village councillors, farmers, and agriculture unionists from 18 of india’s 27 states take part in a “right to food” campaign as they shout slogans during a protest in New delhi on November 25, 2010. Protesters demanded that the government live up to its promise of guaranteeing food security.
D E V E L O P M E N T O U T R E A C H72
In their article:
Participatory
Development Revisited,
Ghazala Mansuri
and Vijayendra Rao
outline the high hopes for
participation over the last two
decades, yet conclude that
participatory development has
become a “tarnished silver
bullet”—perhaps another in a
long series of development fads
that promise more than they
deliver. The article doesn’t throw
out the idea of participation
altogether, but argues for
a more thoughtful analysis
of the interrelationships
between civil society, markets,
and government to help us
understand how and in what
conditions participation can
best make a difference. The
authors argue that we need
to take into account “civil
society failure,” as well as the
limitations of purely market—
or government-based approaches.
where doeS ParticiPatioN occur?
we aGree. But while the Mansuri and
Rao article offers some important caveats
and insights into understanding partici-
pation in certain settings, we need to be
careful about drawing conclusions from
these too broadly. Their article focuses
on only two arenas of local participation:
donor-driven community-based devel-
opment efforts and the decentralization
of resources and authority to local gov-
ernments. While these may be impor-
tant, they are by no means the only ways
in which people participate in their own
development. In fact, they may be the av-
enues that are most subject to the kinds
of participation failures that the article
discusses. Community-based develop-
ment efforts, particularly the kinds that
the World Bank and others have been
supporting, are often large-scale, created
from above, and based on a form of par-
ticipation mediated by local elites. And
decentralisation in and of itself may or
may not be participatory—it all depends
on the enabling policies and legal frame-
works that are in place, and whether they
include participation as a legal right, or
simply as an invitation for consultation
which can be dismissed or ignored at
will.
toP dowN or BottoM uP?
reSearch by the Development Re-
search Centre on Citizenship, Participa-
tion and Accountability at the Institute
for Development Studies (IDS) at the
University of Sussex yields a somewhat
broader view of where and how partici-
pation happens (Gaventa and Barrett
2010). Drawing from 100 case studies
of citizen engagement in twenty coun-
tries, this research argues that people
don’t engage only in “invited” forums
of participation created by authorities
from above. In most places, they also act
for themselves in myriad other ways—
through their own local community
development associations, neighbor-
hood or self-help groups, through so-
cial movements and campaigns to get
their voices heard, or through informal
as well as formal mechanisms for moni-
toring and holding officials to account.
SoMe hoPeful reSultS
theSe Broader “SPaceS” for partici-
pation provide a slightly different—and
less pessimistic—picture than do donor
or state-created programs or processes.
Analyzing over 800 outcomes of partic-
ipation, the IDS study points to largely
positive results in four broad areas, each
of which is essential for development.
forMiNG Better citizeNS aNd PracticeS
firSt, engagement is important because
it helps form better citizens: people who
are aware of their rights to participate in
the first place, and are more confident of
their ability to do so. Second, it also builds
more effective participation practices:
people can learn the civic skills, form the
relationships and networks, and build the
organizations needed to make their voic-
es heard. Both of these—more aware and
more effective citizens—are necessary,
yet often overlooked, building blocks of
effective participation and for delivering
change more broadly.
SPecial rePortS
A P R I L 2 0 1 1 73
deliVeriNG reSultS aNd ShaPiNG New cultureS
third, the study points to dozens of
examples of participation contributing
to development results, for example, in
improved health, water, sanitation, or
education. There are also many exam-
ples of how participation contributes to
strengthening governance by improving
cultures and frameworks for account-
ability, or better implementation of na-
tional and international commitments
to human rights. Finally, the studies
show that participation can contribute
to more pluralistic and inclusive societ-
ies, bringing new voices and issues into
the public arena.
howeVer...
But JuSt aS Mansuri and Rao found
in their work, this study also warns
that participation is not always used
for purely benevolent or benign pur-
poses. Although 75 percent of the par-
ticipation effects cited in the IDS study
were positive, the other 25 percent were
more negative. These include a sense of
disempowerment arising from mean-
ingless, tokenistic, or manipulated par-
ticipation; the use of new skills and alli-
ances for corrupt or questionable ends;
and elite capture of the participatory
process.
a two-way Street
SiGNificaNtly, many of the negative
examples had less to do with citizens’
failure to participate, than with gov-
ernment’s reluctance or inability to be
responsive. Greater citizen engagement
might simply be met by bureaucratic
“brick walls,” failure to implement
policy decisions and, in many cases, re-
prisals, including violence against those
who challenged the status quo.
what to looK for
theSe StudieS demonstrate that par-
ticipation is no panacea. But under
some conditions it can make a posi-
tive difference. Both the IDS and the
Mansuri and Rao studies suggest that
the challenge is to gain a more nuanced
and sophisticated understanding of the
factors that can lead to failure or suc-
cess. The IDS study points to several of
these factors, with important implica-
tions for donors, policy makers, and
practitioners alike:
Participation is not limited to ■
spaces and through avenues cre-
ated “from above” by donors or
governments. In fact grassroots as-
sociations as well as broader social
movements outside of these arenas
are important sources of positive
change. And, for building account-
able and responsive governments,
the results are most positive when
multiple strategies for engagement
are present simultaneously. Donors
might be well advised to figure out
in any given context how citizens do
participate in their own ways and
spaces, and then build links with
and support for these, rather than
simply creating new “participatory”
mechanisms and inviting citizens
in.
“Invited” forms of participation ■
in local governance or large-scale
donor programs work best where
several other conditions exist. These
include the presence of:
strong champions inside the •
government who open the
doors for civic participation,
organized groups of citizens •
that can help articulate the col-
lective voice and help monitor
the process, and
well-designed processes for de-•
liberation and decision mak-
ing that bring the two together.
These processes also appear to
work better when legal frame-
works give participants an ex-
plicit right to participate, not
just an invitation to do so, and
when there is an acknowledged
need for resources to be allo-
cated or decisions to be made.
Active, aware, and effective citi- ■
zens who can help deliver develop-
ment and governance gains do not
emerge automatically. Yet unless
they are in place, new spaces for
participation, especially those creat-
ed from above, will simply be filled
with the same elite voices. Building
awareness, skills, organizations, and
networks that enable more inclusive
and empowered forms of participa-
tion takes time; but these are critical
for longer-term success, and should
be recognized, and measured, as
intermediate outcomes of broader
change.
Empowered participation faces the ■
risk of reprisal, especially when
citizens may be challenging power-
ful established interests. This may
take the form of violence—as seen
recently in several well-publicized
cases of reprisal against citizens in
India who were using the new Right
to Information laws to demand
D E V E L O P M E N T O U T R E A C H74
transparency and expose corrup-
tion. But they can also take more
subtle forms, including using de-
velopment resources (such as land,
housing, benefits, or jobs) as politi-
cal clubs to silence dissent. Donors
and policy makers who encourage
participation must also be willing
to help protect and strengthen the
space for citizens who do exercise
their voice, and to support the other
enabling conditions for citizen en-
gagement to occur.
SeeiNG the foreSt for the treeS
after More thaN two decades of work
in international development circles to
promote greater citizen participation,
let’s not lose sight of its potentials as we
also become more aware of its limita-
tions and risks in various settings. There
is abundant evidence to show that par-
ticipation can make a difference, but
often in ways and in places that are not
donor-created. The challenge now is for
donors and development institutions
to take a broader and longer-term view
of what participation is about, develop
a better understanding of the condi-
tions under which it makes a difference,
and be willing to support those whose
participation may raise uncomfortable
truths, even when these challenge the
status quo.
John Gaventa is a Professor and Research Fellow in the Institute for Development Studies (IDS) at the University of Sussex, where he is a member of the Participation, Power, and Social Change team and Director of the Development
Research Centre on Citizenship, Participation, and Accountability.
reference
Gaventa, John and Gregory Barrett. 2010. “So What Difference Does it Make? Mapping the Outcomes of Citizen Engagement.” IDS Working Paper 347. http://www.ntd.co.uk/idsbookshop/details.asp?id=119.
Survivors of 1984’s union carbide disaster in Bhopal hold placards as they gather outside the indian Prime Minister’s office to file a right to information (rti) petition in New delhi on May 4, 2010. they filed the rti to get access to all documents concerning the Nuclear civil liability Bill. Government figures put the death toll at 3,500 within the first three days but independent data by the state-run indian council of Medical research (icMr) puts the figure at between 8,000 and 10,000 for the same period.
A P R I L 2 0 1 1 75
D E V E L O P M E N T O U T R E A C H76Schoolchildren in Bhutan.
A P R I L 2 0 1 1 77Schoolchildren in Bhutan.
Fortunately, important insights into this
demographic challenge have emerged
in the past 10 years. Most important
is that the rate of population growth is
not the only demographic variable with
consequences for economic growth
and development: the age structure of
the population is also fundamentally
important.
the deMoGraPhic traNSitioN
PoPulatioN Growth has taken place as
part of a broader phenomenon known as
the demographic transition—the transi-
tion that almost all countries make from
high fertility and mortality to low fertility
and mortality. Not counting net migra-
tion (which has been inconsequential
for most countries), populations grow
because death rates tend to decline before
birth rates. But there is more to this story:
death rates decline disproportionately
among infants and children, which gives
rise to a baby boom. This is not the usual
kind of baby boom in which more babies
are born; rather, it is one in which more
babies survive and mature into children
and adults. Eventually the baby boom
ends when parents realize that they do not
need to have as many children to reach
their goals for family size, which naturally
moderate as development proceeds.
the deMoGraPhic diVideNd
at firSt, the baby boom tends to lower
the measured rate of economic growth
because children need to be fed, clothed,
housed, educated, and otherwise cared
for—all of which require resources
that must be diverted from other uses
such as research and development
(R&D), infrastructure development,
and physical capital accumulation. But
eventually (after 15 to 20 years) the
large “boom” cohorts reach the prime
ages for working and saving, and the
per capita productive capacity of the
economy expands. When this happens,
the country has an opportunity to grow
rapidly—resulting in what we call the
“demographic dividend.”
The demographic dividend is a
composite of accounting and behav-
ioral forces. The accounting forces in-
volve:
the swelling of the potential labor ■
force as the baby boomers reach
working age, and
DEMOGRAPHICS AND DEVELOPMENT POLICY By daVid e. BlooM aNd daVid caNNiNG
By late 2011 there will
be more than 7 billion
people in the world,
with 8 billion in 2025
and 9 billion before
2050. New technologies and
institutions, and a lot of hard
work have enabled us to avoid
widespread Malthusian misery.
Global income per capita has
increased 150 percent since
1960, outpacing the growth of
population. But we cannot be
sure that incomes will continue
to grow. One major difference is
that now the world has a much
larger population to support
and, more notably, nearly all of
the population increase that is
projected in the coming decades
will occur in the most politically,
socially, and economically fragile
countries.
D E V E L O P M E N T O U T R E A C H78
SPecial rePortS
the fact that the working ages coin- ■
cide with the prime years for sav-
ings.
These factors are key to the accumu-
lation of physical and human capital
and technological innovation.
The behavioral forces consist of:
society’s reallocation of resources ■
from investing in children to invest-
ing in physical capital, job training,
technological progress, and stronger
institutions,
the rise in women’s participation in ■
the workforce that naturally comes
with a decline in fertility, and
the boost to savings that occurs be- ■
cause the incentive to save for longer
periods of retirement increases as
people live longer.
Recent analyses have shown that
population growth and age structure
are important drivers of economic
growth (measured by income per
capita). Indeed, as much as one-third
of East Asia’s economic “miracle” was
due to demographic change. Similarly,
the 1980 legalization of birth control in
Ireland sparked a decrease in fertility
that spurred rapid economic growth.
By contrast, the sluggish pace of fertility
decline in most of Sub-Saharan Africa
contributed to that region’s decades-
long economic struggle.
the aGe coMPoSitioN
what doeS thiS MeaN for develop-
ment policy making? Since different
countries are at different phases in the
demographic cycle, the age distribution
of their populations varies. As the de-
mographic transition proceeds and the
baby boom cohort reaches working age
in a given country, the ratio of working-
figure 2 shows where the ratio is still rising—in all developing regions other than eastern asia. these areas could still benefit significantly from a demographic dividend. But collecting this dividend is not automatic. demography is not destiny.data source: uN, world Population Prospects: the 2008 revision.
fiGure 1: reGioNS aBout to eNter the deMoGraPhic dowNSwiNG
where a country stands in the transition will determine the kinds of policies and initiatives it can most usefully undertake to help bring about a demographic dividend. for example, some countries could catalyze the demographic transition by taking steps to lower infant and child mortality—crucial precursors of fertility decline—through the expansion of childhood immunization and the provision of safe water and sanitation. others might encourage a voluntary reduction of fertility, perhaps through efforts to broaden access to primary and reproductive health services, and to girls’ education. data source: uN, world Population Prospects: the 2008 revision.
fiGure 2: reGioNS oN the deMoGraPhic uPSwiNG
2.50
2.25
2.00
1.75
1.50
1.25
1.00
19751950 2000 2025 2050
ratio
, wor
king
-age
to
non-
work
ing-
age
popu
latio
n
2.50
2.25
2.00
1.75
1.50
1.25
1.00
19751950 2000 2025 2050
ratio
, wor
king
-age
to
non-
work
ing-
age
popu
latio
n
A P R I L 2 0 1 1 79
age people to dependents (both young
and old), changes dramatically. Figures
1 and 2 show how this ratio has changed
and is projected to change across the
world. Using the UN Population Divi-
sion’s medium-fertility scenario, Figure
1shows that the ratio is about to fall in
Eastern Asia and the more developed
regions, which means that the oppor-
tunity to reap a demographic dividend
has already reached its peak.
Where a country stands in the transition
will determine the kinds of policies and
initiatives it can most usefully under-
take to help bring about a demographic
dividend. For example, some countries
could catalyze the demographic transi-
tion by taking steps to lower infant and
child mortality—crucial precursors of
fertility decline—through the expan-
sion of childhood immunization and
the provision of safe water and sani-
tation. Others might encourage a vol-
untary reduction of fertility, perhaps
through efforts to broaden access to
primary and reproductive health ser-
vices, and to girls’ education.
differences in fertility, infant and child mortality rates, and life expectancy have combined to give china and india very different ratios of working-age population to dependent population (figure 4). Beginning around 1980, china’s ratio rose very rapidly and has now reached its peak, with nearly 2.6 working-age people per dependent. india’s peak, which is likely to be lower than china’s, is projected to occur around 2035. these patterns suggest that china has already had its opportunity to capture a demographic dividend, while much of india’s opportunity lies ahead. to the extent that india can speed up fertility decline, especially in states where fertility is still high, it stands to reap a more sizable dividend in the coming years.
data source: uN, world Population Prospects: the 2008 revision.
education is important in determining whether a country benefits economically from the demographic transition. india has created a very well educated but relatively small set of people who have stimulated the economy, particularly the information technology sector. But huge numbers of young indians, particularly in poor, populous states such as Bihar and uttar Pradesh, do not have the education needed to participate productively in the twenty-first century economy. china, by contrast, has long promoted education for a much broader segment of the population, and its workforce is therefore highly productive. india can benefit by devoting considerably more effort to increasing access to quality education, and to workforce training.
data source: uN, world Population Prospects: the 2008 revision.
fiGure 4: deMoGraPhic traNSitioNS out of PhaSe—chiNa leadS iNdia By aBout 25 yearS
fiGure 3: iNdia’S fertility rate fell Steadily, chiNa’S PreciPitouSly
7
6
5
4
3
2
119751950 2000 2025 2050
child
ren
per w
oman
china india
2.50
3.00
2.00
1.50
1.0019751950 2000 2025 2050
ratio
of w
orki
ng-a
ge to
no
n-wo
rkin
g-ag
e po
pula
tion
china india
D E V E L O P M E N T O U T R E A C H80
the Policy eNViroNMeNt
ecoNoMic Growth does not auto-
matically accelerate as fertility declines
and the working-age share of a popu-
lation increases. Taking advantage of
a demographic opportunity depends
on a conducive policy environment.
Good governance matters, as do solid
macroeconomic management, a care-
fully designed trade policy, efficient in-
frastructure, well-functioning financial
and labor markets, and above all, effec-
tive investments in health, education,
and training.
healthy aNd educated PeoPle
Better health MeaNS that students
learn more quickly, workers produce
more effectively, foreign investors are
more likely to be attracted, and savings
rise. Expanded access to better quality
education—at the primary, secondary,
and tertiary levels—are also key to high
worker productivity, especially in the
rising number of jobs that demand up-
to-date skills and a high degree of flex-
ibility. Increased education also tends
to lead to lower fertility rates, which
frees up women to engage in the paid
labor force.
In the absence of enabling policies, a
potential demographic dividend can
become, instead, a demographic drag.
For example, a country that has large
numbers of young or middle-age
workers who are unemployed or un-
deremployed is at risk of social and
political instability. And even without
such instability, a large nonproductive
segment of the population is an eco-
nomic drag on those who are working.
Policy MaKerS oN the deMoGraPhic diVideNd
Nigeria’s Ngozi okonjo-iweala, managing director of the world Bank, has said that “one of the greatest untapped growth drivers in Nigeria’s economy is our youth population,”adding that the “public and private sectors should invest in human capital, labor supply, and savings to secure the demographic dividend. these help to create a knowledge-based economy. Policies should be directed toward getting the demographic dividend.”
indian Prime Minister Manmohan Singh: “looking ahead, we enjoy a demographic dividend in terms of a growing working-age population in a world that is aging rapidly.”
former Mexican President Vicente fox: “i also want to tell you that today we have a very potent arm with which to overcome inequalities and marginalization. that arm is what we have called the demographic dividend. … it is crucial, truly crucial, that we take full advantage of it. otherwise, we will have lost a great opportunity. as others have said before me, education and employment are the ways to take advantage of the demographic dividend. … the sustainability of our social and economic development depends, in large measure, on our response to this opportunity.”
Nandan Nilekani, former ceo of india’s infosys and now chairperson of the unique identification authority of india: “… [the] demographic dividend could well become a demographic disaster if we do not make the right investments. … we have this beautiful opportunity; let us not mess [it up].”
A P R I L 2 0 1 1 81
iNdia aNd chiNa— diVerGeNt Policy SceNarioS
coMPariNG iNdia with chiNa high-
lights the effect of differing past policies
and the need for specific policies that fit
with a country’s progress through the
demographic cycle. China’s emphasis
beginning in the 1970s on lowering its
birthrate has resulted in a total fertility
rate of 1.8 children per woman—and a
rapidly aging population that will need
care and support. India’s efforts to slow
population growth were, most of the
time, less intrusive, but they also led to
a less precipitous decline in fertility (2.7
today). Figure 3 illustrates the dramatic
difference between the two countries in
the pace of fertility decline.
The biggest unanswered question is
that of population aging, which is oc-
curring in both developed and devel-
oping countries. Although many have
warned that an older population spells
economic doom, other analysts sug-
gest that it is not an insurmountable
problem provided it is well managed.
Although the private sector can help by
adjusting business practices to adapt to
an older workforce, it is mainly up to
public policy makers to take strategic
and politically feasible decisions on re-
tirement age, immigration policy, and
related issues.
Creating an economic environment
in which the working-age population
is productively employed is a diffi-
cult though essential goal in itself. But
changing demographics provides an
extra spur for adopting the kinds of
economic, health, education, and la-
bor policies that can lead to more rapid
economic growth.
David E. Bloom is Professor of Economics and Demography and David Canning is Professor of Economics and International Health at the Harvard School of Public Health.
Bibliography
Birdsall, Nancy, Allen C. Kelley, and Steven W. Sinding, eds. 2001. Population Matters: Demographic Change, Economic Growth, and Poverty in the Developing World. Oxford: Oxford University Press.
Bloom, David E., and David Canning. 2008. “Global Demographic Change: Dimensions and Economic Significance.” Population and Development Review, vol. 33, 17–51. New York.
Bloom, David E., and David Canning. 2006. “Booms, Busts, and Echoes”, Finance & Development, September, vol. 43, no. 3, 8–13. Washington, D.C.
Bloom, David E., David Canning, and Jaypee Sevilla. 2003. The Demographic Dividend: A New Perspective on the Economic Consequences of Population Change. Santa Monica, California: RAND, MR–1274.
Lee, Ronald, and Andrew Mason. 2006. “What Is the Demographic Dividend?” Finance & Development, September. vol. 43, no. 3, 16–17. Washington, D.C.
United Nations. 2009. World Population Prospects: The 2008 Revision.UN Department of Economic and Social Affairs, Population Division. http://esa.un.org/UNPP/.
children in Gansu Province, china.
D E V E L O P M E N T O U T R E A C H82
DEVELOPMENT WITH A HUMAN FACE
By archBiShoP NJoNGoNKulu NduNGaNe
The goal of
development
must be to enable
people to enjoy
their potential to
be fully human. Though it may
sound strange, I learned what it
means to be truly human when
I was a political prisoner on
Robben Island in the
early 1960s.
SoMehow, that unimaginable brutal-
ity, far outside the norms of civilized
society, convinced me that dignity and
respect, accorded through justice for
both individuals and the communities
to which they belong, are as indispens-
able to full humanity as the material
necessities of life.
Commitment to these values has
shaped me ever since. They are reflect-
ed in what the ancient philosophers re-
ferred to as “the common good.” This
is the fully-rounded well-being of a
society and all its members, the promo-
tion of which, in conditions of peace
and security, has long been seen as the
primary task of every nation. In today’s
globalised world, it should be equally
central in all our international decision
making, and not only in those forums
concerned with development issues.
The Universal Declaration of Hu-
man Rights puts flesh on this concept. Its
opening words affirm that the “recogni-
tion of the inherent dignity and of the
equal and inalienable rights of all mem-
bers of the human family is the founda-
tion of freedom, justice and peace in the
world”. Article 25, albeit in the outdated
language of its day, describes the comple-
mentary material necessities of life:
“Everyone has the right to a stan-
dard of living adequate for the health
and well-being of himself and of his
family, including food, clothing, hous-
ing and medical care and necessary so-
cial services, and the right to security in
the event of unemployment, sickness,
disability, widowhood, old age or other
lack of livelihood in circumstances be-
yond his control.”
Though not technically binding, the
Declaration is now widely regarded as
a part of customary international law,
and its provisions, encompassing every
essential area of human life, should be
seen as constituting an obligation for all
countries, in both domestic and foreign
policy and practice.
If this commitment were taken seri-
ously by our international institutions,
whether or not they primarily address
human rights issues, half the world’s
population would no longer be dehu-
manized through lack of one or more of
A P R I L 2 0 1 1 83
these fundamentals of life. In all sectors,
whether finance, trade, climate, shipping,
labor, telecommunications, and others,
the human dimension ought to remain
centre stage in all policy making, and in
every organization, no matter what its
main focus is. It will not suffice to con-
centrate solely on political expediency,
technical efficiency, economic advantage
or any other instrumental question, while
failing to give adequate consideration to
their human impact on individuals—
especially those with the least voice and
the greatest vulnerability.
When it comes to development poli-
cies in particular, putting human realities
centre stage should be automatic. The
pressing need for this came home to me in
the late 1990s when, soon after becoming
Archbishop, I served as a commissioner
for the South African national poverty
hearings. It was emotionally and physi-
cally draining to listen as people spoke
with dignity about their dire plight. I saw
the face of poverty in the eyes of far too
many men, women, children, the elderly,
and people with disabilities. Their mes-
sage was “Archbishop, take our voices to
the corridors of power, and say for us: We
do not want hand-outs. We have brains.
We have hands. Give us the capacity to
eke out our own existence.”
They were entirely right to make
this plea, not only on grounds of justice
and dignity, but in terms of making aid
work, as shown by Nobel laureate econ-
omist Amartya Sen. Development pro-
grams are most effective and sustain-
able when intended recipients are fully
included—respected, heard, involved—
in every stage from inception and plan-
ning to delivery, and when adequate
attention is paid to the realities on the
ground. Taking this lesson to heart led
me to set up the NGO, African Moni-
tor, which I now head. We are an inde-
pendent pan-continental body, which
brings new African voices, especially
D E V E L O P M E N T O U T R E A C H84
those of the neediest, to the develop-
ment agenda. It also helps monitor how
well the development commitments by
donors or by our own governments are
actually being met and how well they
are achieving a positive and lasting im-
pact in the grassroots communities they
are designed to help. African Monitor’s
theme for the next three years is “Un-
locking the African moment.”
Putting the human dimension and
the specific circumstances of individu-
als and communities at the heart of de-
velopment helps us marry development
theories with the very diverse realities
that people face on the ground. Theory-
driven, top-down, one-size-fits-all policy
making, too often fails to bring lasting
benefits, as we have seen in the past. Ac-
cess to information policies such as the
one being implemented by the World
Bank will enable citizens to track results
and improve aid effectiveness. New mod-
els are also increasingly evident: for ex-
ample, supposedly unorthodox methods
have led to sustained poverty reduction
and growth in Vietnam, Indonesia, Brazil,
Singapore, and, of course, China. Regard-
less of what measures one uses (and not-
withstanding serious problems in other
areas), China has experienced the most
dramatic poverty reduction in recorded
history over the last 20-30 years. The les-
sons are clear: development policies, in-
cluding the MDGs, need to be designed
contextually, within practical frameworks
that are value-driven, circumstance-spe-
cific, and sustainable. Governments must
work hand in hand with their people,
with meaningful dialogue as an essential
part of the full panoply of all that good
governance implies
Bringing the corrective balance of
human realities and contextual ground-
edness into all our policy making is
essential for our planet’s long-term
well-being, without which humanity
will not survive. The fact is that we live
in a world of finite resources and po-
tential, although for too long the eco-
nomic systems of the developed world
have operated as if it were not so—
with catastrophic consequences for us
all. Human-focused economics (to say
nothing of Christian tradition) argues
that creation can well supply enough
for our needs, though certainly not for
our greed, if we are ready to be faithful
stewards not only for today, but also for
tomorrow. In our policy formulations
we must cater for present requirements
without destroying the prospects of
future generations. This means ques-
tions of land ownership and use, en-
ergy, along with food security, must be
responsibly addressed. Environmental
concerns, particularly climate change,
also cannot be ignored, as if we can
mortgage today to tomorrow. The in-
terdependence of humanity applies not
only to the contemporary globalized
world, but to our children and our chil-
dren’s children.
All this is not the task of govern-
ments alone. The private sector must
shoulder its responsibilities. Yet it has
a right to expect that national and
international regulation will create
an environment in which good busi-
ness ethics are promoted, and where
entrepreneurship and risk are rightly
rewarded, though not at the cost of
exploitation of the poorest and weak-
est. Current policies that exacerbate
the inequalities between rich and poor,
across most nations of the world, and
between regions of the planet, are dan-
gerously destabilizing—in economic
terms, in social terms, and in human
terms. We can and must do better, and
giving a human face to our policy mak-
ing will help us avoid such pitfalls, at-
tractive though they may be to those
with power and influence when viewed
in the short term.
“How then shall we live?” is per-
haps the ultimate question of human
existence, and the only answer with in-
tegrity lies in promoting the common
good, building a just world fit for all
the inhabitants of our planet. We must
never forget the human face in our so-
ciopolitical and economic endeavors.
And when it comes to development
policies, alongside all the statistics
of hunger and need, and the totals of
dollars spent, we must remember that
what matters most is that the neediest
individuals urgently find tangible, sus-
tainable solutions. Though this is often
the hardest thing to quantify, it is the
only thing that truly counts.
I wrote earlier of the norms of civi-
lized society. Samuel Johnson put it this
way: “A decent provision for the poor is
the true test of civilisation.” My conclu-
sion and my challenge is this: we must
cease measuring progress primarily
through the condition of our econo-
mies and the strength of our curren-
cies, and instead concentrate on how
well our planet feeds its hungry, cares
for its sick, houses its homeless, edu-
cates its children, employs its adults,
and supports its elderly and vulnerable.
Only when we achieve this can human-
ity dare claim to be truly civilized.
Archbishop Njongonkulu Ndungane is Head of African Monitor, a pan-African nonprofit organization that monitors development funding, delivery, and impact and helps bring African voices to the development agenda.
A P R I L 2 0 1 1 85Mother and child in Mozambique.
D E V E L O P M E N T O U T R E A C H86
SouNdiNG Board
W h a t i s t h e m o s t i m p o r t a n t f e a t u r e [ ]k e y s u c c e s s f a c t o r
The most impor
tant feature
that will make
a development
policy succeed
is ownership
of the policy.
The process
of policy deve
lopment should
be consultativ
e, taking into
account the ne
eds of all the
people, includ
ing the grassr
oots
majority. This
process will
ensure that th
e policy has
addressed the
needs of the p
eople
and, as a resu
lt, they will
push
for its implem
entation since
they have an i
nterest in it.
Most often a p
olicy fails
because there
is a lack of
political comm
itment, such a
s
allocating ina
dequate resour
ces
for its implem
entation. A po
licy
may also fail
when it does n
ot
address the ne
eds of the peo
ple
it is intended
to serve.
Annie Namagony
a
Principal Gend
er
and Developmen
t Officer,
Ministry of Ge
nder, Children
,
and Community
Development,
Malawi
Rahul SurChief, Conduct and Discipline Unit, Office of the Special Representative of the Secretary-General, UN Stabilization Mission in Haiti (MINUSTAH) 2006-2009.
My experience in Haiti brought home the
fundamental importance of capacity for any policy
to succeed. In my travels, when I asked why
mountain after mountain lay denuded, they replied
that the trees had been cut for fuel.
When further asked why electric plants could
not supply the power, the reason given was that
there were few engineers to maintain them. This
lack of skills was mirrored in every profession
essential for development. The weakness in each
generated its own vicious cycle and malevolent
externalities. I think that without skilled
people essential for implementation, a policy
irrespective of how elegantly conceived is not
much better than squiggles on a paper. All
successes in development policy ultimately flow
from this lodestone.
OlubuNMi DiPO-SAlAMi
CEO, laRen Consulting,
Obafemi Awolowo university,
Nigeria
in my experience, the key success
factor for a development policy is the
political will for implementation.
in my part of the world, although
policies that could influence social
change are formulated on a daily basis
,
the implementation is fraught with
lip service and lack of commitment.
A policy would surely fail where the
perspectives of the citizens are not
considered. lack of participation
would lead to lack of ownership and
commitment.
S h a r e y o u r v i e w s .
A P R I L 2 0 1 1 87
t h a t w i l l m a k e a d e v e l o p m e n t p o l i c y s u c c e e d o r f a i l ?
Development policymaking is a means of achieving
common benefits that have been agreed upon by the
citizens and the governments or the private sector.
This agreement provides a foundation for official
decisionmaking by government authorities and the
relevant institutions. in the development context,
public policies can be defined as a series of
interrelated choices, actions, and results.
Successful policies require community participation
in identifying the most important issues, designing
proposals, providing feedback, clarifying their
expectations, and identifying the expected results.
Participatory approaches depend on the availability
of accurate information, direct communication and
public dialogue with the citizens using various
mechanisms for public and individual communication
to help them understand the policy and its
implications.
The cultural, economic, legal, social, and
political contexts should all be taken into account
when designing policies. Civil society can play
an important role in raising public awareness of
citizens’ rights and responsibilities, empowering
citizens, and overseeing the policymaking process.
(continued on next page)
The experiences of countries in the region can help
identify the kind of roles played by civil society.
ibrahim MakramDirector, Evangelical Organization for Social Services, Egypt
Obstacles include: lack of trust, shortage of information,
*
limited democratic practices, *
increasing conflicts, *
a lack of coordination between the three sectors
*
(the government, the private sector and the civil society), and lack of awareness regarding the public benefits that the policy will yield.
A development policy will succeed to the extent that it actively involves all stakeholders, incorporates gender issues, uses scientific research as its basis, incorporates disaster preparedness, and builds the knowledge and technical capacity of policymakers, civil society leaders, and the policy’s beneficiaries, on issues that are relevant to the policy’s success. Development policy that fails to understand how local power dynamics shape policy outcomes, that reflects little understanding of the key constituents that either hold, contest, or are excluded from power, and that fails to clarify the opportunities and risks therein or fails to incorporate disaster mitigation strategies, is likely to fail.
Linus M. NthigaiPrograms Manager Policy and Development, Evangelical Alliance of Kenya, East Africa
SouNdiNG Board
W h a t w o r k s , w h a t d o e s n ’ t ?
D E V E L O P M E N T O U T R E A C H88
SouNdiNG Board
Development is not only economic
growth.
It is a holistic process whereby
vulnerabilities are reduced and
capacities are increased within
societies. External assistance
is important for speeding up the
development momentum, but people
’s
capacity (empowerment) to set th
eir own
priorities based on their own va
lues,
and to organize themselves will
be
the most important determinants
of
development.
It is time to start the transfor
mation
from a one-way top-down approach
to external assistance, to a
multidimensional development pro
gram
with capacity building as the pr
imary
focus. This would include buildi
ng
intellectual, organizational, so
cial,
political, cultural, material, m
arket,
and financial capacity, and not
simply a set of prepackaged tech
nical
interventions targeting predeter
mined
outcomes.
Dr. Thant Zin
Consultant/Advisor
(Freelance), Public Health
and Development, Myanmar
In my opinion, the key to making
a development policy succeed is
“territorialsation.”
By this I mean that it is
crucial that policy formulation
take into account every aspect
of the area where it will be
carried out, especially the
people who will be affected. It
is therefore imperative that
communities participate from the
planning phase, have complete and
accessible information, relevant
training, access to accountability
mechanisms, and the means for
ongoing monitoring and evaluation
throughout the entire process.
Policies keep failing because
the approach to planning and
implementation doesn’t change to
reflect experience. Inertia can be
very strong, even after repeated
defects have been identified; and
evaluation often tends to be
more of a requirement to comply
than a real mechanism to identify
and correct problems and improve
policy effectiveness.
VAlERiA ENRiquEz Researcher, Transparency and Accountability FuNDAR, Center for Analysis and Research
Policies can be appropri
ate, justified, and
evidence-based from a te
chnical point of view,
but if they are not chec
ked against a stakeholde
r
analysis and embedded in
a comprehensive advocac
y
approach they will fail.
ideally, the policy
results from such a proc
ess of analysis that
creates ownership and id
entifies the interests of
different stakeholders.
These interests can be u
sed
creatively to generate i
ncentives for supporting
the implementation and a
ction on the policy.
Dr. Habib benzianManaging Director, The Health bureau ltd, Global Health Consultants, united Kingdom
A P R I L 2 0 1 1 89
With the advent of the Millennium Development Goals (MDGs), we have seen perhaps the most intensive international global commitment to eradicating poverty and improving livelihoods, and with greater emphasis placed on development policymaking and partnerships between developed (donor) countries and developing countries.
For developing and least-developed countries, the most important factor that will make a development policy succeed is the extent of country ownership, from conceptualization through implementation. While strong assistance–both technical and financial–is needed from development partners, how a country takes ownership of the development policymaking process will strongly influence whether the policy succeeds or fails. A major challenge, and thus a priority area for operational research and policy analysis, is the feasibility of country ownership of development policymaking in the context of high-levels of donor aid.
Dr. Oluwatoyin O. Togun, MD, MPHResearch Physician, Viral Diseases Programme, Medical Research Council (UK) Unit, The Gambia--West Africa
businesses need to be in tune with
and listen
to their market. They have to ensu
re that
the products and services that the
y produce
are responsive to the needs and pr
eferences
of their customers. Knowledge of t
he market
is key to developing products that
consumers
will like and buy. likewise, Polic
y makers
also need to listen to their marke
t.
Development policies that are dema
nd-driven
are seen as relevant, and responsi
ve to the
needs of communities.
The people, especially the poor, a
re the
best source of information on the
kinds
of programs and measures that will
answer
their needs. They are able to set
their own
priorities, define the services tha
t they
need, and provide feedback on poli
cies that
work and those that do not work.
Technocrats risk policy failure wh
en policies
are merely products of theory and
research.
Their first job is to listen intent
ly to as
many sectors as possible and under
stand how
they feel.
Milwida M. Guevara
President,
Synergeia Foundation,
Philippines
Development policies bring change and
the first requirement is for change in
the national mindset and for commitment
to the task. There is also a need for
stakeholder buy-in and for national
institutions capable of implementation
and monitoring. This should be combined
with enhanced accountability on the part
of all stakeholders, and alignment of
the development policy, as well as all
other development programs, with the
aspirations and long-term vision of the
country.
Most development policies fail because
they normally follow an emergency
situation, for example, to solve an
economic crisis facing the country. As
such, programs are normally set up in a
hurry and policy implementers are unable
to manage them.
Policies normally fail because of
policy reversals. From my experiences
policymakers are impatient and do not
wait for the adjustment process to be
completed and the fruits of the policies
to be realized. Taking a piecemeal
approach to economic policy development
(partial implementation) is also a major
cause of failure.
Development plans often set unrealistic
targets that cannot be adequately
funded because most people do not earn
enough to save or invest. Furthermore,
development policies are often affected
by volatile political environments which
prevent sustained implementation.
Melania Mujutywa
Chief Economist, Ministry
of Economic Planning
and Investment Promotion,
Zimbabwe
D E V E L O P M E N T O U T R E A C H90
SouNdiNG Board
A development policy s
ucceeds when it answer
s a need, and
responds to the social
, political or economi
c demands of the
community; when the ne
eds assessment studies
reflect multiple
perspectives; and when
there are accountable
implementation
mechanisms in place.
Consultation with stak
eholders. Development
policies have
long been the business
of leaders and decisi
on makers at
different levels, ofte
n in connivance with d
onors. in the
best cases, an advocac
y process would take p
lace to help local
stakeholders understan
d and implement the po
licies. The decade
of the 1990s brought w
ith it an awareness th
at populations
should participate; as
a result, a series of
participatory
methods were introduce
d, without worrying to
o much about their
effectiveness.
Development policies h
ave been more successf
ul when built on
the real-life experien
ces of the affected po
pulations, and
these populations bein
g quite diverse, had d
ifferent interests
in these policies. in
Africa one ethnic grou
p would initiate
a policy, which would
be seen as being aimed
at extinguishing
another ethnic group!
Rumours about children
’s vaccination
often reflected this vi
ew.
i myself witnessed an
agriculture policy in
burundi in the
1980s requiring popula
tions to establish cof
fee plantations
in certain regions. Th
e overzealous agricult
ural supervisors
would not allow any ot
her crop at all to be
planted next to
the coffee.
The supervi
sors would spend their
days distributing pla
nts
and providing technica
l support. but when th
ey came back one
or two weeks later, th
e plants had dried out
, even during the
rainy season! The reas
on given was that the
region’s micro
climate was unfavorabl
e to coffee. but in re
ality, coffee
owners who were unawar
e of its utility compa
red with bananas
or any of the other cr
ops they knew, were sp
ending the night
pouring hot water on t
he plants, or bringing
in parasites
which destroyed the yo
ung plants in a single
day!
Sophie Havyarimana
burundi Director,
ACORD / Women Economists
Association
Needs assessments with multiple perspectives. Needs assessment studies to guide the implementation of policies should be multidisciplinary and include the views of the target groups and institutions. They would also benefit from being carried out by respected scholars, by development practitioners who have hands-on experience, and by CSOs with alternative perspectives. Thus, the policy would benefit from a multidimensional perspective including the key actors. it’s true that there has been great progress in this respect because of the revolution in communications. it is also because of the role and capacity of civil society, and a concern for the inclusion of diverse communities which came about gradually as policies were being conceived and implemented in environments dominated by political and civil conflicts--something inconceivable 15 years ago! Finally, a development policy succeeds better when it is supported by management and implementation mechanisms in which the beneficiaries are involved, and when their knowledge and know-how is valued.
(Translated by Auriane Mortreuil)
SYED HARIR SHAH
Executive Director, Internationa
l Institute
for Disaster Risk Management, Pa
kistan
Successful development policies
should be holistic,
comprehensive, and user friendly
. Those sitting at the helm
of policy development must under
stand the realities on the
ground with respect to tradition
, culture, marginalization,
and vulnerability as well as the
capacities of the people
and implementing agencies. Devel
opment policy makers must
use multidimensional and multipr
onged approaches that reflect
an understanding of all aspect o
f the policy initiative; and
policies should be developed and
designed to serve the people an
d
not vice versa. Bottom-up approa
ches to policy development, with
professional and technocratic su
pport from the top down, will
support successful policies. If
the people take ownership of the
policy intervention, there is no
way for it to fail.
A P R I L 2 0 1 1 91
Failures of overall governance and inefficiency in public
service delivery are endemic characteristics of Nepal.
Nevertheless, after ten years of armed insurgency, a
window of opportunity for peace and reconciliation in
Nepal opened up in November 2006 with the signing of
the comprehensive peace agreement. Now the country has
been struggling to draft a new constitution, through a
Constituent Assembly, by April 2010. In this type of
situation it is very difficult to identify what would
make a policy succeed. I have noted that in recent years,
development science has been reluctant to proclaim any
single factor that contributes to making development a
success.
However, a deeper consultative process using tools
to promote accountability and transparency, such as
public hearings, public audits, citizen scorecards, and
community scorecards, would help develop more realistic
development policies. Also, the policymaking process
has to begin with citizens themselves who have to be
involved. Nothing will change unless people get involved.
Public discourse is also vital in shaping development
policy because the public requires time to digest
anything new that will affect them. People also require
time to conceptualize and decide on suitable approaches.
In my almost 15 years of experience as an advocate for
good governance in Nepal, I have realized that citizens
are never the problem but always the solution. So, I
would strongly urge policy makers to be inclusive and
listen to different political points of views rather than
imposing their own views.
Kedar Khadka
Director, Good Governance Project, Pro Public, Convener: National Coalition against Corruption (NCaC), Vice-President: National Election Observation Committee (NEOC), Vice-President: Human Rights Home
Policymakers should also understand
that public discourse is essential for
preparing citizens for new policies.
Citizens need to understand the vision
and objectives of the policy as well
as the facts, but they also need to
express what they require and what
they value most. Stakeholders must
be understood and provided enough
room to be engaged. Setting criteria
against which to measure success
also goes hand in hand with results-
based monitoring. Finally, monitoring
tools should be simple and useful for
measuring progress--and they should be
intensively applied.
As a proponent of good governance, I
believe that experience is the best
teacher. As a development practitioner
from a third-world country like Nepal,
I have seen that policy makers usually
do not appreciate the importance of
including citizens in the conception
stage of a new policy initiative.
Policies should neither be filled with
jargon nor be copied “as is” from one
place to another, or they will fail.
People must be given opportunities
to read, listen and analyze, and to
test their opinions in discussion
with others. Having said that, public
discourse is not an end in itself,
but rather a means of ensuring
ownership by a larger representation
of citizens.
John NagellaChairperson, Association for Rivers and Coastal-Ecosystems Conservation, india
To my mind the most important features in making a development policy succeed are committed collective action by stakeholders, along with sufficient human and financial resources. These should be corruption free if the policy is to yield results. Without these features a policy will most often fail.
D E V E L O P M E N T O U T R E A C H92
What drives development? What new
issues have arisen due to globalization?
And what kind of policies contribute
to development in a rapidly changing
world? The studies in Doing Good
or Doing Better analyze the different
development strategies employed
on various continents, address
current challenges, and argue that
a new approach—one different
from the European and American
models—is necessary in a globalizing,
interdependent world.
doiNG Good or doiNG Better: development Policies in a Globalizing worldEdited by Monique Kremer, Peter van Lieshout, and Robert Went
BooKShelf
Amid all the complicated economic
theories about the causes and solutions
to poverty, one idea is so basic it
seems radical: just give money to the
poor. Despite its skeptics, researchers
have found again and again that cash
transfers given to significant portions
of the population transform the lives
of recipients. Countries from Mexico
to South Africa to Indonesia are
giving money directly to the poor and
discovering that they use it wisely—to
send their children to school, to start a
business and to feed their families.
Directly challenging an aid
industry that thrives on complexity
and mystification, with highly paid
consultants designing ever more
complicated projects, Just Give Money
to the Poor offers the elegant southern
alternative—bypass governments and
NGOs and let the poor decide how to
use their money. Stressing that cash
transfers are not charity or a safety net,
the authors draw an outline of effective
practices that work precisely because
they are regular, guaranteed and fair.
This book, the first to report on this
quiet revolution in an accessible way,
is essential reading for policymakers,
students of international development
and anyone yearning for an alternative
to traditional poverty-alleviation
methods.
Kumarian Press • December 2010 • $24.95
JuSt GiVe MoNey to the Poor the development revolution from the Global Southby Joseph Hanlon, Armando Barrientos, and David Hulme
A key assumption in development
literature, Adam Fforde argues, is that
development is a predictable process
with knowable solutions. As a result,
the literature is characterized by a
combination of great certainty and
great differences of opinion.
It is no surprise then, that students
and practitioners confronting the
mass of competing assertions about
development “truths” become confused
and frustrated. Coping with Facts
offers guidance for the perplexed
through a penetrating critique of
development studies literature. Rather
than presenting a general examination
of modern development practice,
Fforde develops coping strategies that
help readers evaluate the contending
solutions to problems of development.
Fforde cements his analysis with
detailed case studies of development
projects in Southeast Asia, especially
Vietnam where he spent over 10 years.
Those eager to chart a constructive
career in development theory and
practice as well as students looking for
an introduction to this vast field will
want this book as a navigational aid for
their journey.
Kumarian Press • March 2009 • $23.95
coPiNG with factSa Skeptic’s Guide to the Problem of developmentby Adam Fforde
Amsterdam University Press • September 2010 • $42.50
A P R I L 2 0 1 1 93
Traditional knowledge (TK) has
contributed immensely to shaping
development and human well-
being. Its influence spans a variety of
sectors, including agriculture, health,
education and governance. However,
in today’s world, TK is increasingly
underrepresented or under-utilized.
Further, while the applicability of TK
to human and environmental welfare is
well-recognized, collated information
on how TK contributes to different
sectors is not easily accessible.
This book focuses on the relevance
of TK to key environment- and
development-related sectors, discusses
the current debates within each of
these sectors and presents suggestions
as to how TK can be effectively
integrated with conventional science
and policy. A valuable resource
to researchers, academics and
policymakers, Traditional Knowledge
in Policy and Practice provides a
comprehensive overview of TK, and
its links and contributions to social,
economic, environmental, ethical, and
political issues.
United Nations University Press November 2010 • $38.00
Writing from diverse locations, the
contributors to this volume examine
some of the key terms in current
development discourse. Why should
language matter to those who are
doing development? Surely, there
are more urgent things to do than
sit around mulling over semantics?
But language does matter. Whether
emptied of their original meaning,
essentially vacuous, or hotly contested,
the language of development not only
shapes our imagined worlds, but also
justifies interventions in real people’s
lives. If development buzzwords
conceal ideological differences or
sloppy thinking, then the process of
constructive deconstruction make
it possible to re-examine what have
become catch-all terms like civil society
and poverty reduction, or bland aid-
agency terms such as partnership or
empowerment. Such engagement is far
more than a matter of playing word
games. The reflections included here
raise major questions about how we
think about development itself.
Practical Action • January 2011 • $29.50
traditioNal KNowledGe iN Policy aNd Practice approaches to development and human well-beingEdited by Suneetha M. Subramanian and Balakrishna Pisupati
decoNStructiNG deVeloPMeNt diScourSe Buzzwords and fuzzwordsEdited by Andrea Cornwall, Deborah Eade
We live in a new reality of aid. Gone is
the traditional bilateral relationship,
the old-fashioned mode of delivering
aid, and the perception of the third
world as a homogenous block of poor
countries in the south. Delivering Aid
Differently describes the new realities
of a $200 billion aid industry that has
overtaken this traditional model of
development assistance.
As the title suggests, aid must now
be delivered differently. Here, case
study authors consider the results of
aid in their own countries, highlighting
field-based lessons on how aid works
on the ground, while focusing on
problems in current aid delivery and
on promising approaches to resolving
these problems.
deliVeriNG aid differeNtly: lesson from the fieldEdited by Wolfgang Fengler and Homi Kharas
S o u r c e : w o r l d B a N K i N f o S h o P | w w w . w o r l d b a n k . o r g / i n f o s h o p
Brookings Institution Press • November 2010 • $28.95
D E V E L O P M E N T O U T R E A C H94
The 2008-09 global financial
crisis shook the ground under the
conventional wisdom that had
guided mainstream development
economics. Much of what had been
held as true for decades is now open to
reexamination— from what the role
of governments should be in markets
to which countries will be the engines
of the world’s economy, from what
people need to leave poverty to what
businesses need to stay competitive.
Development economists look into the
future. They do not just ask how things
work today, but how a new policy,
program, or project would make them
work tomorrow. They view the world
and history as a learning process—past
and present are inputs into thinking
about what is coming. It is that appetite
for a vision of the future that led the
authors of The Day after Tomorrow: A
Handbook on the Future of Economic
Policy in the Developing World to invite
some 40 development economists,
most of them from the World Bank’s
Poverty Reduction and Economic
Management Network—an epicenter
of the profession—to report what they
see on the horizon of their technical
disciplines and of their geographic
areas of specialization.
The disconcerting but exciting search
for a new intellectual compact has
begun. To help guide the discussion,
The Day after Tomorrow: A Handbook
on the Future of Economic Policy in the
Developing World puts forth four key
messages:
■ While the developed world
gets its house in order, and
macroeconomics and finance
achieve a new consensus,
developing countries will become a
(perhaps the) growth engine for the
world. Faster technological learning
and more South-South integration
will fuel that engine.
■ Governments in developing
countries will be better—they may
even begin to earn the trust of their
people.
■ A new, smarter generation of social
policy will bring the end of poverty
within reach, but the attainment of
equality is another matter.
■ Many regions of the developing
world will break out of their
"developing" status and will
graduate into something akin to
"newly developed." Africa will
eventually join that group. Others,
like Eastern Europe, have a legacy of
problems to address before such a
transition.
While some regions will do better
than others, and some technical areas
will be clearer than others, there is no
question that the horizon of economic
policy for developing countries is
promising—risky, yes, but promising.
The rebalancing of global growth
toward, at the very least, a multiplicity
of engines, will give the developing
world a new relevance.
The World Bank • September 2010 • $35.00
the day after toMorrow a handbook on the future of economic Policy in the developing worldedited by Otaviano Canuto and Marcelo M. Giugale
BooKShelf
W O R L D B A N K P U B L I C A T I O N S
A P R I L 2 0 1 1 95
The 2008–09 financial crisis, which
originated in the United States and
rapidly spread to the rest of world,
resulting in the most severe and
intense Great Recession since World
War II, has posed new challenges for
international policy coordination
and the management of national
economies. Questions are being
raised about globalization, which has
been a powerful engine of economic
growth over the past three decades but
exposes countries to more volatility
and increases risk. What policies
and reforms increase the resilience
of developing economies to such
external shocks? Which institutional
arrangements and policy frameworks
would allow them to respond most
quickly and effectively? What role
is there for international policy
coordination and for emerging
economies?
The Great Recession and Developing
Countries delves into 10 country case
studies that explore growth during
the precrisis boom, the effects of the
crisis, policy responses, and recovery.
Looking beyond the crisis, the volume
undertakes projections of medium-
term growth and explores the possible
impact of the global crisis. The use of
a common methodology in preparing
the case studies facilitates cross-
country comparisons and helps draw
some useful lessons as well as identify
areas where more study is needed.
Although the case studies do not
constitute a statistically representative
global sample, they illustrate a broad
range of experiences in the wake of
the Great Recession—covering Brazil,
China, Ethiopia, India, Malaysia,
Mexico, the Philippines, Poland,
Turkey, and Vietnam—and give
insights on how developing countries
can best prepare and respond to
such crises. A synthesis chapter
establishes the overall framework,
provides a summary of the global
crisis and its effects on the countries
studied, and draws lessons from the
10 country studies. This book will be
of particular interest to development
practitioners,policy makers, and
academics.
The World Bank • December 2010 • $35.00
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