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I like to read Jeff Sachs for his alternative viewpoints. He often writes about investment and has recently argued that the problem with both free-market and Keynesian economics is that they misunderstand the nature of modern investment. Both schools believe that investment is led by the private sector, either because taxes and regulations are low (in the free-market model) or because aggregate demand is high (in the Keynesian model).
In Sachs’ alternative view, private-sector investment today depends on investment by the public sector. But investment into what? What types of capital should we be accumulating?read more...»
In 2015, the UN's Millennium Development Goals are expiring and the international community will set new goals. This is a hugely important exercise, so I'm drawn to the discussions as part of the Copenhagen Consensus -
"Effective investments for today’s children are fundamental for a better and more equitable world in the future. The Copenhagen Consensus Centre brings a simple but compelling logic to this endeavor: if we want to make sure that this world is realized for our children, let’s focus on the investments that will generate the most good”.
- Richard Morgan, UNICEF Senior Advisor on the Post-2015 Development Agendaread more...»
One optimistic observation in economics is that poor countries should be able to catch up with the richer ones, since it’s easier to grow from a low level of GDP to a higher one. This observation was made by Nobel-winner Robert Solow in 1956, and is based on the idea that low income countries are poor because their workers have access to less capital. This capital shortage (i.e. insufficient infrastructure) implies that the return on investment should be high, so capital should flow from rich countries to poor ones, leading the two worlds to converge on similar levels of productivity and income.
Furthermore, in this theory, growth in rich countries is driven by new technology which, once developed, could be adopted by poorer economies too. Indeed, the poor could potentially learn from the mistakes made by the rich, and leapfrog directly to more productive ways of doing things.
And so it seemed. From the late 1990s to 2008, poor countries were catching up fast. But that catch up seems to have slowed down (see chart above).read more...»
The Economist have posted a terrific video that takes a tour along the Pearl River in China. As the scenery rolls by, the narrator comments on the extent to which the journey through the surroundings reflects a journey through China's recent economic development.read more...»
In Economics, saving offers something of a puzzle. From some viewpoints, savings are a leakage from the circular flow of income, reducing multiplier effects. And if we all saved - in a determined effort to repay our debts (which sounds like a great idea) – the level of aggregate demand (AD) and economic activity would take a serious hit. This is the famous paradox of thrift.
Yet economies do need saving as a fund for business investment. The Harrod-Domar model is used in development economics to explain an economy's growth rate in terms of the level of saving and productivity of capital (see above). But many economies have a savings gap.
Yet I’ve been reading that adults in developing countries are half as likely to have an account at a formal financial institution as those in the rich world. Only 18% of people in the Middle East and north Africa do, compared with 89% in high-income countries. This makes saving even harder. So economists would like the world’s poorest to save more. That would help them to pay for big or unexpected expenses, such as school fees or medical treatment. It could also boost investment and thus accelerate economic growth.read more...»
The overall rate of infant mortality has been halved in the past two decades.
That's the good news. But Unicef' s latest figures estimate every day 17,000 under-fives die - 6.3 million a year - from largely preventable causes. Most of the deaths happen in the first hours or weeks following birth.read more...»
The growth vrs the environment debate is great for opening a thoughtful discussion about the net benefits of economic growth. Some participants take what might be described as a Kuznets Curve approach to the issue. That might be simply summarised as things get worse to begin with, but after a while they start to improve (OK, I’m simplifying a bit here). In environmental terms, you might illustrate this with the Peak Stuff idea. For several years now, the UK economy’s total consumption of physical resources has been falling. In the past, growth made our economy more and more damaging to the environment. But future growth might have far less of an impact, and even contribute to significant environmental improvements.
What about tropical forests, which observers in the last decades of the 20th century noted were under severe threat? The Economist newspaper seems to take an optimistic view. Future growth may have far less worrying consequences for tropical forests.read more...»
Will the best place to live - as identified by the Economist newspaper - be found in the country with the highest GDP per capita?read more...»
Download this engaging teaching resource to test student awareness of the international competitiveness rankings!
You may have already seen Geoff's blog on the newly released International Competitiveness Index. The World Economic Forum annually release its table of competitiveness using a variety of data measures including economic performance, quality of education and labour efficiency. The UK has moved up to 9th in the World.read more...»
According to The Economist there is a long history of efforts to distinguish products that have been made more ethically than others. In the late 18th century, anti-slavery campaigners urged British consumers to boycott sugar from the West Indies in favour of supplies from India. Today’s fair-trade movement took off in the 1960s, mostly in religious organisations that wanted to help the poor, whom they saw as losers in the global trading system. Fair Trade is a really important issue for discussion.read more...»
At the end of last term all our year 12's were set the task of writing a short article about a different developing country. They were tasked with covering:
- Key information- e.g. GDP, HDI, Gini coefficient, indicators of level of poverty/development
- What factors are limiting growth & development in this country
- How is the government and other stakeholders trying to promote growth & development in this country
- How successful have they been so far?
I have collated all these articles together into an e-book which teachers and students studying development economics should find very useful to make use of as part of the course.read more...»
Western Union and MoneyGram dominate the money transfer industry and the high level of fees that these companies has been heavily criticised in recent years. This is an important article given the huge scale of remittance transfers in the world economy to relatively poor countries such as India, the Philippines and many sub Saharan African nations.
Click here for an info graphic on remittances produced by the World Bank: http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/E...
Here is a really excellent blog on the issue of growth divergence - Simon Taylor contrasts the historical growth records of the United States versus Argentina and then South Korea against Ghana. The accompanying charts reveal starkly the widening gap in GDP per capita between each pair of countries over the very long term.
I will be following Simon Taylor's blog as the new school year comes into focus http://www.simontaylorsblog.com
This is an absolutely outstanding article to use when introducing development economics to a level students. The work of Hausmann and Hidalgo on complexity and economic development is becoming more widely recognised and used in schools. Hausmann's article here in Project Syndicate emphasises the importance of building capabilities within an economy to promote the growth of higher value added industries. Here is the link to the article: https://www.project-syndicate.org/commentary/ricar...
Each year the Human Development Report published by the United Nations gives a special focus on a particular issue related to development. In 2014 that issue is vulnerability.
To quote from the opening of the report:
"Real progress on human development, then, is not only a matter of enlarging people’s critical choices and their ability to be educated, be healthy, have a reasonable standard of living and feel safe. It is also a matter of how secure these achievements are and whether conditions are sufficient for sustained human development. An account of progress in human development is incomplete without exploring and assessing vulnerability."read more...»
According to The Economist, the great commodity boom caused by the industrialisation of China and India provided an unprecedented boost to the terms of trade (defined as the ratio of the price of its exports to that of its imports). Yet now the commodities boom may be running out of steam, these countries face a challenge.read more...»
The Philippines has enjoyed a period of rapid economic growth in recent years and attracted increasing attention as one of the fast-growing economies of South East Asia. Can this growth be sustained? What are the risks, challenges and the constraints facing the country? And how can the benefits of growth contribution to a transformation of economic and human development? This blog provides links to some useful resources:read more...»
Data on export patterns for goods from countries around the world provide a fascinating window on the degrees of complexity that nations have achieved. There is growing interest in the significance of knowledge capital or know-how in lifting productivity, competitiveness and improving trade performance for economies at different stages of development. Below is my selection of countries.
There then follows links to videos from Cesar Hidalgo and Riccardo Hausman on their theory of productive knowledge - and in particular how it is acquired at the level of the individual, the level of organizations, and cities, regions, countries and societies.read more...»
With World Bank Group support, millions of Rwandans are on their way to integrating to regional power and transport networks, boosting their agricultural productivity, and delivering results for their families. This is a short info graphic video from the World Bank together with some related links to useful resources on the Rwandan economy.read more...»
I am often writing blogs on the debate over the limitations of GDP as a measure of economic and social progress, most recently with coverage of the Social Progress Index. Here’s another approach, the Good Country Index. It's a deceptively simple concept, yet quite powerful.read more...»
Christine Lagarde is Managing Director of the International Monetary Fund. She was appointed in July 2011. This blog links to the 2014 Amartya Sen lecture given at the LSE in the summer of 2014 on the topic of empowerment and in particular how women can build capacity and capabilities in countries seeking durable development - see also this blog from Mrs Lagarde in September 2013: http://blog-imfdirect.imf.org/2013/09/23/lagarde-w...read more...»
This new short video from the World bank looks at the economic benefits that flow from investment in an improved road network in Senegalread more...»
Although Indonesia has experienced significant growth and development, not everyone has benefitted. This short video from the World Bank offers a personal story. Followed by up a July 2014 blog from BBC Global Business on the rise of the wealth elite in Indonesia.read more...»
The varied nature of Economics means there are so many (sometimes it can seem too many) themes to explore. And priorities change. Sometimes the main issue is production (making more stuff – and how the value of that is measured). Sometimes it’s exchange (looking at how markets work). Yet distribution (often overlooked, especially when economies are booming) seems the hottest topic at the moment. Inequality tops the bestseller lists.
Here are a few tips and links for using the topic as an intro to A2 economics, great for macro, with scope for analysis and evaluation of UK government policy and approaches to development economics.read more...»
Here is a selection of development data for Cambodia put into context with a selection of other Asian countries, drawing on published data from the Asian Development Bank. This blog will be added to shortly with summary notes on the economy and links to other useful resourcesread more...»
Drawing on data from the 2013 Human Development Report, here are the 24 countries in the 2014 World Cup ranked according to the Human Development Scoresread more...»
Here is the recording of Geoff's webinar for A2 Econ students which focused on key aspects of the international & global economy, including a focus towards the end on development economics.read more...»
You’ll often hear it said that Britain, or the world, is ‘overpopulated’, but that’s a very hard concept to pin down. Hostility to migrants into the UK is high, yet economists often argue we need more immigrants.
One Labour MP, Stella Creasy, has stirred controversy by saying “talk to Nigel Farage not just about the immigrants who come here and create jobs, but the immigrants who come here and create skills and create opportunities for people and create new ideas for people. There are now more people over the age of 65 than under the age of 16 in Britain. So unless women like me have a lot of children very quickly our ability to sustain our economy (and) to sustain our public services will come under threat”.
So do extra people add to the economy or subtract from it? I’ve put together a few links and ideas.read more...»
The first title in the list of six available to RES entrants is a challenging one!
Promoting growth and fighting poverty should be the priority in the developing world, not reducing greenhouse gases.” Do you agree?read more...»
This blog entry will feature frequently updated revision resources on economic growth trade and development aspects for a range of sub Saharan African countriesread more...»
Mozambique has discovered large amounts of natural gas - can the extraction of this act as a catalyst for economic growth and development or will Mozambique be added to the long list of countries who have experienced a natural resource curse?
Manuel Chang, Mozambique's minister of finance, says economic growth is only part of the story of a country's development. He tells Javier Blas of the Financial Times how his nation plans to make the most of its vast natural resources.
Manufacturing output in the African continent accounts for less than 2% of global manufacturing production.read more...»
I am really grateful to Bob Denham from Econ Films who has shared with us this newly launched video from the International Growth Centre. It focuses on the competitive challenges facing Pakistan's football manufacturing sector as it loses market share to countries such as China and Indonesia. Footballs in Pakistan are still made mainly by hand, stitching together hexagons and pentagons - a process that leads to a lot of waste and higher unit costs and which then affects the profitability of businesses in what is already a low-margin sector.
Could a team of economists find better ways of cutting the patterns for footballs and then align the incentives of workers and owners? This is a fascinating short video which captures many aspects of the Unit 4 development economics course. Enjoy!read more...»
Guinea has agreed a huge new capital investment framework with a number of transnational partners including Rio Tinto and Chinalco to develop one of the world's biggest iron ore assets. This is a project that may double the country's GDP not least because as well as mining the iron ore, there is a proposal to seek funding to construct a 650km railway and a deep-water port to transport the rocks and minerals.
It is one of those examples that comes along every once in a while that prompts both students and teachers to re-visit the economics of large scale foreign direct investment projects. Is this nation building of the old style? Or is the proposed investment framework one that could be genuinely transformative for one of the world's poorest countries?
- Forecast of 45,000 new jobs created across the entire project
- State of Guinea will retain 15% of any proceeds from the mine
- In exchange, the joint venture with Rio Tinto / Chinalco will enjoy eight years' tax free operations in the country
- Production at the Simandou mine is expected to start within five years
- It will be Africa's biggest mine
Here is a short interview in which it is argued that China will increasingly focus on the quality of growth rather than the quantity. A Chinese slowdown may affect countries that have exported to China more than China itself.read more...»
This short World Bank info-video looks at what $1 buys in China. In China, over 98 million people live on less than 6.3 yuan ($1) per day.read more...»
It is a staggering statistics, but around 3 billion people in the world cook and heat their homes using open fires and simple stoves burning biomass (wood, animal dung and crop waste) and coal. Over 4 million people die prematurely from illness attributable to the household air pollution from cooking with solid fuels. And more than 50% of premature deaths among children under 5 are due to pneumonia caused by particulate matter (soot) inhaled from household air pollution. This short World Bank video looks at the subsidies available to stove manufacturers under the Clean Stove Initiative.read more...»
There has been huge interest in the new book by Thomas Piketty entitled "Capital in the 21st Century". This blog entry will link to some reviews, news articles and short videos on Piketty's ideas and policy prescriptions. In "Capital," French economist Thomas Piketty explores how wealth and the income derived from it magnifies the problems of inequality. At the heart of it is a simple equation R > G - the rate of return on capital is higher than the rate of economic growth. Naturally there is a fierce debate about the data and his methodology!
Recent news articles:
Are we living in the second gilded age? (Linda Yueh, BBC)
Review of "Capitalism in the Twenty First Century"(The Independent)read more...»
Here is a quick note about a news item which provides some excellent evidence of inward FDI in Africa, Chinese investment in access to commodities, and the costs and benefits for an LEDC of overseas investment.read more...»
There seems to be a huge amount of relevant material in here for students preparing for their A2 F585 paper - extract 5 of the pre-release case study focuses on economic growth and development in Sub Saharan Africa. Click this link: http://africaprogresspanel.org/publications/policy...
I’ve been teaching a while, so I was very interested to see an Economist article return to a topic I remembered from way back in 2000, when the multinational company Intel had recently embarked on a significant investment in Costa Rica. What would happen to the relatively poor Central American economy when the giant arrived?
Fast forward to 2014 and Intel have announced that they are leaving. Cue some similar questions: what effects have been felt? And what impact will Intel’s departure have?read more...»
This is a timely and important short video report on the future for Indian manufacturing industry.
Onerous regulations, bureaucracy and poor infrastructure have made it difficult for large manufacturers to prosper in low cost mass manufacturing in India. And just as the South Asian nation starts to benefit from the so-called demographic dividend, manufacturers are shifting towards less labour intensive manufacturing techniques. The Financial Times visits JCB and Bharat Forge in the manufacturing hub of Pune to find out moreread more...»
Income and wealth inequality in the UK are higher than most people think they are and higher than they think they should be. These are among the messages of a new online infographics film:read more...»
New data suggests that China will soon overtake the United States with the largest GDP adjusted for purchasing power parity. This short Financial Times video from Chris Giles looks at the new data which are being driven by fresh estimates of what money can buy - i.e. the volume of goods and services that are produced in different countries and what one dollar can buy in one country compared to another. The data finds that poorer countries are cheaper than economists thought they were and richer countries are more expensive.
China barely breaks into the top one hundred of the countries of the world in terms of GDP per capita (PPP) - it is a large country but not rich!
The 2011 gross domestic product (GDP) of the European Union, the United States and China together accounted for half of the world GDP in 2011. In 2011, the GDP of the 28-nations EU represented 18.6 percent of the world's GDP, expressed in Purchasing Power Standards (PPP). It was followed by the United States with a share of 17.1 percent and China with 14.9 percent.read more...»
Boston Consulting Group have produced a fascinating new report which investigates the competitiveness of the world's top 25 goods exporting nations. Their press release highlights significant changes in the world order over the last decade. The newly-minted BCG Global Manufacturing Cost-Competitiveness Index incorporates four factors: energy costs, productivity, wages and exchange rates. That analysis shows that Brazil is now one of the highest-cost countries, and the UK is the cheapest location in western Europe. Mexico now has lower manufacturing costs than China, while costs in much of eastern Europe are basically at parity with the U.S.read more...»
This video from the Economist is relevant to students of development economics. Severe droughts can cost Kenyan farmers their livelihoods. A new insurance scheme aims to protect them from the whims of the environment.read more...»
Here is a Country Profile revision sheet that I have created as part of my revision programme for my A2 students.
The idea is to complete (neatly) one sheet each for six countries – leaving room on the other side for additional useful revision concepts and background context. ideally students will choose at least one African country, a middle income nation, one or more of the BRICS or MINT countries and an EU country other than the UK.
The sheets can be duplicated for class use and make an excellent prompt for discussion. Download a free version by clicking this link. Country_Profile_Revision_Sheet.pdf
Private capital flows are now much bigger than traditional aid and there has been a geographical shift in where the world's poorest people live. This OECD video provides some useful background on these important changes as we head towards changes to post-2015 development goals.read more...»
Measuring the size of an economy is difficult on so many levels. Of course, there’s always the GDP debate, which asks about the best way to measure economic and social progress. But even measuring GDP is a huge challenge. Nigeria has just experienced a vast 89% increase in GDP having ‘rebased’ its figures.read more...»
For many developing countries tourism is already a major part of their economy and a significant source of extra factor incomes and employment. But there is a fierce debate about the economic and social consequences of tourism - what roles can tourism play in economic development? Can travel to developing countries do more harm than good? This revision blog provides some arguments and resources on this topic.read more...»
Using pubic data from the Asian Development Bank here are some illustrations of the structural changes in output that have occurred across a selection of countries in Far East Asia, Australia and New Zealand. Consider the magnitude of the changes that have taken place over the last twenty years. Note for revision which countries appear at the top and the bottom of each individual chart and think about WHY they appear in that position.read more...»