On Thursday 31st of January 2013, the long-awaited LSE Growth Commission Report was published and launched in London. The document itself is available for download from this link and I urge all teachers and students interested in growth, competitiveness and the fairness agenda to have a look at it. It is full of rewarding and important insights into the drivers of balanced growth in a modern advanced economy.
I will be adding new resources and links to this blog following the launch event
Key Points from LSE Growth Report
- Strong rule of law
- Generally competitive product markets
- Flexible labour market
- A world-class university system
- Openness to foreign investors and migrants
- Independent regulators including competition authorities
- Strengths in many key sectors including high end manufacturing
LSE Commission Growth Agenda
- Greater autonomy for schools, tackle the long tail of under-performance. Conditional cash transfers for families to pupil attendance and performance. Focus league tables less on % attaining 5 A-C grades. Reveal performance at the bottom end.
- Concentrating on skills (improving human capital) gives people the resilience to recover from global shifts in the division of labour
- Critical infrastructure essential for competitiveness in modern economy. For the UK, transport and energy are infrastructure areas with biggest issues; there has been a lack of clear strategy and lots of dithering / political delays.
- Huge opportunities for UK - industrial revolution driven by search for low-carbon technologies driving innovation - can the UK keep up?
LSE Commission proposes:
- 1) Strategy Board (for planning)
- 2) Planning Commission (for delivery)
- 3) Infrastructure Bank (for funding)
- Innovation is the third channel for increased growth
- Problems in UK capital markets mean innovation is not properly funded - short-termism remains a structural weakness of the markets
- More competition in retail banking
- Business bank that prioritises lending to SMEs and innovative firms
Changing the compass of economic performance
- Commission suggests that focus on GDP is not helpful
- GDP misses out on who gets the growth and measures production not income
- Need more focus on Median Household Income
- Median household income and GDP per capita have been decoupled since about 2002. GDP no longer tracks it
UK trend growth rate can be lifted by 0.5% with effective structural reforms - large compound effect on incomes over the long run
Institutions and incentives matter for growth. Macro stability important too. UK politics too short term and adversarial. Fundamental weakness is the failure to create a stable policy framework.
More focus needed on evidence based policy making to make government smarter.
Here Professor John Van Reenen, Director of CEP and co-chair of the LSE Growth Commission, presents a 'manifesto for growth' for the UK economy over the next 50 years, backed up by the Growth Commission's report.read more...»
There are several research organisations out there producing regularly updated forecasts on what is likely to happen to the relative shares of global GDP and income per capita over the long run. Typically the forecast stretches out to 2050 and necessarily involves plenty of uncertainty. But these over the horizon studies are quite interesting in their own right because they remind us of the changing drivers of growth in the world economy.
Here is one of these reports - World in 2050 The BRICs and beyond: prospects, challenges and opportunities - produced by economists at PriceWaterhouseCoopersread more...»
This is potentially an important development in a key consumer industry - can major tea exporters successfully manage the world price of tea in the form of an international cartel? What are the conditions required for cartels to be successful? When do international price agreements break down? Can you think of some of the benefits and costs of such a scheme from the point of view of different stakeholders?
Links to follow:
World tea producers may brew up higher tea prices (Telegraph Australia)
Mark Austen writes on this essay title: Evaluate the impact that the micro-finance and Fair
Trade movements can have in supporting development in some of the world’s
Although many of the broad approaches to economic growth and development are “top-down” in nature – for example an ambitious government strategy to increase productivity or attract foreign direct investment projects – in recent years there has been huge interest in a bottom-up or grassroots approach to enterprise and innovation supported by the micro-finance industry. The world’s poor are exposed to irregular income flows, and their needs are irregular too – ranging from unforeseen medical bills to having to pay more when food prices rise unexpectedly.
Grabs have become an important and controversial issue
in development economics in recent years.
Many of the world’s poorest countries are saddled with high levels of external debt owed to other governments, institutions such as the IMF and foreign companies and individuals.
There is increasing interest in the use of
"smart aid" - aid
programmes that use experimentation and focus on bottom-up projects in order to increase the effectiveness of each £
or $ given in aid
Does aid help or hinder economic growth and development? This is the subject of a fierce debate in the development economics literature
What role can and what role should overseas aid play in promoting and sustaining economic development? These are hugely contentious questions in the subject. Estimates vary from those which suggest that overseas development aid has added about 0.5 per annum to growth in recipient countries to those which suggest that it has had no positive, or indeed negative, effect on growth.
countries have seen a growing share of their GDP directly linked to overseas trade - trade has many positive spillover effects
The Fair Trade movement now covers over 650 producer organisations in more than 60 countries
Comparative advantage is a dynamic concept meaning that it can and does change over time. For a country, the following factors are important in determining the relative unit costs of production:
Revision notes and resources on the World Trade Organisation (WTO)read more...»
The middle income trap exists for some countries that make significant progress in reducing extreme poverty and experience structural change and growth but then find it difficult to make the climb from being a middle-income country to achieve high-income fully-developed status. GDP growth rates often slow down and a country can struggle to build and maintain international competitiveness. Research from the World Bank finds that only 13 of the 101 countries deemed to be middle-income countries in 1960 had achieved high-income levels in 2011. Different studies find different thresholds for where growth tapers off, ranging from $8,500 to $18,500 at 2010 prices, adjusted for purchasing power parity.
The economist Robert Solow (pictured) developed the neo-classical theory of economic growth. Solow won the Nobel Prize in Economics in 1987.read more...»
Hopefully this does what it says on the tin!read more...»
This short report from Al Jazeerah news looks at the rise of e-cash systems (electronic money) as a way for aid agencies to transfer cash to vulnerable people rather than traditional sacks of food aid. The Center for Global Development has been at the forefront of establishing cash on delivery aid - more details hereread more...»
Here is a series of links to recently available resources on international financial flows and their impact on growth and developmentread more...»
I am linking in this blog to some of the ideas and arguments contained in "The Quest for Prosperity" the new book on economic development from Professor Justin Lin - in particular the case he makes for the need for a new development economics - devel econ 3.0!read more...»
The Guardian provides a feast of visual images covering some of the leading economic development stories of 2012. Their Global Development Blog is a superb resource and well worth following if you are studying or teaching global development as part of your course. Here is the link to their main blog.
I am linking here to a lecture given recently at the Royal Society of Engineering by Tom Standage from the Economist.read more...»
In many countries, resource nationalism has become more frequent in recent years, indeed it has been one of the key stories in 2012 as several countries have introduced new resource taxes, natural resource licence reviews and expropriation of assets from private sector companies. This Financial Times news video looks at the trends including resource nationalism within countries as provinces and regions look to exert great control on the revenues from oil, gas and mining projects.
See also: Economist: Foreigners beware - oil and mining in Indonesia
Resource insecurity: New report from Chatham House
Interactive resource: New political economy of natural resourcesread more...»
Drawing on data from the December 2012 World Bank Database, this Guardian data resource looks at growth and development indicators for six fast growing countries over the period 2007-2011. The countries are Chile, Ghana, Indonesia, Mexico, Thailand and Turkey, looking at child mortality, university enrolment, mobile phone subscriptions and the numbers of tourists arriving to analyse the 'boom'
Liberia has an apparently stable government, plenty of aid available, and the debt hanging over the country has been written off.
And yet, as Evan Davis explains in this valuable article, for many people in Liberia, conditions are still medieval.
Regular listeners to Radio 4's 'Today' programme will know that they have run a series of reports about Liberia. It's economy is in ruins, after years of civil war. That conflict was partly funded by exports of timber and diamonds, and the UN placed bans on those exports. However, those bans were lifted in 2006 and 2007 respectively, so why does Liberia still record unemployment of 80%?
Evan explores the multiple causes of the problems which hold the country back, and condemn it to a catch-22 in which investment cannot easily occur. It should be highly attractive as a destination for inward investment, with wage
rates of about $5 a day in the formal sector of the economy (about a fifth of those in the most industrial parts of
China). But for industrial development, as the article points out "...you first need electricity; for electricity, you need some trained
workers; for trained workers, you need some schools; for schools you
need some money; for money, you need some industry."
There are other examples of the practical issues which individually hold back progress, and which combine to slow it to a barely perceptible crawl. The article provides a superb example of how to analyse the factors that might hold back development, and is a must-read for unit 4 students over Christmas!
The rate of growth in the Indian economy seems to be slowing down and poses challenges for a government that needs a good rate of growth to support development and further progress in cutting extreme poverty. Asia's third largest economy has seen a reduction in the annual growth of real GDP. The country's growth rate came in at 5.3% during the third quarter of 2012.
According to this Guardian news article:
"Analysts say India needs to take more steps quickly, including speeding up approval for infrastructure projects, overhauling the tax system and reducing its swollen deficit to revive capital investment."
Growth has been hit too by persistently high rates of consumer price inflation which has caused business costs to rise and squeezed real incomes for many millions of India's emerging middle class.
Glossary of some key terms in development economics - R to Wread more...»
Glossary of some key terms in development economics, M to Qread more...»
Glossary of some key terms in development economics from H to Lread more...»