Post on 18-May-2018
Recent Development Experience
Latin America, Africa and Asia
(Todaro text Chapter 2, pp 56-93)
ECON 3508 September 9 and 15, 2015
Hans Rosling on Information
regarding Development
http://www.ted.com/talks/hans_rosling_show
s_the_best_stats_you_ve_ever_seen.html
http://globalpublicsquare.blogs.cnn.com/2011
/03/04/hans-rosling-shows-the-world-
catching-up-to-america/
Agenda
1. Characteristics of Developing Countries:
Diversity and Commonalities?
2. How Low-Income Countries Today Differ
from Developed Countries in Their Earlier
Stages
3. Recent Development Experience
A. Latin America and the Caribbean
B. Africa
C. Asia
D. Arab Countries
4. The “Convergence” Issue
1. Characteristics of Developing Countries:
Diversity and Commonalities?
Can we lump the developing countries into a single category?
Are there common features among “developing countries”?
1. Characteristics of Developing Countries:
Diversity and Commonalities?
Can we lump the developing countries into a single category?
Some possible commonalities, (but note numerous exceptions): 1. Lower levels of living and productivity?
2. Lower levels of human capital (health, education, skills)?
3. Higher Levels of Inequality and Absolute Poverty?
• Absolute Poverty
• World Poverty
4. Higher Population Growth Rates?
• Crude Birth rates
UNDP Characterization of Countries by NHDI
NHDI OECD Africa Latin America
& Caribbean
Asia East-Europe
& Former
USSR
Republics
Very High
NHDI
27 1 6 6
High NHDI 1 1 15 4 17
Medium
NHDI
10 9 15 5
Low NHDI 38 1 5
Source UNDP. HDR, 2011, pp. 143-147
Characteristics of the Developing World:
Diversity within Commonality, cont’d:
5. Greater Social Fractionalization?
(See ethnic maps of Kenya, Congo and Zambia)
6. Larger Rural Populations but Rapid Rural-to-
Urban Migration?
7. Lower Levels of Industrialization and
Manufactured Exports?
8. Adverse Geography
– Resource endowments?
See text for explanation
1. cont’d: Characteristics of the Developing
World: Diversity and Commonality
9. Underdeveloped Financial and Other markets
– Imperfect markets
– Incomplete information
10. Colonial Legacy and
– Differing colonial impacts: legislation, language,
political systems, institutions
– Property rights and allocations
11. External Dependence
2. How Might Low-Income Countries Today Differ from
Developed Countries in Their Earlier Stages?
• Eight possible differences
– Physical and human resource endowments
– Per capita incomes and levels of GDP in relation to the rest of the
world
– Climate
– Population size, distribution, and growth
– Historic role of international migration
– International trade benefits
– Basic scientific/technological research and development
capabilities
– Efficacy of domestic institutions
– Advantages of “being a latecomer”
See text for explanation
3. Recent Development Experience
A. Latin America and the Caribbean
B. Africa
C. Asia
D. Arab Countries
A. Economic
Performance in
Latin America
Sources:•Social Panorama of Latin America, 2014, and
•Preliminary Overview of the Economies of Latin America and the Caribbean, November 2014,
UN Economic Commission for Latin America and the Caribbean, Santiago Chile
Mexico City
Contrasting Experiences:
Chile, Costa Rica. Brazil, Uruguay. Argentina,
Mexico
English-Speaking Caribbean
Peru, Colombia, Paraguay, Guatemala,
Honduras. El Salvador, Dominican Republic
ALBA: Cuba, Venezuela, Ecuador, Bolivia,
Nicaragua
Haiti
Explain
The Recent African Development Experience
Bad News: Economic Contraction, 1970s to 1990s– minus 0.9 % per capita per year, 1975-2000
– 27 countries with declining GDP pc, 1975-2000
Good News: Recent Growth Recovery late 1990s to 2015
1999-2007 + 4.7% per year or about
2.4% % per capita per year,
Bad News:2009: caught in global recession; but slow-down was minimal
Good news: 2010-2014:Quick Recovery,\
2015: Slowdown again (due to low commodity prices resulting from China’s growth deceleration)
1. Internal Factors“Poverty Traps” and Interacting Vicious Circles
Low YLow SLow ILow K StockLow Y….
Economic ContractionLower Inco,eDecliningTaxesDeclining Public ExpenditureWorsening Infrastructure, Health, Education Further Economic Contraction…….
Weak HealthIneffective WorkLowYPoorNutritionPoor Health………
Inappropriate economic policies:• Modern sector Industrial &Urban Bias• Trade protectionism; • Ineffective integrative schemes• Exchange rate dysfunction• Price Controls;
EXPLANATION OF DEVELOPMENT EXPERIENCE
3. General Problems of Governance
• Political instability
• Civil war,
• Weak governance and corruption;
Underlying Origins?
General Problems of Governance
Underlying Origins?
– Artificiality of some nation states;
– Traditional view of state as an alien force, inherited from colonial times
– Capture of the state by particular groups
– Insufficient experience in self government in colonial era
– Shortages of trained personnel at Independence
4. Environmental Problems
• Desertification;
• Firewood problem in many areas
• Soil depletion
• Climate change
Explanation of 1975-1998 Economic Contraction:
A Conjuncture of Negative Circumstances
Many things going wrong at the same time;
Interlinked vicious circles
Consequences of the Economic Contraction:
Source: OECD Development Centre / African Development Bank, 2009
Real GDP Growth
-6
-4
-2
0
2
4
6
8
2000 2001 2002 2003 2004 2005 2006 2007 2008(e) 2009(f) 2010 (f)
Re
al G
DP
Gro
wth
%
Africa (Febr) Total OECD Africa (May)
Δ = 6.6%
Δ = 4.1%
Δ = 3.5%
Δ = 4.8%
Overall African Growth Rates, 2000-2010
Renewed Economic Expansion, 1999-2015:Explanation:
Again, a Conjuncture of Favourable Circumstances
1. Buoyant world economy promoted recovery
– primary commodity prices rose
2. Some debt reduction and relief from servicing the debt
3. Increased development assistance
4. Direct foreign investment started up (+/- 40 Billion, 2008).
5. Reduced conflict in the region? (ambiguous)
6. Improving Governance?
7. Improved public policy
Increased political stability ???
Political Troubles and Hardening of the Regime
0
50
100
150
200
250
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Hard
en
ing
of
the
reg
ime:
weig
hte
d s
um
of
ev
en
ts
0
100
200
300
400
500
600
Po
liti
ca
l tr
ou
ble
s:
weig
hte
d s
um
of
ev
en
ts
Hardening of the regime indicator Political troubles trend
Sources: African Economic Outlook 2006 Political Indicators
2015: Major Concerns• Somalia (El Shaba) Boko Haram (Nigeria, Niger, Chad),
Sudan, Chad, South Sudan
• Concerns in Kenya;
• Dictatorial regimes (Burundi, Ethiopia…)
• Plus socio-economic-political melt-down in Zimbabwe,
now ended?
Continuing Good News Politically:
• Peaceful democratic successions in many countries;
• Peace and better governance (Liberia)
And defeat of Ebola
Result:
• Poverty levels decline;
• Personal & family incomes rise;
• Tax revenues and social expenditures (health & education) rise
• General improvement
But: problems mentioned earlier remain;
- some countries are in trouble;
- peace and stability are tenuous in a few cases.
A “Second Scramble for Africa”
Continuing challenges and vulnerability:
• Meeting the MDGs – a major challenge
– Only 12% satisfactory rate towards reducing extreme poverty by half
• Global imbalances
– Commodity price volatility
– Exchange rate uncertainties: $ depreciation, euro appreciation,
– Trade challenges: difficulties in reaching agreements on the Doha Round; developing Africa’s capacity to trade; new competitors
• Domestic sources of instability
– Limited diversification
– Unfinished reform agendas
– Environmental challenges; Natural Hazards – drought;
– Civil strife, failed states
Key Features:
Dramatic or stellar growth, modernization and
human development for some major countrues
(South Korea, China, Hong Kong, Singapore)
Major improvements: Indonesia, Malaysia,
India,
Overall, major reductions in poverty;
Lagging countries;
Continuing issues re poverty, quality of economic
poverty. Governance, political stabilityfor some
cases
Asia: Some Basic Development Indicators
Country NHDI
1980
NHDI
2010
GNIpc(PPP)
($US 2008)
Growth Rate,
GDPpc (PPP)
1990-2007
South Korea .616 .877 29.518 4.5%
China .368 .663 7,258 8.9
India .370 .519 3,337 4.5
Pakistan .311 .490 2,678 1.6
Bangladesh .259 ,429 1,587 2.0
Thailand .483 .654 8,001 2.9
Indonesia .390 .600 3,957 2.3
Viet Nam .407 .572 2,995 6.0
Afghanistan n.a. .349 1,419 n.a.
Source:UNDP HDR, 2010 and 2011,Statistical Tables
At the current trends, the standard of living in China will
surpass that of the US in 25 years!
Per
Cap
ita
Inco
me
58
Why is China’s Manufacturing Capacity
Growing at Historic Levels?
Factors include…
• Rapid Transition From Low to High Tech Production (advantages of being a late-comer)
• Education and Recruitment
• Labor Supply and Wage Rates
• Massive economies of scale and agglomerative economies
• International Trade Policy
• Exchange Rate Policy
• Foreign Direct Investment
59
The Impact of Chinese Production
Commodity Price, 1997 Price, 2001
Decrease
DVD Player $491 $165 66.4%
Fax Machine $314 $136 56.7%
VHS Recorder $157 $70 55.4%
Telephone $19 $12 36.8%
Glass Windshields $27.41/sqm $18.5/sqm 32.5%
Source: Nikkei BP Network, National Automotive Glass Consultants
Hans Rosling on Asia’s Rise(15:50 minutes)
• http://www.ted.com/talks/hans_rosling_asia
_s_rise_how_and_when.html
Arab States: A Mixed Picture:
* GDP per person per year, 1975-2000: +0.3
* GDP per person per year, 1990-2005: +1.3
Some Countries Cases:* Egypt: 2.9 and 2.5 % in 1975-2000 and 1990-2000
* Algeria: -0.1 and +o.9 % respectively;
* Lebanon: 0.0 and + 4.2 %
* Morocco: 1.3 and 1.1 %
* Tunisia: 2.0 and 3.2 %
* Jordan: 0.3 and 0.5 %
Explanations:
Varied and complex.
The “Convergence” Issue:
What is happening to the relative “real” income levels of “developing countries” vis-à-vis the “high income countries?”
Possible Answers; Which is correct?
1. The rich countries are getting richer and the poor countries are getting poorer, that is “divergence” is occurring, not “convergence.”
2. The lower income countries are on average catching up with the high income countries, that is, “convergence” is occurring.
3. Global income distribution is more or less unchanged over the last few decades.
4. The international income distribution picture is too complicated to summarize with one word.
5. There is insufficient information to judge.
Why might “Convergence” be occurring?
What factors may promote convergence”
Why might “Divergence” be occurring”?
What forces may be at work promoting
divergence?
Which forces are Actually prevailing?
Note:
– Relative country convergence
– Absolute country convergence
– Population weighted country convergence
– World-as one country convergence (includes
income distribution within countries as well as
between countries)
Explain
Source: OECD Development Centre / African Development Bank, 2009
Real GDP Growth
-6
-4
-2
0
2
4
6
8
2000 2001 2002 2003 2004 2005 2006 2007 2008(e) 2009(f) 2010 (f)
Re
al G
DP
Gro
wth
%
Africa (Febr) Total OECD Africa (May)
Δ = 6.6%
Δ = 4.1%
Δ = 3.5%
Δ = 4.8%
Overall African Growth Rates, 2000-2010
Table 1. World Economic Growth and Real GDP per capita
Grouping GDP per
capita (PPP,
$US, 2003)
GDPpc Growth
Rate, 1975-2001,
% per year
GDPpc Growth
Rate, 1990-2003,
% per year
Developing Countries 4,359 2.3 2.9
Least Developed 1,328 0.4 2.0
Arab States 5,685 0.3 1.0
East Asia & Pacific 5,100 5.9 5.6
Latin America and
Caribbean
7,404 0.7 1.1
South Asia 2,897 2.4 3.5
Sub-Saharan Africa 1,856 -0.9 0.1
E. Europe & Former
Soviet Union
7,939 -2.0 0.3
OECD 25,935 2.0 1.8
Canada 30,677 1.5 2.3
World 8,229 1.2 1.4 Source: United Nations Development Program, Human Development Report, 2005, New
York: Oxford University press, 2003, pp. 278-280.
Nature and Role of Economic Institutions
• Institutions provide “rules of the game” of economic life
• Provide underpinning of a market economy
• Include property rights; contract enforcement
• Can work for improving coordination,
• Restricting coercive, fraudulent and anti-competitive behavior
• Providing access to opportunities for the broad population-
• Constraining the power of elites, and managing conflict
• Provision of social insurance
• Provision of predictable macroeconomic stability
• Note: These institutions are correlated and it is not clear which
of these institutions matter most; and “transitional institutions”
may help in the development process