Tuesday, October 30, 2007
Debate on new global working class
On 20 November I will be speaking at an event at the Institute of Contemporary Art in London on the new global working class.
Labels: globalisation, speeches, work
Sunday, October 28, 2007
Correct statistics on India’s economy
The main aim of this note is to spell out the correct statistics on India’s economic growth record. A participant in today’s session on India at 60 at the Battle of Ideas conference claimed incorrectly that India enjoyed strong growth in the decades immediately following the second world war. I said I would put the correct statistics on my site so here they are:
1950-1980 – average growth rate 3.75%.
1980-1990 – average growth rate 5.7%.
1990-2000 – average growth rate 6.0%.
2000-2005 – average growth rate 6.9%.
My source for this is a presentation by TN Srinavasan, a professor of economics at Yale, to an International Monetary Fund book forum on December 14, 2006. A PDF is available here (see page 8).
The pattern is confirmed in the recent country report on India from the Organisation for Economic Cooperation and Development. The graph of GDP growth per head here clearly shows that the economy was pretty sluggish from the 1950s to the 1970s.
As it happens there is a serious debate among economists about Indian’s economic growth but it is not about the facts of growth from the 1950s to 1970s. Instead it is about whether India’s growth took off in the 1980s or whether the reforms of the 1990s were truly responsible.
While I am writing I will quickly correct a couple of other misconceptions.
First, while it is true that India’s agricultural sector is important socially it is much less important economically. Although agriculture accounts for 60% of India’s work force it only accounts for 17.5% of its GDP (see the India entry in the CIA World factbook). Therefore even if the output of the agricultural sector grew rapidly it would only have a limited impact on GDP.
Second, it is necessary to be wary of the talk of India’s “middle class” or indeed that of other developing countries too. The problem is that the term is used extremely loosely. It is necessary to be more specific about how the term is being defined before drawing any sweeping conclusions about a rising middle class.
The point of course it not to be against the use of statistics. On the contrary, they are a valuable tool in understanding development. But they need to be used carefully rather than in a cavalier way.
1950-1980 – average growth rate 3.75%.
1980-1990 – average growth rate 5.7%.
1990-2000 – average growth rate 6.0%.
2000-2005 – average growth rate 6.9%.
My source for this is a presentation by TN Srinavasan, a professor of economics at Yale, to an International Monetary Fund book forum on December 14, 2006. A PDF is available here (see page 8).
The pattern is confirmed in the recent country report on India from the Organisation for Economic Cooperation and Development. The graph of GDP growth per head here clearly shows that the economy was pretty sluggish from the 1950s to the 1970s.
As it happens there is a serious debate among economists about Indian’s economic growth but it is not about the facts of growth from the 1950s to 1970s. Instead it is about whether India’s growth took off in the 1980s or whether the reforms of the 1990s were truly responsible.
While I am writing I will quickly correct a couple of other misconceptions.
First, while it is true that India’s agricultural sector is important socially it is much less important economically. Although agriculture accounts for 60% of India’s work force it only accounts for 17.5% of its GDP (see the India entry in the CIA World factbook). Therefore even if the output of the agricultural sector grew rapidly it would only have a limited impact on GDP.
Second, it is necessary to be wary of the talk of India’s “middle class” or indeed that of other developing countries too. The problem is that the term is used extremely loosely. It is necessary to be more specific about how the term is being defined before drawing any sweeping conclusions about a rising middle class.
The point of course it not to be against the use of statistics. On the contrary, they are a valuable tool in understanding development. But they need to be used carefully rather than in a cavalier way.
Labels: development, economics, growth, india
Friday, October 26, 2007
Sterling defence of GM agriculture
In contrast to the gloom in the previous entry, Dick Taverne, a Liberal Democrat Peer and chair of Sense about Science, has written a defence of Genetically Modified (GM) agriculture for the November issue of Prospect magazine:
“Seldom has public perception been more out of line with the facts. The public in Britain and Europe seems unaware of the astonishing success of GM crops in the rest of the world. No new agricultural technology in recent times has spread faster and more widely. Only a decade after their commercial introduction, GM crops are now cultivated in 22 countries on over 100m hectares (an area more than four times the size of Britain) by over 10m farmers, of whom 9m are resource-poor farmers in developing countries, mainly India and China. Most of these small-scale farmers grow pest-resistant GM cotton. In India alone, production tripled last year to over 3.6m hectares. This cotton benefits farmers because it reduces the need for insecticides, thereby increasing their income and also improving their health. It is true that the promised development of staple GM food crops for the developing world has been delayed, but this is not because of technical flaws. It is principally because GM crops, unlike conventional crops, must overcome costly, time-consuming and unnecessary regulatory obstacles before they can be licensed.”
“Seldom has public perception been more out of line with the facts. The public in Britain and Europe seems unaware of the astonishing success of GM crops in the rest of the world. No new agricultural technology in recent times has spread faster and more widely. Only a decade after their commercial introduction, GM crops are now cultivated in 22 countries on over 100m hectares (an area more than four times the size of Britain) by over 10m farmers, of whom 9m are resource-poor farmers in developing countries, mainly India and China. Most of these small-scale farmers grow pest-resistant GM cotton. In India alone, production tripled last year to over 3.6m hectares. This cotton benefits farmers because it reduces the need for insecticides, thereby increasing their income and also improving their health. It is true that the promised development of staple GM food crops for the developing world has been delayed, but this is not because of technical flaws. It is principally because GM crops, unlike conventional crops, must overcome costly, time-consuming and unnecessary regulatory obstacles before they can be licensed.”
Labels: health, technology
Alarmist report from United Nations
The Global Environment Report (GEO-4) published by the United Nations Environment Programme gives a gloomy view of the outlook for the environment. The report self-consciously refers to the Brundtland Report (Our Common Future) of 20 years ago. It also says there is a need “to correct the technology-centred development paradigm”. I do not have time at present to do a critique of the report but it is certainly important to do at some point.
Labels: climate, consumption, development, environment, inequality
Spiked review on “Africa’s Malthusian trap”
Spiked has run my review of Gregory Clark’s A Farewell to Alms in its monthly review of books.
Labels: Africa, book, progress, review, spiked
Tuesday, October 23, 2007
Yet more development blogs
Two more blogs on development economics have been drawn to my attention (see post of 19 October). From the United Nations Conference on Trade and Development there is the ideas4development blog. Its high profile contributors include: Kemal Dervis (UNDP), Abdou Diouf (Organisation de la Francophonie), Donald Kaberuka (African Development Bank), Pascal Lamy (World Trade Organisation), Supachai Panitchpakdi (Unctad), Jean-Michel Severino (Agence française de développement) and Josette Sheeran (World Food Programme). Then there is the development blog of the Center for Global Development, a prominent think tank based in Washington DC.
Labels: development, economics
Monday, October 22, 2007
Advanced economies still have global sway
The latest Fund Strategy has a comment by me on the current popularity of developing countries among investors.
Everyone seems to be interested in emerging markets. People who a few years ago would not know Bhutan from Bolivia seem ready to invest in exotic places.
It is not hard to explain the growing popularity of emerging markets. Developing economies are growing far more rapidly than those of the West and their stockmarkets are generally performing well.
Moreover the recent bout of market volatility generally affected emerging markets less than those of the west. It should also be remembered that the credit crunch started in America, the world's largest economy and arguably its most developed nation. It is a long way from 1997-8 when the global financial crisis was centred on Asia.
The growing importance of developing economies is underlined in the latest World Economic Outlook from the International Monetary Fund (IMF). It points out that, for the first time ever, China was the largest contributor to global growth in the first half of 2007. America was relegated to second place by the Asian giant. In addition, over half of global growth was accounted for by China, India and Russia combined.
Such changes are transforming the world. What was previously known as the third world is becoming an increasingly substantial part of the global economy. The key developing economies are no longer primarily agricultural producers (although many people still live in the countryside). They are often large manufacturers and many are highly urbanised.
However, it would be wrong to write off the developed world. The bulk of economic activity, and indeed manufacturing, is still located in the West.
Statistics for GDP at purchasing power parity, widely quoted nowadays, exaggerate the importance of developing economies. If GDP is measured at market exchange rates, which is better basis for comparison, the West is still larger.
It is also important to recognise that the recent growth of developing economies is not as autonomous as it seems. It is true, for example, that East Asia is becoming more integrated as a region. There are growing trade and investment links within the area. However, many of its final products end up in the developed world and America in particular. An American slowdown would not be a disaster but it would have a significant effect on developing countries.
Developing economies are becoming an increasingly important part of the world. But it would be premature to downplay the remaining influence of the advanced economies.
Everyone seems to be interested in emerging markets. People who a few years ago would not know Bhutan from Bolivia seem ready to invest in exotic places.
It is not hard to explain the growing popularity of emerging markets. Developing economies are growing far more rapidly than those of the West and their stockmarkets are generally performing well.
Moreover the recent bout of market volatility generally affected emerging markets less than those of the west. It should also be remembered that the credit crunch started in America, the world's largest economy and arguably its most developed nation. It is a long way from 1997-8 when the global financial crisis was centred on Asia.
The growing importance of developing economies is underlined in the latest World Economic Outlook from the International Monetary Fund (IMF). It points out that, for the first time ever, China was the largest contributor to global growth in the first half of 2007. America was relegated to second place by the Asian giant. In addition, over half of global growth was accounted for by China, India and Russia combined.
Such changes are transforming the world. What was previously known as the third world is becoming an increasingly substantial part of the global economy. The key developing economies are no longer primarily agricultural producers (although many people still live in the countryside). They are often large manufacturers and many are highly urbanised.
However, it would be wrong to write off the developed world. The bulk of economic activity, and indeed manufacturing, is still located in the West.
Statistics for GDP at purchasing power parity, widely quoted nowadays, exaggerate the importance of developing economies. If GDP is measured at market exchange rates, which is better basis for comparison, the West is still larger.
It is also important to recognise that the recent growth of developing economies is not as autonomous as it seems. It is true, for example, that East Asia is becoming more integrated as a region. There are growing trade and investment links within the area. However, many of its final products end up in the developed world and America in particular. An American slowdown would not be a disaster but it would have a significant effect on developing countries.
Developing economies are becoming an increasingly important part of the world. But it would be premature to downplay the remaining influence of the advanced economies.
Labels: economics, finance, Fund Strategy, growth
Sunday, October 21, 2007
Exterminating malaria
Good news on malaria. An Economist article raises the possibility of a vaccine to eradicate the disease.
Labels: health
China achieves a global first
A little noticed but key fact in the new World Economic Outlook from the International Monetary Fund (page 1 of chapter one). In the first half of 2007 China made the largest contribution to global growth for the first ever. This is true not only if measured at purchasing power parity but also at market exchange rates.
Labels: china, economics, growth
Friday, October 19, 2007
IMF economics blog
It seems that blogs are becoming a must-have item for any self-respecting economist (see blogs of 24 March, 25 April and 19 September). The latest one which looks useful to me is from Simon Johnson, the economic counsellor at the International Monetary Fund.
Labels: economics
Wednesday, October 17, 2007
Cover story on African investment
Fund Strategy has published a cover story by me on investment (primarily by funds) in Africa. It is written for a financial readership but includes points that could be of more general interest.
Labels: Africa, development, Fund Strategy
Tuesday, October 16, 2007
China’s rulers adopting growth scepticism?
The Chinese bureaucracy seems to be taking on growth scepticism. According to a report in the Guardian the Chinese president, Hu Jintao, emphasised the dangers of environmental degradation and social inequality in his speech to the 17th congress of the Communist Party:
“President Hu Jintao admitted yesterday that China's Communist party had failed to live up to the expectations of the people and promised a more sustainable and accountable policy of development.
“In a speech that will set China's direction for the next five years, Mr Hu spoke of the need to address the problems of environmental degradation, political corruption and income inequality between the rich cities on the eastern seaboard and villages in the poor western interior.”
A full English language version of the speech does not appear to be available yet on the internet but there is a useful official summary.
Of course there is nothing inherently wrong with discussing inequality or environmental degradation. The problem comes when they are used as arguments against economic growth.
Sheila Lewis has also recently discussed the debates on environmental damage and inequality in China on the Battle of Ideas website.
“President Hu Jintao admitted yesterday that China's Communist party had failed to live up to the expectations of the people and promised a more sustainable and accountable policy of development.
“In a speech that will set China's direction for the next five years, Mr Hu spoke of the need to address the problems of environmental degradation, political corruption and income inequality between the rich cities on the eastern seaboard and villages in the poor western interior.”
A full English language version of the speech does not appear to be available yet on the internet but there is a useful official summary.
Of course there is nothing inherently wrong with discussing inequality or environmental degradation. The problem comes when they are used as arguments against economic growth.
Sheila Lewis has also recently discussed the debates on environmental damage and inequality in China on the Battle of Ideas website.
Labels: Asia, china, environment, inequality
World Bank development notes
The World Bank has updated the development notes on its website. They give a useful summary of the current orthodoxy on topics such as aid, climate change and development, equitable growth, governance and trade policy.
Labels: aid, climate, development, economics, trade
Monday, October 15, 2007
The Battle for Africa
I will be speaking at a session on economic development at the Battle for Africa strand at the Battle of Ideas festival in London. My session will include Professor Paul Collier, Giles Bolton and Firoze Manji. Other sessions in the strand are on saving Africa and on the continent’s growing ties with China. The Battle of Ideas is on the weekend of 27-28 October.
Labels: Africa, china, development, speeches
Sunday, October 14, 2007
IMF on global inequality
A key chapter (PDF) in the latest World Economic Outlook from the International Monetary Fund (IMF) looks at globalisation and inequality. The chapter concedes that inequality has generally widened over the past 20 years although it also makes the point that living standards have generally risen. In other words the poor are better off in absolute terms but the gap between rich and poor has widened at the same time.
The chapter also uses an econometric model to try to identify the sources of inequality. Contrary to common belief it concludes that increased trade does not lead to wider inequalities. Instead inequality is associated with financial openness – particularly foreign direct investment – and most of all to technology. The reasoning behind the latter is that skilled workers are better able to make use of technology.
I am sceptical about the use of such models. They may help identify correlations – for example, one variable is associated with another – but that is not the same as explaining relationships. To be fair to the IMF it is also cautious about the conclusions that can be drawn from the model.
The chapter also uses an econometric model to try to identify the sources of inequality. Contrary to common belief it concludes that increased trade does not lead to wider inequalities. Instead inequality is associated with financial openness – particularly foreign direct investment – and most of all to technology. The reasoning behind the latter is that skilled workers are better able to make use of technology.
I am sceptical about the use of such models. They may help identify correlations – for example, one variable is associated with another – but that is not the same as explaining relationships. To be fair to the IMF it is also cautious about the conclusions that can be drawn from the model.
Labels: finance, globalisation, inequality, technology, trade
Tuesday, October 09, 2007
Monbiot’s imaginary taboo
George Monbiot, Guardian columnist and environmental campaigner, presents himself as breaking a “universal taboo” when he attacks economic growth in his comment in today’s Guardian. To quote his opening paragraph:
“If you are of a sensitive disposition, I advise you to turn the page now. I am about to break the last of the universal taboos. I hope that the recession now being forecast by some economists materialises. I recognise that recession causes hardship. Like everyone I am aware that it would cause some people to lose their jobs and homes. I do not dismiss these impacts or the harm they inflict, though I would argue that they are the avoidable results of an economy designed to maximise growth rather than welfare. What I would like you to recognise is something much less discussed: that, beyond a certain point, hardship is also caused by economic growth.”
Strangely Monbiot does not seem to realise that such views, far from being taboo, are thoroughly mainstream. Indeed he has often expressed them himself before. Perhaps he should monitor this website for numerous references to ideas similar to his.
“If you are of a sensitive disposition, I advise you to turn the page now. I am about to break the last of the universal taboos. I hope that the recession now being forecast by some economists materialises. I recognise that recession causes hardship. Like everyone I am aware that it would cause some people to lose their jobs and homes. I do not dismiss these impacts or the harm they inflict, though I would argue that they are the avoidable results of an economy designed to maximise growth rather than welfare. What I would like you to recognise is something much less discussed: that, beyond a certain point, hardship is also caused by economic growth.”
Strangely Monbiot does not seem to realise that such views, far from being taboo, are thoroughly mainstream. Indeed he has often expressed them himself before. Perhaps he should monitor this website for numerous references to ideas similar to his.
Another tome on economic history
There seems to be a surge of interest in economic history. After the works by Jared Diamond and Greg Clark (see 7 August and 10 August posts), and the provisional text on growth by Daron Acemoglu (see 6 October post), another draft work has appeared on the internet. Meir Kohn, professor of economics at Dartmouth College in New Hampshire, has put most of his The Origins of Western Economic Success in PDF format on his homepage.
Labels: book, economics, growth, progress
Saturday, October 06, 2007
Paradox of Choice discussion
On Monday I will be introducing a discussion of The Paradox of Choice by Barry Schwartz at Nico Madonald’s Innovation Reading Circle. Details along with further readings and links are available at Nico’s website.
Labels: affluenza, consumption, happiness
Mammoth text on economic growth
Daron Acemoglu, a professor of economics at the Massachusetts Institute of Technology, has published a draft version of his massive Introduction to Modern Economic Growth on the internet. The work looks highly technical but it does address three of the core questions in economic development (p25):
• Why are there such large differences in income per capita and worker productivity across countries?
• Why do some countries grow rapidly while others stagnate?
• What sustains economic growth over long periods of time and why did sustained growth start 200 years or so ago?
• Why are there such large differences in income per capita and worker productivity across countries?
• Why do some countries grow rapidly while others stagnate?
• What sustains economic growth over long periods of time and why did sustained growth start 200 years or so ago?
Labels: book, economics, growth, progress
Wednesday, October 03, 2007
Debating the mobile “footprint”
I have written a short contribution to the spiked debate on the idea of a mobile “footprint”:
The idea of a mobile footprint is meaningless in practical terms. Just think about how much carbon dioxide it takes to produce a particular mobile phone. If the energy used is generated from nuclear or hydroelectric power it could be zero. If the energy is generated from fossil fuels it will be higher, but the precise amount will depend on the sophistication of the technology used.
A similar argument can be made in relation to the raw materials used in the phone and its manufacture. The processes used to make the same phone can be relatively efficient or inefficient. There is no fixed amount of material used.
Since the quantity can vary so widely the idea of a footprint has no validity as a practical measure. The use of a labelling scheme can only add a spurious air of objectivity to a dubious concept.
The real importance of the idea of an ecological footprint is moral. It is used by environmentalists as a metaphor to suggest that human beings should limit their impact on the environment. It is part of what could be called a morality of self-limitation.
Such a morality is particularly inappropriate to uphold in relation to mobile technology. Surely the appeal of such technology is that it enables people to extend their horizons. It makes it possible to communicate with people we know in new ways as well as broadening our range of contacts. As a result it helps us extend our control over nature still further.
The idea of a mobile footprint is meaningless in practical terms. Just think about how much carbon dioxide it takes to produce a particular mobile phone. If the energy used is generated from nuclear or hydroelectric power it could be zero. If the energy is generated from fossil fuels it will be higher, but the precise amount will depend on the sophistication of the technology used.
A similar argument can be made in relation to the raw materials used in the phone and its manufacture. The processes used to make the same phone can be relatively efficient or inefficient. There is no fixed amount of material used.
Since the quantity can vary so widely the idea of a footprint has no validity as a practical measure. The use of a labelling scheme can only add a spurious air of objectivity to a dubious concept.
The real importance of the idea of an ecological footprint is moral. It is used by environmentalists as a metaphor to suggest that human beings should limit their impact on the environment. It is part of what could be called a morality of self-limitation.
Such a morality is particularly inappropriate to uphold in relation to mobile technology. Surely the appeal of such technology is that it enables people to extend their horizons. It makes it possible to communicate with people we know in new ways as well as broadening our range of contacts. As a result it helps us extend our control over nature still further.
Labels: footprint, spiked, technology
