Current trends in development. ICT4D: Context, Strategies, and Impacts. The economic development challenge Population living on less than $1 PPP a day 1993. # of people (million) share of popln East Asia & Pacific 450 28% Europe & Ctrl Asia 5 4
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Current trends in development
ICT4D: Context, Strategies, and Impacts
# of people (million) share of popln
Note: PPP, purchasing power parity; Source: World Bank, 1998
GROWTH AS A FUNCTION OF 3 FACTORS:
“keep it simple stupid” --demands simple explanations and universally valid propositions
=> No simple correlations
=> Multiple feedback effects & unclear direction of causality
Dani Rodrik,ed. In Search of Prosperity: Analytic Narratives on Economic Growth (Princeton U Press, 2003)
BUT HOW?? What about distributive conflicts?
John Williamson, Latin American adjustment: How much has happened? 1990
Growth below expectations in all cases, “transition crisis” deepened in former socialist economies . . .
Experience of 1990s
BUT at same time
World Bank Economic Growth in the 1990s: Learning from a Decade of Reform (2005)
Need for deeper institutional change to achieve goals => “Second generation” reforms
“Institutions fundamentalism” getting institutions right
Institutions are by definition deeply embedded in society, so very difficult and slow to change—except in aftermath of war, civil war, revolution, or other major political upheaval
Largely unverifiable, impossible to fulfill policy agenda
Original W. Consensus
Reorient public spending
Competitive exchange rate
Openness to foreign invest.
Secure property rights
Augmented W. Consensus
Flexible labor markets
Exchange rate regime full
Independent central bank
Social safety nets
Targeted poverty reduction
1. No strong causal connection between institutions and economic growth in research
Compare growth, investment rates, in Russia (Western style private ownership) and China (state ownership, TVEs) in 1990s
2. Research focuses on long-term economic performance, level of income, not growth rate
Rapid growth starts in China in late 1970s and India in early 1980s with minimal institutional change; significant institutional reform after growth begins
United Nations Millennium Project (2005) Sachs et al
A more cautious, experimentalist approach consisting of three sequential elements:
Problem:Low levels of private investment and entrepreneurship
Low returns to econ activity
Low social returns
Low appropriability (govt failure? Mkt failure?)
High cost of finance
Bad international finance
Bad local finance (low saving? poor banks?)
Challenge: How to fit these alternatives into a broader view of long term development?
2005 “The International Year of Microcredit” UN
Microcredit (mI-[*]Kro'kre-dit); noun; programmes extend small loans to very poor people for self-employment projects that generate income, allowing them to care for themselves and their families. - Microcredit Summit http://www.gdrc.org/icm/
The Grameen Bank in Bangladesh aims to provide credit to those in extreme poverty. 94 per cent of those who meet the bank's criteria and take up loans are women. Grameen borrowers keep up repayments at a rate of around 98 per cent. The Bank lends US$30 million a month to 1.8 million borrowers.
World Bank estimates at there are now over 7000 microfinance institutions, serving some 16 million poor people in developing countries. The total cash turnover of MFIs world-wide is estimated at US$2.5 billion
Social capital refers to the norms and networks that enable collective action.
Increasing evidence shows that social cohesion — social capital — is critical for poverty alleviation and sustainable human and economic development.
Sources of social capital: families, firms, communities, public sector, associations
A new way to fight poverty
A response to the “digital divide”
A money-making opportunity for firms
Can technology help reduce poverty?
How can it best serve the poor?
Hernando DeSoto The Other Path: The Invisible Revolution in the Third World (1989)
Mercantilism: bureaucratic and excessive regulation that benefits an elite & discourages wealth creation by sanctioning red tape, corruption & kills incentives