Friday, April 06, 2012

Bhagwati dishes:

Dr. B. is not a fan of the Obama administration's pick of Jim Kim for World Bank President.

He's also not a fan of an exclusively micro approach to development:

But perhaps the most compelling factor in Obama’s choice seems to have been a fundamental misunderstanding of what “development” requires. Micro-level policies such as health care, which the Obama administration seems to believe is what “development” policy ought to be, can only go so far. But macro-level policies, such as liberalization of trade and investment, privatization, and so forth, are powerful engines of poverty reduction; indeed, they are among the key components of the reforms that countries like India and China embraced in the mid-1980’s and early 1990’s. Such reforms turned these countries from stagnation to stellar growth. 

The anti-reform lobbies reacted by arguing that poverty and inequality had worsened. But new empirical studies show otherwise: growing economies benefit the poor not because wealth “trickles down,” but because growth “pulls up” those at the bottom. In fact, it is the rapid acceleration of economic growth in the major emerging countries that has reduced poverty, not only directly, through jobs and higher incomes, but also by generating the revenues governments need to undertake the public-health, education, and other programs that sustain poverty reduction – and growth – in the long term. India followed this path...

The problem with Kim, and presumably with the Obama administration’s development experts, is that they do not understand that successful development requires big-payoff pro-reform, pro-growth policies, not just small-payoff micro-level policies. Bangladesh has gone down that road, substituting such policies for macro-level reforms, and is developing at a far slower pace than India, where macro-level reforms came first.

I have to say that while I don't think it really matters who becomes president of the WB, I am quite sympathetic to Bhagwati's point of view about what really matters for development.

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