June 3, 2008

The Humble Economist

Martin Wolf offers another interpretation of the Growth Report and William Easterly's expert opinion that development experts are done for:
Contrary to what Prof Easterly argues, the report makes useful contributions to policymakers’ understanding. The most important is the emphasis on growth itself, underplayed by many advisers and activists in the 1990s and early 2000s. Growth is not everything. But it is the foundation for everything. The poorer the country the more important growth becomes, partly because it is impossible to redistribute nothing and partly because higher incomes make a huge difference to the welfare of the poorest. 
. . . . . . . 
This report, then, should be seen as a pragmatic guide to policies for accelerating growth in developing countries. What emerges is how tricky this has proved to be: it notes, rightly, how often growth has slowed once a country has achieved middle-income status. This is partly because policies and politics will, and must, change as the economy evolves.

Achieving sustained, rapid growth turns out to be very hard. Recognition of this is no objection to the report’s conclusion. It is an admission of how little we know about such a complex economic, social and political process. Yes, the report is humble. There is much for economists to be humble about. But humility should not be mistaken for total ignorance.
Dani Rodrick agrees with Wolf's take on both the report and Easterly.

Unless I missed it I haven't seen Paul Collier's take on the report or Easterly's comments, but for me one of the most valuable contributions in his book The Bottom Billion was his emphasis on growth:
So far I have couched the problem of the bottom billion in terms of growth rates:  these countries' growth rate has been negative in absolute terms, and in relative terms massively below that of the rest of the developing world.  Nowadays, however, the talk is about poverty reduction and the other Millennium Development Goals, not about growth rates.  Many of the people who care most about development feel more comfortable talking about goals such as getting girls into school than discussing growth.  I share the enthusiasm for getting girls into school, and indeed for all the other goals.  But I do not share the discomfort about growth.  While I was directing the World Bank's research department, the most controversial paper we produced was one called "Growth is Good for the Poor."  Some NGO's hated it, and it was the only time in five years that Jim Wolfensohn, the Bank's president, phoned me to voice his concern.  Yet the central problem of the bottom billion is that they have not grown.  The failure of the growth process in these societies simply has to be our core concern, and curing it the core challenge of development.  For policies in the rich world to become more supportive of growth in these societies, we will need the full lobying power of those who care about the world's poor.  And so the people who care will need to take another look at growth.  (p. 11)

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