OutreachP U T T I N G K N O W L E D G E T O W O R K F O R D E V E L O P M E N T A P R I L 2 0 1 1

D E V E L O P M E N T

Mary McNeilFounding Editor editorial Board

SwaMiNathaN S. aiyarEconomic Times of India • New Delhi • IndiaMichael coheNNew School University • New York • USAPaul collierOxford University • Oxford • UKJohN GaGePartner, Kleiner PerkinsJoSePh K. iNGraMPresident, The North-South Institute CanadaKwaMe KariKariExecutive Director, Media Foundation for West Africa • Accra • GhanaVira NaNiVSKaDirector, International Centre for Policy Studies • Kiev • UkrainePePi PatroNCatholic University • Lima • PeruJ. roBert S. PrichardGovernor, Canadian Unity Councilrafael raNGel SoStMaNNMonterrey Tech University System Monterrey • Mexico

Development OUTREACH is published three times a year by the World Bank Institute and reflects issues arising from the World Bank’s many learning programs. Articles are solicited that offer a range of viewpoints from a variety of authors worldwide and do not represent official positions of the World Bank or the views of its management.

JoSé-MaNuel BaSSatExecutive Editor

JohN P. didierSenior Editor

JuNKo SaitoManaging Editor

Moira ratchfordPublication Design

World Bank Institute Sanjay Pradhan, Vice President The World Bank 1818 H Street NW Washington, DC 20433, USA www.worldbank.org/wbi www.worldbank.org/devoutreach

ISSN 1020-797X © 2011 The World Bank InstituteThis magazine is printed on recycled paper, with vegetable-based inks.

aBout thiS iSSue

Some assert that development has been a clear success. others may argue that it has failed. Some say that it has reduced poverty levels, but that the global number of poor has grown; or that it has raised incomes but increased inequality. and the debate goes on.

the fact is that development is a complex business. and it takes time. it means integrating the multiple dynamic systems of economics, finance, politics and culture, and shaping policies that crisscross and sometimes collide. add to this recipe the ambiguities of human behavior, brittle eco-logical endowments, and random acts of nature, and the task of develop-ment becomes even more daunting. Globalization has generated enormous opportunities but at the same time created countless new challenges. Policymaking is hard. Growth is fragile.

But we continue to learn. we know that policies must not be imposed top-down, but rather gently shaped to fit each country’s need. we have seen that economic elites and academics do not have a monopoly on truth and that directives are not discourse—nor do they constitute a consensus. that people matter and that they must feature in the development debate—as citizens, not subjects.

that people who are living their own social and economic realities often know a great deal about how to make them better. their knowledge and experience are to be valued and applied and, thanks to current technology, can usefully be shared across borders.

creativity and innovation are keys to economic productivity. the best ideas often come from unexpected sources, and trading knowledge and ideas can lead to socioeconomic transformations. we know too that young people are the future and that their education will help unleash the trans-formative power of knowledge—but not without jobs to put that knowledge to work.

we have learned that markets are, well…, markets and not magic. insti-tutions, both public and private, have roles to play in organizing people and resources to achieve equitable results with efficiency and integrity.

we know also that there are many things we don’t know: how often have we disavowed “the magic bullet”? But the point is to keep learning. this is-sue of Development Outreach offers some current thinking on development policymaking as we attempt to clear new pathways to growth, equity, and human dignity.

José-Manuel Bassatexecutive editor

A P R I L 2 0 1 1 1

V O L U M E T H I R T E E N N U M B E R O N E A P R I L 2 0 1 1

GUEST EDITORIAL PathwayS to deVeloPMeNt: what we know and don’t knowRaj Nallari

froM the BloGoSPhereDevelopment 3.0 by Shantayanan Devarajan

aS a Matter of fact... 16 things you didn’t Know about africa

iN the NewS Interview with John Quiggin, author of Zombie Economics

what if we’re Not NoNGoVerNMeNtal orGaNizatioNS (NGoS)? the opportunities ahead for international development NGosDr. Kent Glenzer

deMyStifyiNG SucceSS: the new structural economics approach Justin Yifu Lin

BeiJiNG coNSeNSuS or waShiNGtoN coNSeNSuS: what explains china’s economic success? Yang Yao

educatioN for educatioN . . . or for SKillS? Eric A. Hanushek

why areN’t childreN learNiNG? Abhijit V. Banerjee and Esther Duflo

technology and labor ProductivityDale Jorgenson and Khuong Vu

citieS oN the Prowl Tim Campbell

the GreeNiNG of deVeloPMeNt Carlo Carraro and Emanuele Massetti

iNduStrializatioN aNd the laNd acquiSitioN coNuNdruM Pranab Bardhan

the PoliticS of deVeloPMeNt Brian Levy

ParticiPatory deVeloPMeNt recoNSidered Ghazala Mansuri and Vijayendra Rao

ParticiPatioN MaKeS a differeNce: But not always how and where we might expect John Gaventa

deMoGraPhicS aNd deVeloPMeNt Policy by David E. Bloom and David Canning

deVeloPMeNt with a huMaN face by Archbishop Njongonkulu Ndungane

SouNdiNG Board

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D E V E L O P M E N T O U T R E A C H2

A P R I L 2 0 1 1 3

PATHWAYS TODEVELOPMENT

By raJ NallariWhat We Know and Don’t Know

D E V E L O P M E N T O U T R E A C H4

Development is

about improving

people’s lives

through economic,

social, political,

and technological change. It is

a transformation that certainly

requires incomes to grow but it is

also about reducing poverty and

inequality, building individual

skills, having access to social

services, and raising the quality

of life. And economic growth and

development both depend on

distributive politics—how society

deals with vested interests and

social conflicts. New priorities

are emerging as development

economics reviews its track record

over the 20th century.

We now know that early consulta-

tion with stakeholders and involving

beneficiaries in implementation are

central to successful policymaking as

the contributors to this magazine’s

Sounding Board feature have asserted.

In a recent speech, World Bank pres-

ident Robert Zoellick advocated a new

approach to development economics

and indeed to development lending it-

self, one that is more cooperative and

experience-based while less restricted

to “elites.”

In our interview on his book, Zom-

bie Economics, John Quiggin questions

the relevance of some longstanding

economic beliefs sorely called into

question after the crises of recent years.

He proposes some new directions for

the 21st century. And do we need a

Development 3.0 as Shanta Devarajan

suggests, where communication tech-

nologies enable civil society to engage

in monitoring and correcting govern-

ment failures?

MiXed reSultS

SiXty yearS of development experi-

ence tells us that the pathways to devel-

opment are varied, guided by different

visions, different strategies, and differ-

ent definitions of progress. If sustained

growth is the measure, then progress

has also been mixed. Between 1990 and

2008, the developing economies have

grown nearly twice as fast on average as

the developed countries. But over the

past six decades, only a dozen countries

have sustained their growth for twen-

ty years or more because of frequent

shocks, redistributive conflicts, and dif-

ficulty in sustaining reform efforts over

time.

The number of people in developing

countries who live in absolute poverty

(less than $1 a day) dropped from 40

percent of the population in 1981 to

18 percent in 2004 (Ferreira and Raval-

lion 2008). The largest reductions have

been in China and India, countries with

high growth rates; the smallest in the

countries of Sub-Saharan Africa. But

inequality has been on the rise world-

wide (Ferreira and Ravallion 2008; and

Firebaugh and Goesling 2007). Clearly,

the benefits of development have not

yet reached the neediest.

MarKetS VerSuS State: a falSe dichotoMy

oVer the PaSt SeVeral decadeS, eco-

nomic theories have espoused various

systems of resource allocation, ranging

from free market to state intervention

and centrally-planned systems. The col-

lapse of the Soviet Union and various

crises in other state-controlled econo-

mies in the 1990s prompted develop-

ment thinkers to return to the Wash-

ington Consensus with its policies of

economic liberalization, privatization,

and macroeconomic stabilization pro-

grams. This yielded mixed results and

considerable controversy. A number

of countries, however, had successfully

applied mixed models of government

SPecial rePortS

I T ’ S N O T O N LY A B O U T G R O W T H .

A P R I L 2 0 1 1 5

intervention in otherwise fundamen-

tally market-based systems of resource

allocation.

Yifu Lin in his essay proposes an

alternative pathway to economic devel-

opment, describing a proactive role for

the state in promoting selected indus-

trial policies—a role that complements

market mechanisms and compensates

for negative externalities. Yao Yang’s

article attributes China’s recent suc-

cess to its embrace of certain features of

the Washington Consensus reinforced

by constant experimentation. Is there

a synthesis of Washington Consensus

and Beijing Consensus that could serve

as a model for a given set of developing

countries?

Key SucceSS factorS

we KNow that the upper middle- and

high-income countries have grown

mainly because they have become more

productive.

Most researchers believe that sus-

tained long-term growth is a function

of the quantity and quality of the fac-

tors of production (labor, capital, land,

energy) all of which contribute to total

factor productivity (TFP). Successful

developers have, to varying degrees,

emphasized five objectives in their pur-

suit of growth, with a view to increasing

total factor productivity:

creating a learning economy ■ that

values skills, ideas and technology,

and lays the foundations for do-

mestic innovation. This includes the

schooling and vocational training

systems, tertiary education, research

by universities and public institutes

and by domestic and foreign busi-

nesses, and the harnessing of digital

information using state-of-the-art

information and communication

technology (ICT). The important

research findings of Dale Jorgenson

and Kuong Vu show that labor pro-

ductivity can be enhanced by invest-

ing in human capital and ICT. In

this context, Eric Hanushek’s essay

argues that improving the quality of

education is a priority that requires

not only qualified teachers, but also

a combination of local autonomy

for setting teacher salaries, com-

bined with accountability through

testing by a central agency. Abhijit

Banerjee’s and Esther Duflo’s work

with randomized trials describes a

complex education system of inter-

connected incentives, behaviors, and

choices involving parents, teachers,

and students.

Stimulating entrepreneurship and ■

organizational efficiency. Where

entrepreneurship is weak, innova-

tion and technology adoption is

slow. Entrepreneurship must be

complemented by strong manageri-

al skills to keep the businesses going

and to make the best use of existing

as well as frontier technologies.

Promoting competition and open- ■

ness. Trade openness (as opposed

to protectionism) is associated with

higher growth and the adoption of

new technologies. Public ownership,

procurement rules, local regulations

and standards, labor market rules

affecting entry and exit of firms,

and financial market constraints,

can dampen competition if they are

not carefully designed or controlled.

Regional integration is enhanced by

open borders and regional transport

networks but the cost of doing busi-

ness is a constraint.

Building effective institutions. ■ In

complex modern economies, gov-

ernments must craft an institutional

infrastructure to implement their

long-term strategies. Institutions,

such as the legal system or gover-

nance mechanisms in the public and

private sectors, need to consider the

interests of both labor and the busi-

ness community (Bhagwati 2010),

and to strengthen the administrative

capabilities of the state to formulate

and implement policies and service

delivery programs. Pranab Bard-

han’s essay, for example, emphasizes

the need for creating land markets

as a means of transferring land from

lower-productivity farming to the

higher-productivity manufacturing

and services sectors, especially in

densely populated countries such as

D E V E L O P M E N T O U T R E A C H6

India and China. At the same time,

he highlights the need for fair treat-

ment and involvement of the dis-

placed farmers.

M ■ anaging urban systems that take advantage of agglomeration econo-mies and positive spillover effects to other parts of the economy. De-

velopment relies increasingly on the

urban sector which is much more

productive and innovative than

the primary or rural sector. Urban

populations will continue to grow

and urban gross domestic product

(GDP) already accounts for between

60 and 80 percent of total GDP. In-

dustry gravitates to urban centers

and there has been a correlation

between urbanization and develop-

ment (Polese 2005). But, over the

past twenty years, research shows

that the composition of industrial

production and the size of cities are

interrelated and can raise produc-

tivity through agglomeration and

scale economies. Tim Campbell’s

essay describes the search for and

exchange of knowledge and innova-

tive ideas that goes on among fast-

growing cities in the North and the

South.

. . .aNd other coNSideratioNS

loNG-terM SuStaiNaBle Growth and

development also depends on other fac-

tors. For example, population growth

is negatively correlated to per capita

income levels and its growth across

countries. One of the main challenges

is to productively employ working-age

people. To do so requires public policies

that invest in health, education, and la-

bor thereby promoting more rapid eco-

nomic growth (see the article by Bloom

and Canning). In contrast, the growth

of aging-populations that is occurring

in many countries places a burden on

public budgets and curtails productiv-

ity. What are the best social safety nets

for the elderly and the vulnerable?

Energy is another factor that af-

fects sustainable “green” growth. Car-

raro and Massetti in their essay show

that higher growth creates higher per

capita energy consumption, which if

unchecked could lead to higher carbon

emissions and global warming. To re-

duce carbon emissions to zero over the

A P R I L 2 0 1 1 7

next two decades, research and devel-

opment spending on new technologies

will have to increase fivefold, which in

turn requires carbon pricing and per-

haps some government funding to sup-

port research.

Although we know a great deal

about the role of public budgets and

finance in development, we can’t seem

to avoid periodic fiscal and financial

crises. There are many questions that

still need to be answered: What are the

limits to globalization–that is, the free

movement of capital, labor, goods and

services across countries? What is the

optimal regulation of finance? Of utili-

ties? How does one manage economic

booms and busts? What is the policy for

affordable housing?

uNderStaNdiNG the SocioPolitical laNdScaPe

eVery Growth and development pol-

icy has an economic and social dimen-

sion as well as a political dimension.

As Daron Acemoglu (2010) observes:

“There is increasing recognition that in-

stitutional and political economy factors

are central to economic development.

Many problems of development result

from barriers to the adoption of new

technologies, lack of property rights over

land, labor and businesses, and policies

distorting prices and incentives. Typically

policymakers introduce or maintain such

policies to remain in power or to enrich

themselves, or because politically power-

ful elites oppose the entry of rivals, the

introduction of new technologies, or im-

provements in the property rights of their

workers or competitors.”

Affluent individuals or groups, pri-

vate firms, or oligarchs attempt to “cap-

ture the state,” that is, to shape the laws,

public policies, rules, and regulations

to their own advantage. This shap-

ing may be done by private firms, rich

elites, ethnic groups, or the military. In

countries where the state is highly cap-

tured, all or most institutions may be

affected: parliament, political parties,

the executive including ministries and

public enterprises, judicial courts, and

key bureaucracies

Kent Glenzer’s essay underscores

the need to accelerate development

through international development

NGOs (IDNGOs), as well as through

social entrepreneurs, philanthropists,

and corporate social responsibility.

Levy’s essay on the intersection of poli-

tics and institutions speaks to the need

to tailor policy interventions to the so-

ciopolitical context, moving away from

“best practice” to “best fit.”

Mansuri and Rao assess participa-

tory approaches to development and

find that decentralization of resources

and more authority to local govern-

ments can lead to experimentation and

innovation and, under the right condi-

tions, improve the welfare of the many

and not only the few. In response, John

Gaventa’s piece argues that participa-

tion takes many forms and that we

need to think more broadly about what

makes it work, where, and why.

Finally, Archbishop Njongonkulu

Ndungane appeals for a steady focus

on the most important development

objective: “…promoting the common

good, building a just world fit for all the

inhabitants of our planet.”

The pathways to development are

narrow and winding and all too often

blocked by political obstacles. Suc-

cessful development depends not only

on good policies but also on domes-

tic political dynamics that under ideal

circumstances should be highly sup-

portive or at least neutral. This issue of

Development Outreach highlights some

of the current research on a few of the

key issues that will shape the future of

development.

Raj Nallari is Manager of the Growth and Competitiveness Practice at the World Bank Institute.

referencesAcemoglu, Daron. 2010. “Theory, General Equilibrium, Political Economy and Empirics in Development Economics.” Journal of Economic Perspectives. Forthcoming.

Baghwati, Jagdish. 2010. “Running in Place on Trade.” Project Syndicate 7/20/2010: http://www.project-syndicate.org/.

Ferreira, Francisco H.G., and Martin Ravallion. 2008. “Global Poverty and Inequality: A Review of the Evidence.” World Bank Policy Research Working Paper 4623. Washington, DC: World Bank.

Firebaugh, Glenn, and Brian Goesling. 2007. “Globalization and Global Inequalities: Recent Trends.” In The Blackwell Companion to Globalization, ed. Ritzer, George, Malden, MA: Blackwell Publishing.

Polese, Mario. 2005. “Cities and National Economic Growth: A Reappraisal.” Urban Studies 42(8): 1429–1451.

D E V E L O P M E N T O U T R E A C H8

I gave a lunch talk at a recent conference of civil society

and technology people organized by the Tech@State

folks at the U.S. State Department. I thought I’d share

it more widely.

in the old days—that is, the 1950s and 1960s—development was about correct-

ing market failures. Influenced by the

“big push” theories of economists

like Rosenstein-Rodan, post-war

Keynesian economics and the

apparent success of the Soviet

Union, policymakers in develop-

ing countries saw the role of gov-

ernment as providing public goods

(bridges, roads and ports), addressing

externalities (protecting “infant industries”) and

redistributing income to poor people (by, for instance, keep-

ing food prices low). Donors supported these countries by fi-

nancing some of the public goods—a bridge, say. Knowledge

assistance consisted of helping to identify the market failure,

and then designing the “optimal bridge.”

the incentives of poor-country politicians and rich-country donors were aligned. Politicians could take credit for correcting market failures—government was doing what it was supposed to do—while donors could make sure their money was well-spent. thiS waS deVeloPMeNt 1.0.

Starting in the 1970s, it became clear that these government interventions were not delivering the intended results. Pro-

tected industries were so insulated from world markets

that they never produced efficiently (the Morogoro shoe

factory in Tanzania never exported a single pair of shoes).

Roads were built but not maintained to the point that they

were not passable. Low food prices led to food shortages

and increased poverty in rural areas. In correcting market

failures, we created a set of government failures: well-inten-

tioned interventions that fail to deliver the intended results.

to rescue these economies from distress, donors made their financial assistance “conditional” on governments’ reversing these policies. the previously harmonious relationship began to fray. Politicians resisted—mostly because their friends and family were benefiting from the distorted policies—and complied half-heartedly—often blaming the donors when things went awry. and knowledge assistance focused on estimating the costs of the previ-ous interventions (as if the only thing standing in the way was the politician’s lack of knowledge about these costs). you MiGht call thiS deVeloPMeNt 2.0.

today, although many of the egregious distortions have been re-moved, we find ourselves still faced with government failures, but in a more insidious form that directly hurts poor people. Many of

the failures are in infrastructure, education, and health—the

sacred cows of government intervention. Correcting them

invites the criticism that we are trying to undermine govern-

ment, harking back to the days of conditionality.

A classic example is water tariffs. Subsidized or free water

leads to water scarcity. Politicians, who control the utilities

through these subsidies, ensure that the scarce water goes to

neighborhoods where their clients live. Poor people mean-

while have to pay 5 to 16 times the meter rate to buy water

from vendors. But no politician can run on a platform of rais-

ing water tariffs (even if it will help the poor) and hope to

get elected. Other examples include absenteeism of teachers

in public primary schools—25 percent in India, 27 percent

in Uganda. Or the leakage of public funds in health—that

reaches a staggering 99 percent in Chad.

these government failures do not happen by accident. rather, they arise from two kinds of imperfections in the public sector (much like market failures arise from imperfections in the private sector). • Whentheydon’tusemarketincentives,governmentshavedif-

ficulties in monitoring and enforcing performance by frontline service providers. the result is absentee teachers, clinics with-out drugs, impassable roads.

froM the BloGoSPhere

DEVELOPMENT 3.0excerpted from the “africa can...end Poverty” Blog http://blogs.worldbank.org/africacan

By Shantayanan devarajan

A P R I L 2 0 1 1 9

“...why don’t donors (including the World Bank)

use technology to have the beneficiaries monitor

and supervise development projects?”By Shantayanan devarajan

D E V E L O P M E N T O U T R E A C H10

• Asecond,morepervasive imperfection is in thepoliticalsys-tem. even in democracies where the median voter is poor, poli-ticians who advocate anti-poor policies (such as some of the government interventions above) continue to get elected. one reason is that politicians are able to control the flow of informa-tion to the electorate, convincing them to vote for policies that are, in fact, not in their interest. in the water tariff example, politicians run on a platform of maintaining free water—and get re-elected.

In this situation of government failure, the traditional in-

struments of financial and knowledge assistance are not very

effective. Politicians will resist conditionality, and refuse the

financial assistance if it could lead to electoral defeat. Provid-

ing financial assistance without conditionality makes it easier

to continue with distorted policies. Reports about the costs

of distortions are of little value (not to say irritating) to the

politician who is the cause of the distortions. Even if he is

not the cause—and is instead a reform champion—then by

definition he already knows the costs. The reports are still of

little value.

So what can we do? Our understanding of government fail-

ure has coincided with two other developments. One is the

rise of civil society’s voice in public discourse. The second is

the technology revolution in poor countries. There’s a mes-

sage here. Can we use technology and the voice of civil society

to address these government failures?

rather than imposing conditions, we can empower poor people to monitor service providers. with some 80 percent of africans hav-ing access to a cell phone, it is not difficult to have parents (or the students themselves) send an SMS message if the teacher is not in school, or there are no drugs in the clinic or the purported road maintenance program is not happening. this could do more for helping governments and donors get value for money than all the fiduciary controls we put in place. While we are at it, why

don’t donors (including the World Bank) use technology to

have the beneficiaries monitor and supervise development

projects?

We can also use technology to alleviate the information

problem. Rather than writing reports on the costs of distor-

tions (and whispering them in the Finance Minister’s ear), we

could disseminate these results—in digestible form—to poor

people through their cell phones. Get the information out

about who benefits from infrastructure subsidies, which dis-

tricts have the highest teacher absentee rate, etc. This is infor-

mation about poor people’s daily lives; they should be the first

to receive it. As better informed voters, they may then start

voting for politicians who advocate in their interest. Going

further, why not prepare these reports in collaboration with

poor people? After all, the analysis is about them.

each year, the world Bank produces a world development re-port. while there is an extensive consultation process with the draft, the report is essentially written by a core team of Bank staff. why not produce the report like wikipedia, and invite the whole world to write it? as one of my colleagues put it “then it will be the world’s development report.”

aNd a fittiNG SyMBol of deVeloPMeNt 3.0.

Shantayanan Devarajan is the Chief Economist of the World Bank’s Africa Region.

A P R I L 2 0 1 1 11

D E V E L O P M E N T O U T R E A C H12

T H I N G S Y O U D I D N ’ T K N O W

7

only 5.7 percent of births in ethioPia are attended by skilled personnel compared to 98.4 percent in MauritiuS.

6

16

caPe Verde receives the highest net official development assistance (oda) per capita: $438.20.

NiGeria receives the lowest: $9.50.

4

the highest connection charge for a

business phone is $366.60 in BeNiN.

the lowest is in GhaNa at $0.70.

8

in two thirds of SSa countries, only one or two products are responsible for 75 percent or more of the country’s total exports.

3

the percentage of parliamentary seats held by women is highest in rwaNda with 56.3 percent, and lowest in São toMé aNd PríNciPe with 1.8 percent.

youth literacy (ages 15-24) is highest in GaBoN at 97 percent and lowest in BurKiNa faSo at 39.3 percent.

5

the largest population in Sub-Saharan africa (SSa) is 151.3 million in NiGeria.the smallest is 0.1 million (100,000) in SeychelleS.

1

total trade as a percentage of gross domestic product (GdP) is the highest in SeychelleS: 283.4 percent and lowest in ceNtral africa rePuBlic: 37.5 percent.

2

aS a Matter of fact.. .

Source: African Development Indicators, World Bank, 2010. A P R I L 2 0 1 1 13

A B O U T

in Sierra leoNe, 3 persons per 1,000 are internet users. in SeychelleS, where there were 212 computers per 1,000 people for the

period 2005-2007, 371 in every 1,000 people are internet users. 15

in SoMalia, 29 percent of the population has access to a safe source of water.

in MauritiuS, access is 100 percent.

14

A F R I C Ain chad, 37 percent of children who start first grade make it to the fifth grade, versus 99 percent in MauritiuS.

12

the percentage of firms that indentify corruption as a major constraint to doing business was highest in côte d’iVoire at 75.0 percent, while the lowest is in GhaNa with 9.9 percent.

11in Sierra leoNe 272 out of every 1,000 children die before the age of five.in SeychelleS, the number is 13 per 1,000.

13

9

in côte d’iVoire it takes 16.6 days on average to clear customs on direct exports, compared with 3.8 days in GaBoN. imports, on the other hand, take 31.4 days to clear customs in the rePuBlic of coNGo, compared to 4.4 days in leSotho. 10

South africa has the highest carbon dioxide emissions: 414,649 metric tons, while coMoroS has the lowest: 88 metric tons.

in South africa there are 924 mobile phones per 1000 people.

in eritrea there are 22 per 1000 people.

16

D E V E L O P M E N T O U T R E A C H14

iN the NewS

A P R I L 2 0 1 1 15

Q: You argue in Zombie Economics that certain long-held

economic beliefs no longer apply, and that they have in fact

contributed to the recent crises, but they nevertheless are still

walking around like zombies. While many would agree with

you, others may feel that the zombies still serve us well and

should be kept alive. What would you say to these advocates?

A: At this point it is necessary to compare the experience of

the Keynesian social-democratic period, from the 1940s to

the 1970s, with that of the market liberal period, the 1970s to

the 2000s. Both applied models that seemed to work for an

extended time and both also ended in crisis.

In the postwar golden age, the experience of the leading

economies was very different from today: full employment

was sustained for decades on end, social equality was greater

than at any time before or since, and economic growth rates

were higher than at any time before or since.

But the Keynesian-social democratic period ended in the

crisis of the 1970s, indicating that the model was not perfect.

Now that the market liberal model has also produced a

systemic crisis, any reasonable comparison would suggest

that the market liberal model has not served us well–except

for the very wealthy.

It is true that, during this period, developing countries

such as China and India have done very well. But the same

was true during the postwar boom for Japan, Southern Eu-

rope, and many other countries that were poor in 1945; and

they used a wide range of economic models.

Q: Could simply killing the zombies and replacing them

with alternative economic theories for the 21st century

prevent another crisis? If so, what would you call this new

economics?

A: This crisis differs from the Great Depression, when

Keynes presented the General Theory, and from the stagfla-

tion of the late 60s and early 70s, when Milton Friedman of-

fered both a convincing analysis and a plausible alternative.

In this case, there is no ready-made solution.

In Zombie Economics, I make a number of suggestions re-

garding the way forward, including the use of realistic rather

than idealized models of individual behavior, attention to

historical evidence, and a focus on real-world relevance even

at the expense of theoretical rigor. But these suggestions do

not amount to an alternative economics. Perhaps what is

most important is “humility instead of hubris.” That is, given

the spectacular failure of the theories and policy approaches

that were dominant for the past thirty years, economists

should be more willing to admit fallibility and more open to

new ideas.

Q: There are many factors other than economic theories

and policies that affect people’s lives: for example, good and

bad political and corporate governance including corrup-

tion, access to technology, and environmental quality, to

name a few. What is the role of economics in this broader

context?

A: Economics has something to say about all these issues.

But economists need to be more open to insights from

other social sciences, and more willing to admit that social

sciences, including economics, are shaped by history (more

like evolutionary biology) rather than being purely deductive

(like pure physics).

Q: You mention the need for realism (vs. rigor), equity (vs.

efficiency), humility (vs. hubris). What are your thoughts on

the role of development organizations including the World

Bank in shaping the future of development by adopting

these qualities? And do they have a role to play in putting the

zombies to rest?

A: As regards development, the biggest lesson is probably

the importance of equity. The experience of the last 30 years,

particularly in the U.S., shows that it is possible to produce

reasonably strong growth in measured GDP while not gener-

ating a sustained improvement in living standards for much

of the population. So, it is evident that GDP growth alone is

not a reliable measure of economic performance, and that it

is necessary to look at such variables as the change in median

household income and in the income of the poorest deciles

of the population.

Zombie Economics: How Dead Ideas Still Walk Among Us. John quiggin. New Jersey: Princeton university Press. 2010.

John quiggin is an australian economist and professor at the university of queensland. he has also held academic positions at the australian National university and James cook university. Best known for his work on utility theory, quiggin is among the top 500 economists in the world according to ideaS/rePec. quiggin authors an australian blog, and is a regular contributor to crooked timber. he also writes a fortnightly column in the australian financial review.

D E V E L O P M E N T O U T R E A C H16

WHAT IF WE’RE

NONGOVERNMENTAL ORGANIzATIONS (NGOS)

By dr. KeNt GleNzer

The Opportunities Ahead for International Development NGOs

NOT ?

A P R I L 2 0 1 1 17

oxfam and other members of tcktcktck, an alliance of 250 NGos, showed support to Kyoto with a “photo booth” where delegates were asked to pose together with “Kyoto.”

D E V E L O P M E N T O U T R E A C H18

This conjuncture of contradictory

trends puts IDNGOs in an odd posi-

tion. On the one hand, our long-stated

poverty mission is being stripped away.

Developing country governments are

putting stricter rules in place to control

their activities, and Southern partners

are more vocal about IDNGO ineffi-

ciencies and patronizing procedures.

On the other, a new generation of ac-

tors is on the rise–social entrepreneurs,

philanthropreneurs, social venture cap-

italists–and taking aim at spaces long

monopolized by IDNGOs.

This is a classic learning moment,

a moment in which we can re-imagine

the NGO sector. To do this, we must

capitalize on four opportunities.

oPPortuNity 1: PuSh BacK at NarrowiNG defiNitioNS of SucceSS

if the 1980s can be categorized as

“the NGO decade,” the 2000s may well

come to be known as “the interven-

tion epoch” of randomized controlled

trials. Spurred by dismal results from

four decades of post-independence

development projects, provoked by

the desire for efficiency and scale, and

catalyzed by the Center for Global De-

velopment’s report Why Won’t We Ever

Learn: Improving Lives Through Impact

Evaluation, major international donors

have turned to increasingly narrower

technical interventions amenable to

experimental designs, quantification,

and attributable causal pathways. Their

laudable goal is to uncover more ef-

ficient policy-relevant technical fixes

that developing world governments

can massively scale up. But these nar-

row fixes institutionalize blindness to

the realities of power, supporting

“… only those programmes claim-

ing to deliver easily measurable results

rather than to support transformative

processes of positive and sustainable

changes in people’s lives…many devel-

opment practitioners cynically comply

with the performance measurement

demands, often with a nod and a wink

from a sympathetic bureaucrat equally

despairing of what is now required….

The methods demanded of us to be

more accountable are actually having

the effect of our becoming ever less

responsible for seriously enquiring of

ourselves how we can most usefully

contribute to transformative social

change and be held accountable for our

actions in that respect.”2

This new concern with proving nar-

row relationships between interven-

tions and outcomes–misleadingly la-

beled impact by many–deploys certain

forms of social science rigor to alleviate

poverty’s symptoms.

IDNGOs need to both support this

shift and push back at it. There is an

important niche for approaches like

randomized controlled trials, but IDN-

GOs should cede the narrow, technical,

X causes Y world to others. We should

push, more strongly, for a new social

market–and additional resources–that

focuses not on symptoms but on root

causes of inequality and injustice, on

context, and on comparative cases of

structural change. This entails strategiz-

SPecial rePortS

International development

NGOs (IDNGOs)* have

both flourished and been

objects of cogent critique

over the past twenty years.

The populations and budgets of

IDNGOs continue to grow even as

concerns about accountability,

quality, and cost persist.

Meanwhile, major inroads have

been made on reducing poverty,

driven not by official development

assistance (ODA) but by market

forces. This economic growth

comes with widening inequality,

civil strife, and “...escalating

discrimination and persecution

of members of vulnerable

groups—often racial, religious

or ethnic minorities, but also

women, members of indigenous

communities, children, persons

with disabilities, and other

vulnerable groups that lack the

political power in their societies

to defend their own interests.”1 The views expressed in this article are the author’s and do not reflect Oxfam America’s organizational policies or official perspectives. *IDNGO, while still a fuzzy category, specifies more closely the population of international NGOs that this article is interested in; that is, those that engage in development programs and projects in developing countries, either directly or through local partners.

A P R I L 2 0 1 1 19

ing, investing, and acting within long-

term time frames. Such work calls for

10 to 15 year investments—or more—

in specific sites, with refutable theories

of change, and deep understanding of

context. IDNGOs need to enlist social

scientists, historians, and other unusual

disciplines to measure such changes.

oPPortuNity 2: MultileVel coalitioNS that BridGe well-KNowN differeNceS

focuSiNG oN root cauSeS of poverty

and injustice means that IDNGOs need

to build mission-driven, multilevel co-

alitions that act at community, national,

and international levels simultaneously.

Such strategies combine technical in-

terventions that address symptoms in

the short term with policy advocacy,

constituency building, and opinion

shaping over a decade or more.

But this requires IDNGOs to un-

learn and relearn a few things. We have

to unlearn the fixation on attribution—

perpetuated by symptom-focused proj-

ects—because no single IDNGO can

do this kind of work alone. We have to

unlearn, also, ways of communicating

achievements and obstacles to boards

and other important stakeholders. And

we have to learn that fostering social

transformation requires a multiplicity

of skills over time, a variety of financial

resources, and more egalitarian rela-

tionships between international and lo-

cal NGOs. Yet this is difficult:

“Coalitions are essential to civil society

organizations seeking to influence events

beyond the ordinary scope of small, eco-

nomically limited, locally-based actors.

But building trust and understanding

across gaps of wealth, power and cul-

ture does not come easily to civil society

leaders, who are more accustomed to

influencing those who share their values,

aspirations and expectations. Learning

to build bridges across major social, po-

litical and economic differences is pivotal

to gaining that influence.” 3

The most central change is to ask

not “what does my organization do and

how do I prove it to my stakeholders?”

but rather, “with whom do we need to

join forces and resources and how, to-

gether, will we tell our impact story?”

This approach flies in the face of 2000s’

accountability discourse–and emerging

procedures from watchdog organiza-

tions like Charity Navigator–which fo-

cuses on the effectiveness of individual

agencies.

oPPortuNity 3: Structurally reiNVeNt dowNward aNd lateral accouNtaBility

coalitioNS that StaNd the test of time

and that achieve results beyond the

grasp of any one member require trust.

They require a safe space for critical

discussions of performance. And they

require honesty. Unfortunately, project

and competitive bidding modalities in-

strumentalize collaborations between

us, making the creation of such trust

and honesty more difficult. IDNGOs

need to take advantage of the current

conjuncture—reduction in global pov-

erty combined with radical increases in

inequality and human rights abuses—to

advocate for changes in the ways proj-

ects are developed and implemented,

ways we have all known about for two

decades but which always get marginal-

ized. But more interestingly: we need to

promote entirely new ways of measur-

ing relationships between partners, and

between partners and poor people.

One of the most promising of these

is Keystone Accountability’s work on

constituency voice. Borrowing from

J.D. Power and Associates, Keystone

adapts customer satisfaction meth-

odologies from the private sector and

deploys them among collaborating

partners and eventually, we in Oxfam

America hope, between partners and

the poor. The goal is to build an objec-

tive and comparative database against

which organizations can benchmark

themselves, and which equips partners

and the poor with information about

whom they are working with. The con-

stituency voice approach deliberately

takes the power to define success out of

IDNGO hands, injects anonymity into

mutual performance reviews; and treats

trust, honesty, and coalition effective-

ness as accomplishments over time, as

learning processes. Making such meth-

odologies a requirement—like general-

ly accepted accounting principles—for

all donor and IDNGO efforts would re-

sult in a structural transformation that

no amount of good intentions will ever

achieve. 4

oPPortuNity 4: aNSwer the queStioN, “what if we areN’t NGoS?”

NGos teNd to Stay in a very small room

of the international resource mansion,

a room called ODA. In 2007, ODA to-

taled around $103 billion, while private

capital flows to developing countries

iNterNatioNal deVeloPMeNt NGoS continued on page 31

D E V E L O P M E N T O U T R E A C H20

DEMYSTIFYING SUCCESS

A P R I L 2 0 1 1 21

DEMYSTIFYING SUCCESS The New Structural Economics ApproachBy JuStiN yifu liN

D E V E L O P M E N T O U T R E A C H22

It took a Scottish moral

philosopher with no

training in economics

to set the course of

modern economics and

challenge researchers to answer

what is arguably the most

fundamental question in public

policy, namely: what is the

recipe for growth, job creation,

and poverty reduction?

Indeed, since Adam Smith offered

his theory of wealth creation in 1776,

economists have behaved like detectives

in mystery novels, imagining theories,

exploring hypotheses, examining facts,

tracking evidence, and following leads.

They have had some successes and

many disappointments. Most progress

has been made in identifying systemic

differences in institutions and policies

between high-growth and low-growth

countries. But what really works in

policy making remains left to conjec-

ture. In fact, more than 200 years after

Smith’s seminal work, economic growth

is still a “mystery” to many, and an “elu-

sive quest” to others—to quote Elhanan

Helpman and William Easterly.

what the clueS tell uS

we haVe aN iMPortaNt clue: prior to

the 18th century, it took about 1,400

years for the Western world to double

its income. In the 19th century, the

same process took about 70 years, and

only 35 years in the 20th century. That

dramatic acceleration in growth rates

came about with the transformation

of agrarian economies into modern

industrialized societies. This intriguing

trend has led us to recognize that con-

tinuous structural change prompted by

industrialization, technological inno-

vation, and industrial upgrading and

diversification are essential features

of rapid, sustained growth. The pace

of structural transformation and the

rapid growth path followed by a small

number of countries such as Brazil,

Chile, China, India, Korea, Malaysia,

Mauritius, Singapore, or Vietnam have

been impressive. In those nine coun-

tries, several hundred million people

have been lifted out of poverty in the

space of one generation. On the other

hand, the apparent inability of many

other countries to escape the poverty

trap is puzzling. These lower-income

countries are home to more than one-

sixth of humanity—they count as the

bottom billion, a term coined by Oxford

economist Paul Collier. The mystery of

diverging country performances, es-

pecially during the second half of the

twentieth century, persists.

a loSS of faith

the GloBal criSiS has fundamentally

undermined our faith in free markets,

and revived the belief that both the gov-

ernment and the private sector play im-

portant roles in successful economies.

We now have a unique opportunity to

rethink economic development—and

economic theory and practice in gen-

eral—and to reassess how the govern-

ment and the private sector can shape

the industrialization process.1

To do so, we need to understand

why and how some countries have

been able to succeed where others have

failed. The lessons of history, theory,

and practice can all help us understand

the ingredients of economic success.

how did they Get there?

iN the PoSt-world war ii era, only

thirteen economies have achieved an av-

erage annual growth rate of seven per-

cent or higher for 25 years or more. The

Growth Commission, headed by Nobel

Laureate Michael Spence, found that

the most important common feature

of these 13 economies is that they were

able to tap into the potential advantage

of backwardness—that “they imported

what the rest of the world knew and

exported what it wanted” (World Bank

2008, p. 22). Lessons from these suc-

cess stories can help other developing

countries that are currently struggling

to eradicate poverty and narrow the in-

come gap (Lin and Monga 2010a).

SPecial rePortS

A N E L U S I V E Q U E S T.

A P R I L 2 0 1 1 23

the adVaNtaGe of BacKwardNeSS

the firSt leSSoN is that continuous

technological innovation is key to sus-

tained economic growth in any econo-

my (Lin 1995). And this is where devel-

oping countries may have the advantage

of backwardness (Gerschenkron 1962).

In advanced high-income countries,

technological innovation and indus-

trial upgrading require indigenous in-

ventions supported by costly and risky

research and development (R&D), as

their technologies and industries are

leading global development. Moreover,

the institutional innovation required

to foster the development of new tech-

nologies often entails a costly trial-and-

error, evolutionary process.

In the process of upgrading or di-

versifying into a new sector, a develop-

ing country can borrow technology and

the supporting social and economic in-

stitutions from advanced countries. In

doing so, it has the potential of reduc-

ing the costs and risks of innovation

and growing at an annual rate several

times that of high-income countries.

To tap that potential, the country’s in-

dustrial development needs to be con-

sistent with its comparative advantages

so as to be competitive in both domes-

tic and international markets. A well-

functioning market system is a precon-

dition since the market will ensure that

prices reflect the relative scarcity of the

factors of production (land, labor, and

capital), which in turn guides firms into

industries that are consistent with the

country’s comparative advantages. The

country will grow fast, produce a large

surplus (profits), accumulate capital

rapidly, and quickly upgrade its endow-

ment structure and industries.

a MarKet-PluS SolutioN

at the SaMe tiMe, a smooth industrial

and technological upgrading process re-

quires simultaneous improvements in

soft infrastructure such as educational,

financial, and legal institutions, and in

hard infrastructure such as telecommu-

nications and transportation. These im-

provements will enable firms to reduce

their transaction costs and become the

lowest-cost producers (Harrison and

Rodriguez-Clare 2009). But no single

firm can afford to take on all these in-

frastructure initiatives; and spontaneous

self-coordination among many firms to

meet these challenges is unrealistic.

The task requires collective action,

or at least coordination, between infra-

structure service providers and indus-

trial firms. In fact, the government itself

must initiate or proactively coordinate

these changes. In addition, industrial

upgrading and diversification requires

that certain firms act as first movers. If

they fail, they bear all the costs of their

decisions; if they succeed, they are usu-

ally followed into the marketplace by

competitors, and quickly lose the eco-

nomic rents and rewards that they ex-

pected as first movers. Because of the

above asymmetry in the expected cost

and gain for the first movers and the in-

formation externality created by them,

the government must provide incen-

tives to encourage them.

the New Structural ecoNoMicS

aS we re-eXaMiNe sustainable growth

strategies for developing countries af-

ter the global crisis, we need to pay

special attention to structural change

and its corollary, industrial upgrading

and diversification. The new struc-

tural economics (Lin 2010) proposes

a framework that complements earlier

approaches. It takes the following prin-

ciples into consideration:

firSt, ■ an economy’s structure of fac-

tor endowments (the relative abun-

dance of the factors of production)

changes as it moves from one level

of development to another. There-

fore, its optimal industrial structure

will also be different at different lev-

els of development, requiring a cor-

responding level and mix of hard

and soft infrastructure to support

its operations and transactions. For

example, the United States had to

update its financial and legal system

when it evolved from an agrarian

economy to an industrialized one

in the 18th century. The dynam-

ics of hard and soft infrastructure

was even more notable in the 19th

century when railroads were built to

accommodate the needs of increas-

ingly large firms, and sophisticated

new regulations had to be adopted

to guide interstate commerce.

SecoNd ■ , each level of economic

development is a point on a con-

tinuum from low-income agrarian

to high-income industrialized, not a

dichotomy of two stages: poor ver-

sus rich or developing versus indus-

trialized. This is why industrial and

infrastructure upgrading targets in

developing countries should not

necessarily be the same as those of

high-income countries.

third, ■ at each level of development,

the market is the main mechanism

for allocating resources. However,

history and economic theory sug-

gest that although markets are in-

D E V E L O P M E N T O U T R E A C H24

dispensable in allocating resources

to the most productive sectors and

industries, government interven-

tion—through the provision of

information, coordination of in-

frastructure improvements, and

compensation for externalities—is

equally indispensable in helping

economies move from one level of

development to another. This up-

grading entails large externalities

that affect firms’ transaction costs

and returns to capital investment.

Thus, the market is necessary but

not sufficient, and the government

needs to play an active role.

The evidence that suggests the ben-

efits of government involvement may

not be enough to validate an idea that

has long been mired in controversy.

Many economists who believe that

government intervention is indispens-

able for structural transformation may

still oppose a proactive public sector

role in industrial upgrading and diver-

sification. The main reason for their

opposition is the lack of a framework

for industrial policy making. But we

can derive some guiding principles by

drawing on the theories of compara-

tive advantage and the advantage of

backwardness, and by analyzing some

industrial successes and failures.

fiNdiNG a Pathway

the New Structural ecoNoMicS ap-

proach suggests a user-friendly six-step

framework to help policy makers iden-

tify and facilitate growth paths (Lin and

Monga 2010b):

firSt, ■ identify those tradable goods

and services that have existed for a

period of about 20 years in dynami-

cally growing countries that have

similar endowment structures but

with a per capita income that is

about double their own.

SecoNd, ■ among the industries on

that list, identify those that have at-

tracted domestic private firms and

try to pinpoint:

any obstacles that may be pre-•

venting them from upgrading

the quality of their products,

or

any barriers that may be dis-•

couraging other private firms

from entering.

This could be done using value-

chain analysis or the Growth Diag-

nostic Framework suggested by Haus-

mann, Rodrik, and Velasco (2008). The

government can then implement poli-

cies to remove the constraints at home,

and carry out randomized controlled

experiments to test their effectiveness

in eliminating the constraints before

scaling those policies up to the national

level.

third, ■ some of the identified indus-

tries may be new to domestic firms.

The government could encourage

firms in the higher-income coun-

tries identified in the first step to in-

vest in these industries, since those

firms have the incentive of relocat-

ing their production to the lower-

income country so as to reduce

labor costs. The government could

also set up incubation programs to

assist the entry of private domestic

firms into these industries.2

fourth, ■ unexpected opportunities

for developing countries may arise

from their unique endowment and

from technological breakthroughs

around the world. Developing

country governments should there-

fore pay close attention to successful

discoveries and engagement in new

business niches by private domestic

enterprises and provide support to

scale up those industries.

fifth, ■ in countries with poor infra-

structure and unfriendly business

environments, special economic

zones or industrial parks can help

overcome barriers to firm entry

and foreign investment. These can

create preferential environments

which most governments, because

of budget and capacity constraints,

are unable to implement for the

economy as a whole in a reasonable

timeframe. Industrial clusters could

also be encouraged.

SiXth, ■ the government can com-

pensate pioneer firms through time-

limited tax incentives, cofinancing

of investments, or access to foreign

exchange. To avoid rent seeking and

the risk of political capture, these

incentives should be limited both

in time and in financial cost, and

should not be in the form of mo-

nopoly rent, high tariffs, or other

distortions.

Policy makers in all developing coun-

tries could take this approach to help

their economies follow their compara-

tive advantages, tap into the potential

advantage of backwardness, and achieve

dynamic and sustained growth.

Justin yifu lin is world Bank chief economist and Senior Vice President, development economics.

A P R I L 2 0 1 1 25

references

Akerlof, G. A. and R. J. Schiller. 2009. Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism. Princeton, N. J.: Princeton University Press.

Basu, K.. 2011 [forthcoming]. Beyond the Invisible Hand: Groundwork for a New Economics. Princeton, N.J.: Princeton University Press.

Gerschenkron, A. 1962. Economic Backwardness in Historical Perspective, a book of essays. Cambridge, Mass.: Belknap Press of Harvard University Press.

Harrison, A. and A. Rodríguez-Clare. 2010. “Trade, Foreign Investment, and Industrial Policy for Developing Countries,” in D. Rodrik, ed. Handbook of Economic Growth, Vol. 4.

Hausmann, R., D. Rodrik, and A. Velasco. 2008. “Growth Diagnostics,” in N. Serra and J.E. Stiglitz, eds. The Washington Consensus Reconsidered: Towards a New Global Governance. New York: Oxford University Press, pp. 324–354.

Krugman, P. 2009. “How Did Economists Get it so Wrong?” New York Times Magazine, September 2.

Lin, J.Y. 2010. “New Structural Economics: A Framework for Rethinking Development.” Policy Research Working Paper no. 5197. Washington D.C.: World Bank.

Lin, J. Y. 1995. “The Needham Puzzle: Why the Industrial Revolution Did Not Originate in China.” Economic Development and Cultural Change, 41, (2), 269–92.

Lin, J. Y., and C. Monga. 2010a. “Growth Identification and Facilitation: The Role of the State in the Dynamics of Structural Change.” Policy Research Working Paper no. 5313. Washington D.C.: World Bank.

Lin, J. Y., and C. Monga. 2010b. “The Growth Report and New Structural Economics.” Policy Research Working Paper no. 5336. Washington D.C.: World Bank.

Katz, J. 2006, “Salmon Farming in Chile,” in V. Chandra ed. Technology, Adaptation, and Exports: How Some Developing Countries Got It Right. Washington, D.C.: World Bank, pp. 193-223.

Monga, C. 2009. “Post-Macroeconomics: Reflections on the Crisis and Strategic Directions Ahead.” Policy Research Working Paper no. 4986. Washington D.C.: World Bank.

Rhee, Y.W. 1990. “The Catalyst Model of Development: Lessons from Bangladesh’s Success with Garment Exports.” World Development, Vol. 18, No.2, pp. 333–346.

Stiglitz, J. 2009. Freefall: America, Free Markets, and the Sinking of the World Economy. New York: W. W. Norton & Co.

World Bank. 2008. The Growth Report: Strategies for Sustained Growth and Inclusive Development. Washington, D.C.: World Bank.

endnotes

1 Stiglitz (2009), Akerlof and Schiller (2009), and Krugman (2009) have questioned some of the fundamental tenets of mainstream economics, most notably the assumption that competitive markets are sufficient to create strong business incentives, and wealth creation, and to ensure efficient outcomes. Monga (2009) and Basu (2011) suggest that economics move beyond the boundaries of methodological individualism because all economic systems rely on social norms and beliefs.

2 Bangladesh’s vibrant garment industry is an example of a new industry starting from foreign direct investment—in this case, Daiwoo, a Korean manufacturer, in the 1970s. After a few years, enough knowledge transfer had taken place and the direct investment became a sort of “incubation.” Local garment plants mushroomed in Bangladesh, and most of them can be traced back to that first Korean firm (Rhee 1990). Chile’s successful salmon industry is an example of incubation by the government. Fundación Chile, a public sector firm, set up the first commercial salmon-farming operation in the country in 1974 and demonstrated that salmon farming could be successful in Chile. This industry expanded rapidly to the private sector and in size and complexity after the 1980s (Katz 2006).

D E V E L O P M E N T O U T R E A C H26

B E I J I N G CO N S E N S U S OR WASHINGTON CONSENSUS

By yaNG yao

What Explains China’s Economic Success?

A P R I L 2 0 1 1 27

D E V E L O P M E N T O U T R E A C H28

China’s remarkable

economic growth is

often attributed to

strong government

intervention that

can mobilize large amounts of

resources to clear any bottleneck

to growth or institutional

change. This approach is

often referred to as the Beijing

Consensus (BC) as compared

to the Washington Consensus

(WC): the former being a

model of authoritarianism

and heavy state involvement

in the economy, the latter

a model of neoliberal and

market-oriented doctrines. But

these characterizations are

inaccurate.

VariatioNS oN a theMe

iN JoShua raMo’S original formula-

tion published in 2004 by the U.K.’s

Foreign Policy Centre, the BC is defined

by three principles, none of which nec-

essarily requires strong government in-

tervention:

institutional innovation, ■

equitable and sustainable develop- ■

ment, and

self-determination. ■

Over the last 30 years, the Chinese

economy has moved progressively to-

ward the market doctrines of neoclas-

sical economics as summarized by John

Williamson in his formulation of the

WC. These include:

prudent fiscal policy, ■

economic openness, ■

privatization, ■

market liberalization, and ■

the protection of private property. ■

China has been extremely cautious in

maintaining a balanced budget and keep-

ing inflation in check. Programs aimed

purely at redistributing economic re-

sources have been few, and transfers from

the central government to the provinces

have generally been dominated by infra-

structure investment. The country is the

world’s second largest recipient of foreign

direct investment after the United States;

and more than 80 percent of China’s

state-owned enterprises have been priva-

tized or transformed into publicly listed

companies.

BiG BaNG or eVolutioN?

what’S uNique is the way China has

applied the WC. Implementing the

WC requires substantial institutional

change and policy reform, whereas de-

veloping countries are usually charac-

terized by rigid institutions that impede

the function of the market. A big-bang

approach to reforms is usually politi-

cally impractical or prohibitively costly.

China’s gradual one-step-at-a-time ap-

proach has been more successful. So if

there is a Beijing Consensus it refers to

the way China shaped its institutional

and policy reforms to make the Wash-

ington Consensus work in the Chinese

context.

the BeSt May Be the eNeMy of the Good

the chiNeSe eXPerieNce has yielded a

number of lessons for other developing

countries.

firSt, institutional efficacy is more important than institutional purity.

The recent development economics

literature points to the importance of

institutions for economic growth. But

institutions are effective only if they

provide the right incentives to align the

personal interests of economic and so-

cial agents with the interests of society

at large.

In this case, first-best institutions

may be ineffective because they often

require drastic changes in the incentive

structure which may be detrimental to

and alienate the major stakeholders.

Admittedly, adaptation which implies

compromises with political and social

realities, can result in lower efficiency.

This may simply be the cost of success.

Adaptation properly applied can mo-

tivate the stakeholders to buy into the

reform, which is a key success factor.

SPecial rePortS

A P R I L 2 0 1 1 29

what’S iN it for Me?

But chiNa alSo offerS many ex-

amples of institutional adaptation that

improved efficiency.

the township and village enterprise (tVe) played a key role in china’s in-dustrialization in the 1980s. TVEs were

nominally owned by local governments

but in effect managed by private entre-

preneurs. So although their ownership

structures were unclear, they did offer

strong incentives to both entrepreneurs

and local officials to improve economic

efficiency. They helped entrepreneurs

circumvent the adverse political con-

straints at the time and generated local

government tax revenues and econom-

ic growth.

the dual-track price system imple-mented between 1985 and 1994 is an-other example. This system assigned

two prices to a single good, one for

planned quotas and the other for market

transactions. In this case the efficiency

losses came in the form of corruption:

because the planned prices were much

lower than the market prices, the offi-

cials who controlled the quotas could

take advantage of the price differential

to make money (arbitrage). However,

the system provided powerful incen-

tives for state-owned enterprise (SOE)

managers to produce more output for

the market while protecting weak SOEs

from failing in the face of market com-

petition. This was important to win

support for reform from the larger part

of the society. In addition, the system

prevented hyperinflation which was

plaguing other transition economies.

the carrot or the SticK

SecoNd, government officials need to be motivated.

The role of government in econom-

ic development was highlighted in the

World Bank’s influential 1993 report

The East Asian Miracle and echoed in its

recent 2008 Growth Report. Although

both explored how government can

usefully take action to remove bottle-

necks to economic growth, they spent

little time on how to motivate govern-

ment officials to take those actions.

In China, government officials are

motivated in two ways.

First, promotion of government

officials is strongly based on merit,

especially their contributions to eco-

nomic growth. This is quite different

from performance evaluation based

on accountability, which requires gov-

ernment officials to follow preset rules

or be punished. Although this kind of

negative incentive exists in China, posi-

tive incentives for innovation and per-

formance leading to economic growth

are more prevalent. So far, the positive

effects of this system have outweighed

the negatives.

Second, public servants benefit di-

rectly from economic growth:

those in more prosperous regions ■

enjoy much higher salaries than

workers assemble solar-powered vehicles in weifang. designed and manufactured by a chinese company, the vehicle can run 120 to 150 kilometers under normal driving conditions on a full charge with speeds of up to 48 kilometers per hour. it has attracted its first batch of export orders from countries including Germany, the united States, and Norway.

D E V E L O P M E N T O U T R E A C H30

those in less developed regions,

different government departments ■

can offer different levels of income

and welfare, with departments that

are directly involved in managing

economic activities enjoying better

treatment, and

some provinces provide bonuses to ■

officials in subnational governments

for generating more tax revenue.

Politically, many of those practices

are regarded as extra-legal. In China

they are considered practical ways of

harnessing the inevitable forces of hu-

man nature.

Fiscal decentralization, too, has

helped motivate subnational govern-

ment officials. As one of the most fis-

cally decentralized countries in the

world, China’s subnational government

revenue accounts for 45 percent of total

government revenue and subnational

spending accounts for 77 percent of

total government spending. Decentral-

ization turns local government officials

into strong stakeholders in local eco-

nomic growth. In addition, fiscal de-

centralization has created a construc-

tive competition for resources among

local governments, inducing them to

improve services, local infrastructure,

and other aspects of the business envi-

ronment.

reduciNG elite caPture

third, insulation from special interests.Government officials should be im-

mune to conflicts of interests and pres-

sure from special interest groups which

in many developing countries often de-

rail institutional and policy reforms.

Because Chinese society has been

relatively equal, the government faces

less pressure from powerful inter-

est groups. The primary interest is in

promoting long-run economic growth

which helps ensure better incomes for

society as a whole.

Another strategy has been to search

for so-called Pareto-improving re-

forms: when no one is made worse off

and at least one person is made better

off. When reforms drastically change

the distribution of wealth or power in

society, the government must take a

stand and address challenges from the

less favored. Pareto-improving reforms

make it easier to mobilize broad public

support.

a hoPeful future

iN deScriBiNG eaSt aSia’S growth

experience, political scientists have pro-

posed the concepts of autonomous states

or developmental states, where the state

plays a role in macroeconomic planning.

But they are strong concepts because they

require that the state have certain intrin-

sic qualities. Ultimately, they lay the bur-

den on having visionary and committed

leaders. The Chinese experience has taken

a different approach. It treats the govern-

ment as made up of of rational individu-

als who need to be motivated to work for

the common good of society. Based on

this belief, a wide range of institutional

arrangements have been established to

incentivize government officials to be-

have as if they were disinterested when

they face conflicts of interests in society.

Although China’s application of the

Washington Consensus may be coun-

try specific, it contains a key principle

that others can learn from: namely, a

volitional pragmatism featuring con-

stant experimentation with a defined

objective to improve on the status quo.

Nothing is taken as permanent or per-

fect: the future is always envisioned as

better than today and incentives are

crafted to make that vision a reality.

Yang Yao is a Professor and Director of the China Center for Economic Research at Peking University in the Peoples Republic of China.

When reforms

drastically change

the distribution of

wealth or power

in society, the

government must

take a stand and

address challenges

from the less

favored.

A P R I L 2 0 1 1 31

totaled around $325 billion5 and remit-

tances $240 billion.6 These last two fig-

ures are likely underestimates. At best

IDNGOs tend to compete for far less

than 10 percent of all capital flows that

affect poverty, inequality, and injustice

in developing countries.

We need to think more deeply

about the other 90 percent. Corporate

social responsibility is a low-leverage

approach. We need to think differ-

ently, and bigger. For example, more

consistently influencing the basic rules

of Wall Street might pay huge divi-

dends. So too might helping multina-

tional corporations understand how

their supply chain and local policies can

benefit poorer and more marginalized

populations. Influencing governments

to unrig rules, regulate capital flows that

can severely impact the poorest, and be

more transparent about private sector

contracts and distribution of profits are

all things that merit greater attention.

And we need to probe for counterintui-

tive hybrids: is there a cross between a

hedge fund and a social justice organi-

zation, and if so, what is it? Where is the

intersection between trading commod-

ity futures and social justice? Can non-

profits help for-profits—themselves

working under restrictive and terribly

short-term metrics—find new ways to

reach the poor that is good for growth,

and good for equality, such as helping

to test low-margin products like crop

or weather index insurance for Sub-

Saharan farmers? Working with inter-

national capital, and understanding

capital markets, are not standard core

competencies among IDNGOs. They

probably need to become so.

Dr. Kent Glenzer is Oxfam America’s Director of Learning, Evaluation, and Accountability. He can be reached at kglenzer@oxfamamerica.org.

endnotes

1 Bureau of Democracy, Human Rights, and Labor. 2009 Human Rights Report: Introduction. U.S. Department of State. http://www.state.gov/g/drl/rls/hrrpt/2009/frontmatter/135936.htm.

2 Rosalind Eyben. “The Big Push Back!” Posted on 11 October 2010 on Harvard

University’s Hauser Center blog. http://hausercenter.org/iha/2010/10/11/the-big-push-back/.

3 L. David Brown and Jonathan Fox. “Transnational Civil Society Coalitions and the World Bank: Lessons From Project and Policy Influence Campaigns.” The Hauser Center for Nonprofit Organizations and The Kennedy School of Government. Harvard University, October 2000. Working Paper No. 3.

4 See www.keystoneaccountability.org.uk.

5 Hudson Institute. “Executive Summary: A Comprehensive Guide to the Sources and Magnitude of Global Giving to the Developing World.” The Index of Global Philanthropy and Remittances 2010. Center for Global Prosperity. Washington, D.C.

6 Dilip Ratha, Sanket Mohapatra, K. M. Vijayalakshmi, Zhimei Xu. “Migration and Development Brief 3.” Development Prospects Group, Migration and Remittances Team, November 29, 2007. Washington, D.C.: World Bank.

iNterNatioNal deVeloPMeNt NGoS continued from page 19

D E V E L O P M E N T O U T R E A C H32

EDUCATION FOR EDUCATION...

A P R I L 2 0 1 1 33

Countries in the

developing world

were led to believe

that education

would put them

on the path to becoming

modern economies—and they

responded enthusiastically.

Education for All was a powerful

message that has led to a

veritable transformation of

schooling throughout the world.

School attainment (the years of school-

ing completed by individuals) expanded

dramatically. But many countries did not

reap the promised rewards of economic

success. While this has puzzled many, and

has led to skepticism about the role of hu-

man capital development, the solution to

the puzzle is evident. School attainment

frequently expanded without a commen-

surate increase in achievement or cognitive

skills, leading to unsatisfactory economic

outcomes. Ensuring that schooling en-

hances cognitive skills will require different

policies and institutions.

SKillS VerSuS Seat tiMe

iNVeStiNG iN huMaN caPital is good

policy, but execution has often been

faulty. Too frequently, students have

spent time in schools, but have not

learned what their counterparts in de-

veloped countries learned. As a result,

they have not become competitive in

the world economy. Take Peru: 60 per-

cent of students get at least nine years of

schooling, yet only 20 percent of these

reach the basic skill level of developed

countries. Or Ghana, where 37 per-

cent of students get at least nine years

of schooling, but only one in seven of

these reach the basic skill level of devel-

oped countries.1

It turns out that it is the skills that

count. National growth rates are closely

linked to achievement, and only if addi-

tional years of schooling lead to higher

achievement will those years be pro-

ductive.

Most policy makers cannot conceive

of education without achievement. Af-

ter all, schooling is about learning, and

more schooling must lead to some im-

provement—this is just common sense,

they say.

deMaNdiNG quality

there iS, howeVer, mounting evi-

dence to the contrary. High-quality

studies of demand-side programs in-

cluding fee reductions for students,

conditional cash transfers, and school

nutrition programs show that these

initiatives tend to increase school at-

tendance and attainment without in-

creasing learning (Hanushek 2008).

The problem is that these programs

are directed solely at school attendance

with no consideration of what goes on

in the schools.

On the other hand, when a school

program emphasizes achievement, such

as Kenya’s scholarship program for girls

(Kremer, Miguel, and Thornton 2009)

which has the right incentives in place,

learning does increase. Programs that

emphasize education for all while ig-

noring the quality dimension do not

serve the underlying purposes that mo-

tivate them (UNESCO 2005).

SuPPlyiNG quality

while deMaNd-Side approaches are

important, there is no doubt that the

supply of high quality schools is the

main constraint: indeed, demand-side

policies are unlikely to work if schools

do not provide the right kinds of learn-

ing experiences.

Formulating policies that ensure

high-quality schools has been difficult.

A policy maker’s first instinct is often to

expand resources:

reducing class sizes, ■

increasing the qualifications of ■

teachers,

providing additional administrative ■

support, and

generally sending more funds to ■

schools.

But research from both developed

and developing countries has consis-

tently shown that resource policies, by

themselves, are unlikely to lead to the

desired achievement outcomes. Per-

haps surprisingly, resource constraints

SPecial rePortS

OR FOR SKILLS? By eric a. haNuSheK

D E V E L O P M E N T O U T R E A C H34

SPecial rePortS

are not the most significant challenge

facing schools.

it’S aBout the teacher

the MoSt coNSiSteNt reSearch find-

ing is that teacher effectiveness is the

main determinant of high achievement.

This finding may not in itself be par-

ticularly surprising; more instructive,

however, is that effective teachers are

not always the most experienced, the

better trained, the more educated, or

the better paid. In fact, it has been im-

possible to identify the characteristics

of good teachers—those who produce

large learning gains in their students.

Because the characteristics of good

teaching are not well-described, it is im-

possible to identify and regulate the skills

and approaches that make for a good

teacher. This finding is important, be-

cause a common school improvement

is to require more qualified teachers. But

without a solid understanding of the

teacher attributes, experience, or train-

ing that lead to better performance in the

classroom, it is impossible to set qualifi-

cation standards for effective teachers.

autoNoMy, accouNtaBility, aNd choice

the alterNatiVe to reGulatioN is

to create incentives that will induce

schools to seek out effective teachers

and programs. Incentives, here, means

providing rewards (either extrinsic

or intrinsic) for better achievement

or, conversely, punishment for poor

achievement.2 Specifically, institu-

tional policies that establish test-based

accountability, that introduce school

choice and competition, and that pro-

vide for local autonomy in decision

making have been found to enhance

student outcomes.

Over the last two decades, many

countries have introduced account-

ability into their schools. The most

celebrated are the “league tables” in

the U.K. and the federal legislation un-

der No Child Left Behind in the United

States. Other countries have also start-

ed assessing student performance as

a basis for rewarding and penalizing

schools. Early evaluation of these pro-

grams points to their positive impacts

on student achievement.

These kinds of accountability poli-

cies can also be used to provide learning

incentives for students. In the previous-

ly mentioned Kenyan scholarship pro-

gram, students responded to rewards:

achievement rose when they were

promised a grant for further schooling

if they scored well on tests. Similarly,

Bishop (2006)) shows that promotion

and graduation standards for students

can directly influence performance.

Giving parents and students choices

about which school to attend can pro-

vide another set of incentives: as par-

ents select schools that provide better

learning opportunities, they put pres-

sure on the other schools that do not

attract large numbers of students.

Clearly, the power of choice depends

on the range of opportunities available,

and having a healthy and competitive

market is important. Further, because

the value of these incentives depends

on parents systematically choosing

high-quality schools, a good system of

student testing and accountability will

provide information on which to base

their selection.

fiGure 1: autoNoMy coMBiNed with accouNtaBility iNcreaSeS achieVeMeNt

Note: Performance relative to least effective policy (that is, school autonomy without central exams).Source: hanushek and woessmann (2011), based on woessmann (2005).

80

70

60

50

40

30

20

10

023.7

0.0

76.2

55.5

School autoNoMy oVer teacher SalarieS

Math PerforMaNce

ceNtral eXaMS

Noyes

No

yes

A P R I L 2 0 1 1 35

Establishing autonomy of decision

making at the school level is important

because local decision makers know the

specific schooling challenges that they

face and the local capacity to respond to

these challenges. At the same time, lo-

cal decision making must give priority

to achievement, otherwise local schools

might simply pursue policies that make

life more comfortable for school person-

nel, for instance. Here, again, account-

ability policies must feature prominently.

For example, the figure shows that letting

local schools set salaries actually lowers

achievement if there is no central test-

ing, while the combination of local salary

autonomy and accountability yields very

large gains in student performance.

Schools can provide the essential

cognitive skills that lead to a country’s

long-run economic growth, but simply

providing more resources without pay-

ing attention to incentives is unlikely to

lead to better performance.

Eric A. Hanushek is the Paul and Jean Hanna Senior Fellow in the Hoover Institution at Stanford University and a member of the Koret Task Force on K–12 Education.

references

Bishop, John H. 2006. “Drinking from the Fountain of Knowledge: Student Incentive to Study and Learn—Externalities, Information Problems, and Peer Pressure.” In Handbook of the Economics of Education, edited by Eric A. Hanushek and Finis Welch. Amsterdam: North Holland: 909–944.

Hanushek, Eric A. 2008. “Incentives for Efficiency and Equity in the School System.” Perspektiven der Wirtschaftspolitik 9, Special Issue: 5–27.

Hanushek, Eric A., and Ludger Woessmann. 2011. “The Economics of International Differences in Educational Achievement.” In Handbook of the Economics of Education, Vol. 3, edited by Eric A. Hanushek, Stephen Machin, and Ludger Woessmann. Amsterdam: North Holland: 89–200.

Hanushek, Eric A., and Ludger Woessmann. 2008. “The Role of Cognitive Skills in Economic Development.” Journal of Economic Literature 46, no. 3 (September): 607–668.

Kremer, Michael, Edward Miguel, and Rebecca Thornton. 2009. “Incentives to Learn.” Review of Economics and Statistics 91, no. 3 (August): 437–456.

UNESCO. 2005. Education for All: The Quality Imperative, EFA Global Monitoring Report. Paris: UNESCO.

Woessmann, Ludger. 2005. “The Effect Heterogeneity of Central Examinations: Evidence from TIMSS, TIMSS-Repeat and PISA.” Education Economics 13, no. 2 (June): 143–169.

endnotes

1 See Hanushek and Woessmann (2008) for the underlying discussion of the role of cognitive skills and for discussion of skill levels in developing countries.

2 The international evidence comes largely from developed countries but does include some developing countries that have participated in international testing; see Hanushek and Woessmann (2011).

D E V E L O P M E N T O U T R E A C H36

A P R I L 2 0 1 1 37

WHY A R E N ’ T C H I L D R E N L E A R N I N G ?By aBhiJit V. BaNerJee aNd eSther duflo

D E V E L O P M E N T O U T R E A C H38

We are five

years away

from 2015,

the year

when the

Millennium Development Goal of

universal education is supposed

to be achieved, and the school

attendance numbers do look

good. In many parts of both East

and West Africa, and almost all

of South Asia, school enrollment

has grown rapidly, with primary

school enrollment now exceeding

90 percent in many areas

(UNESCO 2009).

So why areN’t we celeBratiNG? The problem is that the children are

in school, but they are not learning. In

India, for example, nearly 60 percent of

children in grade 4 cannot read a sim-

ple story at grade 2 level, and 76 percent

cannot do simple division (Pratham

2005). In neighboring Pakistan, 80

percent of children in grade 3 cannot

read a grade 1 paragraph (Andrabi et

al. 2009). In Kenya, 27 percent of grade

5 children cannot read even a simple

paragraph (Uwezo 2010).

What’s keeping children from learn-

ing? Or to reverse the question, what

enables them to learn? In this article, we

offer a reading of the recent evidence,

primarily but not exclusively from ran-

domized trials, that, we hope, contrib-

utes to an answer.

the firSt SteP iS ShowiNG uP

eNSuriNG that childreN have access

to schools and actually spend time there

does matter. The data clearly show that

children who spend more time in school

have better life outcomes (for example,

Duflo 2001, Spohr 2003). The trouble

is that while being enrolled is obviously

a necessary condition for this, there are

many reasons why enrollment by itself

may not translate into much more ef-

fective schooling. The school year in

India is only about 140 days, and each

school day often lasts only 3 hours. By

contrast, children in most OECD coun-

tries spend between 180 and 200 days

in school, with longer school days of 6

to 8 hours.

...aNd teachiNG

MoreoVer, being in the classroom is

less useful if the teacher is not there.

In 2002 and 2003, the World Absentee-

ism Survey of six countries, led by the

World Bank, concluded that in Bangla-

desh, Ecuador, India, Indonesia, Peru

and Uganda, teachers miss one day of

work out of five on average, and the ra-

tio is even higher (one in four) in India

and Uganda. Their data from India also

find that teachers who are in school do

not necessarily teach—they read the

newspaper, drink tea, or chat with their

colleagues. Overall, teachers spend less

than half the time they are supposed to

be teaching actually doing so (Chaud-

hury et al. 2006).

iNceNtiVeS helP

there iS Not eNouGh PreSSure on

teachers to teach. When such pressure

is brought to bear, they do teach more,

and students’ test scores improve, sug-

gesting that students can indeed be

taught (something teachers often ques-

tion), and that teachers know how to

teach (something education experts,

who tend to insist on the need for train-

ing, sometimes doubt). A randomized

evaluation in nonformal schools in

Rajasthan, India found that linking

teacher compensation to attendance,

by verifying attendance with objec-

tive impersonal means (such as photos

taken with tamper-proof date and time

stamps), was effective. Teacher absenc-

es fell by half, from 42 percent to 21

percent. And, students learned more:

test scores rose by 0.16 standard de-

viations, and children were 50 percent

more likely to pass the exam allowing

them to join formal schools (Duflo et

al. 2010a). Another evaluation in India

found that basing teacher pay on stu-

dent performance was highly effective

at improving student learning (Mu-

ralidharan and Sundararaman 2009).

In Kenya, teachers hired on short con-

tracts, under supervision by the school

committee, were much more likely to

be present then regular teachers, and

their students had higher test scores

than those of regular teachers, even

though the contract teachers had no

prior teaching experience (Duflo et al.

2010b).

SPecial rePortS

A P R I L 2 0 1 1 39

PriVate SchoolS do Better, But Not By a huGe MarGiN

aNother way to looK at incentives is

to compare children in private schools

with children in government schools. In

Colombia, students who won a lottery

for a private school voucher were 15

percent more likely than losers to attend

private school, and scored significantly

higher on a standardized test (Angrist

et al. 2002). In Pakistan, students in pri-

vate schools increase average achieve-

ment by 0.25 standard deviations each

year, compared to students in public

school. Self-selection is obviously an is-

sue here, but Sonalde Desai and others

try to deal with it by comparing siblings

in India who belong to the same family.

They found that, compared to their sib-

lings in public schools, primary school

age children attending private school

score 0.31 standard deviations higher

in reading and 0.22 standard deviations

higher in arithmetic. This likely re-

mains an overestimate of the impact of

private school in India, if parents send

the most able children to private school

or if they provide them with other ad-

ditional inputs.

The net effect of private school is

thus not that much higher than the

effect of improving incentives in the

NGO (nongovernmental organization)

schools in Rajasthan. Indeed, part of

the effect of private school may be due

to the fact that private school teachers

attend school more often: using the

effect of teacher attendance estimated

from the Rajasthan study combined

with the estimate from the World

Bank’s study on absenteeism that pri-

vate school teachers in India are 8 per-

centage points less likely to be absent

than public school teachers in the same

village, it is possible to account for

roughly half to a third of the estimated

overall gain in test scores from private

schooling just by virtue of the fact that

private school teachers are more likely

to be at work. The rest may be the result

of teacher effort while in school, or bet-

ter pedagogy.

But iNceNtiVeS are oNly Part of the Story

iN the 2000s, Pratham, a large NGO

in India, trained balsakhis (children’s

friends) to provide remedial education

to the lowest performing 3rd and 4th

graders in Vadodara and Mumbai mu-

nicipal schools. Balsakhis were mostly

local high school girls with a week’s

training who were paid a relatively

low salary of 1,000 Rupees per month,

($62.50, at purchasing power parity).

D E V E L O P M E N T O U T R E A C H40

A P R I L 2 0 1 1 41

The primary focus was to teach basic

literacy and numeracy skills to students

who were lagging behind. After one

year, these students’ test scores were a

very large 0.6 standard deviations high-

er than those of similarly low achieving

children in comparison schools (Baner-

jee et al. 2007), and students initially at

the bottom of the class scored a whole

standard deviation higher in the pro-

gram schools.

Another evaluation of a Pratham

program measured the results of a vol-

unteer teacher program in Jaunpur,

India, where school attendance is only

50 percent. More than 60 percent of the

children aged 7 to14 could not read and

understand a simple, first-grade level

story. Pratham recruited and trained

local volunteers in 65 randomly select-

ed villages to conduct evening “camps”

for two months. The volunteers typi-

cally had a high school education and

received only a week of training, but the

children benefited from these camps. A

year later, children who initially could

not read anything were 60 percentage

points more likely to decipher letters

than children in comparison schools.

Those who initially could already deci-

pher letters were 26 percentage points

more likely to be able to read and un-

derstand a story (Banerjee et al. 2010).

In another program, in Bihar, In-

dia, government schoolteachers re-

ceived special training from Pratham

to conduct summer school, focusing

on basic skills. Participating children

showed large learning gains. On aver-

age, they tested 0.2 standard deviations

higher than children in the compari-

son group—comparable to the private

school effect—even though the sum-

mer school program lasted only four

weeks and less than one in five children

participated in the program, so the ef-

fect on those who did would have to be

five times larger or about one standard

deviation(JPAL, 2009).

A fourth study, also with Pratham,

shows that even children who have

mastered the basics can benefit from

these types of programs though the ef-

fect may be smaller. In Bihar, India, an-

other supplemental education program

was targeted at all children, including

those who could already read. Pratham

provided educational materials and

trained volunteers to use them. The

evaluation suggests that children who

were taught by these volunteers saw

large gains as well (0.15 standard devia-

tions in math and 0.16 in language for

children in grades 3 to 5) [JPAL 2009].

However, when Pratham trained gov-

ernment school teachers in these tech-

niques, rather than volunteers, and the

teachers were asked by the government

to use these techniques during the reg-

ular school year, we see no evidence of

similar gains.

it’S PuzzliNG

firSt, MaNy of theSe GaiNS seem

large relative to the gains from private

school. Why don’t the private schools

adopt Pratham-style pedagogical tech-

niques to improve their performance,

since it takes only a week’s training?

Second, why do government school

teachers use the Pratham techniques

during the summer, but not during the

school year? Third, why did parents and

children not respond more enthusiasti-

cally to the offer of Pratham’s remark-

ably effective remedial programs? In

Jaunpur only 8 percent of the children

(13 percent of those who could not

read) attended the evening remedial

sessions. With the summer schools, the

corresponding number was 18 percent.

educatioN aS a lottery

we ProPoSe a Very SiMPle theory

to account for all of this, which we call

the education-as-lottery hypothesis.

Surveys of parental aspirations suggest

that the average semieducated or un-

educated parent sees education mainly

as a way to secure a government or

other salaried job. For this reason, they

think that education is only worthwhile

if their child can get through the gate-

keeping public exams that restrict access

to these kinds of jobs. All the evidence

suggests that they are probably wrong.

That is, while the evidence suggest that

the return to an extra year of educa-

tion in developing countries is more or

less constant, parents believe that the

returns are concentrated at the higher

levels of education: in Morocco for ex-

ample, parents believe that each year

of primary education increases a boy’s

earning by 5 percent, but each year of

secondary education by 15 percent.

The pattern was even more extreme

for girls: parents believed each year of

primary education was worth almost

nothing, 0.4 percent. But each year of

secondary education was perceived to

increase earnings 17 percent. As a re-

sult they believe that education is much

more of a lottery than it really is.

Several implications follow from

this hypothesis:

Given the winner-take-all nature of

education, it is very important to identify

the child who has the best chance of be-

ing a winner as early as possible and put-

ting all the resources behind him or her.

D E V E L O P M E N T O U T R E A C H42

This is the child who gets sent to private

schools, and we often see parents refer-

ring to her as the only smart child in the

family. In Pakistan, children perceived by

their parents as more intelligent are four

times more likely to be enrolled in private

schools (Andrabi et al. 2009, p. 100). In

Burkina Faso, a study found that adoles-

cents were more likely to be enrolled in

school when they scored high on a test

of intelligence, but they were less likely

to be enrolled in school when their sib-

lings had scored high. The result is that

many children (perhaps a majority) get a

signal from their parents relatively early

in their lives (the private school/public

school choice, for example, often happens

at the primary school level) that they are

likely to be unsuited to education. It is

no wonder that after this, many of them

are mostly going through the motions in

school, waiting for when they can drop

out. This would explain why, for example,

child attendance rates in India are 70 per-

cent, worse even than teacher attendance

(ASER 2005).

This tendency to pick winners early

and focus on them would explain why

parents are not very excited by remedial

education. If their child needs remedial

education, they feel, he is probably be-

yond help.

Because parents are focused on the

lottery, it is no surprise that the edu-

cation system gets designed to reflect

those preferences. Since the bet is on the

highest performing children, the focus

in class is always to cover the whole syl-

labus even if the average child is totally

lost. Think of those fourth graders who

cannot read but get geography and his-

tory and science thrown at them. The

whole system conspires against them

on this—India’s Right to Education

Bill makes finishing the syllabus a legal

requirement. In Kenya, providing ad-

ditional textbooks benefited only those

students who were already at the top of

their class since the textbooks were far

too advanced to be useful to the rest of

the children (Glewwe et al. 2007).

This explains why teachers do not use

the Pratham techniques in class, since

those techniques focus on helping the av-

erage child master the basic concept bet-

ter and distract from “finishing” the sylla-

bus. On the other hand, during summer

school, they were there explicitly to help

the children to catch up and therefore

willing to do what Pratham suggested.

What is true for government

schools is probably even more so for

private schools, which depend for their

existence on pleasing the parents. Why

would we expect them to use techniques

that are meant for the average child?

the eVideNce for our hyPotheSiS?

a Study By traNG NGuyeN is highly

consistent with this view. She finds that

in Madagascar some parents consider-

ably overestimate the return to educa-

tion and some substantially underesti-

mate it, though on average they get it

about right. However, they dramati-

cally overestimate (by a factor of two)

the chance that those who graduate

A P R I L 2 0 1 1 43

from school will get a government job,

making education more of a lottery

(Nguyen, 2008).

Nguyen also finds that when par-

ents who underestimate the returns are

given information about actual returns

to education, their children perform

much better: their test scores improved

by 0.37 standard deviations. An earlier

study by Jensen also finds that in the

Dominican Republic giving students

information about the returns to edu-

cation reduced the chance of dropping

out (Jensen, 2010b). More recently, a

randomized evaluation in three North-

ern States in India (also by Jensen)

found that once parents became aware

of the high-paying jobs available to

educated young women through a re-

cruitment drive for call centers, they

were more likely to keep their daugh-

ters in school. In other words, this

convinced them that investing in their

daughters was a better lottery ticket

than they thought (Jensen 2010a). On

the other hand, interestingly, this study

also found that in response to the drive

parents reduced educational invest-

ment for boys they wanted to keep with

them on the farm, and they increased

the education of boys they wanted to

send to the city.

A more indirect but compelling piece of

evidence comes from a randomized evalu-

ation of a tracking program in Kenyan gov-

ernment schools. Extra teachers were hired,

and classes were split to allow for smaller

class sizes. Some randomly selected classes

were divided into a more advanced and a

less advanced class based on the children’s

performance, while other classes were split

at random—what is sometimes called

tracking. Children in the tracked classrooms

(both those in the advanced and the less ad-

vanced class) learned more than children

in classes that were split without tracking,

and these gains persisted even one year af-

ter the program ended and all the students

were put back in the same class (Duflo et al.

forthcoming). The children in the less ad-

vanced tracked classes benefitted presum-

ably from the fact that, although the teacher

was probably still teaching to the top of the

(new) class, they were now nearer the top.

what doeS thiS MeaN for educatioN Policy?

a ProPer aNSwer to this question

goes beyond the scope of this article. A

few remarks however seem warranted.

First, there is now huge pressure all over

the world to hire more teachers, but if

we are right, just cutting class size with-

out changing pedagogy will not work.

This is indeed what was found in India

in the 1990s (Banerjee et al. 2005), and

also in Kenya more recently (Duflo et

al. 2010b).

Second, because the long-term incen-

tives are distorted by the assumption of

a lottery, creating short-term rewards for

educational success are all the more im-

portant. A program in Kenya that offered

girls who scored in the top 15 percent of

an exam a scholarship for the next year

worth about twenty dollars, not only got

the girls to do much better but also put

pressure on the teachers to work harder

(to help the girls), which meant that boys

did better too, even though there was no

scholarship for them (Kremer et al. forth-

coming). A computer-based teaching

program that rewards successful learning

by allowing kids to play games, should

also work well in this environment, be-

cause, apart from everything else, it is a

way to create short-term incentives. This

is in fact what was found in Vadodara,

where a program that allowed pairs of

children to play math learning games for

two hours a week generated gains of 0.39

standard deviations, and those gains were

obtained at all levels of the distribution of

test scores (Banerjee et al. 2007).

The ultimate solution, however, has

to involve a wholesale attitude shift by

everyone in the system from parents to

educators. The good news is that if this

shift takes place, very large gains can

follow.

Abhijit V. Banerjee is the Ford Foundation International Professor of Economics at the Massachusetts Institute of Technology (MIT). Esther Duflo is the Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics at MIT. Both authors are founders and directors of the Abdul Latif Jameel Poverty Action Lab (J-PAL) at MIT.

references

Andrabi, Tahir, Jishnu Das, Asim Khwaja, Tara Vishwanath, and Tristan Zajonc. 2009. “Pakistan Learning and Educational Achievement in Punjab Schools (LEAPS): Insights to Inform the Education Policy Debate.” Washington, D.C.: The World Bank.Angrist, Joshua, Eric Bettinger, Erik Bloom, Elizabeth King, and Michael Kremer. 2002. “Vouchers for Private Schooling in Colombia: Evidence from a Randomized Natural Experiment.” The American Economic Review, December: 1535–1558.

Banerjee, Abhijit, Rukmini Banerji, Esther Duflo, Rachel Glennerster, and Stuti Khemani. 2010. “Pitfalls of Participatory Programs: Evidence from a randomized evaluation in education in India.” American Economic Journal: Economic Policy 2 (1): 1–30.

D E V E L O P M E N T O U T R E A C H44

Banerjee, Abhijit, Shawn Cole, Esther Duflo, and Leigh Linden. 2007. “Remedying Education: Evidence from Two Randomized Experiments in India.” Quarterly Journal of Economics 122(3):1235–1264.

Banerjee, Abhijit, Suraj Jacob and Michael Kremer, with Jenny Lanjouw and Peter Lanjouw. 2005. “Moving to Universal Education: Costs and Trade offs” (mimeo). Cambridge, MA: Massachusetts Institute of Technology.

Chaudhury, Nazmul, Jeffrey Hammer, Michael Kremer, Karthik Muralidharan, and F. Halsey Rogers. 2006.”Missing in Action: Teacher and Health Worker Absence in Developing Countries.” Journal of Economic Perspectives 20(1): 91–116.

Chou, Shin-Yi, Liu, Jin-Tan, Grossman, Michael and Ted Joyce. 2010. “Parental Education and Child Health: Evidence from a Natural Experiment in Taiwan.” American Economics Journal: Applied Economics 2(1):33–61.

Desai, Sonalde, Amaresh Dubey, Reeve Vanneman and Rukmini Banerji. 2009. “Private Schooling in India: A New Landscape.” India Policy Forum Vol. 5: 1–58. Suman Bery, Barry Bosworth and Arvind Panagariya, eds. New Delhi: Sage.

Duflo, Esther, Pascaline Dupas, and Michael Kremer (forthcoming). “Peer Effects, Teacher Incentives, and the Impact of Tracking: Evidence from a Randomized Evaluation in Kenya.” American Economic Review. See also NBER Working Paper. W14475. Cambridge, MA: National Bureau of Economic Research.

Duflo, Esther, Pascaline Dupas and Michael Kremer. 2010. “Pupil-Teacher

Ratio, Teacher Management and Education Quality” (mimeo). Cambridge, MA: Massachusetts Institute of Technology.

Duflo, Esther, Rema Hanna, and Stephen P. Ryan. 2010. “Incentives Work: Getting Teachers to Come to School” (mimeo). Cambridge, MA: Harvard University and Massachusetts Institute of Technology.

Duflo, Esther. 2001. “Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from an Unusual Policy Experiment.” American Economic Review 91(4): 795–813.

Glewwe, Paul, Michael Kremer, and Sylvie Moulin. 2007. “Many Children Left Behind? Textbooks and Test Scores in Kenya.” NBER Working Paper. No. 13300. Cambridge, MA: National Bureau of Economic Research.

J-PAL South Asia. 2009. Evaluation of Pratham’s Read India: July 2009 Report to Bihar Government. www.povertyactionlab.org/south-asia.

Jensen, Robert. 2010a. “Economic Opportunities and Gender Differences in Human Capital: Experimental Evidence for India.” NBER Working Paper. W16021. Cambridge, MA: National Bureau of Economic Research.

. 2010b. “The (Perceived) Returns to Education and the Demand for Schooling.” The Quarterly Journal of Economics 125(2): 515–548.

Kremer, Michael, Edward Miguel, and Rebecca Thornton. “Incentives to Learn” (forthcoming). Review of Economics and Statistics. Cambridge, MA: Massachusetts Institute of Technology Press.

Muralidharan, Karthik and Venkatesh Sundararaman. 2009. “Teacher Performance Pay: Experimental Evidence from India.” NBER Working Paper 15323. Cambridge, MA: National Bureau of Economic Research.

Nguyen, Trang. 2008. “Information, Role Models and Perceived Returns to Education: Experimental Evidence from Madagascar.” MIT Working Paper. Cambridge, MA: Massachusetts Institute of Technology.

OECD (Organisation for Economic Co-operation and Development). Key Indicators on Development. www.oecd.org/document/55/0,3746,en_2649_37455_46349815_1_1_1_37455,00.html.

Pratham Annual Status of Education Report. 2005. Final edition. scripts.mit.edu/~varun_ag/readinggroup/images/1/14/ASER.pdf.

Spohr, Chris. 2003. “Formal Schooling and Workforce Participation in a Rapidly Developing Economy: Evidence from ‘Compulsory’ Junior High School in Taiwan.” Journal of Development Economics 70(2): 291–327.

UNESCO (United Nations Educational, Scientific, and Cultural Organization). 2009. EFA Global Monitoring Report: Overcoming Inequality: Why Governance Matters. www.unesco.org/new/en/education/themes/leading-the-international-agenda/efareport/reports/2009-governance.

Uwezo. 2010. “Are Our Children Learning? Annual Learning Assessment, Kenya 2010.” http://www.uwezo.net.

A P R I L 2 0 1 1 45

worldwide, labor has become nearly twice as productive over the last 20 years— and even more so in the developing countries, with asia in the lead.

labor productivity is critical to economic success; and productivity growth has three main sources:

caPital deePeNiNG:• the increase in capital per worker, with ict particularly important. capital deepening requires improving the business environment to enhance investors’ confidence and make investment opportunities more attractive.Growth iN laBor quality:• the increase in the proportion of workers with high levels of education and experience, and total factor ProductiVity (tfP) •Growth: reorganizing production processes using more and better technology and management.

Policies to boost productivity growth must be strategic and must foster simultaneous improvements in all three areas. this means:

investing in human capital and •improving technology for better access to information,making education more accessible •and affordable, and investing in ict as a strategy of •choice for boosting economic growth and competitiveness.

Note: Most of the policy options are adapted from oecd (2008). the authors use the “+” sign to express their own judgment of the expected effect of each policy option:

+ + + = strong effect+ + = significant effect + = some effect

how ict Policy coNtriButeS to laBor ProductiVitycoNtriButeS to…

PolicieS caPital deePeNiNG

laBor quality

tfP Growth

ict iNfraStructure, especially broadband such as internet access

+ + + + +

coMPetitioN aNd reGulatioN to improve quality and reduce costs of ict products and services

+ + + + ++

e-GoVerNMeNt for transparency, efficiency, and effectiveness. for example, e-procurement.

+ + + + +

ProMote ict-eNaBled SerViceS aNd coNteNt deVeloPMeNt to foster ict use across sectors, organizations, and households for better decision making*

+ + ++ ++

ProMote ict-eNaBled SerViceS aNd coNteNt deVeloPMeNt to foster technology diffusion to business*

++ + + + +

ict for educatioN such as online courses and other distance learning

+ + + + +

educatioN for it deVeloPMeNt aNd MaiNteNaNce

+ + + +

techNoloGy aNd laBor ProductiVity

Source: dale Jorgenson and Khuong Vu (2010). “Potential Growth of the world economy.” Journal of Policy Modeling, 32: 615–631.

* Government ict policy should follow market principles and encourage the participation of the private sector as much as possible. enhancing the benefits that users can reap from ict-enabled services and products is more effective than providing them with subsidies.

D E V E L O P M E N T O U T R E A C H46

CITIES ON THE PROWLBy tiM caMPBell

A P R I L 2 0 1 1 47

CITIES ON THE PROWL

D E V E L O P M E N T O U T R E A C H48

Cities in the modern

world are beginning

to share some

features with

the city-states

of millennia past. Now, as

then, cities are important,

even critical, to economic

development. Unlike the walled

cities that harbored flourishing

trade in medieval Europe, today,

cities by the thousands all

around the world are looking

outward in search not of silk

and spices, but rather sources

of finance, global talent, and

most of all, good ideas. But

the search for knowledge isn’t

always easy.

a few weeKS aGo, my colleague Neal

Peirce chided the short-sighted carping

of voters who see in mayoral travel only

junkets, even if they are for purposes of

study. My recent research for a forth-

coming book shows that the 500 larg-

est cities on the planet travel often, on

the order of thousands of study visits

annually, and they visit a wide range of

host cities which are selected carefully,

so that visitors can acquire valuable

knowledge to speed up improvements

back home.

Not oNly for the rich

a SurVey of 50 larGe citieS around

the world revealed that cities visit re-

peatedly and continuously every year,

often more than 10 times per year. They

tend to choose visit partners that are

like themselves, the rich tend to visit the

rich, Stockholm visits London, London

visits New York. But the poor—cities

like Ho Chi Minh City, Vietnam; Dakar,

Senegal; and Tabriz, Iran—visit rich

and poor in equal shares. And though

visitors often select similar-sized hosts,

even the megacities more frequently

visit their cousins in the one to five mil-

lion population range than their sister

megacities. Perhaps something about

that moderate city size enables new-

comers to get their arms around the

whole thing in a short time.

SMart citieS

they Go BecauSe in a globalized econ-

omy, cities need to work harder to make

a living. They no longer have the pro-

tections of trade regimes and the com-

forts of regional isolation. In today’s

world, money moves fast, even faster

than trade deals, and cities have learned

that they must keep up with their prin-

cipal competitors—other cities. If they

want those inward investments, cities

must strive to be on top of their game.

They have to make an attractive place

for global talent and to deliver well-

connected and efficiently functioning

infrastructure.

why do they Go?

But alSo, city leaders go because they

have short terms of office and they

know that learning from others is

cheaper and less risky than pursuing

untested ideas that may end up in false

starts. Good practices from successful

cities offer shortcuts. Cape Town and

Buenos Aires drew on the waterfront

renewal experience of Baltimore and

London. Da Nang took lessons from

Japan in conversion and regulation of

urban land. Regional centers in Ra-

jastan in the north of India are follow-

ing lessons of infrastructure expansion

and business readiness that their peer

cities developed in central and south-

ern India. Amman, Jordan is studying

the many experiments in decentralized

governance from other parts of the

world, even outside the Middle East.

City-to-city exchange was ranked by

survey takers as by far the most effec-

tive way to learn. Visitors can actually

see how things work.

what do they learN?

half of the citieS taking part in the

survey were reformers (by their own

reckoning, they have made “many signifi-

cant reforms”), and they have distinct in-

terests compared to other cities. Reform-

ers showed most interest in transport and

know-how in fostering local economic

development. The search for transport

solutions reflects the well-known spread

SPecial rePortS

A P R I L 2 0 1 1 49

of Curitiba’s bus rapid transit (BRT) sys-

tem to other cities in Brazil, then to Bo-

gota, Colombia, and on to Mexico City.

Currently BRT is reaching Asia. It is also

why dozens of other cities, Portland is a

good example, visit Amsterdam and Co-

penhagen: visitors see demonstrated in

those northern European cities the power

of integrating all forms of movement—

walking, bicycles, automobiles, busses,

and trams—into a single transit system.

The nonreformers in the survey are

those that had made few or no reforms.

Their priorities were spread more or

less evenly across a spectrum of topics,

including finance, urban planning, ur-

ban renewal, and basic utilities. Perhaps

the reformers feel they had this ground

already covered. Both reformers and

nonreformers are concerned with the

big and growing question for all cities

on the planet: how to govern sprawling

metropolitan areas. Cities on the prowl

for answers to the metro puzzle are un-

likely to return home fully satisfied.

Great idea! Now what?

acquiriNG New KNowledGe is only

half the battle. How the knowledge

is validated and applied to problems

back home is a whole other drama. Our

research has also discovered individ-

ual styles in the way cities handle new

knowledge.

Trust and a learning environment

seem to be the main ingredients in the

alchemy of internal processing that is

needed in a city to adapt knowledge

successfully to local circumstances.

Seattle’s Trade Development Alliance

(TDA) has developed this understand-

ing and internalized the practice of re-

lationship building into its study tours.

The TDA involves a range of business,

government, and independent leaders

in each and every mission. Over nearly

20 years of missions and many repeat

participants, the TDA has achieved a

measurable degree of bonding among

its civic leadership.

truSt aMoNG PeerS

leaderS iNterViewed in a half doz-

en cities over the past 18 months also

point to trust and bonding. These are

the key elements in adapting “import-

ed” knowledge to solve problems. Even

though they may not know it, smart

cities create comfort zones of informal,

internal networks of trust. One man-

agement guru calls this zone the “ba,”

a climate conducive to exchange of

shared values. With the right climate,

civic leaders are able to reach consen-

sus, and their reactions and policy ini-

tiatives have greater coherence and are

achieved more speedily.

Our research shows that the prowl-

ing of cities is continuous, it is grow-

ing, and the arrangements for visits

are becoming more sophisticated, with

many nongovernmental organizations

(NGOs) popping up to help match

cities up, much like a dating service

matches couples. A wise policy envi-

ronment and enlightened public sup-

port could help cities create the right

conditions for innovation, even while

they are on the prowl.

Tim Campbell is Chairman of the Urban Age Institute in Washington, D.C.

This article is adapted from the author’s new book Beyond Smart Cities—How Cities Network, Learn, and Innovate, forthcoming in January 2012 from Earthscan Publications, Ltd.

See related papers and articles at www.urbanage.org.

Bus rapid transit (Brt) system in curitiba, Brazil.

D E V E L O P M E N T O U T R E A C H50

SPecial rePortS

THE GREENINGOF DEVELOPMENT

Solar energy is used to light a village shop in Sri Lanka.

By carlo carraro aNd eMaNuele MaSSetti

A P R I L 2 0 1 1 51

N O G R O W T H W I T H O U T E N E R G Y .

Economic

development

increases the

demand for energy.

This is true for

countries at all income levels,

although as economic growth

progresses, the demand tends

to increase more in the low- and

middle-income countries than

in high-income ones. But energy

remains a key ingredient for

economic growth at all stages of

development.

with 5.4 BillioN PeoPle living in low-

and middle-income countries—out of

a global population of 6.5 billion—en-

ergy demand will very likely continue

to grow at a fast pace for many years to

come. Figure 1 shows how energy use

and gross domestic product (GDP) per

capita were related, in different groups

of countries, from 1960 until 2005.

This large increase in energy con-

sumption will pose immense challeng-

es as the world seeks to gain access to

energy sources, achieve energy security,

and arrive at solutions to the inevitable

negative environmental consequences:

especially global warming, which will

increase if the amount of carbon diox-

ide emissions per unit of energy (the

carbon intensity of energy) does not

decline sharply.

what aBout the eNViroNMeNt?

we See Very little differeNce be-

tween the carbon content of energy

in high-income and low- and middle-

income countries. The carbon intensity

of energy has decreased on average by

only 0.5 percent per year in high in-

come countries, and remained stable

in low- and middle-income countries

until the recent rapid expansion of

coal burning power plants in emerging

economies. So that, overall, there was a

global increase between 1998 and 2005.

Economic models confirm that without

the right policies the current trend will

likely persist. Figure 2 shows past and

future trends of carbon emissions in

relation to different stages of economic

development. (EMF22 2009; Clarke et

al 2009).

A middle-of-the-road projection

shows that total primary energy sup-

ply will increase by 80 percent by 2050,

and CO2 emissions per capita will rise

to five times higher than the targets set

at the G8 Summit in L’Aquila in 2009.

So the historic pattern that links emis-

sions to economic development ur-

gently needs to be reversed. The fight

against global warming will require no

less than a revolution in how we use en-

ergy (energy efficiency) and in our mix

of energy sources (reducing the carbon

intensity of energy).

creatiNG New toolS...

oNly a Shift to climate-friendly tech-

nologies, prompted by the right in-

centives, will change the relationship

between emissions and economic pros-

perity. Several recent studies show that

although better energy efficiency would

at first lead to cheap emissions reduc-

tion, the carbon intensity of energy

must eventually fall to nearly zero if the

goal is to cut total emissions by 80 per-

cent or more. In particular, the power

sector would have to adopt an optimal

mix of carbon-free electricity genera-

tion technologies: wind, photovoltaic,

nuclear, and coal power plants with

carbon capture and storage—in differ-

ent proportions according to techni-

cal feasibility and political constraints.

Electric cars and second generation

biofuels are the most attractive options

to reduce emissions in the transport

sector (Bosetti et al 2009).

...aNd PayiNG for theM

our StudieS haVe ShowN that we need

to invent new tools to remedy the global

warming problem, otherwise the cost of

stabilizing emissions at safe levels will

D E V E L O P M E N T O U T R E A C H52

SPecial rePortS

be extremely high. Carbon taxes or cap-

and-trade systems can help by putting

a price on the damage that emissions

cause to society, thereby discouraging

emissions and making alternative en-

ergy sources relatively more economi-

cally attractive. We believe the price of

carbon should be uniform in all sectors

and countries so that emissions are re-

duced and not simply relocated; cred-

ible in the long-term in order to trigger

a change of expectations and invest-

ments in the present since investments

in the energy sector are typically long

term and highly dependent on expec-

tations about future prices and policy

scenarios; and consistent over time to

trigger the right expectations.

SuBSidiziNG a Greater Good

iN SoMe caSeS, subsidies may need to

complement carbon taxes or cap-and-

trade programs. Large-scale projects in

the energy sector are costly and might

require a partnership among several

governments. Public sector support

may also be needed to finance projects

with social returns that are higher than

monetary returns or when uncertain-

ties on the return to investments might

not be resolved by price signals.

In these cases, governments will have

to support research and development

(R&D). An easy solution for financing

R&D subsidies would be to use revenues

from carbon taxes or from auctioning

emissions permits. Recent estimates show

that in the early years, about 75 percent

of carbon revenues would be enough to

cover all additional expenditure in clean

energy R&D by OECD economies. In

later years, the share would decline to a

modest 5 percent, mainly because the

carbon price will increase substantially

over time as a result of the increasing

stringency of the greenhouse gas (GHG)

stabilisation target (Bastianin, Favero and

Massetti 2010).

There is concern that expanding in-

vestment in energy R&D will crowd out

R&D investments in other sectors. We

believe that these concerns are justified

in the very short run, but in the long

term we expect that it will adjust as a

larger supply of scientists and labora-

tories will be attracted into the R&D

market (Carraro, Massetti and Nicita

2009).

ShootiNG for the MooN

the traNSitioN to a high level of R&D

investments in clean energy needs to be

fast. Our estimates show that to drive

the cost of GHG mitigation down to a

minimum level, R&D spending would

have to jump from 0.02 percent of glob-

al GDP to about 0.12 percent within a

few years. This fast expansion of R&D

spending is challenging not from a fi-

nancial point of view but because of the

speed of the transition to a new equi-

librium. An enormous but not unprec-

edented effort is needed. In the 1960s,

for example, the NASA Apollo Space

Program used US$ 98 billion over 13

years (around US$ 7.5 billion per year).

Investment at the peak of the program

was 0.4 percent of national GDP. Only

this level of commitment can win the

global warming challenge.

No free luNch

the reSearch fiNdiNGS presented in

this article clearly show that economic

growth and energy consumption are

tightly intertwined: higher affluence

Note: historical data from the world Bank. energy use (kilograms of oil equivalent per capita). high-income economies are those in which 2008 gross national income (GNi) per capita was $11,906 or more. GdP per capita, market exchange rates, constant 2000 uS$.

6,0001979

5,000

4,000

3,000

2,000

1,000

05,0000 1,0000 15,000 20,000 25,000 30,000

ener

gy u

se p

er c

apita

(k

g of

oil

equi

vale

nt)

GdP per capita1960-2005 (constant 2000 uS$)

fiGure 1: ecoNoMic deVeloPMeNt aNd eNerGy uSe at the GloBal leVel

world

high income

low & Middle income

A P R I L 2 0 1 1 53

levels are generally characterized by

higher per capita energy consumption.

Meeting the growing needs of large

developing countries for cheap and se-

cure energy sources is in itself a daunt-

ing task. But the real challenge is to

minimize the negative environmental

effects that doubling energy consump-

tion will cause, particularly global

warming. Only large-scale technologi-

cal change can de-link emissions and

economic prosperity.

Our analysis shows that R&D

spending in new energy technologies

should increase at least five-fold in the

next two decades if we want to drive

energy emissions to zero. A credible,

long-term, consistent carbon price ap-

pears to be the best tool to move invest-

ments toward clean energy research;

but in certain circumstances govern-

ments may need to step in and support

research with public funds. In the face

of tight public budgets, policy makers

would only need to use a fraction of the

carbon taxes or revenues from the auc-

tioning of emissions permits to finance

innovation.

Carlo Carraro is Professor of Environmental Economics and President of the Università Ca’ Foscari Venezia. He is also Chairman of the Scientific Advisory Board of the Fondazione Eni Enrico Mattei.

Emanuele Massetti is Senior Researcher at the Fondazione Eni Enrico Mattei and at the Euro-Mediterranean Centre for Climate Change (emanuele.massetti@feem.it).

This article is based on research being carried out by the Sustainable Development Programme at the Fondazione Eni Enrico Mattei and by the Climate Impacts and

Policy Division of the Euro-Mediterranean Centre for Climate Change, with financial support from the Italian Ministry of the Environment and the European Commission-funded PASHMINA project.

references

Bastianin, A., A. Favero and E. Massetti. 2010. “Investments and Financial Flows Induced by Climate Mitigation Policies.” FEEM Working Paper no. 13.

Bosetti, V., C. Carraro, E. Massetti, A. Sgobbi and M. Tavoni. 2009. “Optimal Energy Investment and R&D Strategies to Stabilise Greenhouse Gas Atmospheric

Concentrations.” Resource and Energy Economics, 31(2): 123–137.

Carraro, C., E. Massetti and L. Nicita. 2009. “How Does Climate Policy Affect Technical Change? An Analysis of the Direction and Pace of Technical Progress in a Climate-Economy Model.” The Energy Journal, Special Issue. Climate Change Policies After 2012, October 2009, 30 (Special Issue 2): 7–38.

Clarke, L., J. Edmonds, V. Krey, R. Richels, S. Rose and M. Tavoni. 2009. “International Climate Policy Architectures: Overview of the EMF 22 International Scenarios.” Energy Economics, 31(2): 64–81.

EMF 22. 2009. Energy Modeling Forum 22: Climate Change Control Scenarios. Stanford University. http://emf.stanford.edu/research/emf22/.

1.3

1.2

1.1

1.0

0.9

0.8

01960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004

inde

x of c

arbo

n in

tens

ity o

f ene

rgy

(bas

e 20

05)

world high income low & Middle income

Note: authors’ calculations from world Bank development indicators. high-income economies are those in which 2008 GNi per capita was $11,906 or more.

fiGure 2: carBoN iNteNSity of eNerGy index, Base 1975

D E V E L O P M E N T O U T R E A C H54

By PraNaB BardhaN

AND THE LAND ACQUISITION CON U N D R U M

I N D U S T R I A L I z A T I O N

A P R I L 2 0 1 1 55

The development

economics

literature cites

several barriers to

industrialization:

low savings, ■

weak domestic demand ■

or export prospects,

lack of access to credit, ■

marketing, infrastructure,

an educated labor force,

or technological support

structures,

excessive government ■

controls,

coordination failures, ■

and so on.

uNtil receNtly, few development

economists believed that acquiring

enough land to start factories (or to

build the infrastructure to support

them) presented much of a problem.

But particularly in densely populated

areas, this has now become a major

bone of contention between farmers

and those who need land for commer-

cial and industrial uses and for mining,

or when the state tries to acquire the

land on their behalf. In high-growth

densely populated countries like China

and India this has quickly become a

politically explosive issue, sometimes

leading to social unrest and violence.

More thaN ecoNoMicS

thiS May Be SurPriSiNG since in

countries like China and India agri-

cultural productivity is so much lower

than that of manufacturing, mining,

and much of the service sector. There-

fore, transferring land to those alterna-

tive uses could generate a large surplus,

from which the new users could amply

compensate the farmers while retain-

ing much of the surplus for themselves.

Theoretically this seems like a win-win

situation. So why is it so contentious in

reality?

the wolf at the door

iN Part, because farmers in poor

countries are often suspicious of the

intermediaries involved in land trans-

actions—commercial developers and

their touts, or government officials

who may apply eminent domain laws

to requisition the land, are suspected

of grabbing much of the surplus. The

history of poor countries is filled with

examples of forcible dispossession with

little compensation, reneged prom-

ises of resettlement, and defrauding by

middlemen and contractors. In China

I N D U S T R I A L I z A T I O N

D E V E L O P M E N T O U T R E A C H56

SPecial rePortS

this issue is heightened by the fact that

farmers have no land ownership rights,

only user rights, and so they are much

more vulnerable to arbitrary decisions

made by local officials in collusion with

commercial developers.

ProtectiNG a way of life

SoMe farMerS also worry about dam-

age to the local environment resulting

from the mines, dams, and polluting

factories—damage from which the

market price of land will not compen-

sate them. In educationally backward

communities the farmers fear that their

children will not be qualified for the

newly created jobs that will be filled

mainly by outsiders. They do not want

to let go of the only secure asset they

have—their land—in exchange for a

lump-sum cash compensation which is

not only inadequate, but will soon be

frittered away; and their banking habits

and facilities are often too underdevel-

oped for them to make prudent invest-

ments. There are also cultural ties to

ancestral land and to a pristine way of

life based on it, which they know will be

spoiled by the dislocations and uncer-

tainties generated by the new commer-

cialization of the area driven mainly by

outsiders.

what’S worSe thaN BeiNG eXPloited...

iN reSPoNSe, NGO’s (nongovernmen-

tal organizations) and environmental

activists often organize resistance move-

ments among the farmers. But in their

romantic activist ardor they often for-

get that the centuries-old status quo of

low productivity and poverty consigns

these farmers to a life of misery. As the

famous British economist Joan Robin-

son once quipped: what is worse than

being exploited is not to be exploited

at all. One way to escape the low-pro-

ductivity trap of traditional agriculture

is to produce new high-value labor-

intensive farm products such as fruits,

vegetables, and livestock products. But

these require large investments in cold

storage, refrigerated transport, retail

marketing chains, and so forth which

in turn require large amounts of capital

from outsiders. Surveys in India have

shown that the overwhelming majority

of farmers’ children want to leave agri-

culture, since a growing population is

causing productivity per person to de-

cline. While development has become

a dirty word among many activists,

there is no general alternative; but the

processes can be made more inclusive

and the outcomes of development can

be made more humane.

the leSSer of two eVilS

So aSSuMiNG that some amount of

land has to be acquired for nonagricul-

tural and commercial use, how can the

poor benefit most from the transfer?

Those who are against state acquisi-

tion of land often believe the process

should be left to the market, with the

state intervening only when recalcitrant

farmers in contiguous plots “hold up”

the land transfer that has been agreed

by a large number of willing sellers to a

buyer looking for a compact land unit.

They say that the intervention of the

state prevents farmers from getting the

fair market price they might through

bargaining with the buyers. They think

this is much cleaner than the messy po-

litical process where all kinds of third-

party interests stick their fingers in the

pie.

But this market process can also

be unfair and costly. It’s unfair to the

farmers, because the numerous unco-

ordinated small sellers are no match for

the bargaining power of large corporate

buyers, and they often face intimida-

tion and strong-arm tactics by the land

mafia who will try preemptive buying.

For the corporate buyer, the transac-

tion costs of dealing with thousands

of small sellers (particularly in densely

populated areas) are large, even apart

from the hold-up problem referred to

earlier. So the state has to be fully in-

volved in the transfer process, but its

usual high-handed or corrupt tenden-

cies should be held in check by stronger

political accountability mechanisms at

the local level.

Show Me the MoNey

oNe of the MaiN ProBleMS of land

acquisition by the state in China and

India is inadequate compensation. In

India, under the old Land Acquisition

Act of 1894, compensation is based on

some multiple of the recent value of the

land. But everyone knows that the land

value will in the near future increase

many times, and the seller will not

benefit from this appreciation, whereas

neighbors or fellow villagers whose land

is not being acquired will. One solution

is for the state to offer sellers a two-part

compensation package: a minimum

lump sum related to the recent average

market value of the agricultural land,

and an annuity (a monthly pension as it

were for the farmer’s retirement) from

A P R I L 2 0 1 1 57

a trust fund where some shares of the

new company are vested. This fund will

collect shares from all the companies in

the country that buy land, so that risk is

pooled and the fund cannot be brought

down by any single project failure. The

fund should be independently and pro-

fessionally managed, like pension funds

in many countries. For poor farmers, a

stream of annuity payments is much

better than one-off cash payments

which, as we have mentioned, are often

frittered away. Given the large produc-

tivity gap between the agricultural and

nonagricultural use of land, a reason-

able annuity may not drain much of the

revenue surplus from the new land use,

at least not in the long run. In projects

where the land is acquired mainly for

public infrastructure, a betterment levy

on nearby land may be contributed to

the trust fund. In the case of mining

projects, the mining rights should be

auctioned in a transparently competi-

tive bidding process, and the proceeds

also deposited in this trust fund.

The state should also provide train-

ing and skill-formation programs

for those giving up their land—just

promising them jobs in the new proj-

ects, irrespective of qualifications, as is

sometimes proposed, is unfair to the

employers and inefficient for the econ-

omy. It is also imperative for the state

to arrange compensation schemes and

welfare payments for the other, often

poorer, stakeholders like sharecroppers

and landless wage workers, who are

usually bypassed by the market pro-

cess.

...aNd the watchdoG

wheN GoVerNMeNt officialS are in-

volved in land transactions the scope for

arbitrary decision making and corrup-

tion is large, and the land issue can turn

into a political football among rival po-

litical parties. Therefore, the whole pro-

cess of land transfer, including admin-

istering compensation and annuities

and resettlement has to be handed over

to an independent quasi-judicial au-

thority or regulatory commission. This

agency needs to be insulated from the

day-to-day political process but sub-

ject to periodic legislative review. The

commission would regularly hold local

hearings where all parties can present

their cases and grievances.

Although land acquisition is a sticky

issue on the path to economic devel-

opment, there are ways of adequately

compensating the farmers and peas-

ants, and involving them in a broad-

based participatory process so that

the transfer is voluntary and relatively

friction-free.

Pranab Bardhan is Professor of Economics at the University of California, Berkeley.

farm land bordering iron and steel giant iSKor’s Vanderbijl Park refinery in South africa.

D E V E L O P M E N T O U T R E A C H58

A P R I L 2 0 1 1 59

THE POLITICS OF DEVELOPMENT

By BriaN leVy

D E V E L O P M E N T O U T R E A C H60

The numerous

tectonic shifts

that have shaken

the foundations of

the development

paradigm over the last half-

century have had far-reaching

implications for development

policy formulation and

implementation. In the 1980s,

we recognized the limitations of

investment finance as the path

to poverty reduction, which then

led to a focus on policy reform.

Acknowledging the limits of

policy reform, we moved on,

first, to building institutions

and, more recently, to the role

of politics. The implications

for development policy making

are profound—and only partly

understood.

Institutions are the formal and in-

formal “rules of the game” within which

development takes place. So a decade

ago we began to think that the answer

was “good governance” institutions. We

thought that institutional reform was

akin to engineering. Because the insti-

tutional characteristics of capable and

accountable states are well known (see

Box), we thought that the challenge

was straightforward: to redesign all fac-

ets of the governance system because

strengthening each part was necessary

for the performance of the whole. “A

chain,” went the reigning metaphor, “is

only as strong as its weakest link.” This

became the “best-practice” approach to

governance reform.

BeSt Practice, or wiShful thiNKiNG?

But PoliticS MaKeS the equation

considerably more complex. Achiev-

ing best-practice means working back-

wards from a predefined end state. But

politics—including stakeholders and

their power, incentives, skill, and capac-

ity to organize—gets in the way and

inevitably shapes the dynamics of re-

form. A country’s economic, social, and

political institutions cannot be re-engi-

neered from scratch. A country starts

from where it is, and evolves through

search and learning. Changes in one

part of the system call for adaptations

in other parts, in an ongoing process.

Effective policy making works with

rather than against a country’s grain as

it nudges forward this often nonlinear

process.

Moving away from the best-prac-

tices model requires a different way

of thinking about policy formulation

and implementation. The reality is that

many countries lack the institutions

and capacities to implement otherwise

desirable policies; or the policies may

threaten the leaders’ power or the po-

litical stability. So the craft of policy

making is about finding entry points

that are feasible and that advance the

development agenda, at least to some

degree.

how to do it—a traJectorieS aPProach

SiMPly SayiNG that the answer is “coun-

try-specific” is not very helpful. For eco-

nomic policy reform, Hausman, Rodrik

and Velasco’s (2006) binding constraints

SPecial rePortS

SoMe characteriSticS of traNSPareNt aNd accouNtaBle StateS

predictable decision ■

making and implementation

oversight mechanisms ■

that guard against arbitrariness and ensure accountability in how resources are used

public officials committed ■

to social goals, including the efficient provision of public services

a political process ■

that is broadly viewed as legitimate

the protection of ■

property rights.

A P R I L 2 0 1 1 61

framework can help. For governance re-

form, we offer a new trajectories approach

typology (Levy and Fukuyama 2010).

This approach distinguishes between two

sharply contrasting paths to good gover-

nance and growth, based on a country’s

experiences and current socioeconomic

position. Within each of these trajecto-

ries, countries can be in the early, middle,

or later stages of developing sophisticated

institutions and organizations. (North,

Wallis and Weingast 2009) Knowing

where a country fits in this model can

shed light on how to approach reforms.

The table summarizes the two tra-

jectories and presents their political

features, governance challenges, and

principal governance risks. We can see

that the governance risks and challeng-

es are very different in each.

the doMiNaNt State traJectory

iN thiS traJectory, coordination

among elites is relatively straightfor-

ward. Rulers base their claim to legiti-

macy on an implicit promise that their

decisions will serve the broader long-

run public interest. If they are success-

ful, development will generate an in-

creasingly sophisticated economy and a

wealthier, more empowered citizenry—

which in turn leads to rising pressure

to create institutions that can support

the increasing economic and politi-

cal competition. Examples include the

East Asian “tigers,” Ethiopia, Tunisia,

and others. The Republic of Korea,

for example, has gone from poor to

rich—and from closed to open—along

this trajectory. How? Rapid growth

produced a strong private sector and

a strong middle class that demanded

more sophisticated and responsive po-

litical and economic institutions.

But failure is at least as likely as suc-

cess: if a dominant party promotes only

its own narrow interests; or when person-

alized leadership becomes increasingly

self-seeking and predatory. Many exam-

ples exist, such as the former Zaire and

the Philippines during the Marcos era.

the coMPetitiVe clieNteliSt traJectory

iN the alterNatiVe PatterN, the com-

petitive clientelist trajectory, elite groups

compete for power through elections.

Where public institutions are already

strong—normally in middle- and high-

income countries—elections can be

organized around different visions of

suitable public programs (platforms).

But where public institutions are weak,

elites may, in return for continuing sup-

port, promise to direct public resources

to favored clients rather than com-

mit to governing for the public good.

(Keefer and Khemani 2005). Bangla-

desh, Albania, and Zambia and, histori-

cally, Mexico (Haber and others 2003)

demonstrate that competition and cli-

entelism can attract private investment.

But sustaining forward momentum is a

high wire act: decision making is con-

stantly contested; and narrow interest-

seeking and even individual corruption

are ubiquitous. Conflict continually

threatens to spiral out of control. But as

long as the momentum of continuing

growth can be sustained, an expanding

private sector, middle class and civil so-

ciety will continue to reshape interests,

incentives, and alliances, thereby feed-

ing a groundswell for further rounds of

institutional improvement.

aliGNiNG actioN with “reforM SPace”

SuStaiNiNG forward MoMeNtuM and

avoiding the ever-present risks of re-

versal depend on prevailing political

taBle: GoVerNaNce StructureS aNd the StaGeS of deVeloPMeNt

traJectory

doMiNaNt State coMPetitiVe clieNteliSM

Structural featureS how the distribution of state power is organized

how government makes decisions

a dominant party or leader

coordinated across government units

competitive among parties

“Just enough governance” muddling through

froNtier GoVerNaNce challeNGeS

how to evolve toward a more competitive polity and economy

how to strengthen the capacity of state institutions

PriNciPal GoVerNaNce riSKS

dominance becomes increasingly self-serving and predatory

institutional decay

couNtry eXaMPleS Mozambique, ethiopia, uganda, Vietnam, tunisia, republic of Korea

Bangladesh, Kenya, zambia, albania, india, Mauritius, costa rica

D E V E L O P M E N T O U T R E A C H62

and institutional factors. The best ap-

proach is to find ways of working with

the grain. The figure shows a number of

engagement options, ranging from be-

ing more modest in policy reform op-

tions, to small-g initiatives that enhance

accountability at a micro-level, to far-

reaching big-G governance reforms.

Their feasibility depends on the “space”

for reform.

“JuSt eNouGh” Policy reforM

a firSt-BeSt policy proposal presup-

poses a government with the ability and

will to pursue the public good. But this

is often not the case because (as in some

examples of the dominant state capacity

trajectory) leaders have narrower goals,

or perhaps because (as in the competi-

tive clientelist trajectory) coalitions suc-

ceed in blocking certain options. So

we would choose policy options that

do not confront directly the interests

of powerful existing stakeholders who

want to sustain the status quo. Though

such options are generally not the best,

they can achieve short-term gains, and

potentially lay the groundwork for

more far-reaching reforms down the

road. Promotion of export processing

zones rather than systemwide trade

liberalization is an approach taken by

Korea, Taiwan, Mauritius, and many

others.

SMALL-g reforMS

eVeN where Political leaderS may

not be accountable for delivering re-

sults, there may nonetheless be oppor-

tunities for small-g initiatives such as

creating strong, unambiguous incen-

tives for stakeholders to foster partici-

pation in and oversight of the provision

of public services. Examples include

parental participation in schools; com-

munity oversight of local health clinics

or road maintenance projects; coali-

tions of businesses and middle-class us-

ers of urban water, electricity, and other

utility services seeking agreements with

utility providers on how to improve

services; and the independent oversight

of public procurement practices.

In the short run, small-g initiatives

can yield significant benefits. To give just

one example: A Ugandan community-

based monitoring project that provided

residents in each of fifty communities

with comparative information on how

their village fared in the area of child

mortality—and that spelled out all the

health services to which each village was

entitled—brought about a 33 percent

overall reduction in child deaths in the

space of a single year (Bjorkmann and

Svensson 2009). Viewed from a longer-

run perspective, the potential impact

may be broader still. Initiatives such

as these give people voice in their deal-

ings with government officials, thereby

encouraging the shift from “subject” to

“citizen.”

orcheStratioN

ORCHESTRATING stakeholders for policy

reform focuses on upstream rather than

downstream processes. In contrast to

approaches that work around incum-

bent stakeholders, the aim here is to

pull those who have a stake in reform,

and other advocates of change, into

the discussion to build momentum for

more far-reaching reform initiatives.

Multistakeholder engagement is more

likely in the open environment of the

competitive clientelist setting than in the

dominant state capacity alternative—

although, even in the latter, reformist

leaders sometimes encourage stake-

holder orchestration as a way of in-

fiGure: the SPectruM of reforM SPace

“incremental” approaches adapting design given existing reform space

“transformational” approaches seeking to expand reform space

feasible policy reform

“Small-g” governance reforms

orchestrate stakeholders for

policy change

“Big-G” governance reforms

A P R I L 2 0 1 1 63

ducing more conservative officials to

embrace reform. The Philippine pro-

curement law was reformed by building

a broad coalition of champions from

civil society, church and youth groups,

and the private sector.

BIG-G reforMS

So what aBout the most ambitious

end of the spectrum: big-G governance

reform to strengthen national institu-

tions that hold government to account

such as elected legislatures, the judi-

ciary, centralized auditing authorities,

ombudsmen, a free and vigorous me-

dia, and the like? In the early stages of

development, leaders are unlikely to

accept big-G institutions that will limit

their discretionary powers. It may be

that this conflicts with their legitimiz-

ing claim that they will use their unlim-

ited power to pursue national develop-

ment goals single-mindedly, or perhaps

for more venal reasons. Results have

been uneven. More hopeful however

for big-G institutions is that sustained

economic development can set in mo-

tion deep-seated socioeconomic chang-

es that will, in time, create the kinds of

with-the-grain pressures for better per-

formance and enhanced accountability

which will create an upward spiral, vir-

tuous circle of change.

Brian Levy is Head of the secretariat responsible for implementing the World Bank Group’s Governance and Anti-Corruption Strategy.

references

Bjorkmann, Martina and Jakob Svensson. 2009. “Power to the People: Evidence from a Randomized Field Experiment on Community-Based Monitoring in Uganda.” Quarterly Journal of Economics 124, May: 735–69.

Haber, Stephen, Armando Razo, and Noel Maurer. 2003. The Politics of Property Rights. New York: Cambridge University Press.

Hausman, Ricardo, Dani Rodrik, and Andres Velasco. 2006. “Getting the Diagnosis Right: A New Approach to Economic Reform.” Finance and Development, March, pp. 12–15.

Keefer, Philip, and Stuti Khemani. 2005. “Democracy, Public Expenditures and the Poor: Understanding Political Incentives for Providing Public Service.” World Bank Research Observer. Vol. 20, no. 1, pp. 1–27.

Levy, Brian and Francis Fukuyama. 2010. “Development Strategies: Integrating Governance and Growth.” World Bank Policy Research Working Paper no. 5196. Washington D.C.: World Bank.

North, Douglass C., John Wallis, and Barry Weingast. 2009. Violence and Social Orders. New York: Cambridge University Press.

child sleeping in makeshift quarters, Ghana.

D E V E L O P M E N T O U T R E A C H64

A P R I L 2 0 1 1 65

By Ghazala MaNSuri aNd ViJayeNdra rao

D E V E L O P M E N T O U T R E A C H66

Over the last

two decades

development

policy has

touted civic

participation as a magic bullet

for solving problems at the

local level—from improving

livelihoods, to selecting

beneficiaries for public

programs, providing housing

after earthquakes and floods, or

improving village infrastructure.

The thinking is that involving

village or urban civic

communities in decision making

will improve accountability,

reduce inequality, and

ultimately alleviate poverty.

Note: This article draws heavily on

Localizing Development: Does Partici-

pation Work by Ghazala Mansuri and

Vijayendra Rao, forthcoming from the

World Bank in 2011.

Over the last decade, the World Bank

alone has allocated over $50 billion dol-

lars to local participatory projects, and

other multilateral agencies and bilateral

donors have together allocated a great

deal more, although specific numbers

are hard to come by.

the Search for Voice aNd accouNtaBility

the two MaiN wayS of fostering local

participation are: community based de-

velopment efforts and the decentraliza-

tion of resources and authority to local

governments.

Community Based Development

supports efforts to bring villages, urban

neighborhoods, or other household

groupings into the process of manag-

ing development resources without

relying on formally constituted local

governments. Designs for this type of

aid can range from community-based

targeting—in which communities se-

lect the project beneficiaries—to com-

munity-driven development, where

beneficiaries are involved to varying

degrees in project design and manage-

ment. Advocates for community devel-

opment believe that it enhances the ca-

pacity for collective action, builds social

capital, and strengthens the ability of

the poor to have control over decisions

that affect their lives. Consequently, it is

claimed that community development

improves the capacity of beneficiaries

to hold local governments accountable

thereby empowering the poor, improv-

ing the delivery of public services, and

increasing access to credit and liveli-

hood opportunities.

Decentralization refers to efforts to

create village and municipal govern-

ments, and strengthen them on both

the demand and supply sides. On the

demand side, decentralization strength-

ens citizens’ participation in local gov-

ernment by, for example, instituting

regular elections, improving access

to information, and fostering mecha-

nisms for deliberative decision making.

On the supply side, it is believed to en-

hance the ability of local governments

to provide services by increasing their

financial resources, strengthening the

capacity of local officials, and stream-

lining and rationalizing their adminis-

trative functions.

diSilluSioNMeNt with ParticiPatioN

uNfortuNately, policy decisions on

local participatory development have

historically been driven by fads, rather

than analysis. Passionate advocates

spark a wave of interest followed, after

a few years, by disillusionment which

gives ammunition to centralizers who

engineer a sharp reversal. In time, the

negative fallout from centralization in-

vigorates the climate for local participa-

tion. There have been, at least, two such

waves after World War II and, if current

trends continue, we may be in the early

stages of another centralizing shift.

Advocates, and the vicissitudes of

fashion, are perhaps unavoidable, but

they need to be supplemented if not

surmounted by a better informed and

analytically grounded debate.

a tarNiShed SilVer Bullet

ideally, local development policy

should be determined by a thought-

SPecial rePortS

A P R I L 2 0 1 1 67

ful, and contextually sensitive, diag-

nosis of the interrelationship between

civil society, markets and government.

In particular, it should be informed

by an understanding of civil society.

Much of the current policy literature,

particularly at the local level, seems to

ride on the assumption that solutions

to market and government failures

lie with civic groups—such as village

communities, urban neighborhood as-

sociations, credit groups, or producer’s

cooperatives. Rarely, is much thought

given to the possibility of a “civil soci-

ety failure”—that effectively organizing

groups of people to act in a way that

solves market and government failures

is itself subject to problems of coordi-

nation, asymmetric information, and

pervasive inequity—with attendant

problems of capture, free-riding and

low capacity.

Civil society failure can be broadly

thought of as a situation where collec-

tive participation operates in such a

manner that it results in a net reduction

in social welfare. This could happen be-

cause of a group’s inability to act collec-

tively. Or collective action could occur

in a well-coordinated but dysfunctional

manner that reduces the welfare of the

average citizen: think of an organized

fringe group that uses terror and vio-

lence to further its extremist ends at

high social cost.

BoNdiNG aNd BridGiNG

Such failureS can be broadly classi-

fied into bonding failures and bridging

failures. Bonding failures are internal

to the group and have less to do with

the state or markets: for instance, when

the elite within a village capture public

resources for private gain, when a com-

munity is unable to devise equitable

and efficient rules for the management

of common property, or when group

interests degenerate into persistent

intergroup violence. Bridging failures

occur when citizens are unable to or-

ganize themselves to correct for market

and government failures that have a di-

rect bearing on their lives: for example,

a community’s inability to hold service

providers and local officials account-

able for the quality of public services or

resource allocation decisions.

MaNy ShaPeS aNd SizeS

thiNKiNG aBout development policy

as taking place at the intersection of

market, government and civil society

failures, helps determine when civic

participation may or may not be the

best solution. The answers depend

heavily on the socioeconomic context

since interactions between civil so-

ciety, markets, and governments are

fundamentally conditioned by social

structures and histories that vary from

community to community, even with-

in a country or region. A policy that

works in one village may fail miserably

in another. And, perhaps ironically, ef-

fective collective action is influenced

by a cooperative infrastructure that is

provided by a strong state. It is not at

all clear that strong governments are

created by the presence of a strong civil

society. Rather, it is a chicken-and-egg

problem that does not lend itself to easy

answers. Similarly, while empowering

civic groups may often lead to good out-

comes, it is not true that civic empow-

erment is superior, in every instance,

to a purely market-based development

strategy, or a strategy that strengthens

the role of central bureaucrats. So the

decision about whether, when, and how

to promote local participation should

be made with an understanding of the

tradeoffs involved in moving decision

making to local communities—in a

particular country or region of a coun-

try, and at a particular time.

This leads to some key questions:

What makes participation work or ■

fail?

Do large sums of money for com- ■

munity groups empower the poor,

or enrich the elites?

How can we reduce civic inequality ■

and elite capture?

How can we strengthen the capacity ■

for collective action and build social

capital?

While reliable information on many

of these questions is still quite thin,

some broad patterns are emerging.

what’S the eVideNce?

deceNtralized PoVerty reduction

programs have been only marginally

more successful at targeting beneficiaries

than centrally managed ones, and there

is little evidence that they reduce pov-

erty significantly. However, local public

goods such as roads and drinking water

facilities provided through participatory

mechanisms are often of better quality,

and public services, such as schools and

community health centers function bet-

ter. The outcomes vary enormously, how-

ever, with the more unequal, poorer, less

literate, and more remote communities

generally faring much worse. Note that

these are precisely the circumstances in

which we might expect significant civil

society failures.

D E V E L O P M E N T O U T R E A C H68

Nonetheless, there appears to be

some intrinsic value to participation:

people are generally happier when con-

sulted, which may attest to the trans-

formative role of participation. We can

conclude little about this, as yet, since

most studies measure change in collec-

tive capacity quite poorly. The evidence

we do have, shows that participation

has little effect on the exercise of voice

or on community organized collective

action outside the participatory proj-

ect. Instead, some evidence points to a

decline in collective activities outside

the needs of the project.

the NewS iS Not all Bad

thiS iS Not to Say that there are no in-

stances of success, far from it. However,

successful cases tend to bring together

a set of conditions, whether through

deliberate and thoughtful policy and

design or simple good fortune, that

are not the norm for most participa-

tory development projects. Often these

are cases where community capacity,

as measured by education levels and

management experience, for example,

is high, inequality and absolute poverty

levels are low and government functions

reasonably well. This is hardly surpris-

ing. In most developing countries, low-

er tiers of government have much less

administrative or monitoring capac-

community at Shreeshitalacom lower Secondary School in Kaski, Nepal.

A P R I L 2 0 1 1 69

ity and communities most in need of

development programs are also likely

to be the least advantaged in terms of

resources and capacity. Inequalities of

wealth and power are also likely to be

more salient at the local level. Theory

suggests that decentralizing resource

allocation under such conditions can

reduce resource use efficiency, exacer-

bate horizontal inequities, and increase

rent-seeking by the locally powerful.

ProGraMS fail BecauSe...

Capture and corruption by local ■

elites is commonplace, whether par-

ticipatory projects operate within

or outside the ambit of local gov-

ernments.

Cookie-cutter rules like community ■

cofinancing are made into central

tenets of participation. Community

willingness to contribute to proj-

ects has long been seen as evidence

of the value that the poor place on

specific public goods and services,

as well as a signal of sustainability.

Most decentralized programs also

require local cofinancing, whether

through user fees and project con-

tributions or budget allocations by

local governments. This has little

basis in evidence, however. What

little evidence we do have, suggests

instead that cofinancing can reduce

coverage of the poorest, particularly

when individuals or communities

need to self-select into the program,

or when eligibility thresholds are

also decentralized. The proportion-

ally greater financial burden placed

on poorer localities, communities,

and individuals can also serve to

exacerbate horizontal inequities, in

so far as otherwise equally poor in-

dividuals or communities get lower

levels of benefits simply because

they reside in poorer areas. Com-

munities often have little capacity to

ensure bottom up accountability.

Local government officials often ■

have less experience than the center

with managing resources, and tend

to have weaker administrative ca-

pacity; and not surprisingly, poorer

areas also tend to have weaker local

governments.

Community participation projects ■

require more documentation and

adherence to rules imposed from

the outside. These can be challeng-

ing for communities with low lit-

eracy levels.

They require the ability to evaluate ■

budgets and monitor the actions of

local elites, service providers and

political agents, all of whom have

a far greater capacity to conceal in-

formation or to coerce compliance.

One could argue that the design of

participatory programs makes at

least some elite involvement, if not

elite dominance, inevitable.

Donor funded participatory projects

also come with best practice designs, ac-

companied by unrealistic timelines and

cookie cutter metrics of success, which

often serve only to reduce accountabil-

ity and stifle innovation and experi-

mentation. These problems are greater

when project implementers are also

weak, operate outside the ambit of gov-

ernment oversight, and face little po-

litical competition at the local level. In

such cases, dependence on donor funds

makes implementing agencies upward-

ly accountable to their financiers rather

than downwardly accountable to the

communities they serve. This can also

lead to some communities being over-

served to the neglect of others since

short timelines induce implementers to

funnel resources to communities which

have already been organized, have bet-

ter capacity, are located more conve-

niently, and so forth.

ProGraMS Succeed BecauSe...

So wheN doeS localizing development

work? The evidence suggests that de-

centralized outcomes are most pro-

poor when:

Mechanisms for downward ac- ■

countability have been well thought

out and have teeth.

There is a strong center capable of ■

setting eligibility criteria, building

local capacity, as needed, and ef-

fectively monitoring local resource

allocation decisions.

Projects emerge from local experi- ■

mentation and innovation rather

than best practice implants.

Efforts are made to activate civic so- ■

ciety by creating incentives, such as

audits and performance-based re-

wards, or by building the communi-

ty’s capacity to observe and sanction

through the provision of informa-

tion or training, particularly where

inequities are entrenched.

Ghazala Mansuri and Vijayendra Rao are Lead Economists in the World Bank’s Poverty Reduction and Equity and Development Economics Groups.

D E V E L O P M E N T O U T R E A C H70

PARTICIPATION MAKES A DIFFERENCEBut not always how and where we might expectBy JohN GaVeNta

A P R I L 2 0 1 1 71

indian grassroots activists, village councillors, farmers, and agriculture unionists from 18 of india’s 27 states take part in a “right to food” campaign as they shout slogans during a protest in New delhi on November 25, 2010. Protesters demanded that the government live up to its promise of guaranteeing food security.

D E V E L O P M E N T O U T R E A C H72

In their article:

Participatory

Development Revisited,

Ghazala Mansuri

and Vijayendra Rao

outline the high hopes for

participation over the last two

decades, yet conclude that

participatory development has

become a “tarnished silver

bullet”—perhaps another in a

long series of development fads

that promise more than they

deliver. The article doesn’t throw

out the idea of participation

altogether, but argues for

a more thoughtful analysis

of the interrelationships

between civil society, markets,

and government to help us

understand how and in what

conditions participation can

best make a difference. The

authors argue that we need

to take into account “civil

society failure,” as well as the

limitations of purely market—

or government-based approaches.

where doeS ParticiPatioN occur?

we aGree. But while the Mansuri and

Rao article offers some important caveats

and insights into understanding partici-

pation in certain settings, we need to be

careful about drawing conclusions from

these too broadly. Their article focuses

on only two arenas of local participation:

donor-driven community-based devel-

opment efforts and the decentralization

of resources and authority to local gov-

ernments. While these may be impor-

tant, they are by no means the only ways

in which people participate in their own

development. In fact, they may be the av-

enues that are most subject to the kinds

of participation failures that the article

discusses. Community-based develop-

ment efforts, particularly the kinds that

the World Bank and others have been

supporting, are often large-scale, created

from above, and based on a form of par-

ticipation mediated by local elites. And

decentralisation in and of itself may or

may not be participatory—it all depends

on the enabling policies and legal frame-

works that are in place, and whether they

include participation as a legal right, or

simply as an invitation for consultation

which can be dismissed or ignored at

will.

toP dowN or BottoM uP?

reSearch by the Development Re-

search Centre on Citizenship, Participa-

tion and Accountability at the Institute

for Development Studies (IDS) at the

University of Sussex yields a somewhat

broader view of where and how partici-

pation happens (Gaventa and Barrett

2010). Drawing from 100 case studies

of citizen engagement in twenty coun-

tries, this research argues that people

don’t engage only in “invited” forums

of participation created by authorities

from above. In most places, they also act

for themselves in myriad other ways—

through their own local community

development associations, neighbor-

hood or self-help groups, through so-

cial movements and campaigns to get

their voices heard, or through informal

as well as formal mechanisms for moni-

toring and holding officials to account.

SoMe hoPeful reSultS

theSe Broader “SPaceS” for partici-

pation provide a slightly different—and

less pessimistic—picture than do donor

or state-created programs or processes.

Analyzing over 800 outcomes of partic-

ipation, the IDS study points to largely

positive results in four broad areas, each

of which is essential for development.

forMiNG Better citizeNS aNd PracticeS

firSt, engagement is important because

it helps form better citizens: people who

are aware of their rights to participate in

the first place, and are more confident of

their ability to do so. Second, it also builds

more effective participation practices:

people can learn the civic skills, form the

relationships and networks, and build the

organizations needed to make their voic-

es heard. Both of these—more aware and

more effective citizens—are necessary,

yet often overlooked, building blocks of

effective participation and for delivering

change more broadly.

SPecial rePortS

A P R I L 2 0 1 1 73

deliVeriNG reSultS aNd ShaPiNG New cultureS

third, the study points to dozens of

examples of participation contributing

to development results, for example, in

improved health, water, sanitation, or

education. There are also many exam-

ples of how participation contributes to

strengthening governance by improving

cultures and frameworks for account-

ability, or better implementation of na-

tional and international commitments

to human rights. Finally, the studies

show that participation can contribute

to more pluralistic and inclusive societ-

ies, bringing new voices and issues into

the public arena.

howeVer...

But JuSt aS Mansuri and Rao found

in their work, this study also warns

that participation is not always used

for purely benevolent or benign pur-

poses. Although 75 percent of the par-

ticipation effects cited in the IDS study

were positive, the other 25 percent were

more negative. These include a sense of

disempowerment arising from mean-

ingless, tokenistic, or manipulated par-

ticipation; the use of new skills and alli-

ances for corrupt or questionable ends;

and elite capture of the participatory

process.

a two-way Street

SiGNificaNtly, many of the negative

examples had less to do with citizens’

failure to participate, than with gov-

ernment’s reluctance or inability to be

responsive. Greater citizen engagement

might simply be met by bureaucratic

“brick walls,” failure to implement

policy decisions and, in many cases, re-

prisals, including violence against those

who challenged the status quo.

what to looK for

theSe StudieS demonstrate that par-

ticipation is no panacea. But under

some conditions it can make a posi-

tive difference. Both the IDS and the

Mansuri and Rao studies suggest that

the challenge is to gain a more nuanced

and sophisticated understanding of the

factors that can lead to failure or suc-

cess. The IDS study points to several of

these factors, with important implica-

tions for donors, policy makers, and

practitioners alike:

Participation is not limited to ■

spaces and through avenues cre-

ated “from above” by donors or

governments. In fact grassroots as-

sociations as well as broader social

movements outside of these arenas

are important sources of positive

change. And, for building account-

able and responsive governments,

the results are most positive when

multiple strategies for engagement

are present simultaneously. Donors

might be well advised to figure out

in any given context how citizens do

participate in their own ways and

spaces, and then build links with

and support for these, rather than

simply creating new “participatory”

mechanisms and inviting citizens

in.

“Invited” forms of participation ■

in local governance or large-scale

donor programs work best where

several other conditions exist. These

include the presence of:

strong champions inside the •

government who open the

doors for civic participation,

organized groups of citizens •

that can help articulate the col-

lective voice and help monitor

the process, and

well-designed processes for de-•

liberation and decision mak-

ing that bring the two together.

These processes also appear to

work better when legal frame-

works give participants an ex-

plicit right to participate, not

just an invitation to do so, and

when there is an acknowledged

need for resources to be allo-

cated or decisions to be made.

Active, aware, and effective citi- ■

zens who can help deliver develop-

ment and governance gains do not

emerge automatically. Yet unless

they are in place, new spaces for

participation, especially those creat-

ed from above, will simply be filled

with the same elite voices. Building

awareness, skills, organizations, and

networks that enable more inclusive

and empowered forms of participa-

tion takes time; but these are critical

for longer-term success, and should

be recognized, and measured, as

intermediate outcomes of broader

change.

Empowered participation faces the ■

risk of reprisal, especially when

citizens may be challenging power-

ful established interests. This may

take the form of violence—as seen

recently in several well-publicized

cases of reprisal against citizens in

India who were using the new Right

to Information laws to demand

D E V E L O P M E N T O U T R E A C H74

transparency and expose corrup-

tion. But they can also take more

subtle forms, including using de-

velopment resources (such as land,

housing, benefits, or jobs) as politi-

cal clubs to silence dissent. Donors

and policy makers who encourage

participation must also be willing

to help protect and strengthen the

space for citizens who do exercise

their voice, and to support the other

enabling conditions for citizen en-

gagement to occur.

SeeiNG the foreSt for the treeS

after More thaN two decades of work

in international development circles to

promote greater citizen participation,

let’s not lose sight of its potentials as we

also become more aware of its limita-

tions and risks in various settings. There

is abundant evidence to show that par-

ticipation can make a difference, but

often in ways and in places that are not

donor-created. The challenge now is for

donors and development institutions

to take a broader and longer-term view

of what participation is about, develop

a better understanding of the condi-

tions under which it makes a difference,

and be willing to support those whose

participation may raise uncomfortable

truths, even when these challenge the

status quo.

John Gaventa is a Professor and Research Fellow in the Institute for Development Studies (IDS) at the University of Sussex, where he is a member of the Participation, Power, and Social Change team and Director of the Development

Research Centre on Citizenship, Participation, and Accountability.

reference

Gaventa, John and Gregory Barrett. 2010. “So What Difference Does it Make? Mapping the Outcomes of Citizen Engagement.” IDS Working Paper 347. http://www.ntd.co.uk/idsbookshop/details.asp?id=119.

Survivors of 1984’s union carbide disaster in Bhopal hold placards as they gather outside the indian Prime Minister’s office to file a right to information (rti) petition in New delhi on May 4, 2010. they filed the rti to get access to all documents concerning the Nuclear civil liability Bill. Government figures put the death toll at 3,500 within the first three days but independent data by the state-run indian council of Medical research (icMr) puts the figure at between 8,000 and 10,000 for the same period.

A P R I L 2 0 1 1 75

D E V E L O P M E N T O U T R E A C H76Schoolchildren in Bhutan.

A P R I L 2 0 1 1 77Schoolchildren in Bhutan.

Fortunately, important insights into this

demographic challenge have emerged

in the past 10 years. Most important

is that the rate of population growth is

not the only demographic variable with

consequences for economic growth

and development: the age structure of

the population is also fundamentally

important.

the deMoGraPhic traNSitioN

PoPulatioN Growth has taken place as

part of a broader phenomenon known as

the demographic transition—the transi-

tion that almost all countries make from

high fertility and mortality to low fertility

and mortality. Not counting net migra-

tion (which has been inconsequential

for most countries), populations grow

because death rates tend to decline before

birth rates. But there is more to this story:

death rates decline disproportionately

among infants and children, which gives

rise to a baby boom. This is not the usual

kind of baby boom in which more babies

are born; rather, it is one in which more

babies survive and mature into children

and adults. Eventually the baby boom

ends when parents realize that they do not

need to have as many children to reach

their goals for family size, which naturally

moderate as development proceeds.

the deMoGraPhic diVideNd

at firSt, the baby boom tends to lower

the measured rate of economic growth

because children need to be fed, clothed,

housed, educated, and otherwise cared

for—all of which require resources

that must be diverted from other uses

such as research and development

(R&D), infrastructure development,

and physical capital accumulation. But

eventually (after 15 to 20 years) the

large “boom” cohorts reach the prime

ages for working and saving, and the

per capita productive capacity of the

economy expands. When this happens,

the country has an opportunity to grow

rapidly—resulting in what we call the

“demographic dividend.”

The demographic dividend is a

composite of accounting and behav-

ioral forces. The accounting forces in-

volve:

the swelling of the potential labor ■

force as the baby boomers reach

working age, and

DEMOGRAPHICS AND DEVELOPMENT POLICY By daVid e. BlooM aNd daVid caNNiNG

By late 2011 there will

be more than 7 billion

people in the world,

with 8 billion in 2025

and 9 billion before

2050. New technologies and

institutions, and a lot of hard

work have enabled us to avoid

widespread Malthusian misery.

Global income per capita has

increased 150 percent since

1960, outpacing the growth of

population. But we cannot be

sure that incomes will continue

to grow. One major difference is

that now the world has a much

larger population to support

and, more notably, nearly all of

the population increase that is

projected in the coming decades

will occur in the most politically,

socially, and economically fragile

countries.

D E V E L O P M E N T O U T R E A C H78

SPecial rePortS

the fact that the working ages coin- ■

cide with the prime years for sav-

ings.

These factors are key to the accumu-

lation of physical and human capital

and technological innovation.

The behavioral forces consist of:

society’s reallocation of resources ■

from investing in children to invest-

ing in physical capital, job training,

technological progress, and stronger

institutions,

the rise in women’s participation in ■

the workforce that naturally comes

with a decline in fertility, and

the boost to savings that occurs be- ■

cause the incentive to save for longer

periods of retirement increases as

people live longer.

Recent analyses have shown that

population growth and age structure

are important drivers of economic

growth (measured by income per

capita). Indeed, as much as one-third

of East Asia’s economic “miracle” was

due to demographic change. Similarly,

the 1980 legalization of birth control in

Ireland sparked a decrease in fertility

that spurred rapid economic growth.

By contrast, the sluggish pace of fertility

decline in most of Sub-Saharan Africa

contributed to that region’s decades-

long economic struggle.

the aGe coMPoSitioN

what doeS thiS MeaN for develop-

ment policy making? Since different

countries are at different phases in the

demographic cycle, the age distribution

of their populations varies. As the de-

mographic transition proceeds and the

baby boom cohort reaches working age

in a given country, the ratio of working-

figure 2 shows where the ratio is still rising—in all developing regions other than eastern asia. these areas could still benefit significantly from a demographic dividend. But collecting this dividend is not automatic. demography is not destiny.data source: uN, world Population Prospects: the 2008 revision.

fiGure 1: reGioNS aBout to eNter the deMoGraPhic dowNSwiNG

where a country stands in the transition will determine the kinds of policies and initiatives it can most usefully undertake to help bring about a demographic dividend. for example, some countries could catalyze the demographic transition by taking steps to lower infant and child mortality—crucial precursors of fertility decline—through the expansion of childhood immunization and the provision of safe water and sanitation. others might encourage a voluntary reduction of fertility, perhaps through efforts to broaden access to primary and reproductive health services, and to girls’ education. data source: uN, world Population Prospects: the 2008 revision.

fiGure 2: reGioNS oN the deMoGraPhic uPSwiNG

2.50

2.25

2.00

1.75

1.50

1.25

1.00

19751950 2000 2025 2050

ratio

, wor

king

-age

to

non-

work

ing-

age

popu

latio

n

2.50

2.25

2.00

1.75

1.50

1.25

1.00

19751950 2000 2025 2050

ratio

, wor

king

-age

to

non-

work

ing-

age

popu

latio

n

A P R I L 2 0 1 1 79

age people to dependents (both young

and old), changes dramatically. Figures

1 and 2 show how this ratio has changed

and is projected to change across the

world. Using the UN Population Divi-

sion’s medium-fertility scenario, Figure

1shows that the ratio is about to fall in

Eastern Asia and the more developed

regions, which means that the oppor-

tunity to reap a demographic dividend

has already reached its peak.

Where a country stands in the transition

will determine the kinds of policies and

initiatives it can most usefully under-

take to help bring about a demographic

dividend. For example, some countries

could catalyze the demographic transi-

tion by taking steps to lower infant and

child mortality—crucial precursors of

fertility decline—through the expan-

sion of childhood immunization and

the provision of safe water and sani-

tation. Others might encourage a vol-

untary reduction of fertility, perhaps

through efforts to broaden access to

primary and reproductive health ser-

vices, and to girls’ education.

differences in fertility, infant and child mortality rates, and life expectancy have combined to give china and india very different ratios of working-age population to dependent population (figure 4). Beginning around 1980, china’s ratio rose very rapidly and has now reached its peak, with nearly 2.6 working-age people per dependent. india’s peak, which is likely to be lower than china’s, is projected to occur around 2035. these patterns suggest that china has already had its opportunity to capture a demographic dividend, while much of india’s opportunity lies ahead. to the extent that india can speed up fertility decline, especially in states where fertility is still high, it stands to reap a more sizable dividend in the coming years.

data source: uN, world Population Prospects: the 2008 revision.

education is important in determining whether a country benefits economically from the demographic transition. india has created a very well educated but relatively small set of people who have stimulated the economy, particularly the information technology sector. But huge numbers of young indians, particularly in poor, populous states such as Bihar and uttar Pradesh, do not have the education needed to participate productively in the twenty-first century economy. china, by contrast, has long promoted education for a much broader segment of the population, and its workforce is therefore highly productive. india can benefit by devoting considerably more effort to increasing access to quality education, and to workforce training.

data source: uN, world Population Prospects: the 2008 revision.

fiGure 4: deMoGraPhic traNSitioNS out of PhaSe—chiNa leadS iNdia By aBout 25 yearS

fiGure 3: iNdia’S fertility rate fell Steadily, chiNa’S PreciPitouSly

7

6

5

4

3

2

119751950 2000 2025 2050

child

ren

per w

oman

china india

2.50

3.00

2.00

1.50

1.0019751950 2000 2025 2050

ratio

of w

orki

ng-a

ge to

no

n-wo

rkin

g-ag

e po

pula

tion

china india

D E V E L O P M E N T O U T R E A C H80

the Policy eNViroNMeNt

ecoNoMic Growth does not auto-

matically accelerate as fertility declines

and the working-age share of a popu-

lation increases. Taking advantage of

a demographic opportunity depends

on a conducive policy environment.

Good governance matters, as do solid

macroeconomic management, a care-

fully designed trade policy, efficient in-

frastructure, well-functioning financial

and labor markets, and above all, effec-

tive investments in health, education,

and training.

healthy aNd educated PeoPle

Better health MeaNS that students

learn more quickly, workers produce

more effectively, foreign investors are

more likely to be attracted, and savings

rise. Expanded access to better quality

education—at the primary, secondary,

and tertiary levels—are also key to high

worker productivity, especially in the

rising number of jobs that demand up-

to-date skills and a high degree of flex-

ibility. Increased education also tends

to lead to lower fertility rates, which

frees up women to engage in the paid

labor force.

In the absence of enabling policies, a

potential demographic dividend can

become, instead, a demographic drag.

For example, a country that has large

numbers of young or middle-age

workers who are unemployed or un-

deremployed is at risk of social and

political instability. And even without

such instability, a large nonproductive

segment of the population is an eco-

nomic drag on those who are working.

Policy MaKerS oN the deMoGraPhic diVideNd

Nigeria’s Ngozi okonjo-iweala, managing director of the world Bank, has said that “one of the greatest untapped growth drivers in Nigeria’s economy is our youth population,”adding that the “public and private sectors should invest in human capital, labor supply, and savings to secure the demographic dividend. these help to create a knowledge-based economy. Policies should be directed toward getting the demographic dividend.”

indian Prime Minister Manmohan Singh: “looking ahead, we enjoy a demographic dividend in terms of a growing working-age population in a world that is aging rapidly.”

former Mexican President Vicente fox: “i also want to tell you that today we have a very potent arm with which to overcome inequalities and marginalization. that arm is what we have called the demographic dividend. … it is crucial, truly crucial, that we take full advantage of it. otherwise, we will have lost a great opportunity. as others have said before me, education and employment are the ways to take advantage of the demographic dividend. … the sustainability of our social and economic development depends, in large measure, on our response to this opportunity.”

Nandan Nilekani, former ceo of india’s infosys and now chairperson of the unique identification authority of india: “… [the] demographic dividend could well become a demographic disaster if we do not make the right investments. … we have this beautiful opportunity; let us not mess [it up].”

A P R I L 2 0 1 1 81

iNdia aNd chiNa— diVerGeNt Policy SceNarioS

coMPariNG iNdia with chiNa high-

lights the effect of differing past policies

and the need for specific policies that fit

with a country’s progress through the

demographic cycle. China’s emphasis

beginning in the 1970s on lowering its

birthrate has resulted in a total fertility

rate of 1.8 children per woman—and a

rapidly aging population that will need

care and support. India’s efforts to slow

population growth were, most of the

time, less intrusive, but they also led to

a less precipitous decline in fertility (2.7

today). Figure 3 illustrates the dramatic

difference between the two countries in

the pace of fertility decline.

The biggest unanswered question is

that of population aging, which is oc-

curring in both developed and devel-

oping countries. Although many have

warned that an older population spells

economic doom, other analysts sug-

gest that it is not an insurmountable

problem provided it is well managed.

Although the private sector can help by

adjusting business practices to adapt to

an older workforce, it is mainly up to

public policy makers to take strategic

and politically feasible decisions on re-

tirement age, immigration policy, and

related issues.

Creating an economic environment

in which the working-age population

is productively employed is a diffi-

cult though essential goal in itself. But

changing demographics provides an

extra spur for adopting the kinds of

economic, health, education, and la-

bor policies that can lead to more rapid

economic growth.

David E. Bloom is Professor of Economics and Demography and David Canning is Professor of Economics and International Health at the Harvard School of Public Health.

Bibliography

Birdsall, Nancy, Allen C. Kelley, and Steven W. Sinding, eds. 2001. Population Matters: Demographic Change, Economic Growth, and Poverty in the Developing World. Oxford: Oxford University Press.

Bloom, David E., and David Canning. 2008. “Global Demographic Change: Dimensions and Economic Significance.” Population and Development Review, vol. 33, 17–51. New York.

Bloom, David E., and David Canning. 2006. “Booms, Busts, and Echoes”, Finance & Development, September, vol. 43, no. 3, 8–13. Washington, D.C.

Bloom, David E., David Canning, and Jaypee Sevilla. 2003. The Demographic Dividend: A New Perspective on the Economic Consequences of Population Change. Santa Monica, California: RAND, MR–1274.

Lee, Ronald, and Andrew Mason. 2006. “What Is the Demographic Dividend?” Finance & Development, September. vol. 43, no. 3, 16–17. Washington, D.C.

United Nations. 2009. World Population Prospects: The 2008 Revision.UN Department of Economic and Social Affairs, Population Division. http://esa.un.org/UNPP/.

children in Gansu Province, china.

D E V E L O P M E N T O U T R E A C H82

DEVELOPMENT WITH A HUMAN FACE

By archBiShoP NJoNGoNKulu NduNGaNe

The goal of

development

must be to enable

people to enjoy

their potential to

be fully human. Though it may

sound strange, I learned what it

means to be truly human when

I was a political prisoner on

Robben Island in the

early 1960s.

SoMehow, that unimaginable brutal-

ity, far outside the norms of civilized

society, convinced me that dignity and

respect, accorded through justice for

both individuals and the communities

to which they belong, are as indispens-

able to full humanity as the material

necessities of life.

Commitment to these values has

shaped me ever since. They are reflect-

ed in what the ancient philosophers re-

ferred to as “the common good.” This

is the fully-rounded well-being of a

society and all its members, the promo-

tion of which, in conditions of peace

and security, has long been seen as the

primary task of every nation. In today’s

globalised world, it should be equally

central in all our international decision

making, and not only in those forums

concerned with development issues.

The Universal Declaration of Hu-

man Rights puts flesh on this concept. Its

opening words affirm that the “recogni-

tion of the inherent dignity and of the

equal and inalienable rights of all mem-

bers of the human family is the founda-

tion of freedom, justice and peace in the

world”. Article 25, albeit in the outdated

language of its day, describes the comple-

mentary material necessities of life:

“Everyone has the right to a stan-

dard of living adequate for the health

and well-being of himself and of his

family, including food, clothing, hous-

ing and medical care and necessary so-

cial services, and the right to security in

the event of unemployment, sickness,

disability, widowhood, old age or other

lack of livelihood in circumstances be-

yond his control.”

Though not technically binding, the

Declaration is now widely regarded as

a part of customary international law,

and its provisions, encompassing every

essential area of human life, should be

seen as constituting an obligation for all

countries, in both domestic and foreign

policy and practice.

If this commitment were taken seri-

ously by our international institutions,

whether or not they primarily address

human rights issues, half the world’s

population would no longer be dehu-

manized through lack of one or more of

A P R I L 2 0 1 1 83

these fundamentals of life. In all sectors,

whether finance, trade, climate, shipping,

labor, telecommunications, and others,

the human dimension ought to remain

centre stage in all policy making, and in

every organization, no matter what its

main focus is. It will not suffice to con-

centrate solely on political expediency,

technical efficiency, economic advantage

or any other instrumental question, while

failing to give adequate consideration to

their human impact on individuals—

especially those with the least voice and

the greatest vulnerability.

When it comes to development poli-

cies in particular, putting human realities

centre stage should be automatic. The

pressing need for this came home to me in

the late 1990s when, soon after becoming

Archbishop, I served as a commissioner

for the South African national poverty

hearings. It was emotionally and physi-

cally draining to listen as people spoke

with dignity about their dire plight. I saw

the face of poverty in the eyes of far too

many men, women, children, the elderly,

and people with disabilities. Their mes-

sage was “Archbishop, take our voices to

the corridors of power, and say for us: We

do not want hand-outs. We have brains.

We have hands. Give us the capacity to

eke out our own existence.”

They were entirely right to make

this plea, not only on grounds of justice

and dignity, but in terms of making aid

work, as shown by Nobel laureate econ-

omist Amartya Sen. Development pro-

grams are most effective and sustain-

able when intended recipients are fully

included—respected, heard, involved—

in every stage from inception and plan-

ning to delivery, and when adequate

attention is paid to the realities on the

ground. Taking this lesson to heart led

me to set up the NGO, African Moni-

tor, which I now head. We are an inde-

pendent pan-continental body, which

brings new African voices, especially

D E V E L O P M E N T O U T R E A C H84

those of the neediest, to the develop-

ment agenda. It also helps monitor how

well the development commitments by

donors or by our own governments are

actually being met and how well they

are achieving a positive and lasting im-

pact in the grassroots communities they

are designed to help. African Monitor’s

theme for the next three years is “Un-

locking the African moment.”

Putting the human dimension and

the specific circumstances of individu-

als and communities at the heart of de-

velopment helps us marry development

theories with the very diverse realities

that people face on the ground. Theory-

driven, top-down, one-size-fits-all policy

making, too often fails to bring lasting

benefits, as we have seen in the past. Ac-

cess to information policies such as the

one being implemented by the World

Bank will enable citizens to track results

and improve aid effectiveness. New mod-

els are also increasingly evident: for ex-

ample, supposedly unorthodox methods

have led to sustained poverty reduction

and growth in Vietnam, Indonesia, Brazil,

Singapore, and, of course, China. Regard-

less of what measures one uses (and not-

withstanding serious problems in other

areas), China has experienced the most

dramatic poverty reduction in recorded

history over the last 20-30 years. The les-

sons are clear: development policies, in-

cluding the MDGs, need to be designed

contextually, within practical frameworks

that are value-driven, circumstance-spe-

cific, and sustainable. Governments must

work hand in hand with their people,

with meaningful dialogue as an essential

part of the full panoply of all that good

governance implies

Bringing the corrective balance of

human realities and contextual ground-

edness into all our policy making is

essential for our planet’s long-term

well-being, without which humanity

will not survive. The fact is that we live

in a world of finite resources and po-

tential, although for too long the eco-

nomic systems of the developed world

have operated as if it were not so—

with catastrophic consequences for us

all. Human-focused economics (to say

nothing of Christian tradition) argues

that creation can well supply enough

for our needs, though certainly not for

our greed, if we are ready to be faithful

stewards not only for today, but also for

tomorrow. In our policy formulations

we must cater for present requirements

without destroying the prospects of

future generations. This means ques-

tions of land ownership and use, en-

ergy, along with food security, must be

responsibly addressed. Environmental

concerns, particularly climate change,

also cannot be ignored, as if we can

mortgage today to tomorrow. The in-

terdependence of humanity applies not

only to the contemporary globalized

world, but to our children and our chil-

dren’s children.

All this is not the task of govern-

ments alone. The private sector must

shoulder its responsibilities. Yet it has

a right to expect that national and

international regulation will create

an environment in which good busi-

ness ethics are promoted, and where

entrepreneurship and risk are rightly

rewarded, though not at the cost of

exploitation of the poorest and weak-

est. Current policies that exacerbate

the inequalities between rich and poor,

across most nations of the world, and

between regions of the planet, are dan-

gerously destabilizing—in economic

terms, in social terms, and in human

terms. We can and must do better, and

giving a human face to our policy mak-

ing will help us avoid such pitfalls, at-

tractive though they may be to those

with power and influence when viewed

in the short term.

“How then shall we live?” is per-

haps the ultimate question of human

existence, and the only answer with in-

tegrity lies in promoting the common

good, building a just world fit for all

the inhabitants of our planet. We must

never forget the human face in our so-

ciopolitical and economic endeavors.

And when it comes to development

policies, alongside all the statistics

of hunger and need, and the totals of

dollars spent, we must remember that

what matters most is that the neediest

individuals urgently find tangible, sus-

tainable solutions. Though this is often

the hardest thing to quantify, it is the

only thing that truly counts.

I wrote earlier of the norms of civi-

lized society. Samuel Johnson put it this

way: “A decent provision for the poor is

the true test of civilisation.” My conclu-

sion and my challenge is this: we must

cease measuring progress primarily

through the condition of our econo-

mies and the strength of our curren-

cies, and instead concentrate on how

well our planet feeds its hungry, cares

for its sick, houses its homeless, edu-

cates its children, employs its adults,

and supports its elderly and vulnerable.

Only when we achieve this can human-

ity dare claim to be truly civilized.

Archbishop Njongonkulu Ndungane is Head of African Monitor, a pan-African nonprofit organization that monitors development funding, delivery, and impact and helps bring African voices to the development agenda.

A P R I L 2 0 1 1 85Mother and child in Mozambique.

D E V E L O P M E N T O U T R E A C H86

SouNdiNG Board

W h a t i s t h e m o s t i m p o r t a n t f e a t u r e [ ]k e y s u c c e s s f a c t o r

The most impor

tant feature

that will make

a development

policy succeed

is ownership

of the policy.

The process

of policy deve

lopment should

be consultativ

e, taking into

account the ne

eds of all the

people, includ

ing the grassr

oots

majority. This

process will

ensure that th

e policy has

addressed the

needs of the p

eople

and, as a resu

lt, they will

push

for its implem

entation since

they have an i

nterest in it.

Most often a p

olicy fails

because there

is a lack of

political comm

itment, such a

s

allocating ina

dequate resour

ces

for its implem

entation. A po

licy

may also fail

when it does n

ot

address the ne

eds of the peo

ple

it is intended

to serve.

Annie Namagony

a

Principal Gend

er

and Developmen

t Officer,

Ministry of Ge

nder, Children

,

and Community

Development,

Malawi

Rahul SurChief, Conduct and Discipline Unit, Office of the Special Representative of the Secretary-General, UN Stabilization Mission in Haiti (MINUSTAH) 2006-2009.

My experience in Haiti brought home the

fundamental importance of capacity for any policy

to succeed. In my travels, when I asked why

mountain after mountain lay denuded, they replied

that the trees had been cut for fuel.

When further asked why electric plants could

not supply the power, the reason given was that

there were few engineers to maintain them. This

lack of skills was mirrored in every profession

essential for development. The weakness in each

generated its own vicious cycle and malevolent

externalities. I think that without skilled

people essential for implementation, a policy

irrespective of how elegantly conceived is not

much better than squiggles on a paper. All

successes in development policy ultimately flow

from this lodestone.

OlubuNMi DiPO-SAlAMi

CEO, laRen Consulting,

Obafemi Awolowo university,

Nigeria

in my experience, the key success

factor for a development policy is the

political will for implementation.

in my part of the world, although

policies that could influence social

change are formulated on a daily basis

,

the implementation is fraught with

lip service and lack of commitment.

A policy would surely fail where the

perspectives of the citizens are not

considered. lack of participation

would lead to lack of ownership and

commitment.

S h a r e y o u r v i e w s .

A P R I L 2 0 1 1 87

t h a t w i l l m a k e a d e v e l o p m e n t p o l i c y s u c c e e d o r f a i l ?

Development policymaking is a means of achieving

common benefits that have been agreed upon by the

citizens and the governments or the private sector.

This agreement provides a foundation for official

decisionmaking by government authorities and the

relevant institutions. in the development context,

public policies can be defined as a series of

interrelated choices, actions, and results.

Successful policies require community participation

in identifying the most important issues, designing

proposals, providing feedback, clarifying their

expectations, and identifying the expected results.

Participatory approaches depend on the availability

of accurate information, direct communication and

public dialogue with the citizens using various

mechanisms for public and individual communication

to help them understand the policy and its

implications.

The cultural, economic, legal, social, and

political contexts should all be taken into account

when designing policies. Civil society can play

an important role in raising public awareness of

citizens’ rights and responsibilities, empowering

citizens, and overseeing the policymaking process.

(continued on next page)

The experiences of countries in the region can help

identify the kind of roles played by civil society.

ibrahim MakramDirector, Evangelical Organization for Social Services, Egypt

Obstacles include: lack of trust, shortage of information,

*

limited democratic practices, *

increasing conflicts, *

a lack of coordination between the three sectors

*

(the government, the private sector and the civil society), and lack of awareness regarding the public benefits that the policy will yield.

A development policy will succeed to the extent that it actively involves all stakeholders, incorporates gender issues, uses scientific research as its basis, incorporates disaster preparedness, and builds the knowledge and technical capacity of policymakers, civil society leaders, and the policy’s beneficiaries, on issues that are relevant to the policy’s success. Development policy that fails to understand how local power dynamics shape policy outcomes, that reflects little understanding of the key constituents that either hold, contest, or are excluded from power, and that fails to clarify the opportunities and risks therein or fails to incorporate disaster mitigation strategies, is likely to fail.

Linus M. NthigaiPrograms Manager Policy and Development, Evangelical Alliance of Kenya, East Africa

SouNdiNG Board

W h a t w o r k s , w h a t d o e s n ’ t ?

D E V E L O P M E N T O U T R E A C H88

SouNdiNG Board

Development is not only economic

growth.

It is a holistic process whereby

vulnerabilities are reduced and

capacities are increased within

societies. External assistance

is important for speeding up the

development momentum, but people

’s

capacity (empowerment) to set th

eir own

priorities based on their own va

lues,

and to organize themselves will

be

the most important determinants

of

development.

It is time to start the transfor

mation

from a one-way top-down approach

to external assistance, to a

multidimensional development pro

gram

with capacity building as the pr

imary

focus. This would include buildi

ng

intellectual, organizational, so

cial,

political, cultural, material, m

arket,

and financial capacity, and not

simply a set of prepackaged tech

nical

interventions targeting predeter

mined

outcomes.

Dr. Thant Zin

Consultant/Advisor

(Freelance), Public Health

and Development, Myanmar

In my opinion, the key to making

a development policy succeed is

“territorialsation.”

By this I mean that it is

crucial that policy formulation

take into account every aspect

of the area where it will be

carried out, especially the

people who will be affected. It

is therefore imperative that

communities participate from the

planning phase, have complete and

accessible information, relevant

training, access to accountability

mechanisms, and the means for

ongoing monitoring and evaluation

throughout the entire process.

Policies keep failing because

the approach to planning and

implementation doesn’t change to

reflect experience. Inertia can be

very strong, even after repeated

defects have been identified; and

evaluation often tends to be

more of a requirement to comply

than a real mechanism to identify

and correct problems and improve

policy effectiveness.

VAlERiA ENRiquEz Researcher, Transparency and Accountability FuNDAR, Center for Analysis and Research

Policies can be appropri

ate, justified, and

evidence-based from a te

chnical point of view,

but if they are not chec

ked against a stakeholde

r

analysis and embedded in

a comprehensive advocac

y

approach they will fail.

ideally, the policy

results from such a proc

ess of analysis that

creates ownership and id

entifies the interests of

different stakeholders.

These interests can be u

sed

creatively to generate i

ncentives for supporting

the implementation and a

ction on the policy.

Dr. Habib benzianManaging Director, The Health bureau ltd, Global Health Consultants, united Kingdom

A P R I L 2 0 1 1 89

With the advent of the Millennium Development Goals (MDGs), we have seen perhaps the most intensive international global commitment to eradicating poverty and improving livelihoods, and with greater emphasis placed on development policymaking and partnerships between developed (donor) countries and developing countries.

For developing and least-developed countries, the most important factor that will make a development policy succeed is the extent of country ownership, from conceptualization through implementation. While strong assistance–both technical and financial–is needed from development partners, how a country takes ownership of the development policymaking process will strongly influence whether the policy succeeds or fails. A major challenge, and thus a priority area for operational research and policy analysis, is the feasibility of country ownership of development policymaking in the context of high-levels of donor aid.

Dr. Oluwatoyin O. Togun, MD, MPHResearch Physician, Viral Diseases Programme, Medical Research Council (UK) Unit, The Gambia--West Africa

businesses need to be in tune with

and listen

to their market. They have to ensu

re that

the products and services that the

y produce

are responsive to the needs and pr

eferences

of their customers. Knowledge of t

he market

is key to developing products that

consumers

will like and buy. likewise, Polic

y makers

also need to listen to their marke

t.

Development policies that are dema

nd-driven

are seen as relevant, and responsi

ve to the

needs of communities.

The people, especially the poor, a

re the

best source of information on the

kinds

of programs and measures that will

answer

their needs. They are able to set

their own

priorities, define the services tha

t they

need, and provide feedback on poli

cies that

work and those that do not work.

Technocrats risk policy failure wh

en policies

are merely products of theory and

research.

Their first job is to listen intent

ly to as

many sectors as possible and under

stand how

they feel.

Milwida M. Guevara

President,

Synergeia Foundation,

Philippines

Development policies bring change and

the first requirement is for change in

the national mindset and for commitment

to the task. There is also a need for

stakeholder buy-in and for national

institutions capable of implementation

and monitoring. This should be combined

with enhanced accountability on the part

of all stakeholders, and alignment of

the development policy, as well as all

other development programs, with the

aspirations and long-term vision of the

country.

Most development policies fail because

they normally follow an emergency

situation, for example, to solve an

economic crisis facing the country. As

such, programs are normally set up in a

hurry and policy implementers are unable

to manage them.

Policies normally fail because of

policy reversals. From my experiences

policymakers are impatient and do not

wait for the adjustment process to be

completed and the fruits of the policies

to be realized. Taking a piecemeal

approach to economic policy development

(partial implementation) is also a major

cause of failure.

Development plans often set unrealistic

targets that cannot be adequately

funded because most people do not earn

enough to save or invest. Furthermore,

development policies are often affected

by volatile political environments which

prevent sustained implementation.

Melania Mujutywa

Chief Economist, Ministry

of Economic Planning

and Investment Promotion,

Zimbabwe

D E V E L O P M E N T O U T R E A C H90

SouNdiNG Board

A development policy s

ucceeds when it answer

s a need, and

responds to the social

, political or economi

c demands of the

community; when the ne

eds assessment studies

reflect multiple

perspectives; and when

there are accountable

implementation

mechanisms in place.

Consultation with stak

eholders. Development

policies have

long been the business

of leaders and decisi

on makers at

different levels, ofte

n in connivance with d

onors. in the

best cases, an advocac

y process would take p

lace to help local

stakeholders understan

d and implement the po

licies. The decade

of the 1990s brought w

ith it an awareness th

at populations

should participate; as

a result, a series of

participatory

methods were introduce

d, without worrying to

o much about their

effectiveness.

Development policies h

ave been more successf

ul when built on

the real-life experien

ces of the affected po

pulations, and

these populations bein

g quite diverse, had d

ifferent interests

in these policies. in

Africa one ethnic grou

p would initiate

a policy, which would

be seen as being aimed

at extinguishing

another ethnic group!

Rumours about children

’s vaccination

often reflected this vi

ew.

i myself witnessed an

agriculture policy in

burundi in the

1980s requiring popula

tions to establish cof

fee plantations

in certain regions. Th

e overzealous agricult

ural supervisors

would not allow any ot

her crop at all to be

planted next to

the coffee.

The supervi

sors would spend their

days distributing pla

nts

and providing technica

l support. but when th

ey came back one

or two weeks later, th

e plants had dried out

, even during the

rainy season! The reas

on given was that the

region’s micro

climate was unfavorabl

e to coffee. but in re

ality, coffee

owners who were unawar

e of its utility compa

red with bananas

or any of the other cr

ops they knew, were sp

ending the night

pouring hot water on t

he plants, or bringing

in parasites

which destroyed the yo

ung plants in a single

day!

Sophie Havyarimana

burundi Director,

ACORD / Women Economists

Association

Needs assessments with multiple perspectives. Needs assessment studies to guide the implementation of policies should be multidisciplinary and include the views of the target groups and institutions. They would also benefit from being carried out by respected scholars, by development practitioners who have hands-on experience, and by CSOs with alternative perspectives. Thus, the policy would benefit from a multidimensional perspective including the key actors. it’s true that there has been great progress in this respect because of the revolution in communications. it is also because of the role and capacity of civil society, and a concern for the inclusion of diverse communities which came about gradually as policies were being conceived and implemented in environments dominated by political and civil conflicts--something inconceivable 15 years ago! Finally, a development policy succeeds better when it is supported by management and implementation mechanisms in which the beneficiaries are involved, and when their knowledge and know-how is valued.

(Translated by Auriane Mortreuil)

SYED HARIR SHAH

Executive Director, Internationa

l Institute

for Disaster Risk Management, Pa

kistan

Successful development policies

should be holistic,

comprehensive, and user friendly

. Those sitting at the helm

of policy development must under

stand the realities on the

ground with respect to tradition

, culture, marginalization,

and vulnerability as well as the

capacities of the people

and implementing agencies. Devel

opment policy makers must

use multidimensional and multipr

onged approaches that reflect

an understanding of all aspect o

f the policy initiative; and

policies should be developed and

designed to serve the people an

d

not vice versa. Bottom-up approa

ches to policy development, with

professional and technocratic su

pport from the top down, will

support successful policies. If

the people take ownership of the

policy intervention, there is no

way for it to fail.

A P R I L 2 0 1 1 91

Failures of overall governance and inefficiency in public

service delivery are endemic characteristics of Nepal.

Nevertheless, after ten years of armed insurgency, a

window of opportunity for peace and reconciliation in

Nepal opened up in November 2006 with the signing of

the comprehensive peace agreement. Now the country has

been struggling to draft a new constitution, through a

Constituent Assembly, by April 2010. In this type of

situation it is very difficult to identify what would

make a policy succeed. I have noted that in recent years,

development science has been reluctant to proclaim any

single factor that contributes to making development a

success.

However, a deeper consultative process using tools

to promote accountability and transparency, such as

public hearings, public audits, citizen scorecards, and

community scorecards, would help develop more realistic

development policies. Also, the policymaking process

has to begin with citizens themselves who have to be

involved. Nothing will change unless people get involved.

Public discourse is also vital in shaping development

policy because the public requires time to digest

anything new that will affect them. People also require

time to conceptualize and decide on suitable approaches.

In my almost 15 years of experience as an advocate for

good governance in Nepal, I have realized that citizens

are never the problem but always the solution. So, I

would strongly urge policy makers to be inclusive and

listen to different political points of views rather than

imposing their own views.

Kedar Khadka

Director, Good Governance Project, Pro Public, Convener: National Coalition against Corruption (NCaC), Vice-President: National Election Observation Committee (NEOC), Vice-President: Human Rights Home

Policymakers should also understand

that public discourse is essential for

preparing citizens for new policies.

Citizens need to understand the vision

and objectives of the policy as well

as the facts, but they also need to

express what they require and what

they value most. Stakeholders must

be understood and provided enough

room to be engaged. Setting criteria

against which to measure success

also goes hand in hand with results-

based monitoring. Finally, monitoring

tools should be simple and useful for

measuring progress--and they should be

intensively applied.

As a proponent of good governance, I

believe that experience is the best

teacher. As a development practitioner

from a third-world country like Nepal,

I have seen that policy makers usually

do not appreciate the importance of

including citizens in the conception

stage of a new policy initiative.

Policies should neither be filled with

jargon nor be copied “as is” from one

place to another, or they will fail.

People must be given opportunities

to read, listen and analyze, and to

test their opinions in discussion

with others. Having said that, public

discourse is not an end in itself,

but rather a means of ensuring

ownership by a larger representation

of citizens.

John NagellaChairperson, Association for Rivers and Coastal-Ecosystems Conservation, india

To my mind the most important features in making a development policy succeed are committed collective action by stakeholders, along with sufficient human and financial resources. These should be corruption free if the policy is to yield results. Without these features a policy will most often fail.

D E V E L O P M E N T O U T R E A C H92

What drives development? What new

issues have arisen due to globalization?

And what kind of policies contribute

to development in a rapidly changing

world? The studies in Doing Good

or Doing Better analyze the different

development strategies employed

on various continents, address

current challenges, and argue that

a new approach—one different

from the European and American

models—is necessary in a globalizing,

interdependent world.

doiNG Good or doiNG Better: development Policies in a Globalizing worldEdited by Monique Kremer, Peter van Lieshout, and Robert Went

BooKShelf

Amid all the complicated economic

theories about the causes and solutions

to poverty, one idea is so basic it

seems radical: just give money to the

poor. Despite its skeptics, researchers

have found again and again that cash

transfers given to significant portions

of the population transform the lives

of recipients. Countries from Mexico

to South Africa to Indonesia are

giving money directly to the poor and

discovering that they use it wisely—to

send their children to school, to start a

business and to feed their families.

Directly challenging an aid

industry that thrives on complexity

and mystification, with highly paid

consultants designing ever more

complicated projects, Just Give Money

to the Poor offers the elegant southern

alternative—bypass governments and

NGOs and let the poor decide how to

use their money. Stressing that cash

transfers are not charity or a safety net,

the authors draw an outline of effective

practices that work precisely because

they are regular, guaranteed and fair.

This book, the first to report on this

quiet revolution in an accessible way,

is essential reading for policymakers,

students of international development

and anyone yearning for an alternative

to traditional poverty-alleviation

methods.

Kumarian Press • December 2010 • $24.95

JuSt GiVe MoNey to the Poor the development revolution from the Global Southby Joseph Hanlon, Armando Barrientos, and David Hulme

A key assumption in development

literature, Adam Fforde argues, is that

development is a predictable process

with knowable solutions. As a result,

the literature is characterized by a

combination of great certainty and

great differences of opinion.

It is no surprise then, that students

and practitioners confronting the

mass of competing assertions about

development “truths” become confused

and frustrated. Coping with Facts

offers guidance for the perplexed

through a penetrating critique of

development studies literature. Rather

than presenting a general examination

of modern development practice,

Fforde develops coping strategies that

help readers evaluate the contending

solutions to problems of development.

Fforde cements his analysis with

detailed case studies of development

projects in Southeast Asia, especially

Vietnam where he spent over 10 years.

Those eager to chart a constructive

career in development theory and

practice as well as students looking for

an introduction to this vast field will

want this book as a navigational aid for

their journey.

Kumarian Press • March 2009 • $23.95

coPiNG with factSa Skeptic’s Guide to the Problem of developmentby Adam Fforde

Amsterdam University Press • September 2010 • $42.50

A P R I L 2 0 1 1 93

Traditional knowledge (TK) has

contributed immensely to shaping

development and human well-

being. Its influence spans a variety of

sectors, including agriculture, health,

education and governance. However,

in today’s world, TK is increasingly

underrepresented or under-utilized.

Further, while the applicability of TK

to human and environmental welfare is

well-recognized, collated information

on how TK contributes to different

sectors is not easily accessible.

This book focuses on the relevance

of TK to key environment- and

development-related sectors, discusses

the current debates within each of

these sectors and presents suggestions

as to how TK can be effectively

integrated with conventional science

and policy. A valuable resource

to researchers, academics and

policymakers, Traditional Knowledge

in Policy and Practice provides a

comprehensive overview of TK, and

its links and contributions to social,

economic, environmental, ethical, and

political issues.

United Nations University Press November 2010 • $38.00

Writing from diverse locations, the

contributors to this volume examine

some of the key terms in current

development discourse. Why should

language matter to those who are

doing development? Surely, there

are more urgent things to do than

sit around mulling over semantics?

But language does matter. Whether

emptied of their original meaning,

essentially vacuous, or hotly contested,

the language of development not only

shapes our imagined worlds, but also

justifies interventions in real people’s

lives. If development buzzwords

conceal ideological differences or

sloppy thinking, then the process of

constructive deconstruction make

it possible to re-examine what have

become catch-all terms like civil society

and poverty reduction, or bland aid-

agency terms such as partnership or

empowerment. Such engagement is far

more than a matter of playing word

games. The reflections included here

raise major questions about how we

think about development itself.

Practical Action • January 2011 • $29.50

traditioNal KNowledGe iN Policy aNd Practice approaches to development and human well-beingEdited by Suneetha M. Subramanian and Balakrishna Pisupati

decoNStructiNG deVeloPMeNt diScourSe Buzzwords and fuzzwordsEdited by Andrea Cornwall, Deborah Eade

We live in a new reality of aid. Gone is

the traditional bilateral relationship,

the old-fashioned mode of delivering

aid, and the perception of the third

world as a homogenous block of poor

countries in the south. Delivering Aid

Differently describes the new realities

of a $200 billion aid industry that has

overtaken this traditional model of

development assistance.

As the title suggests, aid must now

be delivered differently. Here, case

study authors consider the results of

aid in their own countries, highlighting

field-based lessons on how aid works

on the ground, while focusing on

problems in current aid delivery and

on promising approaches to resolving

these problems.

deliVeriNG aid differeNtly: lesson from the fieldEdited by Wolfgang Fengler and Homi Kharas

S o u r c e : w o r l d B a N K i N f o S h o P | w w w . w o r l d b a n k . o r g / i n f o s h o p

Brookings Institution Press • November 2010 • $28.95

D E V E L O P M E N T O U T R E A C H94

The 2008-09 global financial

crisis shook the ground under the

conventional wisdom that had

guided mainstream development

economics. Much of what had been

held as true for decades is now open to

reexamination— from what the role

of governments should be in markets

to which countries will be the engines

of the world’s economy, from what

people need to leave poverty to what

businesses need to stay competitive.

Development economists look into the

future. They do not just ask how things

work today, but how a new policy,

program, or project would make them

work tomorrow. They view the world

and history as a learning process—past

and present are inputs into thinking

about what is coming. It is that appetite

for a vision of the future that led the

authors of The Day after Tomorrow: A

Handbook on the Future of Economic

Policy in the Developing World to invite

some 40 development economists,

most of them from the World Bank’s

Poverty Reduction and Economic

Management Network—an epicenter

of the profession—to report what they

see on the horizon of their technical

disciplines and of their geographic

areas of specialization.

The disconcerting but exciting search

for a new intellectual compact has

begun. To help guide the discussion,

The Day after Tomorrow: A Handbook

on the Future of Economic Policy in the

Developing World puts forth four key

messages:

■ While the developed world

gets its house in order, and

macroeconomics and finance

achieve a new consensus,

developing countries will become a

(perhaps the) growth engine for the

world. Faster technological learning

and more South-South integration

will fuel that engine.

■ Governments in developing

countries will be better—they may

even begin to earn the trust of their

people.

■ A new, smarter generation of social

policy will bring the end of poverty

within reach, but the attainment of

equality is another matter.

■ Many regions of the developing

world will break out of their

"developing" status and will

graduate into something akin to

"newly developed." Africa will

eventually join that group. Others,

like Eastern Europe, have a legacy of

problems to address before such a

transition.

While some regions will do better

than others, and some technical areas

will be clearer than others, there is no

question that the horizon of economic

policy for developing countries is

promising—risky, yes, but promising.

The rebalancing of global growth

toward, at the very least, a multiplicity

of engines, will give the developing

world a new relevance.

The World Bank • September 2010 • $35.00

the day after toMorrow a handbook on the future of economic Policy in the developing worldedited by Otaviano Canuto and Marcelo M. Giugale

BooKShelf

W O R L D B A N K P U B L I C A T I O N S

A P R I L 2 0 1 1 95

The 2008–09 financial crisis, which

originated in the United States and

rapidly spread to the rest of world,

resulting in the most severe and

intense Great Recession since World

War II, has posed new challenges for

international policy coordination

and the management of national

economies. Questions are being

raised about globalization, which has

been a powerful engine of economic

growth over the past three decades but

exposes countries to more volatility

and increases risk. What policies

and reforms increase the resilience

of developing economies to such

external shocks? Which institutional

arrangements and policy frameworks

would allow them to respond most

quickly and effectively? What role

is there for international policy

coordination and for emerging

economies?

The Great Recession and Developing

Countries delves into 10 country case

studies that explore growth during

the precrisis boom, the effects of the

crisis, policy responses, and recovery.

Looking beyond the crisis, the volume

undertakes projections of medium-

term growth and explores the possible

impact of the global crisis. The use of

a common methodology in preparing

the case studies facilitates cross-

country comparisons and helps draw

some useful lessons as well as identify

areas where more study is needed.

Although the case studies do not

constitute a statistically representative

global sample, they illustrate a broad

range of experiences in the wake of

the Great Recession—covering Brazil,

China, Ethiopia, India, Malaysia,

Mexico, the Philippines, Poland,

Turkey, and Vietnam—and give

insights on how developing countries

can best prepare and respond to

such crises. A synthesis chapter

establishes the overall framework,

provides a summary of the global

crisis and its effects on the countries

studied, and draws lessons from the

10 country studies. This book will be

of particular interest to development

practitioners,policy makers, and

academics.

The World Bank • December 2010 • $35.00

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the Great receSSioN aNd deVeloPiNG couNtrieS economic impact and Growth Prospects Edited by Mustapha K. Nabli

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