Helping the poorest nations: Ethiopia, Mali, Malawi, Niger, Bangladesh

Transcription

1 Helping the poorest nations: Ethiopia, Mali, Malawi, Niger, Bangladesh World Poverty and Economic Development ECON 3240 Spring 2014 Darryl McLeod, Economics, Fordham University

2 How to help Malawi vs. Bangladesh? Malawi, Aid then trade, needs green revolution (fertilizer subsidies). Bangladesh (BGD): had Aid, now trade food aid in 1973: trade sanctions, World Food Program. BGD got special access to MFA quota (expired last year, except for China). See NY Times article on fertilizer subsidies..

3 The Bangladesh miracle: women s agency & social innovation despite very bad institutions, very bad government... Mohammed Yunus, social innovation, thought up micofinance Grameen (but Accion may have been first). Amazing fall in population growth, see Melinda Gates letter part 3, 2014 Immigration, remittances from middle east countries mainly (Egypt, Saudi Arabia). Health system, access to contraception... See QJE 2009 T. Paul Schultz on Matlab

4 Is Ethiopia the next Bangladesh? Bangladesh (BGD): had Aid (Elizabeth McGovern, Map of the world a David Hare play documents major food aid scandal in 1973 in which the United States punished World Food Program. After this BGD got special access to MFA quotas (expired in 2005, except for China). How did BGD Garment industry get started? Daewoo industries opened plant in

5 Is Ethiopia the next Bangladesh? The MFA + aid scandal was crucial As reported in Easterly (2002), in 1979 Daewoo signed a collaborative agreement with Desh Garment Ltd in Bangladesh. Daewoo agreed to bring 130 Bangladeshi workers to South Korea for training at a Daewoo plant in return for Desh paying commissions amounting to 8 percent of future sales. At the time of the training there were a total of 40 workers producing garments in Bangladesh, and Desh s first year of operations produced $55,050 in sales on 43,000 shirts. By 1987 the industry s output had grown to 2.3 million shirts. During the 1980s, of the 130 Bangladeshi workers initially trained by Daewoo, 115 of them had left Desh to set up their own garment export firms. see, Beaudry, P. and P. Francois, 2005, Managerial Skill Acquisition and the Theory of Economic Development, NBER Working Paper No June. (same story reported in UNDP s 2004 Report Unleashing Entrepreneurship.

6 The new bottom billion?: 72% are now in middle income countries Andy Sumner vs. Paul Collier

7 Carbon footprints point to us.

8 Malawi landlocked, but near very successful Mozambique

9 Malawi and Africa doing better recently, why is Africa doing so well? Malawi Growth and aid inflows (what global economic crisis?) Per Capita GDP annual % growth Aid and Debt inflows % of GDP Average Income per Person 2011 $PPP or $US (f) Source: IMF World Economic Outlook, October

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11 Malawi Fertilizer subsidies photo 3

12 Fertilizer subsidies help

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14 Bangladesh growing rapidly but vulnerable to climate change..

15 Why Poverty fell rapidly in Indonesia (and in China, Vietnam, Bangladesh.) Green Revolution in the 1970s tripled rise yields raising the incomes of many small farmers Higher farm incomes led to new spending on goods and services by richer farmers (Engle s law** at work ). NIKE and other multinationals set up factories to export shoes and garments from Indonesia Villager s & migrants sent kids to school (with shoes). **Engle s law says that if people s income doubles, they will not double their spending on food, instead they buy other stuff. As a result agriculture becomes a smaller and smaller share of the economy and raising farm incomes creates demand for other goods and services and these account for most of employment even in a small village like Begajah in Indonesia.

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17 Poverty Fell sharply and then rose a bit in Indonesia Indonesia $1 per day Poverty Rate (H) 58 % of Pop Poor (Headcount) Feb- 96 Feb- 97 Feb- 98 Dec- 98 Feb- 99 May- 99 Aug- 99

18 Poverty Fell sharply and then rose a bit in Indonesia a record reversal?

19 Poverty falling in BGD on track.but from 59% in 2000 to 43% in 2010, or about 1.6% per year, 5 * 1.6 = 8 so perhaps 35% in 2015, exactly MDG 1

20 Vietnam: done with MDG 1 in years early!

21 $2/day poverty rates are much higher, but still falling Figure 3: Poverty in Developing Countries % Poor living in LDCs 67% 40% 60% 33% $2/day Poverty Rate 64% 60% 61% 56% 54% 51% $1/day Poverty Rate 28% 28% 26% 23% 22% 20% Source: Chen and Ravallion (2004) "How the Poor have fared since the 1980s" World Bank Poverty Net and GEP 2006 Table1.3 page

22 Globalization & Capitalism made about a billion rich, two billion remain poor and about 3 billion are in the new middle class Still, many remain in severe poverty in the world according to the World Bank, about a billion people still get by on less $1.25/day. Lack mobility, cannot afford education: $1 per day only buys about 2250 calories of coarse cheap grain (no meat, few clothes but see B&D, 2011). Vulnerable to Poverty $2-$10 not poor, but risk falling back Middle class: > $10 per day, less likely to fall back into poverty

23 Climate change offers new rationale for poverty reduction (in low lying Bangladesh), rich country alternatives: 1. Mitigation of carbon emissions: (expensive for OECD residents) 2. Migration out of vulnerable areas (politically unpopular here & in Europe ) 3. Adaptation at our expense: higher transfers (foreign aid) may also be expensive and politically tricky, Bali accord solution 4. Adaptation at their expense: reducing poverty spreads the burden of adaptation and abatement it may be the cheapest way out

24 Special topic: conflict and poverty 500 Figure 3: Battle-Related Deaths (thousands) Source: Lacina and Gleditsch (2005) Deaths per conflict (right scale)

25 Total deaths and the # of conflicts have fallen since the end of the cold war, but 60 Figure 4: Number of World Conflicts Source: UCDP/PRIO Armed Conflict dataset (conflicts that caused at least 25 battle-related deaths a year.

26 Conflicts have become concentrated in poor countries Table 1: Changing Patterns of Civil Conflict 1/ Human Development Argricultural Civil wars starting before 1989 Income per $1/day HDI Employment person Country Start End Duration Poverty Index Total Female* ($ppp) Vietnam $1, Guatemala $3, b 17 b Uganda $ Angola $2, Cambodia $1, Ethiopia (a) $ Mozambique $ Afghanistan $3, Nicaragua $4, El Salvador $3, Zimbabwe $2, Lebanon $2, Sri Lanka $ Sudan $1, Somalia na na na Pre-cold war (1989) Averages 17 40% $1,

27 Table 1: (cont.) Post-cold war conflicts 1/ Human Development Argricultural Civil wars 1989 start or later (post cold war) Income per Employment $1/day HDI person Country Start End Duration Poverty Index Total Female* ($ppp) Afghanistan Chad Liberia NA NA Rwanda , Sierra-Leone Bosnia/Herzegovinia NA 2, Tajikistan , Burundi Congo, Dem. Rep Congo, Rep. of Ethiopia (b) Guinea-Bissau Post-1989 War Averages 5 57% $1,

28 Youth unemployment & conflict: Uganda, Afghanistan, Iraq Challenge: Conflict employs and empowers youth to bad ends Youth are a high risk group (crime and conflict). Opportunity: mobile and malleable youth are open to new ideas and technology ICT, strongly influenced by group dynamics and education Young Uganda Lord's Resistance Army (LRA) fighter with David Beckham shirt at Ri- Kwangba, Southern Sudan. Nov. 12, 2006, Stuart Price AFP*

29 Step 1: Putting Poverty and inequality trends in Perspective how are the poor doing? How do we decide when someone is poor or not. The most widely used international poverty level of income or consumption is $1 per day and $2 per day (roughly). Using these conservative cut off points the World Bank estimates about 1.2 and 2.8 million people are poor.

30 Why it is so hard to reduce the poverty rate Population growth is rapid in poor countries. Poverty Traps: Aids and Malaria + political instability in newly independent states. Bad development policies, e.g. the resource curse Lack of globalization, geographic or political isolation

31 A longer View Poverty reduction is a race between the population non-poor and the poor Poverty should fall because, economic growth raises income per person.. Technical progress helps bring cheaper food and better medicine to the poor, living better on the same income with antibiotics, vaccinations, etc. But population growth work against the poverty rate population growth is faster among the poor

32 Developing Country Poverty Trends: How you measure poverty has become an issue. The $1 per day poverty rate fell more slowly than expected from 1980 to 1998 from 29% to 24% as opposed to the 18% projected in However, during the 1990s the number of poor fell by almost 30 million per year in East Asia China, Korea, Indonesia, Thailand, Malaysia. Living standards and longevity have improved substantially despite slow progress in reducing poverty the poor have better access to clean water, health care, education etc.

33 Spring 2010 Themes Global poverty: 1. Conflict, terrorism and poverty: is there a connection, what can be done? (Collier) 2. Immigration backlash? Who gains and who loses from migration (CRS DVD) 3. Climate change and poverty.. (next Fall) 4. Case studies: Mozambique, Rwanda, Uganda, Bangladesh and India, China??? U.S. poverty and inequality 1. Why is inequality rising in the U.S.? 2. Recession, outsourcing, migration and cheap Walmart imports: who pays the price?

34 Bangladesh: on track to meet MDGs?

35 Bangladesh: on track to meet MDGs?

36 Bangladesh: on track to meet MDGs?

37 On track to meet MDGs

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