Development in Transition

COVID-19: A game changer for the Global South and international co-operation?

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By Debapriya Bhattacharya, Chair, Southern Voice and Distinguished Fellow, Centre for Policy Dialogue (CPD), and Sarah Sabin Khan, Senior Research Associate, CPD

This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.

In a short but seemingly never-ending time span, the COVID-19 crisis has propelled governments into the dilemma of balancing the response to immediate health, economic and social fallouts, with long-term recovery. Some remain vigorously engaged in saving lives. Others are seesawing between loosening restrictions and enforcing new ones to prevent a second wave. Countries from the Global South are among the worst affected by the pandemic. This is due to both their weak pre-crisis conditions as well as their disadvantaged position in global governance. There is a broad consensus that things will not and cannot go back to the way they were before. A “new normal” will emerge in terms of how governments, producers, businesses, consumers and other economic agents conduct themselves. This will be also true for global governance structures and the conventionally dialectical relationship between the North and the South.  

In this context, pessimistic views and optimistic outlooks on the post-COVID world confront one another. 

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COVID-19 and the human development crisis: what have we learnt?

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By Pedro Conceição, Director of the Human Development Report Office and lead author of the Human Development Report and Mario Pezzini, Director of the OECD Development Centre and special adviser to the OECD Secretary-General on development

This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.

To say COVID-19 is unprecedented is no cliché. Its simultaneous impact on multiple development areas – education, health and the economy – sets it apart. As does its geographic reach: the pandemic, and its spillover, have touched every country.

Of course, the world has seen many crises over the past 30 years, including health crises from HIV/AIDS to Ebola, and economic crises such as the Global Financial Crisis of 2007-09. Each has hit human development, devastating the lives of millions. But overall the world has still made development gains year on year. What distinguishes COVID-19 is the triple hit to health, income and education, fundamental building blocks of human development. And as a result the global human development index is on course to decline this year for the first time since the concept was introduced in 1990 – something that can still be avoided or at least mitigated with strong policy responses.

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Can aid help countries avoid the middle-income trap?

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By Homi Kharas, Interim Vice President and Director – Global Economy and Development, Brookings Institution

This blog is part of an ongoing series evaluating various facets
of Development in Transition

Middle-income-trapMost aid agencies have tried to articulate a “middle-income” strategy for how to support client countries that are no longer poor. For example, see the Asian Development Bank Strategy 2030 and the World Bank’s approach to middle-income countries. In both cases, there is an emphasis on second-generation challenges, including those related to environmental, social and governance institutions. Failure to meet these challenges can trap countries in middle-income status.

The problem, however, is that there is no solid theoretical or empirical foundation on how to support growth in middle-income countries—the diversity of contexts and experiences is so large that robust policy conclusions are hard to draw, and useful interventions by aid agencies even harder to figure out.

Barro (2012) succinctly summarizes the limits of empirical work: “My view is that one has to accept the idea that pinpointing precisely which X variables matter for growth is impossible.” In a similar vein, Rodrik (2012) titled his paper “Why We Learn Nothing from Regressing Economic Growth on Policies.” Most researchers (see for example Jones (2016) and Kim and Park (2017)) find that middle-income growth is all about total factor productivity growth (TFP). TFP growth, in turn, is what is left over after accounting for the growth of all inputs. Jones breaks down TFP into two components: knowledge/ideas and M that he says stands for either misallocation or a measure of ignorance. Continue reading →

Social discontent in Latin America through the lens of development traps

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By Sebastián Nieto-Parra, Mario Pezzini and Juan Vázquez, OECD Development Centre

This blog is part of an ongoing series evaluating various facets
of Development in Transition

LATAM-Social-discontent.jpgUntil recently, rising levels of citizen dissatisfaction with public services and institutions in Latin America might have merely been pictured as an upward line in a graph. However, it seems to have reached a breaking point. Growing social discontent has boiled over into protests across several Latin American countries over the past weeks. While these protests are complex and multifaceted, understanding the underlying causes is essential to defining policy priorities that may help address the structural sources of discontent.

GDP growth is not alone in driving social unrest, as protests have not necessarily taken place in countries with the lowest growth rates or at times of lower economic dynamism, like the 2008 crisis.  Furthermore, income gradually ‘delinks’ from well-being outcomes, as countries move up the income ladder. This has clearly been the case for most Latin American countries since the 2000s (OECD et al., 2019a). Continue reading →

Overcoming the Challenges of the Transition and Exit from Aid

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By Annalisa Prizzon, Senior Research Fellow, Overseas Development Institute 

This blog is part of an ongoing series evaluating various facets
of Development in Transition

 

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Flat stairs, Sao Paulo by Jared Yeh / Flickr CC-BY-NC-ND

Since 2000, the number of low-income countries (LICs) has more than halved — from 63 to 31 — and have now joined the ranks of middle-income countries (MICs). Typically, these economies have strengthened their macroeconomic management, played a stronger and more visible role in global policy, diversified their sources of finance and received less external development assistance (or ceased to benefit materially from it).

As developing countries become richer and address their own development challenges, donors usually reconsider their programming and interventions. And so, transition and exit from bilateral development co-operation programmes should rightfully be celebrated as an indicator of success in economic and social development.

Challenges facing financing for development

However, as countries graduate from soft windows of multilateral development banks or as bilateral donors cut their country programmes — or they shift to loans if that is an option — the financing mix changes. Reliance on tax revenues and commercial finance when aid starts falling inevitably expands, and so does the costs to service debt obligations. Tax revenues do not necessarily increase to fill the gap. Continue reading →

Triangular, the shape of things to come?

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By Mario Pezzini, Alicia Barcena, Stefano Manservisi 

This blog is part of an ongoing series evaluating various facets
of Development in Transition

As the global community gathers in Argentina to mark the 40th anniversary of the United Nations Conference on Technical Cooperation among Developing Countries, we have an additional opportunity to discuss, debate, and design a reinvigorated international co-operation system.

And something as small as what is currently called “triangular co-operation” can take centre stage in that system. Just like few imagined that the European Coal and Steel Community created in 1950 would grow into what the European Union is today, we think triangular co-operation’s future potential could very well dwarf its current status.

Rather than rationalise business as usual, we believe triangular co-operation could give us, instead, wide space for unleashing new thinking about the promise and value of multi-partner engagements to advance inclusive and sustainable development.

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The Future of Development Co-operation: Not the end, just the beginning of a new era?

Development Matters Development finance, ODA, Policy ,

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By Andy Sumner, King’s College London

This blog is part of an ongoing series evaluating various facets
of Development in Transition
The 2019 Perspectives on Global Development
on Rethinking Development Strategies adds to this discussion

immigration-integrationYesterday’s blog listed five areas of change related to global poverty and economic development in developing countries. What do these changes mean for development co-operation?

First, development co-operation needs to adapt to the new polarisation within the developing world. More precisely, the old model of supporting ‘stuck’ and ‘ODA-dependent’ developing countries needs to be complemented with a new model of collaborating with ‘moving’ and ‘post-ODA’ developing countries.

Second, development co-operation to support expanding social welfare regimes and social protection systems focused particularly on children is important to disrupt the inter-generational transmission of poverty, especially given that under 18-year olds make up half of global poverty.

Over 100 developing countries have already established cash transfer schemes, which indicates that these systems are already being built, and systematic reviews concur on poverty reduction impacts. A global knowledge bank on building social welfare and social protection systems is thus one potential area for post-ODA development co-operation. Continue reading →

5 facts about global poverty that may surprise you

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By Andy Sumner, King’s College London

This blog is part of an ongoing series evaluating various facets
of Development in Transition
The 2019 Perspectives on Global Development
on Rethinking Development Strategies adds to this discussion

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This blog is the first of two. Part one outlines five facts about global poverty and economic development in the developing world and discusses how the nature of development is changing. Part two, which will post tomorrow, will consider the implications of these changes for future development co-operation.

Fact 1. A new polarisation is emerging in the developing world. A new polarisation is emerging within the developing world between ‘moving’ and ‘stuck’ countries, as well as between ‘high-ODA’ and ‘post-ODA’ countries. Continue reading →

What’s the path to sustainable development?

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By Mario Pezzini, Director, OECD Development Centre, and Special Advisor to the OECD Secretary-General on Development

This blog is part of an ongoing series evaluating
various facets of Development in Transition.
Perspectives on Global Development 2019: Rethinking Development Strategies
adds to this discussion

Cover-PGD_2019What’s the path to sustainable development? In this era of the Sustainable Development Goals (SDGs) — when all countries face both new challenges and new opportunities for improving the lives of their citizens in inclusive, holistic and environmentally sustainable ways – the question remains as relevant as ever.

Some may think the question was answered in the 2000s when we witnessed the transformation of the global economic geography. Whereas only 12 developing countries in the 1990s managed to double the OECD per-capita growth rates, 83 developing countries managed to do so a decade later. By 2008, developing and emerging economies made up 50% of the global economy for the first time. And the 15-fold surge in South-South trade linkages from 1990 to 2016 and the jump in development finance from USD 3.2 billion in 2003 go USD 15.6 billion in 2012 provided by large emerging economies, notably China, are clear proof points of this new economic geography.

Yet, this upswing in global economic growth masks two underlying issues that we cannot ignore on the road to sustainable development.

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What does it take for a Development Bank to succeed?

Development Matters Development finance, Policy , , ,

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By João Carlos Ferraz, Instituto de Economia, Universidade Federal do Rio de Janeiro, Brazil

This blog is part of an ongoing series evaluating various facets
of Development in Transition. The 2019 “Perspectives on Global Development” on “Rethinking Development Strategies” will add to this discussion

bank-finance-growth-financePublic finance institutions, or development banks, have “development DNA”. But, can they effectively engage in financing “development in transition” or the call to rethink international co-operation to help countries at all levels of income sustain their development gains? What would it take for such institutions to succeed? How can they anticipate and effectively respond to societal and market needs and aspirations?

Political space for this does exist. A consensus exists that development banks must have at least four priorities: infrastructure, innovation, sustainable environment and firms of smaller size. That’s the easy part! No policy maker or analyst in their right mind would be against these priorities. But, consider the nature of these priorities: each one is time- and place-specific but evolving permanently; they are moving targets. More importantly, they are risk-intensive, given the duration and unpredictability of associated projects and/or the potentially low credit worthiness of economic agents pursuing these priorities.
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