Is there an institutional trap in middle-income countries?

By José Antonio Alonso, professor of Applied Economics at the Complutense University of Madrid. He is co-editor of the recent book: Trapped in the Middle? Developmental Challenges for Middle-Income Countries, Oxford University Press, 2020

It is assumed that, as countries progress, they require better institutions to manage the societal issues that emerge with more extensive and sophisticated markets and respond to the needs of a more demanding society. In other words, the development process requires a path of institutional change. However, economic and institutional processes do not necessarily evolve at the same pace, as institutions are subject to greater inertia. As a consequence, inertial institutions can fall behind social demands, or else changes in institutions may not be properly rooted in social behaviour.

These issues are particularly relevant to middle-income countries which tend to experience episodes of intense economic growth that put their institutional frameworks under pressure. Transforming expansive episodes into sustained economic convergence with high-income countries requires a continuous and successful process of institutional improvement. However, these two processes are difficult to synchronise.

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Fiscal policy in the time of COVID-19: a new social pact for Latin America

By Pablo Ferreri, Public Accountant and former Vice Minister of Economy and Finance of Uruguay


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.

We could say that ultimately the role of government remains unchanged overtime: to achieve ever higher levels of development with the understanding that true development means achieving sustained economic growth while generating greater equity and social cohesion. This must be done through more and better exercise of civil rights and in an environmentally sustainable manner. But in achieving this ultimate goal, challenges change according to realities that governments must face.

Challenges that Latin America faced fifteen years ago, when it enjoyed high levels of growth and a commodity boom in an increasingly open world, are quite different to those that have been brought about by economic slowdown, lower international prices and new isolationist tendencies.

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We know what policies can fix the COVID-19 inequality emergency. But only people power can win them

By Ben Phillips, Advisor to the United Nations, governments and civil society organisations, former Campaigns Director for Oxfam and for ActionAid, and co-founder of  the Fight Inequality Alliance. He is the author of “How to Fight Inequality


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.

COVID-19 did not create the inequality crisis. But COVID-19 is seeing inequality metastasise into the most socially dangerous global emergency since World War II.  The problem is clear. The OECD Secretary-General has rightly drawn the analogy with the Post-War reconstruction and Marshall Plan to illustrate the level of ambition needed. Opening the OECD conference on “Confronting Planetary Emergencies”, President Michael D Higgins of Ireland set out the need for a “radical departure” from “decades of unfettered neoliberalism” which have left people “without protection as to basic necessities of life, security and the ability to participate”. As he noted, “it is no longer sufficient to describe, however brilliantly, systemic failure. We must have the courage to speak out and work for the alternatives.”

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Can middle income countries rise up to their citizens’ expectations?

By Mario Pezzini, Director of the OECD Development Centre and Special Advisor to the OECD Secretary General on Development[i]

A call for a new social contract

Despite significant economic growth over the past years, middle-income countries (MICs) face increasingly complex challenges related to, among others, a growing demand from their new and still vulnerable middle-classes. As middle-classes have grown in recent decades, so have citizens’ aspirations and demands for quality public goods, better services and a more responsive and transparent state. More educated, better informed, and more connected than ever before, citizens are asking for more voice in public decisions. In parallel, growing aspirations confronted with chronic vulnerability of middle-classes tend to generate frustration and, more and more frequently, social turbulence. Discontent has been erupting for several years in many of these countries, going back to the Arab Spring, with recent examples like Lebanon, and some Latin American countries, including high-income countries like Chile. Today, challenges are exacerbated as the COVID-19 crisis pushes members of the middle class who had previously escaped extreme poverty, back into it. Governments seem increasingly incapable of understanding how people perceive their quality of life.

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Democracy is a public good. What is the development community doing about it?

By Anthony Smith, CEO of the Westminster Foundation for Democracy (WFD)

Democracy has been undervalued by the development community. I understand why – I am a child of decolonisation and its political economy of liberation, and my introduction to international development was through the target-driven Millennium Development Goals (MDGs). But I have come down firmly on the side of Amartya Sen’s view on the timing of democracy.  He said: “A country does not have to be deemed fit for democracy; rather, it has to become fit through democracy.” For too long, some in the donor community have been ambivalent about this, wanting proof that development goals would be reached faster in democracies than in autocracies and implying that democracy could wait. For too many of us, the politics of our partner country was just a factor to be navigated around to avoid disrupting our programmes.

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