write a critical note on the various debates on models of development planning.
Answers
Reducing poverty and climbing the ladder to prosperity aren’t easy: From 1950-2008, only 28 economies in the world have reduced their gaps with US by 10 percent or more. Among those 28 economies, only 12 are non-European and non-oil exporters. Such a small number is sobering: It means that most countries have been trapped in middle-income or low-income status. As development economists, we must find a way to help them improve their performance so that our dream of “a world free of poverty” can be realized and they can close the gap with the high-income countries.
At the round table discussion during the recent World Bank-IMF Spring Meetings in Washington on April 18, I made the following main points: the first wave of development economics, which emerged as a new sub-discipline of the modern economics after World War II, was heavily influenced by structuralism. Emphasizing importance of structural change, it attributed the lack thereof to market failures and proposed government interventions to correct it, most notably via import substitution strategies, many of which failed. By the 1970s, a second wave of thinking led to a gradual shift to free market policies, which culminated in the Washington Consensus. It expected spontaneous structural change to occur as long as the markets remained free. Its policy framework consisted mainly of getting prices right through liberalization and privatization, ensuring macroeconomic stability, and improving governance. Its results were at best controversial and some have even characterized the 1980s and 1990s as the developing countries’ “lost decades”.
Because developing countries were not able to close the gap with high-income countries and because of persistent poverty, the international donor community shifted their efforts to humanitarian projects such as investing directly education and health for poor people. But service delivery remained disappointing in most countries. This led to a new focus on improving project performance, which researchers at the MIT’s ‘Poverty Action Lab’ have pioneered with randomized controlled experiments.
Commenting on the evolution of development thinking from early structuralism/Washington Consensus to project- or sector-based approaches, Michael Woolcock has written about a shift from "Big Development" to "Small Development". While it is clearly important to understand the determinants of project performance, it is questionable whether that is really the route to economic prosperity. After all, the only 12 economies that were able to close the gap with the US by 10 percent or more did not start their development journey with micro-projects but with big ideas.
In my roundtable presentation I suggested that development economists go back to Adam Smith—not to “the Wealth of Nations”, but to the Inquiry into the Nature and Causes of the Wealth of Nations. Modern economic development in nature is a process of continuous structural changes in technology, industry, socioeconomic and political institutions. It did not appear until the 18th century—before that time every c
Former Soviet Union leader Joseph Stalin and famous Irish writer Oscar Wilde had very little in common. Yet they agreed on one thing: the importance of ideas in human life. The former once said: “Ideas are more powerful than guns. We would not let our enemies have guns, why should we let them have ideas?” The latter boldly wrote that “An idea that is not dangerous is unworthy of being called an idea at all.” My colleagues who serve as regional chief economists at the Bank -- Shanta Devarajan, Kalpana Kochhar, Indermit Gill -- also agree with me that ideas drive various societal transformations. Nevertheless, they disagree with me on several points, as highlighted in their joint post on Africa Can. We all want to generate and channel the best knowledge on development to policymakers around the world who have been struggling for centuries—if not millennia—to lift their people out of poverty.
Reducing poverty and climbing the ladder to prosperity aren’t easy: From 1950-2008, only 28 economies in the world have reduced their gaps with US by 10 percent or more. Among those 28 economies, only 12 are non-European and non-oil exporters. Such a small number is sobering: It means that most countries have been trapped in middle-income or low-income status. As development economists, we must find a way to help them improve their performance so that our dream of “a world free of poverty” can be realized and they can close the gap with the high-income countries.
At the round table discussion during the recent World Bank-IMF Spring Meetings in Washington on April 18, I made the following main points: the first wave of development economics, which emerged as a new sub-discipline of the modern economics after World War II, was heavily influenced by structuralism. Emphasizing importance of structural change, it attributed the lack thereof to market failures and proposed government interventions to correct it, most notably via import substitution strategies, many of which failed. By the 1970s, a second wave of thinking led to a gradual shift to free market policies, which culminated in the Washington Consensus. It expected spontaneous structural change to occur as long as the markets remained free. Its policy framework consisted mainly of getting prices right through liberalization and privatization, ensuring macroeconomic stability, and improving governance. Its results were at best controversial and some have even characterized the 1980s and 1990s as the developing countries’ “lost decades”.
Because developing countries were not able to close the gap with high-income countries and because of persistent poverty, the international donor community shifted their efforts to humanitarian projects such as investing directly education and health for poor people. But service delivery remained disappointing in most countries. This led to a new focus on improving project performance, which researchers at the MIT’s ‘Poverty Action Lab’ have pioneered with randomized controlled experiments.
Commenting on the evolution of development thinking from early structuralism/Washington Consensus to project- or sector-based approaches, Michael Woolcock has written about a shift from "Big Development" to "Small Development". While it is clearly important to understand the determinants of project performance, it is questionable whether that is really the route to economic prosperity. After all, the only 12 economies that were able to close the gap with the US by 10 percent or more did not start their development journey with micro-projects but with big ideas.
In my roundtable presentation I suggested that development economists go back to Adam Smith—not to “the Wealth of Nations”, but to the Inquiry into the Nature and Causes of the Wealth of Nations. Modern economic development in nature is a process of continuous structural changes in technology, industry, socioeconomic and political institutions. It did not appear until the 18th century—before that time every c