Category: Economic Growth

Haiti Stagnates Under Crony Capitalism

(p. A13) A May 2015 World Bank “systematic country diagnostic” on Haiti is instructive.
. . .
As the World Bank report notes, Haiti suffers from crony capitalism that holds back economic growth.
. . .
The record of Haiti’s elected politicians, since the transition to democracy at the beginning of the 1990s, is dismal. The political class still uses its power for personal aggrandizement, as the infamous dictators François Duvalier and his son Jean-Claude did for almost 30 years.
Just as discouraging is that after more than two decades of going to the polls, Haitians have yet to taste economic freedom, and emigration has become the only option for those who hope to get ahead by hard work. The World Bank reports that between 1971 and 2013 gross domestic product per capita “fell by .7% per year on average.”
. . .
The World Bank authors gently speculate that there is “little competitive pressure.” They observe this “could be the result of high legal or behavioral entry barriers” and this “could facilitate tacit agreements among families/groups to allocate markets among themselves, which may harm productivity and incentive to innovate.”
This is polite jargon for collusion, which Haitians already know. They also know that absent the political will to open markets to competition, elections won’t matter much.

For the full commentary, see:
MARY ANASTASIA O’GRADY. “Diagnosing What Ails Haiti’s Economy; The World Bank fingers cronyism, of which Bill Clinton was for years a symbol.” The Wall Street Journal (Mon., Oct. 12, 2015): A13.
(Note: ellipses added.)
(Note: the online version of the commentary was updated on Oct. 11, 2015.)

The World Bank report mentioned in the passages quoted above, is:
HAITI: TOWARDS A NEW NARRATIVE SYSTEMATIC COUNTRY DIAGNOSTIC, May 2015.

Top-Down Aid “Hasn’t Worked in Africa”

(p. 2) John Mackey is the co-founder and co-chief executive officer of Whole Foods Market, the nation’s largest chain of natural foods supermarkets.
READING . . .
. . . “The Idealist: Jeffrey Sachs and the Quest to End Poverty,” by Nina Munk. Sachs is an economist and I’m sure he doesn’t like the book because it points out that his top-down aid type of approach hasn’t worked in Africa. A more bottom-up approach through entrepreneurship and boot strapping seems to be more effective, which is the approach we take at our Whole Planet Foundation.

For the full interview, see:
KATE MURPHY, interviewer. “Download; John Mackey.” The New York Times, SundayReview Section (Sun., NOV. 23, 2014): 2.
(Note: bold in original; ellipses added.)
(Note: the online version of the interview has the date NOV. 22, 2014.)

The book praised in the interview is:
Munk, Nina. The Idealist: Jeffrey Sachs and the Quest to End Poverty. New York: Doubleday, 2013.

World Inequality Declines

(p. 6) Income inequality has surged as a political and economic issue, but the numbers don’t show that inequality is rising from a global perspective. Yes, the problem has become more acute within most individual nations, yet income inequality for the world as a whole has been falling for most of the last 20 years. It’s a fact that hasn’t been noted often enough.
The finding comes from a recent investigation by Christoph Lakner, a consultant at the World Bank, and Branko Milanovic, senior scholar at the Luxembourg Income Study Center. And while such a framing may sound startling at first, it should be intuitive upon reflection. The economic surges of China, India and some other nations have been among the most egalitarian developments in history.

For the full commentary, see:
TYLER COWEN. “The Upshot; Economic View; All in All, a More Egalitarian World.” The New York Times, SundayBusiness Section (Sun., JULY 20, 2014): 6.
(Note: the online version of the commentary has the date JULY 19, 2014, has the title “The Upshot; Economic View; Income Inequality Is Not Rising Globally. It’s Falling.”)

Those Who Use “Consensus” Argument on Global Warming, Should Endorse Genetically Modified Food

(p. B3) NAIROBI, Kenya — Mohammed Rahman doesn’t know it yet, but his small farm in central Bangladesh is globally significant. Mr. Rahman, a smallholder farmer in Krishnapur, about 60 miles northwest of the capital, Dhaka, grows eggplant on his meager acre of waterlogged land.
As we squatted in the muddy field, examining the lush green foliage and shiny purple fruits, he explained how, for the first time this season, he had been able to stop using pesticides. This was thanks to a new pest-resistant variety of eggplant supplied by the government-run Bangladesh Agricultural Research Institute.
Despite a recent hailstorm, the weather had been kind, and the new crop flourished. Productivity nearly doubled. Mr. Rahman had already harvested the small plot 10 times, he said, and sold the brinjal (eggplant’s name in the region) labeled “insecticide free” at a small premium in the local market. Now, with increased profits, he looked forward to being able to lift his family further out of poverty. I could see why this was so urgent: Half a dozen shirtless kids gathered around, clamoring for attention. They all looked stunted by malnutrition.
. . .
I, . . . , was once in [the] . . . activist camp. A lifelong environmentalist, I opposed genetically modified foods in the past. Fifteen years ago, I even participated in vandalizing field trials in Britain. Then I changed my mind.
After writing two books on the science of climate change, I decided I could no longer continue taking a pro-science position on global warming and an anti-science position on G.M.O.s.
There is an equivalent level of scientific consensus on both issues, I realized, that climate change is real and genetically modified foods are safe. I could not defend the expert consensus on one issue while opposing it on the other.

For the full commentary, see:
MARK LYNAS. “How I Got Converted to G.M.O. Food.” The New York Times, SundayReview Section (Sun., APRIL 26, 2015): 5.
(Note: ellipses, and bracketed word, added.)
(Note: the online version of the commentary has the date APRIL 24, 2015.)

“Plunged Back into a Pre-Industrial Hell”

(p. B1) If you drive a car, or use modern medicine, or believe in man’s right to economic progress, then according to Alex Epstein you should be grateful–more than grateful. In “The Moral Case for Fossil Fuels” the author, an energy advocate and founder of a for-profit think tank called the Center for Industrial Progress, suggests that if all you had to rely on were the good intentions of environmentalists, you would be soon plunged back into a pre-industrial hell. Life expectancy would plummet, climate-related deaths would soar, and the only way that Timberland and Whole Foods could ship their environmentally friendly clothing and food would be by mule. “Being forced to rely on solar, wind, and biofuels would be a horror beyond anything we can imagine,” writes Mr. Epstein, “as a civilization that runs on cheap, plentiful, reliable energy would see its machines dead, its productivity destroyed, its resources disappearing.”

For the full review, see:
PHILIP DELVES BROUGHTON. “BOOKSHELF; Go Ahead, Fill ‘Er Up; Renouncing oil and its byproducts would plunge civilization into a pre-industrial hell–a fact developing countries keenly realize.” The Wall Street Journal (Tues., Dec. 2, 2014): A15.
(Note: the online version of the review has the date Dec. 1, 2014, and has the title “BOOKSHELF; Making ‘The Moral Case for Fossil Fuels’; Renouncing oil and its byproducts would plunge civilization into a pre-industrial hell–a fact developing countries keenly realize.”)

The book praised in the review is:
Epstein, Alex. The Moral Case for Fossil Fuels. New York: Portfolio, 2014.

China Looks to Innovation to Increase Growth

(p. 6) Wrapping up the 11-day session at a news conference on Sunday [March 15, 2015], Premier Li Keqiang said that while the economy faced downward pressure, the government has room to step in and has “more tools in our toolbox” should growth flag and affect employment.
. . .
As exports, investment and infrastructure become more ineffective in generating economic growth, China’s leadership is looking to innovation and entrepreneurship to pick up the slack.
Toward that end, Mr. Li said Beijing will continue to reduce regulatory interference. The number of government approvals required to begin a new venture has roughly halved to 50 to 60 steps in recent years, he said, although this level still raises costs and damps enthusiasm for startups.
But the Chinese state retains an oversized role in the economy and many of the outlined moves to limit its role are difficult to verify.

For the full story, see:
MARK MAGNIER. “Beijing Plans More Action to Spur Growth.” The Wall Street Journal (Mon., March 16, 2015): A9.
(Note: ellipsis, and bracketed date, added. Where there was a small difference in paragraph structure, the quoted passages follow the print version.)
(Note: the online version of the story has the date March 15, 2015, has the title “China Plans More Action to Spur Growth.”)

Feds Constrain Startups

(p. A15) Virtually every state has suffered a drop in startups, which suggests that this is a national, and not a regional or state, problem.
. . .
If history is any indication, many of today’s economic heavyweights will ultimately decline as new businesses take their place. Research by the Kaufman Foundation shows that only about half of the 1995 Fortune 500 firms remained on the list in 2010.
Startups also have declined in high technology. John Haltiwanger of the University of Maryland reports that there are fewer startups in high technology and information-processing since 2000, as well as fewer high-growth startups–annual employment growth of more than 25%–across all sectors. Even more troubling is that the smaller number of high-growth startups is not growing as quickly as in the past.
. . .
Surveys by John Dearie and Courtney Gerduldig, authors of “Where the Jobs Are: Entrepreneurship and the Soul of the American Economy” (2013), show that entrepreneurs report being hamstrung by difficulties in finding skilled workers, by a complex tax code that penalizes small business, by regulations that raise the costs of doing business, and by difficulties in obtaining financing that have worsened since 2008.

For the full story, see:
EDWARD C. PRESCOTT and LEE E. OHANIAN. “Behind the Productivity Plunge: Fewer Startups; New businesses were created at a 30% lower rate in 2012 than the annual average rate in the 1980s.” The Wall Street Journal (Thurs., June 26, 2014): A15.
(Note: ellipses added.)
(Note: the online version of the story has the date June 25, 2014.)

The Dynamism of Venturesome New Yorkers: “If You Want Country Living, Move to the Country”

(p. A18) One cannot live any closer to the terminals of La Guardia Airport than the residents of East Elmhurst, Queens. Some homes sit only a few hundred yards away from the control tower, on the opposite side of the Grand Central Parkway. The new $4 billion airport hub envisioned for the site, announced this week by Gov. Andrew M. Cuomo and Vice President Joseph R. Biden, would be even closer.
So it might be assumed that the promise of years of heavy-duty construction and the associated noise, traffic and dust would fill residents with dread.
Not quite.
“We live in New York City, honey,” said Michele Mongeluzo, 56, whose house sits on a rise just south of the parkway, offering an unobstructed view of the airport and the proposed construction site. “If you want country living, move to the country.”
In interviews this week along the blocks closest to the airport, residents almost universally said that they not only had no trepidation about the construction but that they also actually welcomed it. Improvements, they said, were long overdue.
Furthermore, they suggested, what was a little construction on top of the aural challenges — the roaring jet engines, the chop of helicopter rotors, the incessant highway traffic — that they had already contended with and apparently overcome?
“If it’s noisy, I’m used to it,” said Freddy Fuhrtz, 75, who retired as an employee in the cargo division of Pan Am and still lives in the two-story house on 92nd Street where he grew up and raised his children. “It’s progress.”

For the full story, see:
KIRK SEMPLE. “Construction Plans Don’t Faze Airport Neighbors.” The New York Times (Fri., JULY 31, 2015): A18 & A21.
(Note: the online version of the story has the date JULY 30, 2015, and has the title “Construction Plans for La Guardia Airport Don’t Faze Its Neighbors.”)

“The Countryside Was Romantic Only to People Who Didn’t Have to Live There”

(p. C4) Mr. Meyer’s motivation for writing his book is simple and straightforward. “Since 2000, a quarter of China’s villages had died out, victims of migration or the redrawing of municipal borders,” as the country urbanizes, he notes early on, adding: “Before it vanished I wanted to experience a life that tourists, foreign students, and journalists (I had been, in order, all three) only viewed in passing.”
“In Manchuria” shifts back and forth among various genres. It is part travelogue, part sociological study, part reportage and part memoir, but it is also a love offering to Mr. Meyer’s wife, Frances, who grew up in the unfortunately named Wasteland, the village that Mr. Meyer chooses as his base near the start of this decade, and to the unborn son she is carrying by the time “In Manchuria” ends.
. . .
After a year in Wasteland, Mr. Meyer was ready to move on, and he now divides his time between Singapore and Pittsburgh, where he teaches nonfiction writing. But his interlude in Manchuria clearly taught him many lessons, perhaps the most fundamental being this: “The countryside was romantic only to people who didn’t have to live there.”

For the full review, see:
LARRY ROHTER. “A Vanishing Way of Life for Peasants in China.” The New York Times Book Review (Mon., MARCH 8, 2015): C4.
(Note: ellipsis added.)
(Note: the online version of the review has the date MARCH 8, 2015, and has the title “Review: Michael Meyer’s ‘In Manchuria’ Documents a Changing Rural China.”)

The book under review, is:
Meyer, Michael. In Manchuria: A Village Called Wasteland and the Transformation of Rural China. New York: Bloomsbury Press, 2015.

Keeping Growth Rate High in China Achieved by More Misallocation of Capital

(p. A11) . . . , it is Beijing’s recent moves to ease fiscal policy that will ensure that this year’s growth target can be met. Unlike traditional Keynesian stimulus programs, which are typically conducted at the central-government level, in China fiscal easing primarily involves providing additional state-bank money to local governments.
This has a more immediate and powerful effect on GDP growth and job creation, but it comes at a high cost: overinvestment in local projects and the misallocation of capital. China’s landscape is littered with unused highways and airports, redundant steel and cement plants, unnecessary municipal office buildings and “ghost cities” filled with empty high-rises and deserted shopping malls.
From 2009-13, “ineffective investment” amounted to a stunning 41.8 trillion yuan ($6.8 trillion), according to research published in 2014 by Xu Ce of China’s National Development and Reform Commission and Wang Yuan of the Academy of Macroeconomic Research.
That China is heading down this path again can only mean that it has no other way to reach its growth target. It is also an indication of how little the economic system has changed despite the leadership’s much vaunted reform initiatives and efforts to tackle corruption at all levels of government.

For the full commentary, see:
MARK A. DEWEAVER. “Why China Will Still Reach Its Target Growth Rate; The stock market crash won’t stop Beijing from shoveling trillions into wasteful local projects.'” The Wall Street Journal (Fri., July 31, 2015): A11.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date July 30, 2015.)

“The Great Fact” of “the Ice-Hockey Stick”

(p. 2) Economic history has looked like an ice-hockey stick lying on the ground. It had a long, long horizontal handle at $3 a day extending through the two-hundred-thousand-year history of Homo sapiens to 1800, with little bumps upward on the handle in ancient Rome and the early medieval Arab world and high medieval Europe, with regressions to $3 afterward–then a wholly unexpected blade, leaping up in the last two out of the two thousand centuries, to $30 a day and in many places well beyond.
. . .
(p. 48) The heart of the matter is sixteen. Real income per head nowadays exceeds that around 1700 or 1800 in, say, Britain and in other countries that have experienced modern economic growth by such a large factor as sixteen, at least. You, oh average participant in the British economy, go through at least sixteen times more food and clothing and housing and education in a day than an ancestor of yours did two or three centuries ago. Not sixteen percent more, but sixteen multiplied by the old standard of living. You in the American or the South Korean economy, compared to the wretchedness of former Smiths in 1653 or Kims in 1953, have done even better. And if such novelties as jet travel and vitamin pills and instant messaging are accounted at their proper value, the factor of material improvement climbs even higher than sixteen–to eighteen, or thirty, or far beyond. No previous episode of enrichment for the average person approaches it, not the China of the Song Dynasty or the Egypt of the New Kingdom, not the glory of Greece or the grandeur of Rome.
No competent economist, regardless of her politics, denies the Great Fact.

Source:
McCloskey, Deirdre N. Bourgeois Dignity: Why Economics Can’t Explain the Modern World. Chicago: University of Chicago Press, 2010.
(Note: ellipsis added.)