Is Asia Aging Prematurely?

This is from the FT:

China’s working-age population peaked in 2011 but its per capita income was just 20.7 per cent of the US level. Thailand was a little wealthier, at 28.9 per cent, when its working-age share peaked in 2013, but Vietnam was far poorer still, at 10.4 per cent of the US level, when it reached the same point a year later. Malaysia, Indonesia, India and the Philippines are projected to be somewhat better off when they reach peak working-age share, probably between 2020 and 2056, but still some way below the income levels reached in the west, as the third chart shows.

In February of this year, projections by Standard Chartered suggested that, by 2050, the likes of South Korea, Singapore, Thailand and China would have a higher share of pensioners in their population than most developed countries, depicted in the second chart [see below].

Screen Shot 2017-05-17 at 10.25.56 AM.png

These are pretty sobering figures. Basically (East) Asia’s dependency ratios will quickly begin to look a lot more like what obtains in low-income as opposed to high and upper middle income states. And that means a stagnation or even decline in per capita income.

It will be interesting to see how these countries — most of which have historically been averse to immigration — will deal with this demographic challenge.

In addition to the obvious economic challenges, Asian countries will also have to figure out how to take care of the medical needs of an aging population that will likely be living longer.

More on this here.

Cash and Markets in Development

This is from a story in Kenya’s Standard Newspaper:

Martin Wepukhulu is a small-holder farmer in Trans Nzoia County, popularly described as Kenya’s breadbasket. To produce a two-kilogramme tin of maize known as gorogoro here, he spends about Sh25 on land preparation, seeds and fertilisers on his one-acre farm.

Some 270 kilometre away in Turkana County, one of Kenya’s poorest counties, is Loseny Nguono, a goat keeper, with two wives and 13 children. Turkana is one of the 23 counties affected by drought which has left close to 4 million people in danger of starvation.

Loseny receives Sh8,000 after every two months from the national government through the national safety net programme. He is willing to pay Martin a decent Sh70 for his gorogoro of maize. Unfortunately, neither Martin nor Loseny will get his wish. A reclusive government, ruthless cartels, dilapidated roads and marauding bandits conspire to ensure that while Martin sells his cereals at a low of Sh40, Loseny buys it at a high of Sh150.

Read the whole thing here.

It is great that Loseny has cash; and that unconditional cash transfers for social protection are increasingly becoming a mainstream policy option (notice that the story doesn’t even acknowledge the awesomeness of this reality). But the other lesson that we can learn from the story is that in order to get Loseny out of poverty we need good roads, properly functioning markets, and security. All these are public goods that must be provided through collective action, above and beyond the improvements in Loseny’s private consumption.

A Kansas City High Schooler’s Development Questions

I regularly receive emails from readers with all sorts of questions and requests. This one caught my eye:

Hello Dr. Opalo,

My name is [redacted] and I am a senior in high school in Kansas City, MO. I am currently working on an exhibition regarding poverty in sub Saharan Africa. My essential question is: What are the factors that contribute to ongoing poverty in sub Saharan Africa. I was wondering if you would be willing to answer a few questions to assist me in my research.

1. How would you describe the current state of poverty in sub-Saharan Africa?

2. What can be done to solve the feminization of poverty?

3. Is Time Poverty a large factor in ongoing poverty and how can time poverty be solved?

4. How can safety be maintained in sub-Saharan Africa through policy?

5. What can an average American do to help end poverty?

Thank you for your time!

If you have answers to any of these questions, let me know in the comments section. I plan to write back before the student’s exhibition is due…

The vanishingly small African middle class

The Economist reports:

Screen Shot 2015-10-23 at 12.50.11 PMGood data on the exact size of the middle class are hard to come by, but it remains small across most parts of the continent. The Pew Research Centre, an American outfit, reckons that just 6% of Africans qualify as middle class, which it defines as those earning $10-$20 a day. On this measure the number of middle-income earners in Africa barely changed in the decade to 2011.

…… Unlike Asia, Africa has failed to develop industries that generate lots of employment and pay good wages. Only a few countries manufacture very much, largely because national markets are small and barriers to trading within Africa are huge. Most people who leave the countryside move into labour-intensive but not very productive jobs such as trading in markets. John Page, also of Brookings, reckons that such jobs are on average only about twice as productive as the ones that many left behind.

How much does it cost to construct an MDG borehole in Abuja?

The Premium Times of Nigeria reports:

Nigeria’s Millennium Development Goals (MDG) office spent N154.2 million to construct a single borehole in Abuja, in a shocking example of contract inflation that has helped undermine the country’s ability to achieve its MDG goals.

Drilling a single borehole drilling in Abuja averages N1.5 million. A hydrology firm told PREMIUM TIMES that the amount should cover drilling and casing, installation of a solar-powered submersible pump, steel tower for the tanks, tanks, pipes, joints & suckers, installation and labour.

The firm allowed an expanded estimate of N10 million if a water treatment facility is included alongside other optional accessories.

The Abuja borehole, constructed at Gwarinpa, an expansive estate in the federal capital, had no such fittings. Indeed, the borehole had long become dysfunctional and was no longer dispensing water to the residents when PREMIUM TIMES visited in June 2015.

Still, the Abuja MDG office told this newspaper it was more concerned with service delivery to the people, than the amount it takes to do so (emphasis added).

World Bank Recruitment Drive for African Nationals

Are you a national of an African country? Do you have a Masters’ degree and are interested in working for the World Bank Group? Then be sure to apply here before AUGUST 31, 2015. The positions (covering 22 different issue areas) may be based either in DC or in country offices.

“Qualifications for the entry level is a Master’s degree plus 5 years of relevant professional experience. For mid-career professionals, the requirements are a Master’s degree plus 8 years of relevant professional experience. Ideal candidates for these positions must have a demonstrated capacity for strategic thinking, the ability to conduct dialogue on relevant development policies and priorities, and be fluent in English with very good writing and communication skills.

All applications must be received by August 31, 2015. Applications received after the closing date will not be considered.”

More on this here.

H/T Teresa

Making International Development Research and Assistance Work

In the spirit of discussion Tom Pepinsky has a nice pithy response to Chris Blattman’s post on the wastefulness of skills training as development assistance. Both raise interesting questions about development research and practice. Pepinsky writes:

It always strikes me how different the view of (say) the World Bank is from that of the local entrepreneur, laborer, or mother who works at home. My immediate thought when I hear that any individually-targeted development intervention has failed is “well, could it have succeeded?” In other words, does the intervention manipulate a binding constraint for an individual or household? ………….. The people who know how to learn about those everyday constraints are trained in ethnography—and I mean serious ethnography, the kind that involves languages and staying outside of a hotel.

A focus on institutions implies a different direction. Everyone agrees that institutions are important, but the cutting edge in development economics and related parts of political science focuses elsewhere. Why? Because institutions aren’t manipulable, their features bundle lots of treatments, core concepts remain tremendously fuzzy (try defining governance, for example), we don’t seem to have learned a lot from decades of studying them, and the potential for disaster from bad institutional design is just enormous.

I agree with Pepinsky. I would also add that on top of taking local contextual variables and institutions seriously, development practice and research should also take local elites (both economic and political) seriously.

The discourse on development oscillates between “institutions” and “the poor.” Governance reforms try to get institutions right. Pro-poor policies focus on alleviating suffering among the extremely poor via direct interventions at the “grassroots.” Many interventions therefore tend to be designed with a view of either constraining allegedly nefarious and/or clueless local elites via “institutions”; or completely circumventing them and going directly to the people. Needless to say, the attempts to go around local elites often result in failure.

The point here is not completely disparage pro-poor policies or governance reform programs. Rather, it is a reminder that chances of successful intervention go up when local elites are meaningfully involved. And by “involved” I mean when their interests and ideas are taken seriously. Elite capture is obviously a bad. But elite buy-in is almost always necessary for success. It is local elites that have the wherewithal to own job-generating cement plants. It is local elites who set tax rates. And it is local elites who build roads and power supply lines. Their ideas and interests therefore matter, and should be taken seriously (also just in case they do not necessarily want to, or cannot, transform their societies exactly into Denmark).

I say this because the assumption that local elites do not have much to offer except to steal state/aid resources for private benefit leads to research agendas (and interventions) that over-simplify their role in the whole process. Understanding local political dynamics, as suggested by Pepinsky, is therefore key for success. This means going beyond boilerplate “stylized facts” about ethnicity (or other sectoral interests) and patronage; and taking institutions (for example legislatures) and the coalitions of politicians who constitute them seriously. As students of the political economy of development, we ought to invest more in understanding local elite interests and ideas and how they influence state institutions and welfare outcomes at the grassroots.

Imagine for a second how different IMF or World Bank interventions would be if all their agreements with developing countries (say above a prescribed dollar amount) were subject to ratification by host-country legislatures. The process would be messy, yes (looking at you, Greece*). But I’d argue that finance ministers would get much better deals for their people — in no small part on account of greater levels of intra-elite accountability in the management of aid resources.

The irony of development research and practice is that we talk a lot about the importance of institutions, but then turn around and come up with ideas to circumvent them (and their elite membership) at every opportunity.

*Greece is a member of the OECD.

Things to remember as you volunteer or conduct research in a developing country this summer

Rafia Zakaria, on Al Jazeera America, writes:

My friend Jack likes to tell his favorite story about a summer he spent volunteering in Colombia. He recounts that story anytime he’s handed the opportunity, at parties, lunch meetings and airports. He highlights varying facets of the story on different occasions — the snake he found in his tent, his camaraderie with the locals and his skills at haggling. The message to his audience is clear: I chose hardship and survived it.

If designer clothes and fancy cars signal material status, his story of a deliberate embrace of poverty and its discomforts signals superiority of character. As summer looms, many Americans — college students, retirees and others who stand at the cusp of life changes — will make similar choices in search of transformational experiences. An industry exists to make these easier to make: the voluntourism business.

As admirably altruistic as it sounds, the problem with voluntourism is its singular focus on the volunteer’s quest for experience, as opposed to the recipient community’s actual needs.

Zakaria rightly adds that:

Despite its flaws, the educational aspect of voluntourism’s cross-cultural exchange must be saved, made better instead of being rejected completely.

As a volunteer or an academic researcher this summer, here are a few things you can do out of respect for the people you work with (especially if you fit standard definitions of “expat”). These points might seem obvious, but even seasoned professionals need a reminder every now and then.

  • Be respectful: I am often shocked at how some otherwise reasonable academics and college students acquire an aura of arrogant omnipotence the second they land in a developing country. Being accorded high status on account of foreignness can do real damage, it turns out. Do not feed off of this. Maintain a level head, and respect those that you deal with. It is for your own good. You will never be able to completely transform the societies you work in, or study. Be humble. Think incremental change. Remember that your presence is temporary. Do not exploit the goodwill of your hosts.
  • Work with the grain: Do not seek to disrupt the way people do things. You can offer advice and introduce people in the villages you visit to new ideas. But do not imagine yourself to be the great change agent. Because you are not. Sustainable change must be anchored within local power dynamics. Do not create parallel systems. I reiterate, whatever change you introduce must be anchored in existing systems. That is the only way the change will be incentive-compatible with the interests of those who hold the power to completely sabotage everything you do. You will most certainly fail if you ignore this reality.

    Africa_843

    This is not cool

  • Keep a diary: You will be in a lot of situations in which you can’t say exactly what you think (and shouldn’t). So keep a diary, and have it be the place where you jot down your naive and disrespectful random thoughts (we all have these thoughts). Review these diary entries once in a while. See if your entries change as you get to know your hosts better. If they don’t, find out what’s missing.
  • Lastly, do not plaster your social media profile wall-to-wall with images of anonymous people in various states of desperation. Nothing says that you are a jerk like having images of anonymous kids with torn clothes milling around you on your Facebook page. Whatever images you post, the world will know whether these were your real friends or just props to advertise to the world that you went to Nicaragua or Namibia. Do not post pictures of people whose names you don’t know, or of children whose parents did not give you permission to do so. Please, do not be that person.

Also, do not forget to learn. Learn and learn some more. And share with your hosts as much as you can.

UK passes bill to honour pledge of 0.7% foreign aid target, and a note on SDGs

The Guardian reports:

The international development bill passed its third reading in the House of Lords on Monday and will now receive royal assent. Britain met the 0.7% target for the first time last year when it spent £11.4bn – or 0.72% of its GNI – on overseas aid.

The 0.7% commitment was established by the UN in 1970. In 2013, only five other countries – Sweden, Norway, Luxembourg, Denmark and the United Arab Emirates – had met or exceeded the 0.7% aid spending target. The Netherlands had consistently met the target, but fell short in 2013.

All well and good.

The question, though, is what proportion of the 0.7% will finance various jobs programs for UK (and other Western) nationals working in the global development industrial complex (or in other sectors that benefit from tied aid) versus actually going to poverty alleviation in the developing world.

Source: Daily Nation

Source: Daily Nation

And speaking of the global development industry, here’s a nice quote from the Economist newspaper on SDGs:

Developing countries seem to think that the more goals there are, the more aid money they will receive. They are wrong. The SDGs are unfeasibly expensive. Meeting them would cost $2 trillion-3 trillion a year of public and private money over 15 years. That is roughly 15% of annual global savings, or 4% of world GDP. At the moment, Western governments promise to provide 0.7% of GDP in aid, and in fact stump up only about a third of that. Planning to spend many times the amount that countries fail to give today is pure fantasy.

The backers of the SDGs concede from the outset that not all countries will meet all the targets—an admission that robs the goals of the power to shame. The MDGs at least identified priorities and chivvied along countries that failed to live up to their promises; a set of 169 commandments means, in practice, no priorities at all.

A set of 169 commandments also means fundraising opportunities for everyones’ pet issue. But it also means extra meetings, workshop, and clueless tied aid expats consultants for developing country Civil Servants to deal with; and little time for the boring things that actually contribute to sustainable improvement of human welfare.