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Maggie Kidder
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In Milovich’s article, “Does Aid Reduce Poverty?” she hones in on closing two gaps by properly identifying the causal effect of aid on alleviating poverty as well as obtaining reliable poverty data, both of which have remained inconclusive in previous studies. Past studies have not correctly disentangled the causal relation between lower economic growth and higher poverty because both might lead to attracting more foreign aid. Therefore, Milovich studies the differences in the number of years countries have been temporary members of the UNSC in and assesses that higher economic aid disbursed by the U.S. between 1946 and 1999 has a significant relationship with lower multidimensional poverty between 2000 to 2014. I find this approach particularly interesting because it follows the creation of the Council in 1946 and tracks the history of aid where it increased to its first high in 1955, began to decline to its first low in 1974, rose before declining again in the 1990s, and then reached its second low in 1997 before a drastic increase. The report shows that a key factor for the effectiveness of foreign aid is the importance of sound policies, institutions, and economic management. It also advocated for continued aid donation as the “climate for effective aid is the best that it has been in decades.” However, this report makes me ponder how current economic pressures stemming from European refugee crises and other internal security issues can induce wealthier countries to lower their foreign aid for poorer countries and how tapering off aid impacts these developing nations. When the global aid system was implemented after World War II, key donor countries like the U.S. and financial institutions like the World Bank classified poor countries based on its citizen’s income, and as this article shows the relationship between poverty measured from an income perspective is not significant. Additionally, focusing on the relationship between foreign aid and economic growth doesn’t account for social factors like education, health, and quality of life, which impact the well-being of a population. Today, the World Bank reports that middle income countries account for 75% of the world’s population and 62% of the world’s poor. This group accounts for lower middle-income economies with a GNI per capita of $1,006 - $3,955 and upper middle-income economies with a GNI per capita of $3,956 -$12,235. However, once the economies jump from lower-income to middle-income status, the aid and loans that have allowed them to grow tend to stop as well. Because the threshold for defining middle-income countries is still so low, countries with high levels of poverty that lose foreign aid in an immediate manner will faulter and it is difficult to support the efforts in improving health, education, and quality of life. Therefore, I think foreign aid should work on assisting countries with smoother transition after ending aid and help the poorer countries implement productive long-term strategies to continue with growth to ease their reliance on aid. World Bank Data:
Toggle Commented Nov 20, 2019 on Next Week at Jolly Green General
Schultz’s article provides an alternative, social-economic view that replaces the natural earth view that suggests there is a virtually fixed amount of space for crop production and the energy supply for tilling that area of land is being depleted. The new alternative view argues people have the ability and intelligence to depend on cropland and traditional agriculture less and the depleting energy supply can reduce food production costs for the increasing world population. However, in order to achieve this, governments must recognize the important of agriculture and terminate their efforts to distort agriculture with internal policies favoring the urban over the rural population. I read the novel, "Darwin Without Malthus: The Struggle for Existence in Russian Evolutionary Thought," where Daniel P. Todes examines how the varying receptions of Darwinian and Malthusian ideas were deeply shaped by the nature of a particular nation’s cultural, economic, political, and geographic structures throughout the 19th Century. Malthus was best known for his theory that population size will inevitably exceed the available food supply, leading human beings to compete against one another for survival, and all organisms faced a robust and persistent check on population. Malthus claimed that positive checks, such as wars, famine and epidemics, increased mortality rates and preventative checks, such as, postponement of marriage and childbearing, decreased the birthrate. He believed population checks do not discriminate among socioeconomic status as all human beings are equally likely of undergoing these hardships, but when there is a scarcity of food, Malthus argued the least fortunate members of society will suffer most from this heightened competition.Instead of pursuing social progress and reforms, he advocated for nations to eliminate the obstacles hindering free competition. For instance, Malthus argued that British parish poor laws inefficiently increased population without increasing provisions, which tapered the accessibility of food supplies for the industrious poor and inhibited independence. I agree with Malthus and the evidence shows that when left to their own devices, the poor population will continue to be the ones who suffer in times of hardship. However, as exemplified by this article, these fundamental Malthusian beliefs discount the ability of human beings to improve their skills through education and knowledge, with the aid of government assistance. If we augment resources by advances in knowledge and utilize the importance of human agents, the poor will be able to improve their livelihoods and will not be faced with this struggle for existence that Malthus confines them to.
Toggle Commented Oct 30, 2019 on Blog Post for Next Thursday at Jolly Green General
I was very intrigued by the widespread implicit bias that is shared by both women and men in associating men with career and the sciences and associating women with family and liberal arts. Duflo discusses the test where both female and males sort two series of names to the left or the right and then place words associated with career or family to the right or the left. Both genders were more likely to place women with family and liberal arts and men with careers and science. Additionally, when high-achieving female and male math students were told that it was not true that girls were less good than boys at math for a particular test, they performed just as well as males compared to when they weren’t prefaced with that information. This implicit bias is due to females internalizing the belief that they are not as qualified as males in science and career fields. I think this is an often overlooked problem because as labor market participation has increased for females, gender inequality still persists because females do not perceive their abilities as equal to their male counterparts. For instance, labor market participation for women has grown by 15% in East Asia and Latin America between 1971 and 1995, which is a faster growth rate than for men. The labor market opportunities for women increased in the US when the demand for clerical workers rose, which lead to more job opportunities for women from 1930-1950 and paved the way for a continued access to the labor market. More recently, female job availability in factory work has increased in China and Mexico and has increased in outsourcing in India. Duflo details that the less developed nations face higher gender inequalities. However, it is surprising that even in the more developed countries, like that of the United States, women with equal skill sets to male counterparts earn less than men throughout all education levels. As more women began to enter the workforce the prevalent system of gender inequality adapted to this changing dynamic by creating inequality in different ways instead of progressing towards equality. Gender inequality in the labor force is not residue from the past and purely historically based because the rise of technology has brought new occupations like engineering. However, technologically-oriented fields like engineering are primarily male dominated, which indicates that gender inequality reorganized itself when the United States became more industrious, which highlights the serious need for both men and women to overcome the obstacle of implicit bias.
Dani Rodrik’s “Growth Strategies” is encouraging in the sense that he argues there is a wide-range of diversely-packaged principles that can lead to economic growth and it does not require a lot of reform to ignite growth. It is also discouraging in the sense that there is no clear-cut path between implementing a standardized set of good institutions and sustaining economic growth, so it can be difficult to determine what the binding constraints and promising opportunities are for a particular country. One of the most important takeaways from Rodrik’s article for me is that growth accelerations in the short-run are common and frequent, and Rodrik lists 64 cases of growth transitions since the 1950s. These growth transitions were rarely trigged by reform and they exemplify that relatively small changes in the background environment can cause significant spikes in the economy. India in particular has experienced genuine gradualism by slowly deregulating its policy regime while undertaking very little privatization. China has boomed since the late 1970s because they experimented with a series of unorthodox institutional innovations that deviated from Western norms. These led to orthodox results that Western economists would have hope for: market-oriented incentives, property rights, and macroeconomic stability. Additionally. I found the Martian thought experiment and the criticisms of the assumptions for growth in neoclassical economic analysis very intriguing, as they clearly portrayed how diverse and context-specific the successful growth strategies are for different countries. However, very little explanation was devoted to sub-Saharan African countries. I understand that this document was written in 2003 and sub-Saharan Africa’s growth rate dropped 0.8% from 1980 to 2000, but I am curious about the early-on initiatives in sub-Saharan Africa that have now sub-Saharan Africa to have an average growth rate from 2000- 2018 that is higher than both the world’s and the OECD countries’ growth rates.
Toggle Commented Oct 2, 2019 on Rodrik article for Thursday at Jolly Green General
In Paul Krugman’s “The Fall and Rise of Development Economics,” he compares the trend of research in development economics to the evolution of cartography in Africa from the 15th to 19th centuries. He explains how the increase in European’s knowledge of Africa did not induce a corresponding increase in accurate map-making, rather it became even less precise in some regards. Although these maps were misleading in a multitude of ways, they provided information on Africa’s interior that was lost in the future map versions. People began to discard myths and second-hand information and solely pursue the knowledge they knew to be true. I believe due diligence is important and I am not necessarily encouraging spreading false facts, but I think as a society it is important to not disregard old stories and theories at the emergence of new ones and we should holistically examine all possibilities in order to come to a more concise view of reality. I found this analogy compelling in its relation to development economics. Areas of inquiry and speculation were de-emphasized at the expense of pursuing what economists knew to be true. As Krugman points out, what would have happened if economists had modeled the role of increasing returns and circular causation 35 years ago? We will never know, and it is a lesson for society to not risk losing knowledge in the future. In Africa in particular, economic growth has been deemed to have a “double deficit”- a deficit in economic growth, as well as deficit in understanding the actual economic growth deficit. By not exploring these theories out of a fear of not being accurate we are doing ourselves a huge disservice. I think we can often learn most from stories of failure and by examining the pitfalls in why something won’t work out in order to better understand the overall picture, leading us closer to the truth.
Toggle Commented Sep 25, 2019 on Reading for next Thursday at Jolly Green General
Wang, Wong, and Yip’s article explores why income disparities have widened between fast-growing economies and development laggards over the past five decades as well as the role that institutional barriers with relation to technology adoption have played in widening this gap. In particular, this article emphasizes the critical role that unnecessary trade protectionism and government misallocation have on slowing economic growth and the role that export-led open policy and foreign direct investment have on enhancing economic growth. I am not surprised that institutional barriers play a crucial role in income disparities because if a country has a faulty government in place, it is likely to be faulty in numerous ways and fail its citizens with various institutional shortcomings. Therefore, no matter how innovative, technological advancement will not be able to carry an economy on its own. I am currently taking a politics course on Post-Communism and New Democracies, where I discovered that a country transitioning from a nondemocratic regime to a democratic regime achieves about a 20% higher real GDP per capita in the next 25 years. This intrigued me to further investigate the role that a democratic government has on economic growth and stability, especially since there has been an unprecedented rise of democracy around the world in the past fifty years. In 2016 the National Bureau of Economic Research published the working paper: “Democracy Does Cause Growth,” where I learned that democratization increases a country’s real GDP per capita by 20% in the long-run. Democracy supports future GDP growth by “encouraging investment, increasing schooling, inducing economic reforms, improving public good provision, and reducing social unrest.” For instance, South Korea is one of the ten fast-growing economies and after it transitioned to democracy in 1988, its real GDP per capita grew by 4.7% between 1988 and 2008. In comparison, the six countries with the closest GDP per capita to South Korea in 1987 had an average growth rate of 2.6%. Furthermore, the five countries deemed “development laggards” all faced at least one wave of democratization and then democratic reversal throughout the past 50 years, which makes me curious on whether this had any influence. Although there are a multitude of other factors and one cannot assume democracy is an isolated influence on the significant rise in GDP per capita, it is a noteworthy correlation as the role of the government is deeply rooted in a country’s economic structure.
Banerjee and Duflo describe how vastly multifaceted poverty is in its essence and provide an overview of the dynamic problems of poverty that need to be addressed in order to fulfill the Millennium Development Goals and alleviate all extreme deprivation by 2030. Sen’s definition of development emphasizes human beings having the choice to live the lives they value, and although the poor’s ability to make choices is considerably hindered by their monetary position, I found the degree of choice that both the extremely and merely poor have surprising with such a stringent amount of available spending money. As stated, the typical poor in Udaipur could spend up to 30% more on food than they currently do, based on money allocated to alcohol, tobacco, and festivals. I have spent some time volunteering at a café that serves restaurant-style meals to the Los Angeles homeless and have heard from homeless people firsthand that they choose to spend a decent portion of what little money they come across on alcohol and tobacco because it helps them to cope with the struggles of poverty and living on the streets. I understand why the poor spend such a substantial amount on personal indulgences like alcohol, tobacco and entertainment in order to provide relief to their immeasurable economic and personal stresses, but it is troubling to me that the poor still pass down the ability to eat healthier with their current budgets, especially when it concerns children. Banerjee and Duflo report that “eating more and eating better (more grains and iron-rich foods, less sugar) would help them build up BMI (which we noted tends to be very low).” Children are not involved in the household consumption decisions but are most severely impacted by under-nourishment in the early years of their lives. I remember reading a past Economist article that explains that the MDG goals that aligned with nutrition, like lower infant mortality rates for infants, children and mothers, have only decreased by about half of the target amount necessary to fulfill these goals. In the early years of life, good nutrition is vitally important to growth and development needs, and can cause irreversible damage on future development. This is problematic as it can lead to a poverty cycle that can become intergenerational. Additionally, I found it interesting how much greater the number of young people there were in the identified poor countries in comparison to the US. The extremely poor households have a typical adult to youth ratio of 0.2 to 0.3, compared to 0.6 for the US. Therefore, investment in education is necessary for a demographic dividend to begin as well as working to lower fertility rates.
Toggle Commented Sep 11, 2019 on Readings for next week at Jolly Green General
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Sep 11, 2019