In an interesting post about the World Bank, Nancy Birdsall of the Center for Global Development expresses two concerns about the future of the organization. First, she fears the effects of the seemingly endless process of internal restructuring – covered here, for example. Second, she fears that the World Bank may lose its ability to be an effective supplier of ‘global public goods’ in the 21st century.
One does not have to agree with her framing of the issue to see that one of the least controversial, most cost-efficient, and public goods-like functions of the World Bank is to produce internationally comparable data that can serve both as input into research and into policy discussions. The Doing Business project is a case in point, as my colleague Marian L. Tupy and I wrote last year:
In publication since 2003, Doing Business was inspired by academic research into the importance of sound legal environments for economic growth. The survey currently synthesizes expert assessments by roughly ten thousand contributors from 185 countries into a picture of the ease of doing business around the world. It serves as a guide to important requisites such as the costs of starting a business, obtaining permits, hiring and firing, and so on. The project thus brings together a large amount of data that either didn't really exist before or weren't comparable across different countries and presents them in a way that is easy to understand and use.
Following a controversial review last year, the report is undergoing methodological changes phased over several years. That makes comparisons over time more difficult.Read the rest of this post »
Nicholas Kristof provides “a useful reminder of the limitations of charity and foreign aid” in his New York Times op-ed about Haiti today. “Nearly a year after the earthquake in Haiti,” he notes, “more than one million people are still living in tents and reconstruction has barely begun.”
He emphasizes the importance of “trade, not aid” and of the role of business: “It’s hard to think of a charitable project that will be as beneficial as the Coca-Cola Company’s decision to build up the mango juice industry in Haiti, supporting 25,000 farmers.”
He also cites a seemingly successful microfinance aid project that lends money to poor women in Haiti to begin and expand business ventures by, for example, investing in livestock or growing fruit for sale. It is impossible to evaluate the record of that organization based on the anecdotes Kristof provides, but, while microcredit may for a time alleviate the conditions under which poor recipients live (and be successful at pulling some recipients out of poverty), there is little evidence from its overall record that microcredit effectively reduces poverty. It is certainly not a way to reduce poverty on a widespread or sustainable basis. David Roodman of the Center for Global Development notes, for example, that “microfinance institutions in Haiti only reach perhaps 250,000 people, about 2.5% of the population.” (For a critique of some of the claims of microcredit proponents see Thomas Dichter’s Cato study.)
In line with Kristof’s main argument and with decades of evidence of successful countries around the world, the most effective way to reduce poverty in economically repressed Haiti is by opening its markets and increasing economic freedom. Unfortunately, Haiti’s reconstruction and long-term development plan, according to which the United States and international donors have pledged more than $15 billion, reads like a relic of central planning with virtually no mention of policies that promote economic freedom. Two sentences in the document mention the importance of clarifying land titles. One page mentions the role of the private sector, but it is in regards to its cooperation with the government’s “development centers” that will operate throughout the country to stimulate predetermined industries using government funds and guarantees and for “better redistribution of [the] population.”
We’ve been down this road before. If the Haitian government wishes to avoid disappointment and free itself from dependence on international aid, it needs to rethink its approach to development.
The standard view in policy discussions is that emigration of skilled workers from poor countries to rich countries is bad for development becuase it deprives poor countries of much-needed human capital and it reduces growth.
A new study by Michael Clemens at the Center for Global Development challenges this view. Clemens shows that efforts to slow the so-called brain drain "generally brings few benefits to others, and often brings diverse unintended harm." There is little evidence that limiting skilled migration improves growth or public finances in poor countries, while following such a policy may reduce the demand for education, international trade and capital flows, and the diffusion of ideas and norms. There is also a gap between the policy discussion (that takes the negative aspects of the brain drain for granted) and the research literature (that reaches much more ambiguous conclusions). Clemens also rightly stresses choice and freedom as central factors to consider when formualting policy--an element so far missing from the policy discussions.
The study was first released this spring as a background paper to the UN's forthcoming Human Development 2009 annual report, which will focus on migration and incorporate much of Clemens' work.