I just want to call you this line though: "Eradicating poverty in the region will require a laser focus on growth"
Why not a laser focus on poverty? Why should we focus on a measure (assuming you mean GDP) which is kinda correlated with it but contains a lot of other unhelpful noise?
Why, fundamentally, do we not have a laser focus on the things that we actually want to change? Maybe GDP increases along the way, maybe it doesn't, but what we need to do is to eradicate poverty.
The assumption here is that it’s hard to do development (which will require converting growth into more education, higher life expectancies, more jobs, etc) without growth.
Thanks for replying. I'm going to push back again 😊
You clearly agree that growth is not the end in itself; as you say, it needs converting into real outcomes — education, life expectancy, jobs.
So why not just target them? Easier said than done, of course — but then, so is growth. Why not go straight for the end results that we want to see?
But again I would argue that the answer is to target poverty. It's much easier than targeting growth; we can do it through social welfare, basic incomes, marketing boards for agricultural commodities (as I was very happy to see you argue recently).
If the poor are less poor, they'll get themselves better education, health care, and indeed jobs, as the un-poor masses provide an expanding market for goods and services.
Almost inevitably, GDP goes up too. But if it doesn't, who cares? We've achieved our objectives!
I thought a bit about this comment and must say I haven’t managed to answer its point to my own satisfaction. Here’s a go anyway.
Empirically, it is of course true that economic growth and poverty reduction are tightly correlated. Per country Gini coefficients are also quite stable, so in practice as you say it would be nearly impossible to either target growth without reducing poverty or target poverty without creating some growth. But the fastest way to reduce poverty would involve some form of redistribution and while that certainly needs to be on the table that’s no substitute for a focused, aggressive growth program. The greatest poverty reduction drive in modern history is certainly China’s, yet I don’t think they even thought about it in those terms. They didn’t really implement a welfare system (you could even argue they suppressed wages to keep exports competitive) or expand internal markets or try to do much about inequality until recently. Prioritizing growth led to greater poverty reduction than any scheme directly targeting poverty likely would.
The correct policies will in many cases be the same. To take your examples of *outcomes* of a good development program: education, health care, jobs, life expectancy could just as easily be considered inputs to a growth targeting agenda. Investing in education and health care, for instance, improves productivity and the biggest and fastest gains will be made by focusing first on the poorest.
Thanks a lot for engaging with this. It's not obvious to me why directly alleviating poverty, through say a Bolsa Família, is "no substitute for a focused, aggressive growth programme". China certainly did directly target poverty, at least after 2010; but also I think there are many ways in which China's economic transformation can't or shouldn't be a model for today's LDCs. I think Brazil is a better model, where the BF dramatically reduced poverty - and how could it not? It gave money to the poor! Of course, that is also a massive stimulus to the economy, even if the govt feels the need to balance their budget (which I'd argue is in most cases unnecessary, but that's beside the point.) And then those non-poor go and get better outcomes for themselves across the board.
I'm not arguing, of course, that pro-growth policies should not be followed. It should be easy to open and administer a company, taxes and red tape shouldn't be stifling, and so on. But concentrating on growth when your priority is fighting poverty is a distraction. We can tackle poverty directly!
Here’s an article on Brazil’s poverty targeting I found compelling. Particularly the graph showing what happened when the transfers stopped. The money came from a commodity boom that wasn’t going to last forever. It may have been wiser to invest more of the proceeds into improving productivity and shoring up their industries, which are regressing. The last major industrial player left is Embraer, which is losing money and competitiveness. Brazil is increasingly likely to see BF’s gains reversed in coming years. Many poor countries are already in that situation, their efforts at poverty reduction wiped out by COVID.
There’s also a point Ken made earlier: most countries in need of poverty reduction don’t have the fiscal space to run these stimulus packages. They’re deep in debt, have eye-watering interest rates and have to be very prudent with what headroom they’ve got.
Yes China did eventually go after poverty directly, but after more than a decade of spectacular growth. And I agree that many aspects of their story simply cannot be replicated today: among other things there were unique historical opportunities. But it was only through the emphasis on growth that they were able to spot and exploit those opportunities fully. I’d also add that a similar path was charted by much of the West: first rapid growth then a welfare system.
I suspect we’d nevertheless be in agreement on any concrete proposals. I support poverty reduction targeting as urgent and necessary. But historically it seems the best, most sustainable path out of poverty is a laser focus on growth. Fortunately the two are only rarely in conflict.
Concerning "climate change", it's not that you need to worry about (currently the climate is cooling and has been for a decade), it is the massive over-reaction called "Net Zero" combined with the Ukrainian war and the reduction of investment in oil and especially gas production.
Fertiliser is produced primarily from natural gas, and production of fertiliser is dropping fast, I'm sure I don't need to inform you the implications of that.
Excellent piece.
I just want to call you this line though: "Eradicating poverty in the region will require a laser focus on growth"
Why not a laser focus on poverty? Why should we focus on a measure (assuming you mean GDP) which is kinda correlated with it but contains a lot of other unhelpful noise?
Why, fundamentally, do we not have a laser focus on the things that we actually want to change? Maybe GDP increases along the way, maybe it doesn't, but what we need to do is to eradicate poverty.
The assumption here is that it’s hard to do development (which will require converting growth into more education, higher life expectancies, more jobs, etc) without growth.
Thanks for replying. I'm going to push back again 😊
You clearly agree that growth is not the end in itself; as you say, it needs converting into real outcomes — education, life expectancy, jobs.
So why not just target them? Easier said than done, of course — but then, so is growth. Why not go straight for the end results that we want to see?
But again I would argue that the answer is to target poverty. It's much easier than targeting growth; we can do it through social welfare, basic incomes, marketing boards for agricultural commodities (as I was very happy to see you argue recently).
If the poor are less poor, they'll get themselves better education, health care, and indeed jobs, as the un-poor masses provide an expanding market for goods and services.
Almost inevitably, GDP goes up too. But if it doesn't, who cares? We've achieved our objectives!
The basic claim is that the cash for all the targeting has to come from somewhere — i.e., expanding economies.
I thought a bit about this comment and must say I haven’t managed to answer its point to my own satisfaction. Here’s a go anyway.
Empirically, it is of course true that economic growth and poverty reduction are tightly correlated. Per country Gini coefficients are also quite stable, so in practice as you say it would be nearly impossible to either target growth without reducing poverty or target poverty without creating some growth. But the fastest way to reduce poverty would involve some form of redistribution and while that certainly needs to be on the table that’s no substitute for a focused, aggressive growth program. The greatest poverty reduction drive in modern history is certainly China’s, yet I don’t think they even thought about it in those terms. They didn’t really implement a welfare system (you could even argue they suppressed wages to keep exports competitive) or expand internal markets or try to do much about inequality until recently. Prioritizing growth led to greater poverty reduction than any scheme directly targeting poverty likely would.
The correct policies will in many cases be the same. To take your examples of *outcomes* of a good development program: education, health care, jobs, life expectancy could just as easily be considered inputs to a growth targeting agenda. Investing in education and health care, for instance, improves productivity and the biggest and fastest gains will be made by focusing first on the poorest.
Thanks a lot for engaging with this. It's not obvious to me why directly alleviating poverty, through say a Bolsa Família, is "no substitute for a focused, aggressive growth programme". China certainly did directly target poverty, at least after 2010; but also I think there are many ways in which China's economic transformation can't or shouldn't be a model for today's LDCs. I think Brazil is a better model, where the BF dramatically reduced poverty - and how could it not? It gave money to the poor! Of course, that is also a massive stimulus to the economy, even if the govt feels the need to balance their budget (which I'd argue is in most cases unnecessary, but that's beside the point.) And then those non-poor go and get better outcomes for themselves across the board.
I'm not arguing, of course, that pro-growth policies should not be followed. It should be easy to open and administer a company, taxes and red tape shouldn't be stifling, and so on. But concentrating on growth when your priority is fighting poverty is a distraction. We can tackle poverty directly!
https://www.reuters.com/article/us-brazil-economy-poverty-idUSKBN2BI2OE
Here’s an article on Brazil’s poverty targeting I found compelling. Particularly the graph showing what happened when the transfers stopped. The money came from a commodity boom that wasn’t going to last forever. It may have been wiser to invest more of the proceeds into improving productivity and shoring up their industries, which are regressing. The last major industrial player left is Embraer, which is losing money and competitiveness. Brazil is increasingly likely to see BF’s gains reversed in coming years. Many poor countries are already in that situation, their efforts at poverty reduction wiped out by COVID.
There’s also a point Ken made earlier: most countries in need of poverty reduction don’t have the fiscal space to run these stimulus packages. They’re deep in debt, have eye-watering interest rates and have to be very prudent with what headroom they’ve got.
Yes China did eventually go after poverty directly, but after more than a decade of spectacular growth. And I agree that many aspects of their story simply cannot be replicated today: among other things there were unique historical opportunities. But it was only through the emphasis on growth that they were able to spot and exploit those opportunities fully. I’d also add that a similar path was charted by much of the West: first rapid growth then a welfare system.
I suspect we’d nevertheless be in agreement on any concrete proposals. I support poverty reduction targeting as urgent and necessary. But historically it seems the best, most sustainable path out of poverty is a laser focus on growth. Fortunately the two are only rarely in conflict.
Concerning "climate change", it's not that you need to worry about (currently the climate is cooling and has been for a decade), it is the massive over-reaction called "Net Zero" combined with the Ukrainian war and the reduction of investment in oil and especially gas production.
Fertiliser is produced primarily from natural gas, and production of fertiliser is dropping fast, I'm sure I don't need to inform you the implications of that.
https://www.theguardian.com/business/2023/feb/24/basf-cut-jobs-energy-crisis-germany-recession
https://www.politico.eu/article/fertilizer-soil-ukraine-war-the-next-global-food-crisis/