Event Report on "What is the best way to acheive sustained economic development", from panel debate on 28/02/20.

Speaker Introduction

Dr Subhasish Dey, henceforth known as SD, Senior Teaching Fellow at the University of Warwick. Research interests include Applied Microeconometrics, Development Economics, and Political Economy.
Dr Franklyn Lisk, henceforth known as FL, visiting Professorial Research Fellow at CSGR.
Dr. Lucia Pradella, henceforth LP, Senior Lecturer in International Political Economy at King's College London.
Ingrid Kvangraven, henceforth known as IK, Assistant Professor and lecturer in International Development at University of York.

Moderator: What is the definition of the term “Economic Development”, and what are the indicators that we should be looking at in order to determine development?

SD: Development is a social policy, where we allocate the most welfare to the least advantaged.

FL: Economic development is not the same as sustained development. We need to contextualise it; we need real world policies in order to decide what works. Rural stagnation, poverty and degradation are the real problems some policies even cannot be implemented or do not lead to sustained development. A good policy is durable we need to avoid weaknesses in relation to standard neoclassical economics history is important, so is sociology we need an approach based on observation.

IK: Development is a problematic term, there are many different perspectives on it. There are numerous different policies with different approaches: some associate development in terms of financial or industrial improvement, others from a more global perspective. There is a normative aspect to development too: improving people’s lives – what does this mean and who gets to decide this. There are many different answers, but a good definition is that development would mean the increasing capacity of self-determination.

LP: Development of capitalist system is ultimately based on exploitation, which inherently creates division. This labour exploitation is at the centre of economic development. In order to understand, we cannot base our analysis purely on quantitative results but also need theory to question issues such as environmental degradation, racial, gender inequality. These are all important measures of development.

Moderator: Should we look at economic development on an individual or national basis?

SD: Development manifests itself on the macro level, but really causes problems on the micro level. Therefore, a comprehensive theory should work in both directions; both sides are equally important.

FL: The interrelationship between the two is more important than either alone.

A significant part of development comes from the market, so individual behaviours and challenges are important assumptions to consider. However, the national level is also important as well (Why Nations Fail). Therefore, the two should go together, so one should understand the relations of the state for understanding the effect on human development.

IK: Within countries there can be many different groups, who may face various specific constraints. For instance, regional constraints. It must also be asked who is pursuing this development?

LP: Neither the individual nor the national basis should be used to look at economic development. We need to question this assumption. Classes are important, but classes cannot be understood in the national context, because labour and capital are mobile. This means a national context does not suit. We should also look into new forms of colonialism. A global effort should be made.

2. Methodology of Development:

Moderator: Is there a mainstream theory of development economics, and if so, how important are the contributions of heterodox economics?

SD: Mainstream and heterodox are just different tools, so there might not be any essential difference. One must start from the classical theories of development. These classifications are not significant. After all, what was a so-called 'heterodox theory' only a decade or two ago may be a mainstream theory now, depending on how it has been received by the academia. If a theory is good, it will definitely become a part of the mainstream.

IK: I strongly disagree, there is exclusion for those who are not part of the mainstream.

From the 1980’s onwards, development economics has fallen under the influence of neoclassical economics. Imperfect markets, not behavioural economics is the part of this agenda. If you are Keynesian, you are not able to publish in developmental economics journals. There is a clear separation, and there is exclusion. Numerous alternative perspectives are neglected, such as at the macro level – for instance dependency theory (analysing the polarizing tendencies of global capitalism) and the historical structuralist approach. On the micro level feminist economics is also fairly excluded.

LP: The role of labour in development and how much labour exploitation is being used is neglected within mainstream theories. There is definitely a place for a Marxist approach.

FL: I believe in thinking critically, putting me in the middle ground. I am a fan of decolonising development and interested in the structuralist approach. Empirical research is necessary to emphasise the importance of structure. What I call mainstream is the link between the economics of transformation and development. One cannot achieve development without transformation, and it is achieved through structural change - not necessarily institutions, but in a broader sense too. Even if we take the tool-based approach (as SD does), there is a caveat: you cannot really put them into practice, because they arguably work with limited scope. I would like to look into different questions, questions which the mainstream has already drawn conclusions; for example, how much do inequalities drive development? Is democracy or equality necessary for progress and growth?

SD: I disagree with IK’s approach - there are heterodox people in leading institutions. IK’s presence in this debate demonstrates this. There is an integration of heterodox into the mainstream. There is much fluidity between the heterodox and mainstream approaches.

LP: We are living in a time of many problems, for instance environmental degradation, which is overlooked by the neoclassical perspective. Heterodox economics points out the removal of scholars from the global south. It is necessary to revive former traditions, outside of the scope of what is commonly understood as “heterodox economics”.

Moderator: Let's move on to some more 'real' and 'tangible' issues. What do you believe were the causes behind the strong catch-up growth of the Asian Tigers?

FL: The style of development of the Asian Tigers was based on the fusion of the state and the private sector. When we talk about the market system, we need to realise that for them, the market was state-driven. Both the state and private sector are important. In particular, investment in human capital is very, very important. The Asian Tigers were quick to realise the gains that they can get from it, as it created an efficient workforce. There was a particular understanding of governance which was tied to improvement of government and the desire to improve the quality of life for the population. By contrast, African policymakers don't get the difference between the private good and public bad, which commonly leads to corruption. Asian tigers seized the opportunity to achieve progress. An only-Southern approach will not work, since the South works in the relation to the North. Additionally, Western (or developed) countries often facilitate tax evasion. We need to understand the behaviour of affluent nations too to see what works for the South as well.

Moderator: LP, I believe these notions link back to another important question in development economics, the question of the periphery and the core in the world economy. To what extent is there a worldwide division of labour, and how valid is the notion of the periphery and the core in the world economy?

LP: Development is indeed a question of contrasting North and South. Attempts to quantify the extent stolen by Britain from India suggest that more than 17 times the total GDP of today’s UK were taken. It is therefore impossible for the North to repay the whole amount. Rather than thinking that each country should catch up with the north, let’s question the riches of North as they were created through colonisation and exploitation. This reality which is also quantifiable ought to make us think to rethink the role of development.

IK: Most people say that the Asian Tigers show that the notion of periphery and core is wrong, but I would take the opposite approach. We can understand the catch-up of the East Asian Tigers through this question. The issue of Eastern Tigers is usually used to question dependency theory: Japanese colonialism gave power to domestic capitalists in these Tiger countries. It laid the foundation for a strong domestic capitalist domestic class and for a strong state. However, it wasn’t a fairy tale: Exploitation and suppression of labour were common. South Korea and Taiwan got massive American investments, rather than growing organically. They also pursued a lot of trade protection policies – contradicting the common assumption that the free market led the Asian Tigers’ growth.

FL: Briefly there was a time when Ghana had a better development prospects than South Korea. Ghanaian GDP was actually higher than South Korean GDP. They had a visionary leader as well; however, some of the ideas he had clashed with the ideas of the Western world. International pressures caused the two countries to develop in very different ways. Many African leaders with ideas to develop were cut short - the international community realised they were dangerously creative and therefore cut them short with a coup.

SD: This brings back the issue of 'settlers' compared to 'exploiters', and how institutions are different in countries with different types of colonial rulers. These differences led to different forms of economic growth.

LP: The current periphery concepts are useful. Because of the transformation that has occurred, we need to move a step forward about how we perceive the system. What we perceive today (for instance, the dismantlement of the welfare state) is the result of increasing global competition leading to global impoverishment.

IK: I want to clarify what I said; while institutions are important, we differ in several ways in the definition of institutions. Some people presume that strong institutions imply strong notions of property rights, which are not necessarily good for development.

Moderator: I think this leads on very nicely to the last question of the structured part of our panel debate. How can we effectively mitigate the bias of former colonial institutions and decolonize development agendas?

FL: In terms of decolonising economics, we need to understand what kinds of people we need to work with. Without conceptualisation, it is hard to bring any insight. Poverty measurement is not that important, but it is difficult to move on from this metric. What can be done about it? The debate should not focus on ideology, instead it should focus on what is feasible and what can be done.

SD: I think a very useful notion is that of an economist as a plumber: trying out what works and what does not. This is something that was advocated by Esther Duflo, who recently won the Nobel Prize. Rwanda's economic development is a case study of experimentation.

IK: We need to establish what we can do to erase colonial legacy on the policy level, but also how to decolonise economics as a discipline. Randomized controlled trial (RCTs) techniques are not a good idea for decolonising - it is about recognising racial structures, and not the result of a particular source of information. Additionally, RCTs only utilise Western knowledge and are therefore incomplete, moreover, there is a trend of rich white academics going to the global south to conduct experiments on disadvantaged people. Ethics is often thrown out of the window in such studies. RCTs are just one way of looking at the world and they actually undermine the project of decolonising the agenda.

FL: African policymakers should be African to understand the context. Something can be done, see Rwanda: RCT’s are not inherently negative. We need to move on from a colonial past, implementing what works based on evidence rather that ideology.

Q&A:

Question: History is really is useful, but we only have one of it. why not just look at the present to see how we can improve the future? RCTs are a tool for that. They can be effective in pointing us to the right solutions.

IK: I accept that RTCs do provide us with useful information. The problem arises when they become a gold standard. They have so many problems with the methodology, that they become the only methodology, used in conjunction with other methods.

SD: RCTs have some major methodological issues. 16 leading economists have raised many issues with them: why should we not believe them on this issue? RTC imagines poverty as a management failure, when in reality it is a structural failure as well. RTCs are silent on the general equilibrium effect. Aid can cause Dutch disease as well.

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