Economic Development and Global Institutions
It has been way too long since I have commented on other bloggers' work here at AS but I guess that I have been too focused on my own arguments. I still am (focused that is) but balance is also good so for this one I want to note a recent post by Dave Altig over at Macroblog about economic development. His first reference is a note from the WSJ (walled for non-subscribers) by Amar Bhide and Karl Schramm from Columbia University and the Kauffman Foundation respectively about microcredit and whether this much debated and cherished phenomenon is the real road to peace in developing countries or more specifically whether microcredit promotes entrpreneurship or not. This discussion is of course interesting because it pits nobel peace price winner Mohammad Yunus who won for his promotion and management of microfinance and the nobel prize winner in economic Edmund Phelps who emphasizes entrepeneurship as a way towards economic development. Apparently the authors have not quite bought into the whole microcredit story
Economic development does wonders for peace, but what does microfinanced entrepreneurship really do for economic development? Can turning more beggars into basket weavers make Bangladesh less of a, well, basket case? A few small port cities or petro-states aside, there is no historical precedent for sustained improvements in living standards without broad-based modernization and widespread improvements in productivity brought about by the dynamic entrepreneurship that Mr. Phelps celebrates.
In principle, microfinance does not preclude modern entrepreneurship. But in practice, we wonder if the romantic charm of the former might distract governments in impoverished countries from undertaking reforms needed to foster the latter...
To end it off Dave points us to two pieces of related nature. Firstly a piece by Jeffrey Sachs via Mark Thoma about how peace is the key to economic development and secondly a paper by Douglass North, John Wallis, and Barry Weingast which sets out to scrutinize the following questions ...
The fundamental question of both economic history and economic development can be asked in two ways: how did a handful of countries achieve sustained rates of economic growth and development in the late 18th and early 19th centuries? and why have most nations failed to achieve sustained economic growth? This essay seeks an general answer to the second question.
Of course we do. Ngaire Woods from University College, Oxford, tells us how in her new report for UK centre-left think tank the Institute for Public Policy Research: Power Shift Do we need better global economic institutions? She argues that "the WTO, the IMF, and the World Bank each need to be reformed". Woods sees "three innovating forces" that "are pushing towards a reshaping of international institutions":
All sources above are well worth a closer look I suspect so if you are in that mood you should get to it.