World Economic Outlook - A Rocky Recovery - GDP Growth 2022

                  As everyone can see Brazil last year grew more than only four countries in the American continent, the same had happened in 2021. We all must demand higher rates of growth and development from our policymakers if we want a better future for us and our children.  There are twelve years Brazil has had a very low growth rate, this has to change, something has to be done by our policymakers. This post is a summary of the book with the title above published in April 2023 at  https://www.imf.org/en/Publications/WEO/Issues/2023/04/11/world-economic-outlook-april-2023?cid=bl-com-spring2023flagships-WEOEA2023001

                     The global economy is yet again at a highly uncertain moment, with the cunulative effects of the past three years of adverse shocks, most notably, COVID-19 pandemic and Russia's invasion of Ukraine. Spurred by pent-up demand, lingering supply disruptions, and commodity price spikes, inflation reached multidecade high last year in many economies. Although inflation has declined in 2023 as central banks have raised interest rates and food and energy prices have come down, underlying price pressure are proving sticky, with labor markets tight in a number of economies. Overall, the analysis suggest that once the current inflationary episode has passed, interest rates are likely to revert toward pre-pandemic levels in advanced economies. Growth in the volume of world trade is expected to decline from 5.1% in 2022 to 2.4% in 2023, echoing the slowdown in global demand after two years of rapid catch-up growth from the pandemic recession and the shift in the composition of spending from traded goods back toward domestic services. With lower growth and higher borrowing costs, public debt ratios are becoming unsustainable in many countries. Actions must be taken to put them on a credible downward path. Well-designed supply-side policies could help address structural factors impeding medium-term growth and recoup some of the output losses accumulated since the pandemic. Fiscal policymakers should buttress monetary and financial actions in getting inflation back to target while maintaining financial stability. Medium-term debt sustainability will require well-timed fiscal consolidation but also debt restructuring in some cases. Currencies should be allowed to adjust to changing fundamentals, but deploying capital flow management policies on outflows may be warranted in crisis or imminent crisis circumstances, without substituting for needed macroeconomic policy adjustment. The recent slowdown in FDI (foreign direct investment) has been characterized by divergent patterns across host countries, with flows increasingly concentrated among geopolitically aligned countries. In the long term, FDI fragmentation arising from the emergence of geopolitical blocs can generate large output losses. These losses may be especially severe for emerging market economies facing restrictions from advanced economies, which are their major source of FDI. Brexit, trade tensions between the U.S. and China, and Russia invasion of Ukraine pose a challenge to international relations and could lead to policy-driven reversal of global economic integration. Recently, U.S. Treasury Secretary Janet Yellen argued that rather than relying on countries with which the U.S. has geopolitical tensions, U.S. firms should move toward friend-shoring of supply chains to a large number of trusted countries. In Europe, the French government has been urging the E.U. to accelerate production targets, and develop a "Made in Europe" strategy. In China, too, government directives aim to replace imported technology with local alternatives to reduce dependence on geopolitical rivals.                                                              Below the GDP growth in 2022, from the highest growth to the smallest growth. The first column is for countries in the American continent, and the other is for some countries in the rest of the world. As previously forecasted, Guyana had the highest GDP growth of the world last year. The same had happened in 2021. Congratulations to our neighboring country.

GDP 2022 in PanAmerican countries                                 Rest of the World

Guyana        62.3%                                                                       Ireland      12.0%          

Panama        10.0%                                                                Saudi Arabia       8.7%

Venezuela        8.0%                                                                    Vietnam         8.0%

Colombia        7.5%                                                                Philippines        7.6%                                                                          Argentina          5.2%                                                          Bangladesh         7.1%

Uruguay          4.9%                                                                   India           6.8%

Costa Rica          4.3%                                                             Portugal          6.7%

Nicaragua            4.0%                                                               Turkey           5.6%

Guatemala         4.0%                                                                  Spain           5.5%

Honduras          4.0%                                                                  Poland           4.9%

Canada           3.4%                                                                     U.K.        4.0 %

Bolivia            3.2%                                                                       Italy        3.7%

Mexico           3.1%                                                                     Australia         3.7%

Ecuador           3.0%                                                                     China         3.0% 

Brazil            2.9%                                                                        France        2.6%

Peru             2.7%                                                                     Germany        1.8 %

Chile             2.4%                                                                       Japan          1.1%

U.S.A.            2.1%                                                                    Russia          -2.1%

Paraguay            0.2%                                                            Ukraine           -30.3%

Gambling on Development: Why Some Countries Win and Others Lose - Part II

                         This week we carry on with the book about why some countries reach growth and development and others not. Economists and policymakers in Brazil must study hard about development and growth, because since 2011 brazil has not grown enough to overcome its weakeness and past failures and to improve the life of its population. Including, since 2011 has not grown more than its populational growth. Indeed, many economists call the past decade (2011-2020) a lost decade. And the current decade did not begin well, in 2021 and 2022, Brazil kept growing below the world average. The forecast for this year, 2023 is to keep this low growth, below the world average. This post is a summary of the introduction of the book with the title above, published in 2022 at https://www.oecd-forum.org/posts/gambling-on-development-by-stefan-dercon. The second summary is a review of the same book published at https://simonmaxwell.net/blog/gambling-on-development-why-some-countries-win-and-others-lose-by-stefan-dercon.html

                       When I wrote 'Gambling on Development', COVID-19 was ravaging the economies and societies of poor and rich countries alike. What would happen next was uncertain, but what was certain was that political leadership worldwide would be tested for a long time to come. Leaders in better-off countries were invariably using terms involving what had been lost, promising to "build better back". For some of the fastest-growing economies in recent times such as China and India, as well as Ethiopia, Rwanda, Bangladesh, and Ghana, the general tenor was about the need to find ways to resurrect their earlier fast growth. For many of the other countries struggling on the eve of the crisis, such as Lebanon and Nigeria, it was hardly about building back because the recent past was dismal. Instead, populations were hoping for a way out of the growth and development traps in which their countries found themselves. In fact, expectations were high, and politicians everywhere were scrambling to take the initiative. With finance from both East and West more constrained and global cooperation under duress, pressure to ensure that even the poorest countries would find economic recovery models consistent with climate goals was not making matters simpler. Meanwhile, development experts, and others were tossing out prescriptions for what developing countries should or could do. And this is what worried me and why I wrote this book. Often those espousing or considering solutions lack a basic understanding of what has been going on in recent decades. I want to move on from the endless talk and writing about what needs to be done as if there were a silver bullet that would enable countries to pursue successful development. Those of us in the development community are told to get economic policies right, commit to green growth and build institutions so you can develop, in fact, everyone seems to have their own recipe for development. And yet most of these recipes come with few instructions about how to prepare the dish, that is, how to make development happen in a practical sense. And with few explanations of why reasonably sensible steps are taken in some places but not in others. My book, then, is about how and why development has come about here and not there. Successful growth and development requires the presence of a development bargain, that is, an underlying commitment to growth and development by members of a country's political elite. China is a growth and development success story, at least in terms of moving from a desperately poor country with high levels of deprivation to one that has grown quickly and eradicated the most extreme forms of poverty. What China did not doubt worked for its take-off, Indeed, if this state-led model was to work anywhere, it was bound to be in China: no other country of any scale has exceeded its two-thousand-year history as a centralised state, with its well-oiled bureaucratic machinery and centralised taxation. So much attention is paid to the specific blueprints for development, and yet successful countries appear to have pursued a relatively diverse set of economic and other policies. Countries that have achieved their development goals have achieved macroeconomic stability, invested in infrastructure and education, managed their natural resources prudently, provided a investment environment for private sector growth, allowed the market to play a central role but with a broadly supportive state, focused on international trade. Moreover, specific programmes have helped to further reduce poverty. Successful growth and development requires the presence of a development bargain, that is, an underlying commitment to growth and development by members of a country' elite (poilitical and economical). The idea of a development bargain is not simply a restatement of good institutions matter, as in a shared set of laws, informal norms, or understandings that constrain economic or political behaviour. No doubt they matter, how could anyone disagree? In fact, several of the success stories described in my book did not necessarily have strong institutions at the time of take-off. The political and economic elite have more agency than is usually allowed by the historical approach to institutions. A development bargain is just one of many possible deals among the elite. Any stable elite bargain is not just a political deal, but also an economic deal about access to and distribution of the resources of the state and the economy. In a development bargain, this economic deal is centred around pursuing growth and development. It needs to provide the basis for peace and stability, and it determines the extent to which the state apparatus is best used in pursuit of economic progress. One thing is clear: when those in the political and economic elite move towards longer-term growth and development, they are making a bet that may not pay off. They yend to gamble that restraint and lower gains in the short term may pay off later. Vested interest are bound to be affected, and risk to their positions are obvious.                                                                                                                                                                                                This book puts politics at the centre, and argues strongly that development only happens when an elite bargain is in place, linking politicians, business leaders and intellectuals. Aid will work when such bargain is in place, and when donors take a long-term view. The book begins by examining four propositions about why countries and people are poor, and cross-referencing these against the ideas of best-seller authors like Sachs, Collier and others. The four propositions are: countries and people are poor because they are poorly endowed; and growth traps stem from failures in states and their governance. You might think that the development bargain idea is consistent with the proposition on governance. Dercon writes favourably of Acemoglu and Robinson on this topic. In writing about the ideal of Sweden, he says that 'the main lesson from Sweden is not where it has ended up, but how it got there. Sweden was already a high income country by the time the Swedish model and the idea of Sweden emerged'. The drivers of change are internal: 'the primary challenges that developing countries must overcome reside within those countries, not in global markets, global challenges are not enough to explain failure'. In practice, the evolution of a development bargain plays out differently in different places. Leadership is important. Dercon looks in detail at more than a dozen cases. He is impressed by some (China, Indonesia, Vietnam, Ethiopia), less by others (South Sudan, Malawi, D.R.Congo). The case studies make up about half the book. Finally, the global environment is not entirely irrelevant to either set of countries, the messy places or the others. Dercon argues for trade agreements which give access to develop country markets, especially for goods and services with complex supply chains. 

Gambling on Development: Why Some Countries Win and Others Lose

                    This post is a summary of three reviews of the book with the title above,  published in 2022. The first summary was published at https://blogs.lse.ac.uk/lsereviewofbooks/2022/09/14/book-review-gambling-on-development-why-some-countries-win-and-others-lose-by-stefan-dercon/. The second was published at https://www.hurstpublishers.com/book/gambling-on-development/. The third was published at https://www.ft.com/content/e1f203a4-2b6a-4fe3-b29b-5517d1207696

                     Stefan Dercon is a former chief economist at the U.K. department for international development, a professor at Oxford and , until recently, a policy adviser to the U.K. Foreign Secretary. I started off predisposed to scepticism, but ended up being 80% won over. Why sceptical? Because I have read too many books where economists say 'wow, I've just discovered this thing called politics, let me explain it tot you.' But Dercon goes well beyond econo-splaining, making a good effort to bring together economics and politics into a coherent whole. Happily, most of the book is not about aid, but a discussion of the nature of the 'elite bargain' in the countries Dercon knows best, and why/how some elite bargains evolve into 'development bargains' that lead to economic and developmental take-off. For Dercon, this is about how the big men divide up power and the spoils of rule, and how they move to a more long-term vision, submitting to institutions, the rule of law and the needs of the wider economy rather than just grabbing what they can and heading for the nearest airport. His big idea, is important: 'A development bargain is a specific form of elite bargain, one of many possible ones. It is an agreement among those with power that growth and development should be pursued, even if they disagree over policy details. Countries with a development bargain tend to have three features in common: 1) the politics of the bargain are real and credible.  2) the capabilities of the state are used to achieve the goals, but importantly, the state avoids doing more than it can handle.  3) the state possesses a political and technical ability to learn from mistakes and correct course.' But (isn't there always?) two things grated. Firstly, the elitism. The people in all these countries rarely make an appearance, except as grateful recipients of the development bargain or (very occasionally) holding decision makers to account. Second, while Dercon does his best to say that elites have agency, that not everything is pre-determined by history and structure, he struggles to explain how such agency arises. Fair enough: evryone struggles to find ways to help communities in countries with predatory states. But I feel that Dercon's focus on state elites perhaps bilnds him to some alternatives approaches that are worth trying.                                                                                         In the last thirty years, the developing world has undergone tremendous change. Overall, poverty has fallen, people live longer and healthier lives, and economies have been transformed. And yet many countries have simply missed the boat. Why have some countries prospered, while others have failed? Stefan Dercon argues that the answer lies not in a specific set of policies, but rather in a key development bargain, whereby a country's political elites shift from protecting their own position to gambling on a growth-based future. Despite the imperfections of such bargains, China is among the most striking recent success stories. Gambling on Development is about these winning efforts, in contrast to countries stuck in elite bargains leading to nowhere. Building on three decades's experience across forty-odd countries, Dercon winds his narrative through Ebola in Sierra Leone, scandals in Malawi, mobile phone licences in Mozambique, and relief programmes behind enemy lines in South Sudan. 'Dercon's message is sobering: there is no silver bullet for development. But any success must rest on the foundation of a bargain among the political elite, who commit to developmentand are willing to learn. This should and will be a classic in international development." said Yuen Yuen Ang, author of How China Escaped the Poverty Trap and China's Gilded Age. The most important book on international development in a decade. An intensely political story of economic development, one that could only be written by someone with Dercon's mix of scholarship and statemanship. 'Why is there persistent divergence in development outcomes around the world? The focus has been on policies, but this insightful book proposes we focus instead on implicit bargains among political and entrepreneurial elites. Superbly incisive, engaging and timely," said Leonard Wantchekon, Professor of Politics and International Affairs at Princeton University.                                                                                                                                                                                      A sustained period of growth does not guarantee long-term success, as recent conflict in Ethiopia demonstrates. Nor, as China shows, does attainment of a certain standard of living necessary lead to liberal democracy. But fast growth, reasonably equitably shared, remains a prerequisite for a better life. Why do some countries remain poor while others stumble on a path to growth and development? This has been the subject of much academic study and many popular books. Jeffrey Sachs' The End of Poverty emphasises the role of aid to deliver a "big push", while Why Nations Fail by Acemoglu and James Robinson see a country's institutions as a critical determinant of success or failure. Stefan Dercon, a economist at Oxford university and an international development practitioner, is the latest to try to crack the mystery. The result is the book, Gambling on Development, both scholarly and grounded in experience. It may come as close as any to answering this critical question. Its thesis is brutally simple. "The defining feature of a development bargain is a commitment by those with the power to shape politics, the economy and society, to striving for growth and development," writes Dercon. Growth happens, in other words, when elites try to bring it about. To do so, they must gamble on increasing the size of the economy pie rather than carving up the one that already exists. The idea of an "elite bargain" may seem obvious. It is not. Dercon's insight came after meeting in 2013 when he was chief economist of the U.K.'s now defunct Department for International Development, first with officials from the D.R.Congo and then with those from Ethiopia. He came away thinking that, for all their fine words, D.R.C. officials were not serious about development, whereas those from Ethiopia, though they spoke in more unorthodox terms, meant what they said. The facts bore this out. In the 15 years to 2019, resource-poor Ethiopia grew on average at 7% annually per capita, three times faster than the D.R.C. In DRC, it suited a small elite to capture the nation's mining resources and sell them off to foreign conglomerates, leaving most Congolese to fend for themselves. Too many countries, in Africa and elsewhere, fall into this category. Some successful governments may marshal domestic savings, others foreign investment. Some prioritise exports and spending on schools and hospitals. Dercon quotes a study by Michael Spence, a Nobel laureate in economics, who concluded that there was no recipe for development, even if we know some of the ingredients. Dercon's theory offers escape from determinism. History counts. But history and circumstance can be overcome. Bangladesh has overcome a war of independence, political assassinations and widespread poverty to attain more than 20 years of growth. There are gaps in Dercon's argument. Elites do wield outsized power, especially in the absence of democratic accountability, but there is little room in the book for ordinary people's influence over events, if only through the actions of civil society. Nor, for many readers' taste, will there be sufficient acknowledgment of a colonial history that left countries, particularly in Africa, ransacked, traumatised and dismembered. Yet it is precisely the simplicity of Gambling on Development that is its strength. Dercon's message is ultimately an empowering one. "Magic and miracles happen," he writes. But those in charge have got to want it.