Nabila Tabassum Chowdhury > Recent Status Updates

"The good news is that we do have things to do in the meantime; there is a lot that both poor and rich countries could do to get rid of the most egregious sources of waste in their economies. While these things may not propel countries to permanently faster growth, they could dramatically improve the welfare of their citizens."

"The bottom line is that despite the best efforts of generations of economists, the deep mechanisms of persistent economic growth remain elusive. No one knows if growth will pick up again in rich countries, or what to do to make it more likely."

"massive reduction in under-five mortality took place even in some very poor countries that were not growing particularly fast,largely thanks to a focus on newborn care, vaccination, and malaria prevention.And it is no different with many of the other levers for fighting poverty,be it education, skills,entrepreneurship, or health.We need a focus on the key problems and an understanding of what works to address them."

"While better lives are indeed partly about being able to consume more, even very poor people also care about the health of their parents, about educating their children, about having their voices heard, and about being able to pursue their dreams."

"And quality of life means more than just consumption. As we saw in the previous chapter, most human beings care about feeling worthy and respected; they suffer when they feel they are failing themselves and their families."

"The key ultimately is to not lose sight of the fact that GDP is a means and not an end. A useful means, no doubt, especially when it creates jobs or raises wages or plumps the government budget so it can redistribute more. But the ultimate goal remains one of raising the quality of life of the average person, and especially the worst-off person."

"Interestingly, even the IMF, so long the bastion of growth-first orthodoxy, now recognizes that sacrificing the poor to promote growth was bad policy. It now requires its country teams to include inequality in factors to take into consideration when providing policy guidance to countries and outlining conditions under which they can receive IMF assistance."

"The need to be “business friendly” to preserve growth may be interpreted, as it was in the US and UK in the Reagan-Thatcher era, as open season for all kinds of anti-poor, pro-rich policies (such as bailouts for overindebted corporations and wealthy individuals) that enrich the top earners at the cost of everyone else, and do nothing for growth."

"One very real danger is that in trying to hold on to fast growth, India (and other countries facing sharply slowing growth) will veer toward policies that hurt the poor now in the name of future growth."

"It is quite possible that India’s growth, in spite of all of its problems, has very little to do with some special Indian genius. Instead, it has a lot to do with the flip side of misallocation: the opportunities of being an economy with a large pool of potential entrepreneurs to draw upon and lots of unexploited opportunities."

"The growth tide does raise all boats, but it doesn’t lift all boats to the same level— many economists worry that there may be such a thing as the middle-income trap, an intermediate-level GDP where countries get stuck or nearly stuck."

"Perhaps a generational shift, as control passed from the parents to their children, often educated abroad, more ambitious, and savvier about technology and world markets. Or the effect of the accumulation of modest profits that eventually made it possible to pay for the shift to bigger and better plants."

"This appears to be unrelated to any economic policy, and is described as “India’s mysterious manufacturing miracle.” 121 But it is no miracle. At its root, it is a modest improvement from a dismal starting point, and one can imagine various reasons it happened."

"These are “government” failures just as there are market failures, and there are so many instances of these that it would be very dangerous to blindly rely on governments to pick the winners. But there are also so many market failures that it makes no sense either to rely on the market alone to allocate resources to the right use; we need an industrial policy designed that keeps in mind these political constraints."

"Everything we have learned about misallocation tells us we have to step beyond the models and think of how the resources are used. If a country starts by using its resources very badly, like China did under communism or India did in its days of extreme dirigisme, then the first benefits of reform may come from moving resources to their best uses."

"Labor markets frozen by this kind of radical mismatch are wasting resources. These young people are mostly waiting for jobs they will not get. In India, newspapers frequently write about the mad rush for government jobs; for example, that twenty-eight million people applied for ninety thousand low-level jobs in the government-owned railways."

"The growth in government jobs slowed and eventually stopped in the face of budgetary pressures, 114 but the population of the educated, even among the historically disadvantaged, kept growing. 115 In other words, the goalposts have moved."

"They were told that if they studied hard they would get a good job, meaning mostly a desk job or a teaching job. This was closer to the truth in their parents’ generation than it is today (especially for historically disadvantaged populations like the lower castes who benefitted from affirmative action)."

"When the researchers, one of them a former management consultant, sent (for free) a team of highly paid consultants to work for five months with the managers of a randomly chosen set of these firms, profits went up by $ 300,000 per firm, which even for these relatively large firms was not chicken feed."

"Bad banks hurt efficiency from both ends; because of them, savings rates are lower than they could be and savings are poorly managed."

"One natural culprit is the capital market. It clearly plays a role in the Tirupur example, where the most productive entrepreneurs in the most productive T-shirt cluster in India cannot borrow enough to catch up in size with the less productive local firms."

"In other words, the United States is an “up or out” economy, where people try something new and either succeed and make it big or fail after a few years. By contrast, the Indian economy is exceedingly sticky: good firms do not grow and bad firms do not die."

"And then there is the misallocation we do not see, the great ideas that never see the light of day. Given that venture capital is so much more active in scouting out new ideas in the United States than in India, it is plausible that India is also missing more of these unsung geniuses."

"One very prominent estimate suggests that, in 1990, just the reallocation of factors within narrowly defined industries could have increased Indian TFP by 40 percent to 60 percent and Chinese TFP by 30 percent to 50 percent. If we allowed reallocations across broader categories, the estimates would surely be even larger."

"Firms are passed on to sons even when daughters would be better at managing them, 96 all the fertilizer in the family goes to one (male) person’s plot when it would make sense to use a little bit in all the fields."

"And this is true not only of technologies but also of land, capital, and talents. Some firms have more employees than they need while others are unable to hire. Some entrepreneurs with great ideas may not be able to finance them, while others who are not particularly good at what they are doing continue operating: this is what macroeconomists call misallocation."

"But this is often not true. In a given economy, productive and nonproductive firms coexist, and resources do not always flow to their best use."

"A lot of the problem seems to be that these innovations take place in a void, insufficiently connected to the lives they wish to change."

"The frugal engineering world is littered with many similar disasters, from the $ 100 laptop to educate the world (which actually costs $ 200 and has been shown to have no impact on what children actually learn), 87 to cleaner cookstoves that nobody wanted, 88 to various water-filter technologies89 and innovative latrines."

"After all, in developed countries there is no evidence that the advent of the internet ushered in a new era of growth."