Nabila Tabassum Chowdhury > Recent Status Updates

"Institutions need to be tailored to the local environment, and therefore any top-down attempt to change them would probably backfire. Reform, if possible at all, must be gradual, and must recognize that existing institutions are most likely there for a reason."

"The central problem, he rightly points out, is that it is easier to take over a country than to know how to make it run well. The disastrous effort of the United States to institute a market-friendly democracy in Iraq is just one recent example. But more generally, one size does not fit all"

"One possible way to break the vicious cycle of bad institutions is to import change from the outside. Paul Romer, known for his pioneering work on economic growth a couple of decades ago, came up with what seems like a brilliant solution: If you cannot run your country, subcontract it to someone who can."

"In one view, if countries are stuck because they have bad institutions, it is incumbent on the rich countries of the world to help them get better institutions, by force, if need be. In the other view, any attempt at manipulating institutions or policies from the top down is doomed to fail, and changes can only come from within."

"Those countries inherited from the colonial period a set of institutions that were put in place by colonial rulers not for the development of the country but to maximize the extraction of resources for the benefit of the colonial powers. After decolonization, the new rulers found it convenient to hold on to the same extractive institutions and use them for their own benefit, thereby setting off a vicious cycle."

"When they work well, political institutions put enough constraints on rulers to ensure that they cannot deviate too far from the public interest."

"One problem is that rulers, who have the power to shape economic institutions, do not necessarily find it in their interest to allow their citizens to thrive and prosper."

“Economic institutions shape economic incentives, the incentives to become educated, to save and invest, to innovate and adopt new technologies, and so on. Political institutions determine the ability of citizens to control politicians.”"

"Careful thinking and rigorous evaluations can help us design systems to keep corruption and inefficiency in check."

"A generalized theft of government funds was possible, it seems, mainly because no one had bothered to worry about it."

"By 2001, when Reinikka and Svensson repeated their school survey, they found the schools were getting, on average, 80 percent of the discretionary money that they were entitled to."

"However, there was an interesting coda to Reinikka and Svensson’s story. When their results were released in Uganda, there was something of an uproar, with the result that the Ministry of Finance started giving the main national newspapers (and their local-language editions) month-by-month information about how much money had been sent to the districts for the schools."

"At the other extreme, Jeffrey Sachs sees corruption, perhaps not surprisingly, as a poverty trap: Poverty causes corruption, and corruption causes poverty."

"And conversely, without good politics, it is impossible to design or implement good policies, at least not on any scale. There is no point to figuring out the best way to spend a dollar on schools, if 87 cents will never reach the school anyway."

"The real problem of development, in this view, is not one of figuring out good policies: It is to sort out the political process. If the politics are right, good policies will eventually emerge."

"The answer they got was nothing short of stunning: Only 13 percent of the funds ever reached the schools. More than half the schools got nothing at all. Inquiries suggested that a lot of the money most likely ended up in the pockets of district officials."

"How much of these funds allocated to schools by the central government actually made it to the schools?2 It was a relatively straightforward exercise. They just sent survey teams to the schools and asked them how much they had received. Then they compared the numbers to computer records of how much had been sent."

"Even the most well-intended and well-thought-out policies may not have an impact if they are not implemented properly. Unfortunately, the gap between intention and implementation can be quite wide."

"Microcredit and other ways to help tiny businesses still have an important role to play in the lives of the poor, because these tiny businesses will remain, perhaps for the foreseeable future, the only way many of the poor can manage to survive. But we are kidding ourselves if we think that they can pave the way for a mass exit from poverty."

"Most of them manage to do this well enough to survive, but without the talent, the skills, or the appetite for risk needed to turn these small businesses into really successful enterprises."

"So are there really a billion barefoot entrepreneurs, as the leaders of MFIs and the socially minded business gurus seem to believe? Or is this just an illusion, stemming from a confusion about what we call an “entrepreneur”? There are more than a billion people who run their own farm or business, but most of them do this because they have no other options."

"This may set off some virtuous circle: Stable and higher wages would give workers the financial resources, the mental space, and the necessary optimism both to invest in their children and save more. With those savings, and the access to easier credit that a steady job brings, the most talented among them would eventually be able to start businesses large enough to, in turn, hire other people."

"there may be a case for using some governmental resources to help create enough large businesses by providing loan guarantees to medium-size ventures, for example. Something like that happened in China, where state businesses, or at least part of their equipment, land, and buildings, were quietly handed over to their employees. This was also, more explicitly, part of the Korean industrial policy."

"Credit remains perhaps an even bigger problem, given the S-shaped nature of the production technologies: To set up businesses that create lots of jobs (rather than one job for the entrepreneur alone) takes more money than the average business owner in the developing world has access to, and as noted in Chapter 7 on credit, it is not clear how to get the financial sector to lend more to these people. "

"The regulatory environment is also important for creating jobs: Labor laws play a role in ensuring job security, but if they are so stringent that no one wants to hire, then they are counterproductive."

"But because not everyone will be able to move to the city, it is also important that more good jobs be created not just in the largest cities but in smaller towns all over the country. For this to be possible, there must be substantial improvements both in urban and in industrial infrastructure in towns of this sort."

"How then can more “good jobs” be created? Clearly, it would help if it were easier to migrate to cities, so policies on urban land use and low-income housing are obviously vital. Less obviously, effective social safety nets, consisting of both public assistance and market insurance, can make migration easier by reducing dependence on social networks."

" As long as your family is still in the village, even if you get sick in the city and end up in the hospital, you can rely on your connections in the village. But what if you actually pull up your roots and move?"

"There is also the risk: Suppose you pay the cost of setting up a home in the city and moving your family there, only to lose your job. Indeed if you haven’t already had a decent job before and saved up, how do you pay for the move? And what happens if someone gets very sick? It is true that health care is better in the city, but who will come with you to the hospital or have some cash handy if you need it?"

"One of the consequences of temporary migration is that these workers never become indispensable enough to the employer to be made permanent or given any kind of special training; they remain casual laborers all their lives. Their families therefore never move to the city, and never benefit from the better city schools and peace of mind that come from a permanent job."