😬

congrats -- that was a long journey! Happy ending

2. Aid for economic growth is tantalizing but much harder. The new enthusiasm for redirecting billions in aid to subsidize private enterprise is way ahead of the evidence.
www.chat-gdp.org/development-...

Preview of my take:

1. Health aid saves millions of lives. There's still low-hanging fruit; it could save millions more.
www.cgdev.org/blog/malaria...

While it's possible both are right -- the strikes were tactically incompetent, but strategically wise -- that seems to assume this miss (if indeed it was a miss) was an aberration. And we won't just be bungling along, blowing things up in a region we don't understand. TBD.

We end with some 'big think' speculation about deeper causes: the end of hyperglobalization, and the broader retreat from liberalism.

Will leave that florid prose to the full post, link below.

5/5
www.chat-gdp.org/we-were-wro...

This poses a bit of a puzzle: if 70% of LMICs are catching up, why no convergence? The answer is basically about magnitudes: the growth boom in low- and esp middle-income countries has collapsed -- reflected in the end of global poverty reduction that others have documented.

4/

One slightly more optimistic lens on this (2nd) reversal: if instead of a standard Solow-convergence metric, we look at the % of LMICs who are growing faster than the G7, that number remains high, around 70%. But it's also falling fast.

3/

To be precise, it's not so much that we were wrong, as that facts have changed. We're not the first to notice: see links in post to Soumaya Keynes, Olaberria & Reinhardt, and Jonathan Hartley. But having hyped the rise of convergence, we felt we should reflect on its fall.

2/

Washington's new model of aid for growth has upsides if it can incubate new productive sectors. There's nothing wrong with development finance helping investors make money. But it also needs to help poor countries make stuff.

/end

The history of successful industrial policy, e.g., in East Asia, involved leaning against market pressure to invest in finance and real estate, and instead directing scarce subsidies to sectors deemed strategic for growth. In short, export discipline.

10/

Why the turn away from industrialization?

One factor seems to be that development finance institutions like the World Bank's IFC are profit driven, and investing in Togolese factories is just less profitable than investing in Turkish banks.

9/

Applying those sector characteristics to the industry composition of World Bank's private sector investments over time -- which is a bit of a leap, but is the best I can do with the data at hand -- what you see is basically a declining focus on jobs, exports, and growth.

8/

There's a reason economists obsess over manufacturing. It's been the engine of most big economic 'miracles' in modern history: exportable, labor intensive, and fast growing.

7/

There are counter examples -- I discuss a new garment factory in Togo that the World Bank helped finance (see 1st pic). But the modal project is a loan to a bank in Mexico or Turkey, ostensibly to expand credit in the economy -- a strategy with a limited evidentiary base.

6/