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Convergence Theory

HAROLD L. WILENSKY

in Rich Democracies: Political Economy, Public Policy, and Performance

This chapter discusses evidence for convergence theory, the idea that as rich countries got richer, they developed similar economic, political, and social structures and to some extent common values ... More

This chapter discusses evidence for convergence theory, the idea that as rich countries got richer, they developed similar economic, political, and social structures and to some extent common values and beliefs. The analysis reveals that high levels of economic development and related changes in the occupational and industrial composition of the labor force result in two areas of convergence: the gradual spread of nonstandard schedules of work and the substantial and rapid growth of contingent labor in both manufacturing and service. Total annual hours of work declined from the late nineteenth century until about 1960, a trend that has continued in all rich democracies ever since.Less

Is Industrial Policy Necessary and Feasible in Africa?: Theoretical Considerations and Historical Lessons

Ha-Joon Chang

in Industrial Policy and Economic Transformation in Africa

The feasibility of industrial policies in Africa: the constraints of political economy and institutions are much exaggerated. Nor is there any basis for the “Afro-pessimism” steming from some alleged ... More

The feasibility of industrial policies in Africa: the constraints of political economy and institutions are much exaggerated. Nor is there any basis for the “Afro-pessimism” steming from some alleged peculiarities of Africa in terms of climate, geography, culture or history.Less

Accounting for the Distributional Effects of Noncash Public Benefits

Holly Sutherland and Panos Tsakloglou

in Counting the Poor: New Thinking About European Poverty Measures and Lessons for the United States

This chapter extends previous analyses of the distributional effects of welfare programs in rich countries, focusing on three of the most important public transfers in kind, namely, public education ... More

This chapter extends previous analyses of the distributional effects of welfare programs in rich countries, focusing on three of the most important public transfers in kind, namely, public education services, public health care services, and public housing. It analyzes their short-term distributional effects in a strictly comparable framework in five EU countries (Belgium, Germany, Greece, Italy, and the UK). The chapter begins by describing the methods of calculating the value of each of the three sources of in-kind benefits and identifying beneficiaries. This is followed by a presentation of the main results of the distributional analysis, showing the effects of the three noncash elements of income in terms of their relative importance in aggregate and across the cash income distribution. Their effects are compared with those of the cash benefits systems, and their overall impact on measures of inequality and poverty are estimated. The next section discusses the welfare interpretation of the empirical findings and outlines an alternative approach using different sets of equivalent scales.Less

Using Nonmonetary Deprivation Indicators to Analyze European Poverty and Social Exclusion

Brian Nolan and Christopher T. Whelan

in Counting the Poor: New Thinking About European Poverty Measures and Lessons for the United States

Research and monitoring of poverty in rich countries relies primarily on household income to capture living standards and distinguish the poor. Significant efforts have been made to broaden the ... More

Research and monitoring of poverty in rich countries relies primarily on household income to capture living standards and distinguish the poor. Significant efforts have been made to broaden the measure of financial resources and capture the dynamics of income over time. At the same time, there is increasing interest in using nonmonetary information to improve the measurement and understanding of poverty. Such nonmonetary indicators are increasingly used in individual European countries, as well as at the EU level, with the suite of indicators employed to monitor the EU's social inclusion process recently expanded to include a summary deprivation measure. This chapter focuses on the rationales underpinning the use of measures of material deprivation and at the variety of ways they are employed in research and monitoring poverty. It looks at some key patterns revealed by deprivation indicators across the EU, and then discusses the implications for capturing poverty and its multidimensionality. Finally, it highlights some challenges in the further development and use of such measures.Less

Theories of the Postindustrial Society

HAROLD L. WILENSKY

in Rich Democracies: Political Economy, Public Policy, and Performance

This chapter discusses theories concerning post-industrial society. It evaluates research evidence concerning the limits of the structural aspects of post-industrial theory and suggests that its ... More

This chapter discusses theories concerning post-industrial society. It evaluates research evidence concerning the limits of the structural aspects of post-industrial theory and suggests that its account of industrial and occupational trends is too gross to be useful. It argues that the major structural and cultural trends in rich countries are better captured by convergence theory with its accent on the universal and specific effects of continuing industrialization.Less

Types of Political Economy, Party Ideology, and Family Policy: Contrasting Government Responses to a Common Problem

HAROLD L. WILENSKY

in Rich Democracies: Political Economy, Public Policy, and Performance

This chapter examines the contrasting responses of the government of rich countries to the problems concerning family policy. It shows that national differences in family policy and the politics of ... More

This chapter examines the contrasting responses of the government of rich countries to the problems concerning family policy. It shows that national differences in family policy and the politics of the family can be explained by types of political economy and the power and ideology of mass-based political parties. It suggests that the story of changes in family structures, functions, and lifestyles, as well as government responses to those changes, is the story of divergent paths of development to a convergent outcome and explains that convergence is driven by the demographic and organizational accompaniments of continuing industrialization.Less

An Indirect Test of Effectiveness

J. C. Sharman

in The Money Laundry: Regulating Criminal Finance in the Global Economy

This chapter examines whether anti-money laundering (AML) policy works by testing two alternative views. The first is whether AML policy has produced a major reduction in predicate crime, in line ... More

This chapter examines whether anti-money laundering (AML) policy works by testing two alternative views. The first is whether AML policy has produced a major reduction in predicate crime, in line with the logic first used to justify a “follow the money” approach (effectiveness in absolute terms). The second is whether the AML system has delivered benefits to society greater than the costs the system itself has imposed (cost-effectiveness). The chapter evaluates the effectiveness of AML policy as well as the costs and benefits of the AML system in rich countries compared with developing countries such as Barbados, Mauritius, and Vanuatu. It also considers the disconnect between standard policy prescription and local circumstances by focusing on the experience of Nauru. Finally, it assesses the effectiveness of the global AML system in dealing with corruption and kleptocracy in poorer countries.Less

Inequality and Poverty across the World

Francis Teal

in The Poor and the Plutocrats: From the poorest of the poor to the richest of the rich

In this chapter we begin by examining the sources of poverty in the two waves of globalization, the first from 1700 to 1913 and the second from 1950 to the present. We then ask whether, during this ... More

In this chapter we begin by examining the sources of poverty in the two waves of globalization, the first from 1700 to 1913 and the second from 1950 to the present. We then ask whether, during this second wave, absolute poverty has been falling? The answer turns out to depend on how we define the absolutely poor due to how incomes across the world have been rising. Under either of the definitions proposed from 2003 to 2008 the number of the absolutely poor has fallen. The data shows that, in percentage terms, the poorest of the poor have seen faster growth in incomes than the richest of the rich. Further, this pattern of growth has ensured that inequality has increased far more in poor than in rich countries.Less

Puzzling Tax Structures in Developing Countries: A Comparison of Two Alternative Explanations

Roger Gordon and Wei Li

in Fiscal Policy and Management in East Asia

Economic policies in developing countries often differ sharply from those commonly advocated by economists, generating advice to adopt policies more consistent with both the successful practices in ... More

Economic policies in developing countries often differ sharply from those commonly advocated by economists, generating advice to adopt policies more consistent with both the successful practices in richer countries and/or those that appear best based on existing economic theories. Taxes certainly require some interference with market transactions, so the advice would be to enact them with a broad base and low rates so as to lessen the efficiency costs resulting from the distortions created by the tax structure. Broad-based taxes, such as a value-added tax, certainly do play an important role in poorer as well as richer countries. However, a much larger share of revenue in developing than in developed countries comes from taxes with a narrow base. This chapter provides a derivation of the forecasted tax policy coming from a Grossman-Helpman (1994) style political economy model, and compares these forecasts with those derived in the Gordon-Li model. It then reviews the empirical evidence to compare it with the forecasts from these two models.Less

The Rise of the Anti-Kleptocracy Regime

J. C. Sharman

in The Despot's Guide to Wealth Management: On the International Campaign against Grand Corruption

This chapter elaborates on the concept of kleptocracy by providing a portrait of one of the most publicized and influential early examples of grand corruption: that of Mobutu Sese Seko in the Congo. ... More

This chapter elaborates on the concept of kleptocracy by providing a portrait of one of the most publicized and influential early examples of grand corruption: that of Mobutu Sese Seko in the Congo. Sketching out the corruption of Mobutu and his clique shows how the global anti-kleptocracy norm and the resulting regime came into being. For different reasons, a wide variety of intergovernmental organizations, NGOs, and governments from Africa, Asia, and Latin America argue that corruption implicates rich countries as well as poor, because funds looted from poor countries tended to end up in rich ones. The story of intertwined normative and policy change at the global level in this chapter provides context for the following analysis of how well these rules work at a national level.Less

Aid's Purposes: A Brief History

in Foreign Aid: Diplomacy, Development, Domestic Politics

Foreign aid, which began as an instrument of Cold War diplomacy, became a permanent element in relations between states, reflecting a strengthening norm that the governments of rich countries should ... More

Foreign aid, which began as an instrument of Cold War diplomacy, became a permanent element in relations between states, reflecting a strengthening norm that the governments of rich countries should help poor countries improve the well-being of their peoples. Such a norm was hardly imagined at the beginning of the foreign aid era; it is seldom contested today. The path by which that norm developed involves the domestic political processes of aid-giving countries, international trends and events, and pressures from international organizations that supported the use of aid for human betterment. This chapter describes the history of foreign aid over the past threescore years from a global perspective.Less

The Growing Equality across Countries and Inequality within some Countries

Francis Teal

in The Poor and the Plutocrats: From the poorest of the poor to the richest of the rich

Just as unemployment dominated the political agenda of the 1930s, so inequality has come to dominate the concerns of both rich and poor countries in the twenty-first century. Contrary to what is ... More

Just as unemployment dominated the political agenda of the 1930s, so inequality has come to dominate the concerns of both rich and poor countries in the twenty-first century. Contrary to what is widely believed, inequality across countries has been declining since the 1980s, driven primarily, but not exclusively, by the rise in incomes in China. Looking at inequality within countries, on average inequality is much higher in poor than in rich countries. Changes over time in inequality are modest, compared with differences across countries. We observe a world with countries which have policies, or politics, which generate high inequality and ones which generate much lower inequality. There is little link between inequality and growth on average across the world.Less

How to Use Oil Revenues Efficiently

Shantayanan Devarajan

in Institutions and Macroeconomic Policies in Resource-Rich Arab Economies

Oil-rich countries systematically misallocate public expenditures relative to non-oil countries—by favoring consumption over capital, and within consumption, inefficient subsidies and public sector ... More

Oil-rich countries systematically misallocate public expenditures relative to non-oil countries—by favoring consumption over capital, and within consumption, inefficient subsidies and public sector wages over targeted transfers. Furthermore, for given levels of expenditure, value for money is considerably less in oil-rich countries. This chapter argues that the reason for this inefficiency is that oil revenues go directly to the government without passing through the hands of the citizens, as is the case with tax revenues. As a result, governments in oil countries are less accountable for public expenditure, which leads to inefficient spending. To improve public spending efficiency, we propose that all oil revenues be distributed directly to citizens, and the resources that government needs be raised through taxation. We show that such a scheme improves the efficiency of public spending. We consider possible obstacles to such a reform and show that they have been overcome by technology, politics, and global events.Less

Human Society ‘in Perpetual Flux’: Hume’s Pendulum Theory of Civilisation

Ryu Susato

in Hume's Sceptical Enlightenment

Hume’s avowed endorsement of a cyclical view of civilisation has been considered one of his most significant differences from the French philosophes’ upholding of ‘Progress’ and ‘Reason’. Some have ... More

Hume’s avowed endorsement of a cyclical view of civilisation has been considered one of his most significant differences from the French philosophes’ upholding of ‘Progress’ and ‘Reason’. Some have used his divergent position to paint the image of Hume as the alleged forefather of ‘Counter-Enlightenment’ thinkers. As a result, Hume’s endorsement of a cyclical view has not been considered compatible with his vindication of civilisation, causing a dilemma for commentators. Through close examinations of Hume’s texts and comparisons with those of his predecessors and contemporaries (such as William Temple, Fontenelle, and Turgot), this chapter makes it clear that Hume’s cyclical view of civilisation is not limited to the issue of fine arts, but extends to commerce and manufactures. Hume’s vindication of a cyclical view of human history is also closely related to his criticism of the notion of providence, which Josiah Tucker evokes for his defence of perpetual progress in the so-called ‘rich country-poor country debate’. Nevertheless, Hume’s support of a cyclical view of civilisation does not contradict, but rather buttresses, his robust commitment to the values of refinement, liberty, and humanity. Hume is peculiar in keeping a cool head with regards to the possibility of continued progress, while believing in and supporting modern values.Less

Findings: The Global Economic Landscape

William W. Lewis

in The Power of Productivity: Wealth, Poverty, and the Threat to Global Stability

This chapter argues that the difference in economic success among countries is not a matter of nature, intellect, or genetics. The problem—and the solution—lies in public policies. But effective ... More

This chapter argues that the difference in economic success among countries is not a matter of nature, intellect, or genetics. The problem—and the solution—lies in public policies. But effective policies can be created and implemented only if one truly understands what makes the economies of poor (or rich) nations grow. But even during the 1990s, when development economics seemed most promising, it lacked that understanding. The chapter discusses the failure of development economics; the disparities in wealth among those nations at the peak of the global economic landscape; the McKinsey Global Institute research project; and the importance of productivity and why productivity levels are so different around the world.Less