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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

The Petrodollar Economy

David M. Wight

in Oil Money: Middle East Petrodollars and the Transformation of US Empire, 1967-1988

This chapter addresses the US-led petrodollar economy. This order produced new points of contact and cooperative networks among Americans and Arabs and Iranians, broadening the number of individuals ... More

This chapter addresses the US-led petrodollar economy. This order produced new points of contact and cooperative networks among Americans and Arabs and Iranians, broadening the number of individuals and kinds of actors involved in MENA (Middle East and North Africa)–US relations. Yet petrodollar interdependence also proved to be a double-edged sword. While little appreciated by US leaders at first, the influx of American people and products produced hostility in many MENA communities, particularly when they served the repressive functions of local regimes. In becoming increasingly tied to the oil-rich Arab countries, the United States also became even further tied to the repercussions arising from the Arab–Israeli conflict. When the Lebanese Civil War threatened to ignite another full-scale Arab–Israeli war, US policymakers feared that petrodollars could be used as a financial weapon against the United States and its allies. And while petrodollar aid assisted in the US effort to reform the political and economic orientation of Egypt, it also produced unintended social consequences that undermined Anwar Sadat's regime.Less

Developing Countries and Open Markets

Douglas A. Irwin

in Free Trade under Fire: Fifth Edition

This chapter takes a look at developing countries and confirms whether free trade is beneficial in promoting economic development. It analyzes whether countries such as Japan, Korea, and China grow ... More

This chapter takes a look at developing countries and confirms whether free trade is beneficial in promoting economic development. It analyzes whether countries such as Japan, Korea, and China grow rich by rejecting free trade and instead pursuing closed markets and industrial policies. The chapter addresses the issue of fairtrade and how rich-country agricultural subsidies and import tariffs harm developing countries. It also assesses how developing countries harm themselves with their own anti-trade policies. It discusses whether protectionist trade policies contributed to the East Asian growth miracle, whether labor standards should be used to address worker exploitation in sweatshops, and whether “fair trade” offers a satisfactory route to development.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

Oil, US Empire, and the Middle East

David M. Wight

in Oil Money: Middle East Petrodollars and the Transformation of US Empire, 1967-1988

This chapter discusses the US international empire in the Middle East and North Africa (MENA) since the 1920s. Constructed by both US multinational oil companies (MNOCs) and the US government, US ... More

This chapter discusses the US international empire in the Middle East and North Africa (MENA) since the 1920s. Constructed by both US multinational oil companies (MNOCs) and the US government, US empire in the MENA sought to ensure the cheap, plentiful flow of oil from the region to Western consumers. However, US and European empires in the MENA generated popular local resistance to client regimes and their Western backers. This resistance to the US-led order developed in part due to poor labor and human rights conditions, cultural and religious alienation toward encroaching foreign social systems (including capitalism), and nationalist aspirations. This situation increasingly led oil-rich US allies in the MENA to collaborate with each other and additional oil-rich countries to challenge the US-dictated terms of the global petroleum economy. Growing US support for Israel would likewise increasingly push US-allied, oil-rich Arab governments to join Arab countries more hostile to Washington in challenging the United States.Less

The Road to the Oil Shock

David M. Wight

in Oil Money: Middle East Petrodollars and the Transformation of US Empire, 1967-1988

This chapter examines how, in 1973, US president Richard Nixon faced anger and distrust from the US public because of high rates of inflation and the contributing factor of rising oil prices. While ... More

This chapter examines how, in 1973, US president Richard Nixon faced anger and distrust from the US public because of high rates of inflation and the contributing factor of rising oil prices. While the Nixon administration accepted a moderate increase in the cost of MENA (Middle East and North Africa) oil, it opposed a major price rise that would harm the Western economies. Moreover, it expected MENA allies to not challenge key US strategic prerogatives. In October of 1973, the oil-rich countries would defy the United States on both counts. First, the Gulf countries would unilaterally raise the price of their oil by 70 percent, the opening salvo in a series of price hikes that ended the period of cheap global petroleum for over a decade. Second, the Arab countries, including US allies, openly threatened US influence in the MENA by launching an impactful oil embargo against the United States in response to its support for Israel during the latest Arab–Israeli War. These two overlapping events attacked the foundations of US cooperative international empire in the MENA and the larger geopolitical and economic order the United States had instituted over much of the world since World War II.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

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