Monday, January 10, 2011

How to make migration a win-win-win strategy?

By ensuring that the whole initiation has

  • a sustainable migration management system that takes into account the interests of the various stakeholders involved;
  • a clear identification and articulation of objectives and interests in migration by key stakeholders, based on a common conceptual framework for migration and development:
  • regional and bilateral coordination mechanisms to balance these (potentially divergent) objectives and to reach compromise under labor agreements and policies; and
  • effective, evidence-based polices, and public and private sector interventions to achieve the objectives that are known and applied at the levels of sending, receiving, returning, and circulating.

Here is more by Holzmann and Pouget (2010). Quite a mouthful of recommendations! Win-win-win scenario is for labor, migrant’s country, and host country.

Is aid (development) THE problem in Nepal?

Jeremy Rappley thinks that aid/donors is the problem in Nepal’s development. He criticizes the aid industry for distorting Nepal’s development path by imposing their own models that have failed to produce tangible outcomes. He is critical of the development activities carried out in Nepal since the first development donor (apart from India and colonial Britain), i.e. USAID arrived here.

It is a very stimulating piece. I largely agree with his socio-political analysis. But, regarding econ, he’s got some explaining to do.

But, as with the earlier fall of the Ranas, Nepal’s own vision of its future – inclusion, democracy, equity – was quickly overtaken by international donor demands. By the late 1990s, Nepal’s own vision had all but been turned almost completely around: An exclusive focus on efficiency, cost-effectiveness and a consumer logic. In fact, from ‘citizen to consumer’ characterize rather well the two decades since Janaandolan. Again, consider education. The National Education Commission (1990-1992) inaugurated in the wake of Janaandolan stated that the goal was to create an educational system “consistent with the human rights enshrined in the constitution and the democratic values and norms as well as social justice.”

Ten years later, the main themes are decentralization and private schools – the exact same policies we see the donors promoting in every other country of the world. It is little wonder then that it has brought to Nepal the exact same results: A massive spike in inequality, growing exclusion along class lines and the breakdown of democracy.

[…] Loading-shedding has increased, fuel shortages, garbage piling up in the streets, traffic, pollution, and dance bars offering poor Nepali girls to rich Indian tourists. Considering what Kathmandu looked like 50 years ago, what will it look like 50 years in the future? And this is just Kathmandu, where most people still believe in ‘development’.

[…] Venture beyond the rim of the valley and that is where the real future of Nepal lies. It is here that the vast majority of the ‘twice-passed-by’ people live and they are losing patience. Fast. The genius of bikas is that it promised that inequalities would be lessened over time. This was true both within the country and across the world: Poor people were told by donors and local elites to wait patiently, do the right thing, and they would ‘catch-up’. Being twice-passed-by, however, has created a disbelief in ‘development’.

However, his claim that donor’s development agendas and funding resulted in “a massive spike in inequality, growing exclusion along class lines and the breakdown of democracy” does not hold much ground in terms of evidence. The efforts of donors might not have produced the desired outcomes, but this does not mean that the involvement of donors has led to massive spike inequality, exclusion and breakdown of democracy. First, inequality (measured by Gini coefficient) tends to rise, to some extent, with income per capita (remember Kuznets curve?) and it has got little to do with donors’ development agenda. Second, the claim that growing exclusion along class lines being engendered by aid/donors is dubious. Third, donors’ development agendas might have favored some political regimes, but I don’t think there is evidence that it has directly led to a breakdown of democracy in Nepal.

Furthermore, I don’t think the existing loading-shedding, fuel shortages, garbage, pollution, and dance restaurants have got too much to do with the aid industry and donors’ development agenda. We can make a case that the donors failed to fund the activities sorely needed by the country, but this does not mean that the present day economic ills are caused by donors’ development agendas and priorities. That said, I am not being wholly supportive of the donors as well; I have already been very critical of the aid industry in Nepal.

Rather than the donors’ development agendas, it is the failure of our domestic institutions to deliver on the development promises, which the donors’ did little to help reform. It is not the loss of faith in development, but the loss of faith in domestic institutions that is forcing people to ‘exit’ the political system. Largely, the sorry state of the domestic institutions is our own (both politicians and citizens) bringing. Now, what is the solution? This is unanswered by Rappley.

The effectiveness of donors’ activities should be judged in terms of their contribution to poverty reduction, economic growth, and employment generation at the macro level. These objectives are always the aim of donors. In some, they have utterly failed, while in others they have pretty much shown satisfactory results. For instance, the progress in attaining primary and secondary education and reducing maternal mortality, among others, is pretty good. It wouldn’t have happened at this pace without donors’  assistance. But, they have also failed to counter health emergencies (remember a number of deaths due to diarrhea in Jajarkot in 2009?).

I like this:

[…] Blame is perhaps the only growth industry in Nepal; finger-pointing advances in lockstep with stagnation. So we must be careful. Nevertheless, donors need to bear some of the blame.

Yet, having seen this happen before, Nepali policymakers must also take responsibility. But the biggest finger needs to be pointed right back at many of the current readers, those who continue to believe in the idea of ‘development’ amid the obvious stagnation of the country. Those who try to carve out a ‘first world’ existence through private schools, luxury hotels, satellite television, and curtains on their SUVs to block out the putrefying stagnation of Nepal deserve the most blame because they are the ones educated enough to see things clearly. Here is the beginning of a solution: Viewing not the future ideal but the current reality of bikas in Nepal, coming to terms with the country’s place in the global economy, and recapturing some of the equity, inclusion, and social justice goals that Nepal committed itself to in 1950 and 1990. This may sound radical, but no more radical that what is likely to occur in the very near future if Nepali elites do not voluntary move in that direction.

A good analysis. Highly recommended to read the whole article.

Fiscal policy, private consumption & unemployment

This paper uses the old-Keynesian representative agent model developed in Farmer (2010b) to answer two questions: 1) do increased government purchases crowd out private consumption? 2) do increased government purchases reduce unemployment? Farmer compared permanent tax financed expenditure paths and showed that the answer to 1) was yes and the answer to 2) was no. We generalize his result to temporary bond-financed paths of government purchases that are similar to the actual path that occurred during WWII. We find that a temporary increase in government purchases does crowd out private consumption expenditure as in Farmer (2010b). However, in contrast to Farmer's experiment we find that a temporary increase in government purchases can also reduce unemployment.

Full paper by Farmer and Plotnikov here. Overall, they find that a temporary increase in government purchases crowds out private consumption expenditure, but also reduces unemployment.