Economics of Development

MOST RECENT COMMENTARY

Michael Spence

The global economy will probably triple in size in the next quarter-century, fueling concern that the planet’s natural resources and recuperative capacities will not withstand the pressure. The challenge is to change the growth model in order to lighten the impact of higher levels of economic activity.

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RECENT COMMENTARIES

FEATURED COMMENTARIES

The Global Future of Europe’s Crisis

Kemal Derviş Series: A Better Globalization

2012-02-14

The stock of financial assets worldwide has grown so large, relative to national income flows, that financial-market movements can overwhelm most countries. Indeed, the European crisis is a mere foretaste of the central political debate of the first half of the twenty-first century: how to resolve the tension between global markets and national politics.... read

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The Nation-State Reborn

Dani Rodrik Series: Roads to Prosperity

2012-02-13

One of our era's foundational myths is that globalization has condemned the nation-state to irrelevance. But national governments remain our best hope for collective action – indeed, in the absence of transnational identities and viable global-governance mechanisms, they are all that we have.... read

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Sustainable Humanity

Jeffrey D. Sachs Series: Economics and Justice

2012-01-31

Sustainable development means inclusive economic growth that protects the earth’s vital resources. Yet achieving it will be a matter not only of technology, market incentives, and appropriate regulations; we must embrace sustainable development as a common commitment to decency for all human beings, today and in the future.... read

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Rattling the Renminbi

Yu Yongding Series: Enter the Dragon

2012-01-30

From July 2005 until this past December, China’s renminbi appreciated steadily. So why, if China was still running a decent current-account surplus and a long-term capital surplus, did the currency suddenly depreciate, forcing the PBoC to intervene to prevent it from falling further?... read

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Latin America’s Stymied Innovators

Andrés Velasco Series: The Rising Americas

2012-01-27

The main challenge facing Latin America is to transform its huge natural-resource wealth into the kind of wealth that does not run out, because it is constantly enlarged by human creativity. Indeed, if a diversified economy is the best predictor of future growth, Asia will grow much faster than Latin America for decades to come.... read

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Leaderless Global Governance

Dani Rodrik Series: Roads to Prosperity

2012-01-13

Too much global political capital nowadays is wasted on harmonizing policies that don't need it, and not enough is spent on harmonizing those that do. Over-ambitious and misdirected efforts at global governance will not serve us well at a time when global leadership and cooperation are bound to remain in limited supply.... read

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Mind over Market

Michael Spence Series: The New Wealth of Nations

2012-01-13

Most societies have important economic and other objectives that markets and competition are not designed to achieve. In today’s rapidly globalizing world, the most important of these objectives – expressed in various ways through the political and policymaking process in a wide range of countries – are stability, distributional equity, and sustainability.... read

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Global Imbalances and Domestic Inequality

Kemal Derviş Series: A Better Globalization

2012-01-10

Despite years of official talk about addressing global current-account imbalances, they remained one of the world’s main economic concerns in 2011. Indeed, some are increasing again, alongside inequality in many countries – a link that is no accident.... read

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Latin America’s Monetary-Policy Test

Andrés Velasco Series: The Rising Americas

2011-12-30

On matters of sex, the citizens of mostly Roman Catholic Latin America often proclaim one thing and practice something very different. On matters of monetary policy, Latin central banks often do essentially the same thing.... read

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Latin America’s Glossed Decade

Andrés Velasco Series: The Rising Americas

2011-05-18

The Inter-American Development Bank declared last July that this would be “Latin America’s Decade,” an idea subsequently endorsed by The Economist and repeated by countless apologists and experts. But, as in the past, the basis of the current wave of giddiness does not withstand scrutiny.... read

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Learning to Float

Yu Yongding Series: Enter the Dragon

2011-03-29

The economic and welfare costs of China’s exchange-rate policy are too high. It is time for China to consider allowing the renminbi to float freely, while reserving the right to intervene when it must, and tighten the management of cross-border capital flows.... read

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Development in Reverse

Dani Rodrik Series: Roads to Prosperity

2011-03-10

Developing countries' economies are a mish-mash, combining the productive with the unproductive, the First World with the Third. But why are some developing countries able to shift workers from low-productivity activities to higher-productivity sectors, whereas others have seen labor flowing in the opposite direction?... read

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America’s Ungovernable Budget

Jeffrey D. Sachs Series: Economics and Justice

2011-01-31

Politicians can make endless promises, but if the government's budget doesn’t add up, politics is little more than mere words. The US is now caught in such a bind, because taxes are too low to fund adequate government services, and to propose raising them would be political suicide.... read

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Urbanizing China

Fan Gang Series: Enter the Dragon

2010-12-30

Most countries at a stage of development similar to China's experienced faster urbanization than industrialization. But the reverse is true in China, largely because the system of land tenure ensures that the reservoir of labor for industrialization and urbanization remains located in country villages, rather than in city slums.... read

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The End of Fiscal Sovereignty in Europe

Michael Spence Series: The New Wealth of Nations

2010-05-18

The current crisis in the eurozone vividly underscores the importance of fiscal discipline – a point that the common currency's creators understood well. Today, EU leaders and member states must recognize that achieving the combination of discipline and flexibility needed to protect the collective interest and sustain the eurozone implies a loss of full fiscal sovereignty.... read

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Reconstructing Haiti

Jeffrey D. Sachs Series: Economics and Justice

2010-01-25

Rebuilding Haiti will cost perhaps $10-$20 billion, and will require much of the coming decade. Getting started now will save countless lives and prevent a further tragic downward spiral of a society that stands at the very brink of survival.... read

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Investment Strategy after the Crisis

Michael Spence Series: The New Wealth of Nations

2009-12-21

Investors have been hit hard by the current crisis, and lessons are being learned and strategies revised. But the central lesson for investors is that they should not assume that all times are “normal” times, and that risks to the system as a whole are abnormal.... read

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Obama Undermines the UN Climate Process

Jeffrey D. Sachs Series: Economics and Justice

2009-12-20

Two years of climate change negotiations have now ended in a farce in Copenhagen. Barack Obama’s decision to declare a phony negotiating victory amounts to a declaration that rich countries will do what they want and must no longer listen to the “pesky” concerns of many smaller and poorer countries.... read

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Achieving Growth in a Rebalanced World	Michael Spence
Although the financial crisis is winding down, prospects for growth in the global economy are unlikely to pick up. While this is, in part, inevitable, it is also the result of poor coordination between governments as the global economy rebalances.... read
Peace Through Development	Jeffrey D. Sachs
American foreign policy has failed in recent years mainly because the US relied on military force to address problems that demand development assistance and diplomacy. Although Barack Obama has raised hopes for a new strategy, so far the forces of continuity in US policy are dominating the forces of change.... read

Donor Funds are Needed for Poverty, Not Iraq

Jeffrey D. Sachs Series: Economics and Justice

2003-09-29

America wants the world to pledge billions of dollars to Iraq's reconstruction at a donor's meeting to be held in October in Madrid. The world's answer should be an unequivocal "No!" Iraq's long-term reconstruction does not need foreign financial assistance. What it needs is a political settlement, and that will be possible only with the withdrawal of America's occupying army. The billions of dollars that the US seeks should be directed towards true global emergencies, such as the fight against AIDS and hunger. ... read

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The Economics of Happiness

Jeffrey D. Sachs Series: Economics and Justice

2011-08-29

The mad pursuit of corporate profits is threatening us all. To be sure, we should support economic growth and development, but only in a broader context: one that promotes environmental sustainability and the values of compassion and honesty that are required for social trust.... read

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Greek Lessons for the World Economy

Dani Rodrik Series: Roads to Prosperity

2010-05-11

The Greek crisis is yet another manifestation of the political trilemma of the world economy: economic globalization, political democracy, and the nation-state are mutually irreconcilable. We can have at most two at one time. ... read

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America’s Political Class Struggle

Jeffrey D. Sachs Series: Economics and Justice

2010-12-27

For the moment, most Americans seem to be going along with Republican arguments that it is better to close the budget deficit through spending cuts rather than tax increases. Yet when the actual budget proposals are made, there will be a growing backlash – against Republicans and Democrats alike.... read

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Will China Rule the World?

Dani Rodrik Series: Roads to Prosperity

2010-01-12

Americans and Europeans blithely assume that China will become more like them as its economy develops and its population gets richer. But a world order centered on China will reflect Chinese values rather than Western ones - that is, if China can continue its rapid economic growth and maintain its social cohesion and political unity. ... read

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Milton Friedman’s Magical Thinking

Dani Rodrik Series: Roads to Prosperity

2011-10-11

Free-market enthusiasts’ place in the history of economic thought will remain secure. But thinkers like Milton Friedman leave an ambiguous and puzzling legacy, because it is the interventionists who have succeeded in economic history, where it really matters.... read

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The Roots of America’s Financial Crisis

Jeffrey D. Sachs Series: Economics and Justice

2008-03-21

Today’s financial crisis has its immediate roots in 2001, when the US Federal Reserve turned on the monetary spigots to try to combat an economic slowdown amid the end of the Internet boom and the shock of the September 11 terrorist attacks. That fueled another boom, this time in housing, helped by the Fed's failure to regulate banks dangerous lending practices.... read

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The Global Economy’s Corporate Crime Wave

Jeffrey D. Sachs Series: Economics and Justice

2011-04-30

"Money doesn't talk; it swears," as Bob Dylan once wrote, and it is corrupting politics and markets around the world. Indeed, the explosion of corporate crime – in the US, Europe, China, India, Africa, Brazil, and beyond – raises a host of challenging questions about its causes, and about how to control it now that it has reached epidemic proportions.... read

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The Return of Industrial Policy

Dani Rodrik Series: Roads to Prosperity

2010-04-12

Industrial policy is back, openly embraced by governments in countries like Britain and France, and by prestigious organizations like the Word Bank and McKinsey. The standard rap against industrial policy – that governments cannot pick winners – is largely irrelevant: what determines success in industrial policy is the much less demanding capacity to let losers go.... read

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Occupy the Classroom?	Dani Rodrik
Early last month, a group of students staged a walkout in Harvard’s popular introductory economics course. The problem is that, while economists know that they must carefully hedge their assertions when talking to each other, they feel no such compunction when addressing the public – or newcomers to the discipline.... read
Lessons From the North	Jeffrey D. Sachs
Fewer debates over economics would be needed if the world spent more time examining what actually works and what does not. Almost everywhere, debate has raged about how to combine market forces and social security. The left calls for an expansion of social protection; the right says that doing so would undermine economic growth and widen fiscal deficits.... read

FEATURED COMMENTARY

Common Sense on Capital Controls
Andrés Velasco
Series: The Rising Americas

Those who claim that capital controls are ineffective seldom specify at what they are presumed to be ineffective. In fact, by reducing the share of short-term foreign-currency debt in a country’s total liabilities, capital controls can reduce vulnerability to financial crises.

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