Steven Radelet tells the story of the unprecedented progress developing countries have made over the last two decades, why it happened, and what it may portend for the future. February, 2016.
>> And I'm really delighted that you could join us today for our book talk with Steven Radelet. I would like to acknowledge that today's event is cosponsored by the African Studies program and I know that Kelly Askew and so we are very appreciative for that cosponsorship. Today's event will be a little bit less formal than our more traditional policy talks and I know a number of you have joined us for those and we hope to continue to see you again. The book talks at the Ford School series allow us to introduce new policy research from experts who are in the field. And while it's always exciting for me to be able to introduce a book in my field, international economics, I have to say it's a special pleasure when the author is a good friend and someone who I'm very pleased to have the chance to catch up with. And so I'm really pleased to be able to celebrate the new book by Steven Radelet. So, he has just published The Great Surge: The Ascent of the Developing World. Well, Steve has spent much of his professional life working on global development issues. After graduating from university here in Michigan he served as a Peace Corps volunteer in Western Samoa. In fact, he served with his wife who is the current Peace Corps Director, Carrie, Hessler-Radelet and some of you may remember her. She came to the Ford School and devoured a policy talk here just last year. Others, in particular, some of our students might remember Jimmy Schneidewind who is a Ford School alum who also happens to be Steve's nephew. And so in keeping with family tradition, Jimmy is now working at a development organization in Tanzania and he may actually be listening to us because, of course, we're live streaming the event. Well, Steven also went on to receive first a master's and then a PhD degree in public policy. And one of the things I'm always intrigued interested in is the many ways that people use degrees in public policy in their careers. Throughout his career, his work has focused on economic growth, foreign aid, DAT, financial crises primarily in Africa and Asia, but with expertise in countries throughout the world. He's testified before congress on US foreign assistance efforts. He's advised USA ID, the state department, department of treasury on US global development agenda, and since 2005 he has also served as an economic advisor to the president of Liberia, Ellen Johnson Sirleaf. He's currently a professor of practice at Georgetown University and has recently written several articles documenting success stories in global development. And I have to say, as someone who often sees all of the concerns, the success stories are really important and not nearly as well-known as they should be. The Great Surge explores these findings in depth challenging the common assumption that most people who live in developing countries do so in poverty or in extreme poverty. Instead, Steve's book explains how unprecedented economic, social, and political transformation is, in fact, taking hold in developing countries around the world. I look forward to hearing more about these developments. I look forward very much to reading the book. And just want to say a quick note about our format before we begin. Steve will first provide an overview of his book and some of its major points. And then he'll take questions directly from the audience. And so we won't do the more formal card, question, answer that we do for our policy talks. If you are watching online, please Tweet your questions to us using the hashtag policy talks and a member of our staff will read them to Steve during the question and answer period. So, thank you again for joining us here today and it is a great pleasure to introduce our speaker. Welcome, Steve.
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>> Good afternoon. Thanks, everybody, for coming out. Free cookies will always get a good turnout. That's a good idea. And thanks -- thanks, Susan, for the kind introduction. Thanks to Cliff for all of his working putting this together. It's nice to see some old friends. Nice to see Dean who we first worked together a while ago. We won't say how long ago. But it's nice to be back here. I doubt that might nephew Jimmy is watching because he lives out in the middle of nowhere and he says he only gets about two hours of internet a month or so. And so I doubt he's live, but if you are, hey Jimmy. So, thanks for having me here. I'm going to give a brief overview here, just 20 minutes kind of flying at 60,000 feet, if you will, on the main topics. So I'm not going to be able to get into everything in detail, but I want to give you a flavor for what I -- for what I try to do in the book here. This book is really a reaction to what I see is way too much pessimism about what's happening in most of the world. There might be reasons to be pessimistic about the United States. We won't go into that. But we do have a tendency, actually, to believe that because we have difficulties here and income inequality and stagnating economic switch, that, therefore, that must be the case in the rest of the world. And what we hear about in the press about developing countries is war, it's corruption, it's failed elections, it's stagnation, it's famine. That's what we hear about. What we don't hear about is the actually overwhelming opposite story that has been going on for the last 25 years, slowly but surely and under the radar that has been affecting hundreds of millions of people around the world. The fact is that we now live in the period of the greatest progress amongst the global poor in human history. Period. There's no other time that's even close to the amount of progress that has been occurring around the world in the last 25 years. And by progress I mean almost any dimension of progress that you care to look at. Reductions in extreme poverty, increases in income, improvements in health, improvements in education, the spread of democracy, in improvements in basic rights, the reduction in conflict so that we now live, actually, despite the newspapers, in one of the most peaceful times in world history. And so this has been happening in developing countries for more than two decades. A lot of the story is China and India. That won't surprise you. But people who do know some of the outlines of this story often assume that it is only China and India or maybe the bricks, four, five, six countries. This is actually happening in 60 to 70 countries around the world in most dimensions of development progress. And some of them like health, it's happening everywhere as we're about to see. So, the purpose of this book is to pull together the data to show that this is the case, to make the important point that while there has been tremendous progress, it is not everywhere and there are still huge obstacles and hundreds of millions of people that are not making great progress. So, it is not -- I am not declaring that everywhere is great. And then, in the book, to describe why I think it began to change in the mid '90s and then the last part of the book looking forward to think about whether or not this great progress can be extended. So, I'm not sure I'm going to be able to cover all of that in 20 minutes, but I'll give you a taste on it and then, depending on your questions, we can explore all of this in more detail. So what I want to do with a few slides is just show the data in a very simple form in some graphs on several dimensions of development. We're going to look at poverty. We're going to look at income numbers, look at health, education, democracy, conflict. Just a couple slides on each of those to paint the broad pictures of what's going on. So, let's start with poverty. This graph shows the number of people in the world living under a dollar a day going backwards to 1820. The best estimates that we have going back to 1820, the blue line comes from a study done by Francois Bourguignon and Christian Morrisson which was in the American Economic Review about 10 years ago where they took on the heroic task -- and I'm glad they did it and that I didn't have to -- of estimating the number of people living in poverty back to 1820. And we can quibble with their numbers, but the bottom line on the number is that back in 1820 about 900,000,000 out of 1,000,000,000 people in the world lived under a dollar a day in today's dollars. It was actually 1985 dollars that they did this. 90% of people in the world 200 years ago lived in what we now consider extreme poverty. And the basic point is that was the norm for most people for most of human history lived in situations with poor housing, not enough food, they never went to school. They died young. Many of their children died in the first few days if not the first year of life. And, for most people, by today's standards, they lived in deep poverty. And the number of people if you -- once you see that, then you realize that from the beginning of human history, whenever you believe that is, the number of people living in extreme poverty rose alongside with global population. So, if we could extend this back, it was certainly going up and up and up from the beginning of time with perhaps some variations. That was the pattern throughout human history until after World War II where the number for the first time began to level off. The percentage, which I don't show here, was beginning to decline, of course. But the number was leveling off. It's a classic case of where no change was actually a big change for about 30 or 40 years. And then that database ends and we have a second database from Martin Ravallion and Shaohua Chen at the World Bank. This is the World Bank's database also at a dollar a day although with slightly different -- a different price -- different price levels. But, for the first time in history, this number began to fall. And what's remarkable is that this number grew from the beginning of time and then, in the last 20 years, it fell by half in 20 years, which is nothing in terms of human history. And fell by over 1,000,000,000 people. So, that's the broad outlines of what has been going on. Let's look at the last 30 years with more up to date numbers. These are the most recent numbers from the World Bank. Their new poverty line, $1.90 a day. They're so new, in fact, that they came out two weeks after my book was published. It was very kind of the World Bank to wait until the book was published. So the book still has $1.25 a day poverty. Now it's $1.90 a day poverty. In 2011 prices, constant prices, but the broad outlines of the story haven't changed much. The red line uses the left axis as the number of people living under $1.90 a day in 2011 purchasing power parody prices. The blue line is the percentage on the right axis. And what you can see with the red line is that up until about 1993, there were 2,000,000,000 people in the world living under $1.90 a day. That's the end of that leveling off period that started after World War II. Between 1993 and 2012, that number fell by over 1,000,000,000. 1,000,000,000 People were lifted out of extreme poverty in two decades. A billion. Neither remotely like this has ever happened in human history. Yes, China is a big part of it. Of course it's a big part of it. It's a big country [laughing] and there's been enormous progress. And India's a big part of it. Together, they make up for about 60 -- 600,000,000, 60% of this drop. And it would be surprising if they didn't. But it is not just China and India. There are more than 60 developing countries in the world that have reached this historical turning point. And the rise in the number of poor have stopped -- the number has stopped rising and has leveled off and has actually declined. More than 60 countries, Mozambique, Namibia, Mongolia, Sri Lanka, Bolivia, Costa Rica, Dominican Republic. Yes, India. Yes, Indonesia. South Korea started earlier. Countries around the world big and small. This is beginning to happen. Not everywhere. It's not happening in Congo. It's not happening in Somalia. It's not happening in Yemen. It's not happening yet in Myanmar. It's not happening in North Korea. But 60 countries, more than 60 countries, this change has happened and more than a billion people have been lifted out of it. This is one of the biggest changes in human history. Almost nobody is aware of this. There's a survey asking Americans, conducted about four years ago, asking Americans what had happened to the share -- the blue line, the percentage -- what had happened to the percentage of people living in extreme poverty around the world in the last 20 years. And it defined extreme poverty $1.25 according to the World Bank's numbers, it defined it. Answer A, the share had doubled in the last 20 years. 66% of Americans said A, the share had doubled. Which means they'd never heard of China and it's actually almost mathematically impossible for the share to have doubled. But, anyway, 66% of Americans thought that that share had doubled. Answer B, the share had remind the same. 29% of Americans said that was the answer. We're at 95% of Americans. 5% guessed or knew, maybe, answer C, which is that the share had fallen to half. So, this is one of the great transformations in history and people are unaware that it is happening. All right? Those are the poverty. Now people wonder, all right, incomes have now gone over $1.90 a day, fine. That's not very high. Are they $1.91? $1.95? You know? $2.00? If that's the case then maybe it isn't such a big deal. So, I looked at this and this is the number of people with incomes with consumption between different brackets. So, if you'll allow me to walk away from here for a moment. This is the number between $1.00 and $1.90 -- below $1.90 a day. These are the numbers we just looked at. So there's the drop of 1,000,000,000. This is the number of people with incomes between $1.90 and $3.00 a day. $3.00 to $5.00 and more than $5.00 a day. And the blue is in 1993. The red is in 2012. What I thought when I did these numbers -- I hadn't seen anybody else do them -- I thought -- I knew there would be the big drop here. I thought there'd be a big rise here in this bracket that most people were going to move to $2.00 a day or $2.50 a day. Well, there was a little increase here from 1,000,000,000 to 1.1 billion. But a much bigger rise of the number of people between $3.00 and $5.00 a day, which went from 750,000,000 to 1.3 billion. The biggest rise is here with people with incomes more than $5.00 a day where the number is almost tripled from 970,000,000 to 2.7 billion. That's where the rise is. And that tells you, we can't obviously identify particular individuals, but it is clear that if people's incomes are moving not just a little but actually quite a lot along basically the entire spectrum. And throughout human history, this number of people with incomes below $1.90 a day has always been greater than this number around the world with incomes greater than $5.00 a day. About 10 years ago, it flipped and for the first time in human history, there are now far more people -- there are more people with incomes greater than $5.00 a day than there are less than $1.90 a day. It's never been the case before in human history that that is the situation. But it is now. $5.00 a day may not sound like much, but the difference between $5.00 a day and $1.90 a day is huge. It means you get at least two meals a day. It means you have a tin roof on your head and probably cement block walls to keep the rats out and keep the rain out. It means your kids go to school. It means when you're sick, you actually can go see the doctor and get medicine and buy medicine for yourself. It's a huge difference. It means that you are not at risk in the next hungry season of someone in your family dying. You have a little bit of assurance that you're going to make it. So that difference is huge and that's the shift that's been going on. Those are the poverty numbers. Now, switching to income. So, forget about poverty for a moment. This is average income. This is an index of GDP per capita, income per person in all developing countries in the world since 1960. And I've indexed everybody's -- each country's income to be 100 in 1960 so we can see the increase in average income. There are three phases here that jump out immediately that tell us a lot about the history of development actually over the last 50 years. Between 1960 and the mid '70s, incomes rose. At -- not -- at a descent pace. But there is definitely economic growth happening in most developing countries. This is the period -- post-colonial period, newly independent countries. The world economy was doing pretty well and growth was happening in many developing countries. But from the mid '70s to the mid '90s, it stopped. Of course, starting with the oil price courses in the mid '70s when the whole world economy went down and every country in the world had major recession. And that ushered in the period of debt crises, macroeconomic imbalances, and no growth. For 20 years, there was zero growth in average incomes in developing countries. Zip, on average. Many countries were getting progress especially in East Asia, which means there are a lot of countries that were actually going the wrong way. Zero growth means that half developing countries actually had negative growth is what that really means. And that's what was happening. This was a bad period. A lot of conflict, a lot of war, a lot of dictators, the height of the cold war, which we're going to talk about a little more. No economic progress. This is the period why most people think that development progress isn't happening. Because it wasn't for 20 years. But most people are still stuck in that paradigm that there's no growth and very little progress in developing countries. But it ended 20 years ago. And starting in the mid '90s, we have rapid -- much more rapid economic growth around developing countries so incomes have increased pretty significantly over the last two decades. Excluding China, the average income in developing countries in real terms has doubled in the last two decades. Excluding China, the average income in developing countries had doubled in the last two decades, in real terms. Again, we've never seen that kind of broad based progress. Again, is it just a few countries? No, it's not. So, now I'm counting countries. How many countries had growth -- how many developing countries -- had growth exceeding 2% per capita in the earlier period, 1970s to 1990s? 21 out of -- where I have a group of 109 countries where I have decent data. Only 21 exceeded that modest standard of 2% per capita. Now, some of you will know 2% per capita is the long-term historical growth rate of the United States. It's the world average since 1960. This is the number of countries that are doing better than the global average. And it was only 21 out of 109. More recently it's 71. Lots of countries have made this shift to at least modest economic growth. This is the number where growth is now exceeding 4% per capita. It was 10, now it's 30, 30 out of 109 have exceeding 4% per capita. 4% per capita is fast economic growth. It's not China, but it's fast economic growth especially if you can do it for 20 years. That's fast. How many have had negative growth? It was 51, it was half the developing countries. Now it's down to 10. So there are still some countries that are going to wrong way. This is Somalia. This is North Korea. This is Haiti. Unfortunately, Jamaica's in this group. The Central African Republic. We still have some pretty bad situations out there. But they are now the exception. They used to be the rule. So, that's what's going on on economic growth. People now ask about, "OK, what about income inequality?" We all know income inequality in the United States is getting worse. And we all know, therefore, that global inequality is getting worse. Right? Mmmm, not clear at all. Matter of fact, most of the evidence leans the other way that global income inequality has actually gotten better in the last 20 years. OK? Inequality's a tough thing to discuss because there are lots of different ways to think about inequality. It's actually much more complicated than poverty. Poverty we draw a line, $1.00 a day, $2.00 a day, we can argue about the income line and we count, are you above or below this absolute line. Income inequality, one of the reasons the discussions and debates on this are so complicated is that it's comparing the incomes of two different groups of people. Well, which two groups? Richest versus poorest people? The really richest versus the really poorest? Poorest countries versus richest countries? The poorest 20% to the top 20%? Lots of different measures and they're all valid. They all tell you something different. So I'm just going to look at a couple briefly. This is the Gini coefficient, which is the standard measure of income inequality measuring income inequality across countries. So we have 190 countries in the world. We have 190 observations. The average income in all countries in the world. So, it's not all people. It's the average income in all countries. And we look at that two ways. One is unweighted. Every country counts the same. Burundi counts the same as China. OK? The other is population weighted. China counts a lot. Burundi doesn't count for a whole lot. And we look at what happens. The Gini coefficient, when it goes up, inequality is getting worse. When it goes down, inequality is getting better. If you just count countries, inequality is getting worse. Which it had been doing since the beginning of the industrial revolution when the rich countries got rich and the poor countries stayed behind. Up until around 2000, and then inequality has been getting better by this measure if you count all countries the same. But that's actually I don't think the best way to do it. If you weight it by population, which gets you closer to counting people, global income inequality has been improving since 1981, which is exactly when Deng Xiaoping began to open up China. So that actually should not surprise you that that's exactly what's been happening. But if you think about it for a minute, we have 2.5 billion people living in India and China where incomes have been rising quite rapid. So actually the global distribution of income, which had been widening for 200 years, actually has been shrinking a bit because largely the rise of big countries like India, China, Indonesia, Brazil, South Korea and others that are growing faster than we are and, therefore, closing the gap. If you count within country income distribution, within developing countries -- I used a slightly different measure here which is the income share of the poorest 40% of the population. What's the share of the poorest 40%? It's usually around 18 or 19% of GDP. Is that share going up or down? And I have data for 80 developing countries for at least 10 years and I look at the first observation and the last observation. In 37 of those 80 countries -- developing countries -- the share of income going to the poorest 40% has gone up in the last decade. In 22, it didn't change much, plus or minus one percentage point of the income share that they control. And in 21, it got worse. So I don't want to make a strong case here that global income distribution is getting better and we should all be happy. But I do want to push back against the widespread assumption that global income inequality is getting worse. It's really hard to actually back that up. It's true in some countries. It's getting worse in China because the coastal areas are growing faster than the rural areas. But in Brazil it's getting better. So it depends on the country and, when you count the countries, this is the pattern. I think the right way to characterize this is that the overall pattern is that there's not a clear pattern. But it is certainly not the case that you can -- that you can argue that global income inequality is actually getting worse. So, that's inequality. Now, let me switch to health. This is a measure of the share of children that die before their 5th birthday. OK? In 1960, in developing countries, 22% of children didn't make it to their 5th birthday. 22%. And if you can imagine more than one out of five children dying before the age of five. It's really hard to comprehend. It's totally unacceptable, but that's the way the world was. And actually if you go back further in history, that number would have been higher. And frankly it would have been higher in Europe and in many other places if you go back, again, before the Industrial Revolution. That number has been falling much earlier starting right after World War II and it's now down to 5%. So now we're down to one out of 20 children that die before their 5th birthday, which is still, frankly, unacceptable. But it's a whole lot better than 22%. And that drop from 22 to five means that 17 out of every 100 kids that are born today live that would have died just two generations ago. 17 out of every 100. And they're living longer. They're living healthier, as we're going to see. They're getting into school. And poverty rates are falling. This, again, I think -- I think actually this is one of the greatest achievements in human history right here. Nobody knows about it. But it's happening everywhere. I mentioned on the poverty numbers and on the income numbers, it's happened -- those improvements are happening in most countries, but not all. This is quite different for two reasons. First of all, the change started earlier. And, second, it is universal. Not almost universal. It is universal. The share of children that die before their 5th birthday has fallen in every single country in the world since 1980. Period. Every single country in the world. In the United States. In North Korea. In the Central African Republic. In Haiti. Every country in the world. In Afghanistan. Every country in the world, this has fallen. I don't know of any socioeconomic indicator that has moved in the right direction for every country in the world ever. I don't know. But this has. So, it's a big deal. It has a lot to do with child immunizations. Has a lot to do with antidiarrheal treatment. It has a lot to do with the spread of knowledge around germ -- around germs. It has a lot to do with educating girls, as we're going to see in a few minutes. But this is a huge achievement that we see all over the place. A lot of people look at this and say, "Well -- and they whisper -- this is fine. It's really nice these kids live. But doesn't this just mean we're going to have more people in the world? And they're all going to be stuck in poverty. I don't want to say that, but maybe this isn't such a good think." Wrong. This is a really good thing. Why? Because actually this is one of the most powerful drivers for reducing population growth. What happens when fewer children die? Yes, at first population rises because more kids are living. Within a generation, parents are smart. They figure this out and they start having fewer kids. A lot fewer kids. This is one of the biggest drivers for reducing fertility rates. And we see in country after country after country within a generation fertility rates drop and population growth rates drop. That's why, in the late 1960s, global fertility rates started to drop and why global population growth has been slowing since the late '60s. And so this is one of the most important forces behind slowing population growth that we hope, if it continues, will eventually lead to global population growth finally stopping within the next century. We hope. But that's a different story. But this is a powerful thing to reduce population pressures. Life expectancy, another measure of health. It's gone up from 50 years to 65 years. People are living much longer. This is life expectancy contingent on making it to age five. These improvements in health are not just kids. Malaria deaths have fallen by half in the last 15 years. Malaria is the biggest killer in sub-Saharan African. Malaria deaths have fallen by half in the last 15 years. Tuberculosis infections are down by 1/3. We wiped out small pox. We've almost wiped out polio. HIV/AIDS deaths are down by 1/3 since 2005. HIV/AIDS deaths, globally, are down by 1/3 since 2005. How many people knew that? How do we not know this? And nothing about you. This is -- we've been fighting HIV/AIDS, we hear all the bad stories and a couple of people maybe have sort of heard about this. We don't get these stories out there where HIV/AIDS deaths are actually down by 1/3 in just 10 years. So health is much better. Switching to education. This is the average number of years of schooling amongst adults. So put aside kids. Ask adults, "How many years of schooling did you have?" And this data comes from Bob Barro at Harvard and Jong-Wha Lee who's a Korean -- Korea University. In the 1970s, the average adult had 3.5 years of schooling. Now they're up to seven, which is still not enough, but it's twice as much schooling for hundreds of millions of people around the world. The blue brass are for men. The red are for women. And you can see the gap between men and women, but you can also see that that gap is closing. And there's still a gap, but the gap is much -- much smaller. So, this is not enough education. There are big questions about the quality of education. But, far more people have at least a basic education. This is 1970, 3.5 years. If we went back earlier in time into the colonial period, of course, it would have been much, much less. So a generation later, people are at least getting a primary school education and more and more it's girls. So, looking at girls. This is the girls' primary school completion rate for all developing countries. What percentage of girls, today's girls, are completing primary school? It was 60% back in the '70s. It's now 90%. 90% of girls are now getting through primary school. That is a huge, huge change. And it is absolutely transformative because what this means, when we educate a girl, we know, first of all, those girls, when they become women, have more income -- economic opportunities themselves. We know that they get married later. They have fewer children. Their children go to school and have more education. Their children are healthier and their children have higher income opportunities. This is an intergenerational transformation process and it is one of the most important dynamics under way in developing countries. It's not everywhere. There are still many countries that do not give girls the opportunities. But many of them do. And when people ask me whether or not this transformation can continue, this is one reason why I think it can. Because this has impacts across -- across generations. So that's what's going on in education. Here's democracy. Democracy is spreading like never before. Or at least it was up until a few years ago. And I'll talk about that in a minute. Lots of controversy about how to measure democracy and I can talk more about that if you'd like me to. I use two different measures. One is a Freedom House rights based measure. Another is put together by the University of Maryland. It's called the Polity IV index which looks electoral quality and other institutional aspects of democracy. And, by my book, you have to meet both -- a country has to meet both standards for me to count them as a democracy. And my numbers mirror lots of other measures out there in terms of numbers of democracies. In the mid '70s, only 12 developing countries out of the 109 that I'm tracking were democracies. Democracy was very rare. India, Costa Rica, a couple of other countries, Botswana, a couple of other countries. But it was very, very rare and dictatorship was the norm. Today, there are almost 60. More than half of developing countries are now democracies. And, again, I don't mean they just held an election. I actually mean they meet basic standards of -- on freedom of rights, of political liberties, of electoral quality, of constraints on executive power, of rule of law. They're not perfect, but something big has changed not just in India, which has been a democracy for a long time. But, again, in South Africa after apartheid, in Mongolia next to China, in Indonesia, in Brazil. Think of Latin America 20 years ago. It was all run by a bunch of generals and dictators, everywhere expect Costa Rica. Now, think of where they are now. They're all democracies except Venezuela. Haiti is still a bit of a mess. Cuba, who knows what's going to happen? But the rest of them, the generals are gone. The generals who -- from Argentina that invaded the Falklands are gone. And all the conflict with it. And this has been happening in developing countries around the world. And, again, this is the reason why I think a lot of this progress can be sustained. So we can talk more about democracy. Hand in hand with democracies, there's much less conflict. This is a measure of the number of civil wars in developing countries. In the 1980s, at any given time, there were a dozen civil wars going on in developing countries. Now, it's about six. It's gone up a little bit. This is Syria and the Central African Republic. And I don't want to minimize those wars for a minute. They're terrible tragedies. But the amount of conflict today is far less than it's ever been in human history. Steven Pinker at Harvard has written an entire book on this called The Better Angels of Our Nature. It's a great book on the history of violence and conflict around the world. But think back, again, to the 1980s. Every country in Central America was at war. Nicaragua, Guatemala, El Salvador, all of Southern Africa was at war around the end of apartheid from what is now Zimbabwe to obviously South Africa to Mozambique, to what is now Namibia. We had Cuban troops in Namibia financed by the Soviet Union fighting with a group called Swapo, fighting against white South African troops financed by us in what is now almost comical. But that was common. Southeast Asia, the aftermath of Vietnam, the aftermath of the killing fields in Cambodia. Indonesia had invaded East Timor. It's over. It's over. In Asia today we have conflict in Afghanistan and the conflict in Ukraine, but otherwise there is no war going on in Asia, which is actually remarkable. There is no war going on in Latin America, which is actually remarkable. There's a lot of violence. There's a lot of crime. It's not all over. But there is far less war. This counts the number of battle deaths, which is down even more, 75% fewer people are dying in war. It was over 200,000 people were dying a year in war. And now we're down to below 50,000. And, again, I don't want to minimize that for a minute, but there's far less war than there ever has been. Last slide. And I want to go back to income and make the point, again, that this is not everywhere. The middle line here is the line we showed before of average income leveling off and then doubling in the last 20 years. And I took those 109 countries and I took the 25 with the fastest growth rates since 1960 and the 25 developing countries with the slowest growth rates to show one measure of the variation of growth rates around this line. The 25 fastest growing countries, income has increased by almost a factor of six since 1960. And those countries in Korea and in Taiwan and in Indonesia and in China, today's adults have incomes more than five times higher than their grandparents. Five times higher than their grandparents in real terms for hundreds of millions of people. But, at the same time, there are 25 developing countries in which incomes today are the same as they were in 1960. And one of the great puzzles of development is that we live in a world where we see the greatest progress ever juxtaposed against a couple of dozen countries where there's still basically no progress at all. And why is that? And what can we learn from the rapid growing countries that could help the slow growing countries? It's one of the great puzzles of development. But the good news is that this number of countries that have been stagnating is shrinking. It's far fewer than it was in the past two decades. So we're far from success, but we've come a long way. Let me just take two -- a minute to talk about why I think this happened and then I want to stop and we can talk about the future and your questions. Most of this changed in the early 1990s. Not all of it. The health stuff started earlier. But it's striking that the poverty numbers fell, the income numbers fell, the education numbers took off, the democracy numbers took off all in the 1990s. And that gives a big clue as to what happened to bring about the great surge. And I think there are several factors at play. One was the end of the Cold War. There's no question in my mind. And with that the emergence of China, which was actually part of the end of communism, the beginning of the end of communism really. And the end of the Cold War. And with the end of the Cold War, we stopped supporting a lot of nasty dictators and so did the Soviet Union and a lot of those dictators fell from the Duvaliers to Marcos to Mobutu and many others around the world fell. Sometimes they were replaced by new dictators. But more often than not, they were replaced by new leaders that were actually interested in democracy and basic rights and holding the executive accountable and having some modicum of development progress. So there was a big change in political systems at that time. It also reduced war. All of those wars I mentioned were proxy wars for the Cold War in Central America, in Southern Africa, in Southeast Asia. That was all a Cold War with us going to war with the Soviet Unions through some puppets. When Cold War ended, conflict fell dramatically and that opened the opportunities for much more development progress. So a big part of this story is the end of the Cold War and with it a move towards market capitalism. Not free markets, but much more toward market capitalism and democracy. And then the other big force was globalization that opened huge trade opportunities, financial flows, the exchange of ideas, and other forms of global integration, which were highly disruptive. Some people lost. There's no question about that. But hundreds of millions of people gained new job opportunities, new financial opportunities, new ideas, and new knowledge. And perhaps the most important part of that global integration was technology. From cell phones to the internet to better seed varieties to vaccines. I actually think the best example of globalization working really well is vaccines for children. You cannot get a vaccine to a kid -- from a plant in Indiana to somebody -- to a kid in Northern Mozambique without global integration, without private companies working with the United Nations, working with aid agencies, working with local governments, working with the community health worker who actually -- and the mother who actually brings their kids. And you need all those pieces together to work. So, some parts of global integration have worked quite well. And a big part of that has been the transfer of technology from rich countries to poor. So, those are some of the forces behind what's going on. I'd be happy to talk about whether or not I think this will continue. I think it's an open question. It might and it might not. I think it's a matter of choice that we make. Not a matter of fate. But I'm happy to talk about that as we go along. But I've talked enough. So let me stop there and open it up for any questions that you might have.
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Dean. Jump right in.
>> You're probably a very person to address this. What role do you think foreign aid, aid agencies, most bilateral aid agencies play to this story? I think, you know, my gut feeling is that you're right. That it's about institutions. That it's about democracy, reductions in civil conflict, but what about the aid industry?
>> Great. So you notice that I didn't mention aid. And this is not a book about aid. And partly I got sick and tired of everybody who talks about development, equating it with aid. And Dean did not do that. He actually made that separation. But too much of the debate about aid from my very good friends Jeffrey Sachs and Billy Strule [assumed spelling] and others end up equating development with aid and that's a big mistake. I do have a full chapter on aid. It's chapter nine on purpose to put it later in the book. Here's the bottom line and -- of what I believe from my own experience and what I believe that the research evidence points to is that foreign aid has been a secondary -- has had a secondary impact and a modest positive impact on this development progress. So it is nowhere near the major driver for growth. Institutions are. Choices around democracy. Choices around economic policy, and the world economic system are much more powerful. The transfer of technology is much more powerful. But aid can help that. I talked about vaccines. That doesn't happen without aid agencies. To aid is not the most powerful force. But it is also not the disaster that many writers like to paint it out to be. Yes, there's lots of failed aid programs. Yes, the money is not used particularly effectively. But here's where the research basically comes out. There's not much question that this huge improvement in health that I showed happened in large part because of foreign aid programs. And that's why it happened so much earlier. We do not eradicate small pox without foreign aid programs and within UN agencies at the fore. We've almost eradicated polio and it's aid agencies that are doing it. Those immunizations that I talked about, aid is not the only thing happening there, but it's a big part of it. Those reductions in death from malaria and tuberculosis and HIV/AIDS are happening in large part because of aid funds. So there's not much doubt actually on the health side. There's more to the health story, but that's where aid has had the biggest impact. It's also had a pretty big impact on agriculture. The green revolution, of course. New seed varieties and other forms of agriculture. On economic growth, the evidence particular in the last five years -- there's a lot of variation in the research. I read maybe all of it or more than anyone should read in their lifetime on this. But most of the research in the last five years is finding a modest positive relationship between aid and growth, around one percentage point of adding -- adding one percentage point to growth rates from aid flows with a lot of variation. But that's the statistically significant result. And it seems to be a stronger relationship post-1995. And there's five or six very recent studies that show that. So that's -- that's basically where I come out. It's not the biggest driver, but it does help in some circumstances. Yes?
>> So, you've painted a very vivid picture of improvements in the developing world.
>> In everything from health care to education to income, environment, wealth. So, it's fair to say that the developing world is catching up?
>> Yeah. The developed world.
>> But, within the developed world -- and I think also then the developing world, there's increasing inequality within societies.
>> So, yes, overall, there's greater equality on the planet. But within any given society, certainly the US -- but aren't places like India also experiencing increasing internal inequality?
>> So, that's what this slide is about, this distribution within countries. Right? And it is absolutely true in some developing countries that's what's going on. But actually somewhat surprising in the majority of developing countries within country income distribution has actually gotten better. And many of these are countries in Latin America. Brazil is the largest country where this has been -- where this has been the case. El Salvador, this has been the case in the last few years and many other countries where the share of -- this measures the share of income earned by the poorest 40%. But if I did the share of income of the poorest 20% or if I looked at a Gini coefficient, it would be basically the same picture. That, again, either that distribution has either improved or it hasn't changed much. In some countries it has gotten worse. And, again, I don't want to -- I'm not going to make the strong claim that systematically income distribution is getting better. But I do think that you can't make the argument that systematically income distribution is getting worse in developing countries -- in some countries, yes. In some big ones, China, yes. But others -- Indonesia, it actually hasn't changed very much. In South Korea, it hasn't changed very much going back over decades. And in Brazil and Latin America, it's getting better. So, that's what the evidence -- that's the data that we have on developing countries. Yes? And then we'll go -- yes?
>> Just curious, what is the nature and the extent of any international cooperation and the allocation and conservation of water in the obviously the impact that that will have on growth?
>> Yeah. Good. So -- so, let me. To get to that, the last 1/3 of this book is about the future. And the question I ask is, "Can this progress be sustained?" And I decided not to predict the future because whatever I said would be wrong. That's for sure. So I actually lay out three scenarios that I think are all possible, actually. One is that this progress continues. Unevenly, two steps forward, one step backward. Some countries go backwards. More countries go forward. But over 20 or 30 years, we actually see continued progress along these lines. And I think that is entirely possible. And I think because of the institutional changes and the educational changes, that could happen. Commodity prices at the moment are pushing against that. But that's not a 30 year phenomenon I don't think. It's more -- it's a shorter term. Second scenario is that things get -- don't change very much. We've had this progress that basically stagnates. And a third scenario is that it actually goes backwards. OK? And poverty numbers actually start to go up. And I think this is entirely possible because of pressures on the planet. Either because of conflict, we go back to war and we can all imagine scenarios where that might happen. Or because of various pressures on the planet, increasing population, increasing resource demand, obviously climate change, and with that now, I finally get to water. If we don't address that issue, all of those issues, then we got a big problem and this can't -- this kind of progress cannot be sustained. And so I think, to get there, we need to continue -- among many others things and this will be a very short answer to a complicated question -- among many other things, we're going to have to invest in new technologies and resources and R and D along with building the international institutions for cooperation around climate change, obviously, both to stop it, but also to help countries mitigate it. Into green energy -- into clean energy and into water. And one of the key things on water is both the management of the water we have but also things like desalinization. And if we can get the cost curves down on desalinization, which is happening -- so Singapore is doing some of this. Jordan is doing some of this. If we can get those cost curves down, that becomes a game changer in many ways at least for coastal communities. But you still need the management. So how this is going to go? I don't know. A big test -- the Indus Basin Treaty between Pakistan and India, which has been enforced for 40 years, actually ends in 2019. So, Pakistan and India are going to have to negotiate and that's just one example of many that we're going to have to get -- those negotiations are going to be right to manage the inland waters along with some technology on the coastal waters. If we don't do that, this is going to go backwards. If we do, it can progress. So, that's the short answer to a very complicated and good question. Yes?
>> You had mentioned the impact of globalization.
>> Trade agreements.
>> Is there an inverse relation in terms of what's been going on here versus the development --?
>> I think I know what you mean, but I'm going to ask you to be more explicit [inaudible].
>> Yeah. The income gaps that have developed here in part perhaps attributed to the outflow of [inaudible].
>> Good question. And I'm glad that I have one of the world's great trade economists here to help me answer this question. Susan, that would be you since you're [inaudible]. So. If -- If it is -- so, the answer is to some extent, yes. I think. However, as soon as you go down that route, you have to recognize that what that also means is that perhaps one of the reasons that our prosperity has grown so quickly over the last 200 years is perhaps we weren't creating opportunities, or we were suppressing opportunities for the rest of the world. If it is true that they now have opportunities and somehow that's making life more difficult for us, there's an uncomfortable implication about the last 200 years of history. That doesn't make it wrong. But we have to recognize both sides of this coin first of all. Second of all, I do think it is probably the case. There's a lot of debate in the trade literature, which Susan would know better than I, about the extent to which the fact that we've got stagnating wages here for middle income earners has been stagnating. How much of that is trade? How much of that is technology? And other forces at work? My sense is that, yes, competition from India and China has been part of that story. But I -- my own personal belief is that if that is true, the real problem is our poor response to that. That is, it's not so much that we're getting more competition from China and India. It is that we are not responding with better education programs, with better training programs for people who lose their jobs, we're not investing in our infrastructure. Instead of blaming rising competition, we ought to be making the investment so that we can compete in a global economy. And the reason -- one of the reasons I believe that is because when we have done that historically, it's actually ends up being good for all of us. Right? That we had similar questions with Japan and Germany. In the long run it has been very good for us that Germany and Japan have become more prosperous, stable democracies. Not just because of the trade patterns, but because they are now our allies in so many ways. And so one of the reasons why I think this is ultimately good for us, even though it puts some pressure on wages, is because if this continues and we have more and more countries that are successful in some type of democracy, some type of building effective government institutions, some economic opportunities for their next generation, these are allies that we can work with to solve our own problems of fighting terrorism, of fighting conflict, of fighting drugs, of fighting the international issues that we care deeply about. One of the best ways to at least reduce terrorism -- we're never going to eliminate it. It's been around forever -- is to help create more effective states that can counter that. And building those effective states is part and parcel of development which is in our long-term, selfish interest. So I think it is actually good for us even though it does create this pressure on wages. But I think the right way to think about the competition from other countries and what that has done to wage -- I think that highlights our own failure to respond in an effective way. But I don't know if I'm summarizing the literature. I don't know whether I want to put you on the spot for what the evidence says about the impact of competition from developing countries on our own wages.
>> So I would just say two things and I would say I'm familiar with some of the literature. This has really ballooned and is quite huge. And there certainly are a range of views.
>> That's why I passed the buck to you is because [laughing].
>> The pieces that I would add are, first that it really depends on the who is us when you think about where the benefits are and that's I think following up on the point that you were making. There's certainly among -- within the US and within the richer industrialized countries are many groups that have benefited substantially. And so how our institutions and how engagement within the US in particular mean that those gains get distributed is part of it. Now, the other point that I would make is that we often are not very clear about what our [inaudible] is. So what are we comparing the outcomes we see to and often we -- if you actually unpack that -- tend to be comparing them to alternatives, which actually weren't very realistic.
>> And so, you know, it -- depending on what you're comparing these outcomes to, you're view of what the alternatives might have looked like and how to assess them are very very different. There certainly are some quite realistic alternatives in which various kinds of technological and other changes occur without expansions in trade and the implications in terms of growth in the US would actually have been more concerning in some ways. And so that's kind of the second lens on, again, a very important, complicated question that doesn't have a simple answer.
>> Mm-hmm. Yep. OK. Yes?
>> So, you say the rise of democracies as an indicator for growth in developing world. So, my question is, in your opinion, what is the biggest factor of being a democracy that contributes to growth?
>> Right. OK. So I didn't -- well, so I sited democracy as an indicator of development broadly. Not necessarily of growth. But I do believe that the two are related. It's a little hard to look at these pictures and not see the obvious correlation. And so it begs the question, "What is the relationship?" Lots of literature and debate on this. And here's where I come out on it. It is absolutely true that many authoritarian governments have been quite successful in achieving decades of growth. Obviously, China and Vietnam and Rwanda and Ethiopia and Indonesia. When I lived there -- I lived in Indonesia for four years and worked in the Ministry of Finance for the Suharto government, South Korea under the general. So we have lots of examples. So it is not -- you cannot say that democracy is necessary for growth. However, in these last two decades, the majority of countries that have had sustained growth -- the majority -- are democracies. OK? They are not getting the 10% growth of China, but many of them are doing quite well. And it's the majority. It is South Africa and it is India, and it is now Indonesia and it is Tanzania and it is Brazil and it is Chile and it is the Philippines and it is the majority of countries that have moved. And the thing about authoritarian governments is that some of them do quite well. If you happen to have Lee Kuan Yew from Singapore, you know, good on you. But once you go down that path, you're more likely to get Robert Mugabe who started out supposedly as a democrat and went south. And that's the more common pattern. So at least it's a risky business to go down the authoritarian regime. And China's authoritarian regime now looks pretty good. The last one didn't look so good under Mao. So, it's a risky business. And what the evidence is is that under authoritarian governments, there's much more variance in terms of growth performance. Under democracies there's much less variance, which is essentially what Amartya Sen was pointing out in his classical work that showed that there aren't any famines in democracies. Some people can contest that with a few cases depending on how you define a famine. But his point holds. So, the overall pattern has been growth on average of at least as good amongst the democracies with less variance. But then the other point which I think is really the clincher, for all of those countries that have had growth under authoritarian regimes, historically that all end at some point. We'll see what happens to China. In the last 1950s everybody was saying the Soviet growth model was the one. They were outperforming us. But it fell apart. It could not be sustained. The same thing happened under Bismarck in Germany and after the Meiji Restoration in China and many other places. We don't have any rich authoritarian countries. We have a few small oil rich countries that maybe you could define that way. But the authoritarian governments either switch to democracy as citizens demand more accountability. Or there's so much pressure as what happened in the Soviet Union that the system ultimately breaks down and they can't sustain growth and they might try to maintain authoritarian control, but growth is going to slow down. There's a huge debate. That's what happened in Indonesia. All right? They threw Suharto out. I was told, when I lived there, that Indonesians only care about economic progress, not democracy. It turned out that was what the elites wanted. When the Asian financial crisis happened and Suharto had a heart attack and the opportunity arose, it turned out that Indonesians wanted both. The world's largest Muslim country wanted to be a democracy. And last year -- well, now 2014, a furniture maker beat Suharto's son in law, Major General Prabowo -- if you can picture in your mind what Major General Prabowo looks like, that's what he looks like. This is the guy who invaded East Timor. He lost in an election to a furniture maker, small businessman who had became the mayor of Jakarta and then a provincial governor and then ran for president. And if someone would have told me 20 years ago when I lived in Jakarta and worked in the Ministry of Finance that a furniture maker was going to beat Prabowo in an election, I would have told them they were crazy. But that is exactly what has happened. And so my belief and most of history shows that it is the democracies, even though they may not grow faster in the growth spurts, they are much more able to sustain it over time. So that's that.
>> This is probably the last question.
>> Last question.
>> So, kind of related to the democracy discussion, many Western development agencies [inaudible] have democracy requirements on their aid or in their development goals. And so I'm wondering, with countries like China and many more actors and non-western countries being involved in development, how do you see that changing especially in sub-Saharan Africa?
>> Yeah. That's a good question. So, China and other countries are now being donors and they obviously have quite different conditions if any on governance. So a couple things on that. One, that's the way we were 20 years ago when we supported Marcos and Mobutu and lots of other people. So we have to be a little careful when we're critical of China having no governance conditions on their aid because we've been there. So, that's just one point. Second point is that China's aid, like lots of other aid, is quite mixed in its record. And I actually think this question ultimately depends on the receiving government. And this is a little bit simplistic but to the extent that they are a democracy themselves. And where China's aid has been coming into countries where the governments are reasonably accountable and democratic, the aid is actually helping. I mean, it's a lot of money that's building roads and it's building ports and it's building power supplies. And I've seen this in Liberia where Chinese aid has, without any question, been quite helpful in Liberia's post-war recovery and Ebola. And China was one of the first ones that came in and built an Ebola treatment unit, for example. You know, and they didn't have any conditions on governance but it didn't matter because, you know, it's a democracy. But in other countries, especially the non-democracies, where aid flows are getting smaller and they can't get private capital -- again, my friend Robert Mugabe in Zimbabwe is a good example -- can't get money anywhere else. It is possible that the Chinese aid flows are actually helping to support a dictator stay in power just as our money did 20 or 30 years ago and sometimes probably still does. So, there are, I think, situations where Chinese aid can actually undermine good governance and sustain a government that is hurting development. But I think it's very hard to make an overall characterization on the whole given the shortage of capital and the need for investment in infrastructure in Africa and the fact that China's investing in a lot of that infrastructure. My take is that overall it's been helpful. But it, again, depends a lot on the country. That's a good question. So. All right. Thank you very much. I appreciate it.
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>> So, Steve, both congratulations on your new book and thank you very much for sharing some of the findings with us. Thank you all for coming. We would like to continue the conversation out in the Great Hall. There are some additional refreshments and, courtesy of Nicola's Books, you have an opportunity to purchase the book and to have it personally signed. So, I hope that you will stay and join us to continue that conversation. Thanks again for being here.
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