The na­ture of growth has to change

The Pak Banker - - OPINION - Parik­shit Ghosh

KAUSHIK Basu, chief econ­o­mist and se­nior vice pres­i­dent, World Bank, and for­mer chief eco­nomic ad­viser to the govern­ment of In­dia, in an in­ter­view, speaks on is­sues rang­ing from the change in the World Bank's mis­sion and its en­gage­ment with the world, ris­ing in­equal­ity in the de­vel­oped world and man­ag­ing the un­de­sir­able con­se­quences of growth, to be­havioural eco­nom­ics, the role of val­ues in pub­lic ser­vice de­liv­ery and the im­por­tance of com­mu­ni­cat­ing good ideas ef­fec­tively to pol­i­cy­mak­ers and the gen­eral pub­lic.

Of late, there has been a lot of heart­burn about things like out­sourc­ing, im­mi­gra­tion and equity is­sues sur­round­ing cli­mate change talks. Do you see a rift de­vel­op­ing be­tween the North and South?

I don't see a new rift de­vel­op­ing be­tween in­dus­tri­al­ized and emerg­ing economies. There have al­ways been some lines of ten­sion, which shift oc­ca­sion­ally from one area to an­other. We are to­day much more sen­si­tive to the cli­mate con­se­quences of what we do and there­fore some of the ten­sion is around those is­sues. His­tor­i­cally, ten­sions have de­vel­oped over World Trade Or­ga­ni­za­tion (WTO) ne­go­ti­a­tions or when the In­ter­na­tional Labour Or­ga­ni­za­tion (ILO) tried to bring in core labour stan­dards com­mon to the world.

How is the World Bank's mis­sion chang­ing? One in­ter­est­ing change is a re­turn to the Middle East are reel­ing un­der a refugee prob­lem that is a bit like the af­ter­math of a ma­jor war.

An­other broad change is that be­sides fight­ing ab­so­lute poverty, pro­mot­ing shared pros­per­ity has been added to the mis­sion goals. This ba­si­cally at­tends to in­equal­ity by fo­cus­ing on the growth rate of the bot­tom 40% vis-à-vis the rest. Fi­nally, the ar­rival of new banks such as the Asian In­fra­struc­ture In­vest­ment Bank (AIIB) is caus­ing some shift in the World Bank's mis­sion. Th­ese can eas­ily cut into the lend­ing ac­tiv­ity but the World Bank will con­tinue to have its strength in knowl­edge and ad­vi­sory ca­pa­bil­ity.

What, ac­cord­ing to you, is the most im­por­tant cause of the dra­matic in­crease in in­equal­ity in the de­vel­oped world? Tech­nol­ogy-one is tech­no­log­i­cal in­no­va­tion, whereby you can do with less labour, and se­cond is tech­nol­ogy that links labour in dif­fer­ent parts of the world. The share of the wage bill in the gross do­mes­tic prod­uct (GDP) of rich coun­tries has been de­clin­ing rapidly. Trends such as ro­bots and out­sourc­ing are hold­ing back in­comes of poorer peo­ple in rich coun­tries and push­ing up in­comes of more skilled peo­ple in poorer coun­tries, thereby driv­ing up in­equal­ity.

Peo­ple are also earn­ing a larger share of their in­come via pa­tents, shares, etc., which is adding to in­equal­ity. There is a need for ma­jor re­think­ing of the sources of in­come for peo­ple- say, dis­tribut­ing some equity or share in stocks among work­ers. One as­pect of growth is in­clu­sive­ness-mak­ing it ac­ces­si­ble to the bot­tom 40% or 20%. An­other as­pect is neg­a­tive side­ef­fects such as con­flicts over land ac­qui­si­tion or air pol­lu­tion. How do we foster growth with­out th­ese un­de­sir­able con­se­quences?

I think the na­ture of growth has to change. If we con­tinue in the same way, we are go­ing down a path that is not good for all of us. But you can­not hold back de­vel­op­ing coun­tries, which are still abysmally poor. What we need is to think of growth dif­fer­ently. We typ­i­cally think of growth as more of ev­ery­thing. But growth can also in­volve, say, break­throughs in med­i­cal re­search. In­stead of eat­ing more food and build­ing fancier houses, if we can make dra­matic im­prove­ments in our health, the value of that can be huge. This will be growth which is not dam­ag­ing to the en­vi­ron­ment but leads to bet­ter lives.

The ba­sic point is that if we are to sur­vive cli­mate change and other chal­lenges, you do not want to slow down growth but change the na­ture of what it is that we are con­sum­ing and what con­sti­tutes a bet­ter life. The lat­est World De­vel­op­ment Re­port 'Mind, So­ci­ety, and Be­hav­ior' em­pha­sizes be­havioural bi­ases. Maybe peo­ple do not have the right goals and val­ues and some moral sua­sion is re­quired. What is the Bank's role here?

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.