Blog

In September 2015, the UN General Assembly established the Sustainable Development Goals (SDGs). The SDGS specify 17 universal goals, 169 targets and 230 indicators (critics worry about the unwieldy list). The SDGs replace the Millennium Development Goals (MDGs) which expired in September 2015. Health is a core part of the SDGs.

Lancet has recently (21 September, 2016) published a baseline analysis of 33 health-related indicators.

Click to access PIIS0140-6736(16)31467-2.pdf

All the indices are scaled from 0 (worst observed value for 1990-2015) to 100 (best observed value for the same period). In 2015, the median value of the overall health-related SDG index was 59.3 ranging from 85.5 (Iceland) to 20.4 (Central African Republic). There is also good news globally. The value of the health-related SDG index has increased by approximately eight points between 1990 and 2015.

As expected, wealthy nations are healthy nations. However, as the Lancet study notes, ‘…some patterns emerged contrary to what might have been expected’. The United States is ranked 28^th, and below Greece, a nation struggling to cope with externally imposed anti-austerity measures. The unsatisfactory US ranking might be attributed to poor performance in maternal mortality, alcohol consumption and mortality due to interpersonal violence, self-harm, suicide and unintentional poisoning.

What the Lancet study does not highlight is the conspicuous case of Botswana. Often lauded as a development success story, and featuring prominently in Daron Acemoglu and James Robinson’s monumental study on ‘Why nations fail’ (www.amazon.com/Why-Nations-Fail-Origins-Prosperity/dp/0307719227), Botswana is a resource-rich, upper-middle income country. It is one of the very few countries in Sub Saharan Africa with such an income status. In terms of the overall health-related SDG, Botswana is ranked 133 and lies below low-income Timor-Leste. At least from a health perspective, Botswana still has a long way to go.

Financial inclusion – the process via which the ‘unbanked’ are integrated into the formal financial system – is a laudable goal. The G20 has signed up to it as have many central banks in the developing world. Multiple studies have shown that it can be effective way of reducing poverty

https://www.cgap.org/sites/default/files/FocusNote-Financial-Inclusion-and-Development-April-2014.pdf

However, as with all good ideas, sometimes a conspicuous gap can emerge between aspiration and implementation. In India, the current government announced a new financial inclusion plan (‘Jan Dhan’) which promised basic bank accounts for all Indians.

A close friend and former ILO colleague drew my attention to a report in The Economist (September 17, 2016) which turns out to be a cautionary tale about how a highly publicized poverty reduction scheme can become a public relations exercise …except that it seems to have become a public relations embarrassment or a ‘one rupee trick’ as The Indian Express dubbed it.

http://www.economist.com/news/finance-and-economics/21707234-indian-banks-staff-found-dodgy-ways-meet-targets-set-higher-ups-accounts

Apparently, many bank managers used their own money (1 Indian rupee or about 20 Australian cents) to open accounts and reduce the share of ‘zero balance’ bank accounts. Not surprisingly, the share of ‘zero bank accounts’ fell sharply causing the Indian government to proclaim that its financial inclusion plan was a success. One hopes that this embarrassing episode will not tarnish the role of financial inclusion as an important anti-poverty initiative.

I co-authored a paper in 2010 on the ‘Great Recession’ with Dr. Sher Verick (now Deputy Director, ILO, Delhi) which was released as a discussion paper by IZA http://ftp.iza.org/dp4934.pdf.

It became the second most downloaded paper in the history of IZA http://www.iza.org/en/webcontent/publications/papers/topdownloads

Now, the Social Science Research Network (SSRN) advises me that the 2010 paper is in the ‘top ten download’ list.  Macroeconomics: Monetary & Fiscal Policies eJournal Top Ten.

Paul Romer offers a scathing critique of modern macroeconomics that has ‘has gone backwards’ in the last 30 years and has evolved into a ‘post-real’ pseudo-science. (https://paulromer.net/the-trouble-with-macro/).

He holds Robert Lucas, Thomas Sargent and Ed Prescott for being the key figures that led the development of ‘post-real macroeconomics’, despite important scientific contributions that they made prior to 1980.

My inference from this wide-ranging critique is that ‘post-real’ macroeconomics has little to offer to policy-makers in the developing world. What one needs, as Paul Romer puts it, are practitioners who can put useful knowledge to work.

Structural reforms entailing interventions to deregulate labour and product markets can engender ex-ante long-term gains in terms of higher output and more jobs, but their short-run consequences cannot be ignored. This reminds one of the Keynesian dictum that in the long-run we are all dead.

The latest (model-based) conclusions based on an IMF evaluation (2016) are that, while there are likely to be ex-ante long-term gains in terms of higher output and more jobs, a lot depends on the state of the business cycle.[1] If structural reforms are pursued during a recession and periods of slow growth – as is the case now in some BRICS (Brazil, Russia, India, China, South Africa– it will worsen prevailing economic conditions by reducing output and employment that might persist for more than a year.

In the case of India, expected long-term gains from labour market reforms need to consider high short transition costs as noted above. As one study observes: ‘There is a fall in GDP, a rise in unemployment, and a fall in the share of formal firms in the first four to five quarters post labour market reform’ (Anand and Khera, 2016: 36, italics added).[2] If these results hold, the political ramifications are, to put it mildly, rather uncomfortable. Would an incumbent government seeking re-election be prepared to argue that ordinary citizens should suffer for a year or more because there will be a lot of gain after enduring such pain? As a former British (Harold Wilson) observed:a week is a long time in politics.

[1] IMF (2016) World Economic Outlook, April

[2] Anand, R and Khera, P (2016) ‘Macroeconomic Impact of Product and Labor Market Reforms on Informality and Unemployment in India’, IMF Working Paper No.16, The authors note that this can be mitigated by focusing on product market reforms.