progress of development in last 25 years

Mark Weisbrot, Dean Baker, and David Rosnick in a recent work in Center for Economic and Policy Research (CEPR) prepared the scorecard on development for the last 25 years (1980-2005). And contrary to the popular belief, the results, they got, are dissatisfactory. There has been seen a sharp decline in the rate of growth for the vast majority of low- and middle-income countries, China and India are notable exceptions (see the recent musings by Acharya and Rodrik). Accompanying this decline has been reduced progress for the almost all of the social indicators that are available to measure health and educational outcomes.

The methodology, they adopted, precludes the possibility that this reduced economic and social progress was a result of “diminishing returns,� i.e., the increased difficulty of progressing at the same rate from a higher level. It is therefore likely that at least some of the policy changes that have been widely implemented over the last 25 years have contributed to this long-term growth and development failure. In some of the financial and economic crises that took place in the late 1990s — for example in East Asia, Russia, and Argentina — it seems clear that policy mistakes contributed to severe economic losses.

However, it is difficult to show a clear relationship between any particular policy change and economic outcomes, especially across countries. There are many changes that take place at the same time, and causality is difficult to establish. It is certainly possible that the decline in economic and social progress that has taken place over the last 25 years would have been even worse in the absence of the policy changes that were adopted. But that remains to be demonstrated. In the meantime, a long-term failure of the type documented here should at the very least shift the burden of proof to those who maintain that the major policy changes of the last 25 years have raised living standards in the majority of Developing countries, and encourage skepticism with regard to economists or institutions who believe they have found a formula for economic growth and development. Indeed, some economists^# have recently concluded that more “policy autonomy� — the ability of countries to make their own decisions about economic policy — is needed for developing countries. Most importantly, the outcome of the last 25 years should have economists and policy-makers thinking about what has gone wrong.

# Nancy Birdsall, Dani Rodrik, and Arvind Subramanian. (“How to Help Poor Countries,� Foreign Affairs, New York:Jul/Aug 2005. Vol. 84, Iss. 4, p. 136-152)