Reshaping Economic Geography – the latest World Development Report

December 19, 2008 Off By admin

A helpful summary from my colleague Richard King of this year’s World Development Report – the World Bank’s flagship publication. The title is ‘Reshaping Economic Geography’ and Richard found it ‘exciting’. But then he’s a geographer – I found it hard going and fell asleep several times, but maybe that’s the jetlag…..

Richard’s Summary:

Core message: Economic growth has been, and will continue to be, unbalanced – growth will drive up inequality because the drivers of growth are place specific. To resist the inevitable spatial inequality of growth and to attempt to spread it out will not help to reduce poverty – instead it will hinder growth processes. The key to inclusive, but spatially uneven, development is economic integration between leading and lagging areas.

Lagging rural areas often have high poverty rates, but leading urban areas often have most of the poor. Rather than seeking to spread economic investment and activity everywhere, people should be encouraged to move (i.e. migration and urbanization are good things), though basic social services should be provided universally.

Geographic transformations required for prosperity:

Higher densities of economic activity – e.g. growth of cities

Shorter distances to sites of economic activity  – e.g. migration to economic centres, improved transport links

Fewer divisions between neighbourhoods of economic activity – e.g. reducing restrictions on trade between countries

Geographic Changes

Density

Distance

Division

Drivers of transformation

Agglomeration

Migration

Specialisation & trade, transport costs

Policy debates

Urbanisation

Territorial development

Regional integration

Particular relevance to

All countries

Large and middle-income countries

Small and low-income countries

Scale

Local (L)

National (N)

International (I)

Order of importance

Density

Distance

Division

Distance

Density

Division

Division

Distance

Density

Policy makers should work with the drivers (agglomeration, migration, and specialisation) rather than against them; the report calls for a shift away from spatial targeting such as trying to lure industry to deprived regions (which often dominates current policy discussions) to spatial integration, eg improving transport links.

Policy responses should be founded on institutions (spatially blind – universal in coverage) e.g. regulation, provision of social services; infrastructure (spatially connective) e.g. roads, communication systems; and interventions (spatially targeted) e.g. slum clearance, incentivising investment, preferential trade access. How these should be applied depends on the complexity of the development challenge:

Complexity of challenge

(Geographic scale) Challenge

Institutions

Infrastructure

Interventions

One dimensional

(L) Areas with only incipient urbanisation

(N) Nations with sparsely populated lagging areas

(I) Regions close to world markets

X

Two dimensional

(L) Intermediate urbanisation

(N) Densely populated, but economically lagging areas

(I) Distant from world markets

X

X

Three dimensional

(L) Advanced urbanisation, but within-city divisions (eg slums)

(N) Densely populated lagging areas with domestic divisions (e.g. caste or ethnic discrimination)

(I) Distant from markets, with small economies

X

X

X

Some additional thoughts from me on inequality:

The link between growth and inequality is vividly conveyed: ‘across provinces, nations and the world, development comes in waves and leaves behind a bumpy economic landscape – prosperity in some places, poverty in others.’

But overall, when discussing the response, the report’s version of geographical trickle-down (‘trickle across’?) feels like a step back from the World Development Report 2006 (which was on equity). In particular, while the evidence it sets out seems strong that there is a Kuznets Curve (inequality rising, then falling) for urban-rural inequalities, and leading-lagging regions within countries, the evidence for a similar fall of international levels of income inequality looks a lot more flimsy. The report acknowledges that convergence is the slowest at international levels, and ‘has happened only in the fastest-growing regions’ but other World Bank authors (e.g. Branko Milanovic) dispute whether it is falling at all. This matters because the inequalities are so extreme: as the report points out, a child born in New York will enjoy a lifetime income of about $4.5m, while a rural Zambian can expect to earn less than $10,000.

And the report suffers from traditional Bank blind spots on power and politics – it reads like a manual for planning technocrats able to make their decisions based purely on evidence, which is, to put it mildly, a little divorced from reality!

[see also the summary on the Overseas Development Institute website]