Sunday, January 4, 2009

World Development Report: Reshaping Economic Geography

World Bank recently released the World Development Report- 2009: Reshaping Economic Geography. According to the report, the most effective policies for promoting long-term growth are those that facilitate geographic concentration and economic integration, both within and across countries, especially in Africa.

World Development Report
The World Development Report is produced on an annual basis and is the World Bank’s major analytical publication. The World Development Report is a guide to the economic, social and environmental state of the world today. Each year it focuses on a particular aspect of development selected by the Bank’s president. Each World Development Report team is led by a senior bank member who is supported by a team of staff and consultants, under the guidance of the Chief Economist. The topics covered in the past reports are like agriculture, youth, transition economics, labour, infrastructure, health, the environment and poverty. The reports are the Bank’s best-known contribution about development.

Reports consider the social, economic and environmental state of the world. This year the report mentions about facilitating geographic concentration and economic integration. According to the report, the instruments of integration are common institutions, connective infrastructures and targeted interventions. Common institutions imply regulations affecting land, labour and commerce, and social services such as education and health finaced through taxes and transfer. Infrastructure refers to roads, railways, ports, airports and communication system. The targeted interventions include slum clearance programmes, special tax incentives to firms, and preferential trade access for poor countries.

Reshaping Economic Geography

The new report challenges the assumption that economic activities must be spread geographically to benefit the world’s most poor and vulnerable. Trying to spread out economic activity can hinder growth and does little to fight poverty. For rapid, shared growth, governments must promote economic integration which at its core, is about the mobility of people, products and ideas. Mobility has helped people escape the tyranny of poor geography or poor governance. The report sees mobility as part of a vital process of economic integration, since mobile people and products form the cornerstone of inclusive, sustainable globalisation. Integration should be considered as an important concept in the policy discussion involving the location of production, people and poverty, with respect to urbanisation, regional development and globalisation. Balanced regional growth that economic planners aim to achieve has proved elusive. Despite well-intended Policies to disperse economic growth across geographic areas inequalities persist. According to the report, the new approach is change in policy with the focus on “economic integration”. Rather than carry the burden of creating economic growth spatially, the report suggests integration at three geographic live-local, national and international. This is not only changing the role of government but also providing location-based incentives to attract industry to economically backward regions.

Geography is important in deciding what is needed, what is unnecessary. With this developing countries can reshape their economic geography. The report concludes that, their growth will still be unbalanced, but their development will be inclusive. The report draws on ideas that have become mainstreamed in economics over the last generation, including those by this year’s Nobel Prise winner, Paul Krugman’s concept of ‘economics of scale’. The report, published in November, 2008, argues that some places are doing well because they have promoted transformations along the three dimensions of economic geography.

Distance- Migrating to reduce distance to economic opportunity
Countries do not prosper without mobile people. The people’s mobility is the best gauge of their economic potential, and their willingness to migrate to reduce their distance to economic density a good measure of their desire for advancement.

Density- Drawing people into cities

Getting density right requires harnessing market forces to encourage concentration and promote convergence in living standards between villages, towns and cities. According to the report, it is the most important dimension for development at the local scale.

Division- Thinning economic border to access regional and global markets

As countries thin their economic borders to enter world markets to take advantage of specialisation and scale. Border restrictions to flow of goods, capital, ideas and people continue to prevent progress in Africa in contrast with Western Europe.
The report makes it clear that the role of government remains important not spread out economic activity but to encourage mobility towards it, and to ensure universal access to basic services such as health and education. The most important thing is to connect people who are left behind to opportunities in places that are prospering. Policymakers should distinguish between the geography of social welfare and the geography of economic production. Sometimes, place-based programmes in poor places are necessary.