Future Development Reads: Populism, poverty, and inequality

Economists Anne Case and Angus Deaton wrote one of the most talked-about papers at last week’s conference of the Brookings Papers on Economic Activity. “Mortality and morbidity in the 21st century” highlights the “deaths of despair” that prevail even in advanced economies. 

Provocatively, Deaton is asked “Is It Better to Be Poor in Bangladesh or the Mississippi Delta?” Lest we forget, poverty is present everywhere, even in the richest countries; this is one reason why the sustainable development goals are universally applicable to all countries.

At least in rich countries, poverty and inequality are associated with political populism, as underscored in the report “Populism: The Phenomenon” by hedge fund manager Ray Dalio.

A far more positive perspective is provided by looking at developing countries alone. Economist Noah Smith in a Bloomberg article, titled “Capitalism Will Shrink Inequality. In Fact, It’s Happening,” cites a paper by economist Nora Lustig and colleagues on the improvements in inequality that are happening in Latin America.

An oft forgotten fact is that periods of improving inequality tend to be periods of high commodity prices, especially for agricultural goods. An improving rural-urban terms-of-trade is probably the main reason why China’s inequality improved after 2008. So in developing countries it is always necessary to dive deeper into what is happening in specific sectors in order to understand movements in inequality. In a World Bank paper, “Agriculture in Africa—Telling Myths from Facts,” senior economist Luc Christiaensen uses a new data set linking agricultural questions to the Living Standards Measurement Study.

Trends in productivity growth lie behind all the main movements in poverty and inequality across the world. The comprehensive report “Gone with the Headwinds: Global Productivity,” authored by staff at the International Monetary Fund, tells a story of what is happening and speculates on why.

Happy reading!