6/19/2016

WORLD ECONOMY IS GOOD FOR FDI

The End of the Third World
By MARK MOYAR


Feb. 11, 2016 7:11 p.m. ET
At the moment, few observers of international affairs are upbeat about the world’s trajectory. North Africa, the Middle East and South Asia are awash in civil war and violent extremism. Russia and China are menacing their neighbors. The international order that the United States built after World War II is disintegrating as America retreats from the world stage.

 

Into this seeming morass steps Steven Radelet, a former chief economist of the Agency for International Development. Mr. Radelet has the temerity to suggest that the world is faring much better than most people believe. He notes that public perceptions are skewed by media coverage, which focuses on violence, corruption and poverty rather than vaccination programs, improved living conditions and new varieties of rice.
If one looks beyond the crisis du jour, Mr. Radelet observes, life has never been better for the average non-Western person than it has been in the past quarter-century. In this period the developing world has experienced what Mr. Radelet terms the Great Surge. The number of developing countries with annual economic growth exceeding 2% has risen to 71 from 21. Such growth has led to a doubling of per capita income for hundreds of millions of people. And rising personal incomes benefit the world as a whole, by promoting international commerce, for instance, or enabling countries to solve their problems with less external interference.
What triggered the Great Surge? The seminal event, according to Mr. Radelet, was the crumbling of the Soviet Empire. The discrediting of Marxist-Leninism encouraged poor countries to discard autocracy and state control of the economy in favor of liberal democracy and capitalism. The end of superpower competition also eliminated the need for the great powers to prop up repressive dictators.

Combining the real-world knowledge of a practitioner with the rigor of an academic, Mr. Radelet delivers a stimulating reconsideration of development aid. Some elements of his argument in “The Great Surge”—e.g., that the spread of economic growth has reduced global poverty, a notion once derided by intellectuals as mere capitalist propaganda—are now widely accepted. Others remain controversial. Mr. Radelet’s assertion that democracy is better than autocracy at facilitating the move into prosperity butts up against the theory that authoritarianism is more conducive to rapid economic growth (as in Singapore, Chile, South Korea and China). Mr. Radelet argues that autocratic regimes are more likely to empower malign leaders and hence less likely to achieve growth or sustain it.
Mr. Radelet is also at odds with the familiar claim that the integrity and openness of a nation’s institutions—its bureaucracies, legal systems, electoral processes and the like—drive its development. “Existing institutions, on their own, do not dictate outcomes,” he observes. The reason why some poor nations have advanced and others have not, he says, is leadership. Progress came about “because of the choices, decisions, and actions of the people in those countries.” He cites the achievements of leaders like Jerry Rawlings of Ghana and Óscar Arias of Costa Rica, who chose democracy over perpetual dictatorship and capitalism over state control. Meanwhile, in such nations as Uzbekistan and Zimbabwe, corrupt heads of state stole elections and state resources at the expense of their people.
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Mr. Radelet believes that foreign aid has neither been a primary driver of development, as some aid champions believe, nor a complete waste of money. On the whole, he says, it has had a “modest positive impact,” yielding benefits in health, agriculture, disaster relief and post-conflict reconstruction. A nearly tenfold increase in aid for combating malaria since 2000, for instance, has led to a 47% drop in global malaria deaths and a sharp reduction in illness-related employee absenteeism. He recommends increasing aid in these sectors and focusing it on low-income democracies, whose leaders will be less likely than dictators to misuse it.