Tuesday, December 8, 2015

What is development and developing countries?

In the last few weeks, I have had several conversations with colleagues and friends about the meaning of development and the usefulness of the distinction between developed and developing countries.

 This is obviously important for those of us who work in Departments of International Development and have been brought on the belief that there were structural differences between various types of societies. Yet as soon as one walks in the streets of Mexico DC or any Brazilian city, the problematic nature of the categories becomes clear. Despite all its problems, Mexico and Brazil have high quality infrastructure, a strong middle class and high consumption patterns. They have GDP per capita that are closer to Spain than to some low income countries.

 The "DFID solution" (influenced by prominent economists like Paul Collier) is to leave the term "developing country" only for very poor countries in post-conflict situations. Development is about fragile states and the bottom billion. Yet this seems totally unsatisfactory for many reasons: most poor people are in middle income countries and in many emerging economies, institutions are weak; the middle class is still small and much of the territory away from big cities suffers from poor infrastructures and the absence of the state (and well functioning markets).

 But we are still left with the question of what separates developing countries and developed ones or, in terms of specific examples, what distinguishes, say, Mexico from Greece. There are many potential answers, but let me emphasise a few:

 a. The concept of vulnerability at the household and country level is particularly important. When there is a crisis in a developed country, the middle class may suffer but has some insurance mechanisms. As a result, most of the middle class maintains its living standards. When the same happens in a developing country, much of the middle class ends up among the poor and have difficulties to rebuild their lives. This also happens at the country level: any shock has more negative implications in a developing country.

 b. The sustainability of the growth patterns: it is not only about how fast you grow but about how sustainable those growth patterns are. c. At the same time, however, it is more important than ever to compare different groups among various countries to understand better what a "poor" and a "middle class" person means in different contexts.

 Other factors I am forgetting?