by Giovanni Andrea Cornia, University of Florence
One of the unexplained puzzles of development economics concerns the long-term divergence of countries that were initially equally poor. The most cited example of this divergence is that between Ghana (that became independent in 1957) and South Korea (a Japanese colony until 1945 that then went through a devastating war with North Korea until 1948). In the early 1950s, both countries exhibited a low GDP/c and uncertain growth prospects. Yet, by 2015 the GDP/c and life expectancy at birth (LEB) of Ghana were 1364 US$ and 61.4 years, while those of South Korea exceeded 27.000 US$ and 82 years.
Explaining differences in long-term progress is particularly important for extremely poor countries caught in ‘low -level equilibrium poverty traps’ (LLEPT), a condition in which the yearly increase in output is offset by population growth. In such countries, living conditions are extremely harsh, as signaled by very high rates of malnutrition, illiteracy and mortality. Explaining how such countries can exit LLEPT becomes therefore not only an economic but also an ethical challenge. Long-term growth models of various inspirations emphasize the role of savings, human capital and technical progress to exit extreme poverty, but the aggregate nature of such models tends to conceal more than reveal the actual pathways countries can follow to exit LLEPT.
Hereafter we try to contribute to this debate by comparing the development paths and policies followed by two countries – Bangladesh and Niger - that in the early 1970s were trapped in LLEPT. Both have been for long members of the UN Least Developed Countries (LDC) group. Their initial conditions in the early 1970s were similar, if not identical. Both exhibited a low income/c, widespread poverty (82% in Bangladesh), a dominant subsistence agriculture exposed to recurrent whether shocks, high dependence on food imports/aid, a narrow export base( (jute in Bangladesh and peanuts in Niger), low household savings, high Total Fertility Rates (TFR), low LEB (36 Niger and 46 in Bangladesh) and very high rates of child malnutrition. In several areas (land scarcity and population density) Bangladesh fared worse than Niger, though it did better in terms of Irrigated land, school enrollments, and lower distance to harbor. Despite the initial similarities, over the last 45 years these two countries developed in very different ways. As a result, by 2015 Bangladesh was about to ‘graduate’ from the UN LDC group and to become an ‘emerging economy’ while Niger remained trapped in a Malthusian LLEPT. What explains this divergence? Beyond varying initial conditions, differences in policy choices explain their divergent performance in the following areas:
(i) during the first tragic 3-4 years following its Independence (1971) Bangladesh relied heavily on foreign aid and food aid whose combined value reached 10 percent of GDP. But its subsequent development (see later) reduced its dependence on foreign grants to one percent of GDP by 2015, while food imports are now used only to cap grain prices in years of bad monsoon. In contrast, Niger continues to depend chronically on budget support and other form of aid that in 2015 accounted for over 11.4 percent of GDP.
(ii) Bangladesh introduced a Green Revolution that raised rice yields per hectare by 300 % thanks to an increase in irrigation coverage and in the use of high yielding seeds varieties and fertilizers. All this improved food security and stabilized the growth of GDP (Figure 1, top panel). In Niger millet and sorghum yields stagnated as rapid population growth pushed newly-formed families to cultivate fragile Sahelian lands exposed to wind and rain erosion, while almost no technical progress was recorded in agriculture as a whole. All this increased the frequency of bad harvests and outright famines while increasing growth instability (Fig 1, bottom panel).
Figure 1. Real GDP/c growth rate in Bangladesh (upper panel) and Niger (bottom panel), 1965-2015
(iii) Bangladesh tackled head on its over-population problem (that was initially more acute than that of Niger) by raising female education, improving maternal health, information campaigns and promoting the use of contraceptives via a capillary network of NGOs supported by government, donors and religious authorities. In Niger (the country with the highest population growth rate in the entire world), the TFR (now equal to 8) has risen over time and so has the ‘desired family size’. Lack of public interventions in the field of responsible motherhood, minimum age at marriage, and female secondary enrolments (only 15.6 % in 2015), as well as the persistence of polygamy and opposition to contraception by religious authorities explain this worrying situation. Given these trends, the population of Niger is expected to grow from 20 million in 2015 to 200 million in 2100. In addition to reducing TFR, Bangladesh introduced ‘active migration policies’ that helped lessening the pressure on the domestic labor market and generated in 2015 remittances equal to 13% of GDP. No new initiatives of relevance were adopted in this field by the authorities of Niger.
(iv) Niger’s production structure has broadly stagnated, as an increasingly vulnerable subsistence agriculture and cattle raising continue to dominate the economy. Since 1978 exports have depended on uranium (and since 2012, also on oil), the prices of which are however extremely volatile, making Niger vulnerable to fluctuations in its international terms of trade. Meanwhile its (already low) share of manufacturing value added contracted. In contrast, since the early 1980s Bangladesh successfully developed the sector of ready-made garments – of which it is now the second world exporters - while new manufacturing goods have started to be produced and exported.
(v) Finally, the two countries have diverged in terms of human capital formation and human development, mainly due to differences in social values and norms about education, gender parity, access to health and nutrition. The ‘Bangladesh surprise’ – i.e. faster gains in all these areas than in richer India and Pakistan - is explained by growing government social spending and the mobilization of a dense network of NGOs that delivered public services in many parts of the country. Niger, in contrast, recorded a very modest progress in all these areas. The country has now the second lowest Human Development Index of the world.
