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30 Years of economics for development

UNU-WIDER: More Needed Than Ever

24 September 2009

Finn Tarp, New Director at UN University-WIDER*

‘Some of us believe in analysing, some of us believe in humanising’

- Donovan, Children of the World from Slow Down World 

In my student days in the early-to-mid 1970s in Denmark and the US, I was a great fan of Scottish folk singer Donovan. His songs, railing against injustice and his concern for the environment captured my mind and heart. He released Children of the World in 1976, and I used the above two beliefs in introducing my 1978 University of Copenhagen MSc thesis on growth and income distribution in developing countries. I believed in analyzing—in the strength of carefully developed thinking and in spelling out policy implications, and this belief has stayed with me. Equally, I believe in humanising—in our duty to reach out and do our share to help change the world and make it a better place for all.

But beliefs are not enough, the world needs action. Lots of action. Especially, by those of us who have been fortunate enough to grow up well-fed, healthy, and with access to education. This motivated me and my wife Grethe, who has profound knowledge of agricultural seed and seed quality control, to take up work in Swaziland in 1978 with the UN Food and Agricultural Organisation (FAO). Little did we know at the time, that this would be the beginning of a life-long commitment to the struggle for development. This struggle has taken us to many corners of the world: from Swaziland (1978-80) to Mozambique (1981-88) and to Vietnam (2000-03), in addition to many shorter missions across the African continent, Latin America, and more recently Asia. It also provided the platform for my University of Copenhagen posts from 1988, where I became responsible for invigorating teaching and research in development economics—at a time when Deepak Lal had declared that ‘the demise of development economics is likely to be conducive to the health of both the economics and the economies of developing countries’2.

I agreed, as I did during my field assignments, to concentrate on addressing the need for reform in economic policies and planning systems as well as the economic role of the government. Yet, I was sceptical about the orthodox macroeconomic stabilization and structural adjustment package of free markets and outward-oriented policy advice, developed in conjunction with what has become known as the ‘neo-classical counter-revolution’3 of the early 1980s. It was ‘offered’ by the IMF and the World Bank to African governments as somewhat of a panacea to the complex economic problems they faced—and it puzzled me. After all, the contradictions between the standard neo-classically inspired adjustment approach of the 1980s and the economic reality can hardly be greater than in sub-Saharan Africa. This puzzle came to define my research for a number of years and remains a constant thread in my work and the way I look at the world. In parallel, I was involved in a variety of teaching and policy advisory activities in South Africa, Angola, and Zimbabwe and also participated actively in the African Economic Research Consortium (AERC), headquartered in Kenya. In all of this, the coexistence of a set of competing theoretical and practical approaches to the development challenge has always intrigued me.

The micro-macro paradox in the analysis of the impact of foreign aid came to play a big role in my work from the late 1990s. This resulted in 2000 in a major volume on foreign aid and development4 with contributions by a group of both seasoned and younger development economists. We had in common an ambition to come to grips in a constructive manner with the complexity of the aid-development nexus in both the short and long run. There is much to criticize in aid theory and practice. But it is disconcerting that the attention of the aid community in the midst of a serious global economic crisis—where arguably aid is needed more than ever—is on ‘dead aid’, a term coined by Dambisa Moyo.5 Aid has, in spite of many problems and challenges, the same returns as private investment. And aid and private flows are not substitutes. They are complements. Even after a future revival of private capital flows (which does not seem to be just around the corner) foreign aid is still needed to provide the multi-faceted range of public goods that private flows simply cannot and will not put in place. Similarly, developing countries need trade and aid—not trade or aid.

At the turn of the millennium, it was suggested by several colleagues that I should expand my regional focus beyond Africa and Latin America. The complex tunes of economic progress in Asia, so different from the polyrhythmic African sounds, the marrabentas of Mozambique and the South African Shosholoza I had become so accustomed to, had to be explored. I was curious, and wanted to understand more about the development process. This led me, among other tasks, to become deeply involved in a series of challenging microeconomic household and enterprise surveys in Vietnam with colleagues across a range of institutions. Looking back I am intrigued that Mozambique and Vietnam have for more than 15 years, in spite their many differences, been two of the fastest growing countries in the world. This reinforces my belief that the following insights are useful co-ordinates in our search for new lessons within development economics.

  • The correlates of growth are reasonably well known. The same cannot be said about the underlying causes of growth and how regions and countries make the transition out of economic stagnation. Much remains to be learnt both about what good economic governance actually entails and what can be done to promote effective policy-making in low-income economies prone to exogenous shocks.

  • Development economics has, as a discipline, shifted focus from decade to decade. The same goes for the preferred analytical research techniques. The combination of new data and methodological advances gave impetus to a large cross-country econometric literature during the 1990s, but more in depth country studies are called for to bring out the richness of development experiences at hand.

  • Steady state growth appears to be a feature of developed economies while volatile growth and development is characteristic to developing countries. The ‘rule of growth’ is (as noted by Lant Pritchett6) that anything can happen and often does in developing countries.

Experience shows that there are many paths to development due to differing country contexts and circumstances. Even within specific countries, more than one path to success exists, but locating and remaining on a successful development path is difficult, and policy mistakes are unavoidable. The key to success includes the willingness and ability to learn from such mistakes and change course in more productive directions.

Based on my experiences during the past three decades, development economics is both alive and kicking, as is foreign aid. But how do these views tie-up with the future direction of UNU-WIDER?

I am fortunate to take over the directorship of a very well functioning institute with a superb staff. WIDER is an effective forum for high-quality research, global intellectual exchange and the advocacy of policies leading to robust equitable and environmentally sustainable growth. Continuity and maintaining standards will therefore be high on my list of priorities. A key point of reference for our work will be that the global economy is in an unprecedented crisis. The crisis, with roots in the developed world, includes a simultaneous combination of (i) a financial melt-down spreading across North and South which is undermining the real economy; (ii) unchecked climate change with carbon emissions growing at a faster and unforeseen pace; and (iii) hunger exacerbated by the huge run-up in global food prices interacting with the failure of the world to develop timely alternatives to its dependence on oil. I believe the impact on poverty, inequality, social stability and peace are profound and potentially dangerous.

The triple crises pose an immense challenge to social science, including development researchers in general and development economists in particular. Economic transformation has traditionally been at the heart of development economics. More recently, we have seen many advances in furthering the micro-foundations of development and in measuring outcomes, especially in poverty and inequality. UNU-WIDER will continue to contribute high quality research to this foundational agenda.

At the same time, the development profession and the policy community expect UNU-WIDER to respond and be heard on the triple crises. UNU-WIDER’s independent non-partisan and high-quality approach to research gives it a unique obligation to react to the need for understanding and resolving the crises. We will aim to do so while focusing energy on capacity building and joint activities with partners across the developing and developed world in line with the UNU Strategic Plan formulated by our Rector and approved by the UNU Council. In particular, in 2010 UNU-WIDER will aim to engage with the AERC in a fruitful partnership.

In addition, the 2010-11 UNU-WIDER research programme will be organized around three topical pillars related to the global food systems, macro and finance, and development strategy/growth in the context of climate change. Each pillar is motivated by current topical issues (the triple crises). To these pillars we will add cross-cutting tiers relating to fundamental issues in development economics, and in which UNU-WIDER has particular strengths: poverty and inequality (including gender), aid effectiveness and the analysis of other capital flows, and governance at local and global levels. So, the tiers can be viewed as capturing basic research challenges while the columns are more applied and directly policy oriented, involving a core problem in decision-making under uncertainty. This will provide a common methodological thread as we move forward.

In summary, UNU-WIDER will, in the coming years, continue to build on a well deserved reputation as a forum for non-partisan debate and consultation about key development challenges, while at the same time aiming to generate the research-based evidence needed to sharpen policy debate and much needed action. The world needs not only analysing and humanising—but also action that makes a difference. Our stakeholders can in the coming years count on UNU-WIDER as a policy-oriented research and capacity building institution of the United Nations, dedicated to achieving the central goals of the UN system in conflict prevention and resolution, poverty reduction, and sustainable and equitable development. I look forward to contributing to this effort together with my colleagues at UNU-WIDER and in the academic and development community in our host and donor countries, within the UNU and UN, and more broadly with UNU-WIDER’s impressive global network of development researchers and practitioners.

* See http://www.wider.unu.edu/aboutus/people/resident-researchers/en_GB/director-unu-wider/ for more detailed background information and a CV with lists of books, journal articles and other publications.

2 Lal, D. (1984). The Poverty of Development Economics. London: The Institute of Economic Affairs

3 Toye, J. (1993) Dilemmas of Development. Cambridge, Massachusetts: Blackwell.

4 Tarp, F. (2000). Foreign Aid and Development: Lessons Learnt and Directions for the Future. London and New York: Routledge.

5 Moyo, D. (2009). Dead Aid: Why Aid is Not Working and How There is a Better Way for Africa. London: Allen Lane.

6 Pritchett, L. (2000). ‘Understanding Patterns of Economic Growth: Searching For Hills Among Plateaus, Mountains and Plains’. World Economic Review. 14:221-50

WIDER Angle newsletter, September 2009
ISSN 1238-9544

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