Gustav Ranis

GPCR-internal

Interview by Gilad Tanay

Interviewee

Gustav Ranis is a leading development economist. Ranis is the Frank Altschul Professor Emeritus of International Economics, Yale University.He was previously Director of the Yale Center for International and Area Studies (1995-’03), a Carnegie Corporation Scholar (2004-’06), Director of the Economic Growth Center at Yale (1967-’75), Assistant Administrator for Program and Policy at USAID (1965-’67), and Director of the Pakistan Institute of Development Economics (1958-’61).

 

What would you see as strengths or weaknesses of the MDG framework, in terms of overall design, conception of development, goals, targets and indicators?

Gustav Ranis: Well, one strength is that they energized the international community with certain goals. Some weaknesses are that they were too general, without enough specificity. Because every country has different priorities, and among the eight MDGs, different people have different priorities, and that was not recognized in the formulation. The question is, what should be pushed in any given country? What is the priority in that country? We can’t expect them all to follow the same guidelines. So, I think that’s the main problem-that underneath each of the major MDG objectives, we ought to be more specific as to what needs to be done on a country-by-country basis. And let the country determine how they want to achieve their priorities if we do anything after 2015.

Were there ways in which the MDGs were detrimental to poverty alleviation?

Gustav Ranis: Well, I think that they did bring worthwhile objectives, like poverty alleviation, to the attention of many agents. I think they were more embraced by the donors than by the recipients. I think the recipients were a little cool, partly because there was not enough country specificity, and they felt they were being pushed into it. Though, actually, they really supported the goals, in some cases.

How would you assess the degree to which the MDGs have been achieved?

Gustav Ranis: Well, they have changed international public opinion, which is important/ they’re probably loosening up some financial resources, although in the last year, the international financial crises have hurt the financial side. So it’s given a boost to have that energy and a push on quantity [of financial resources]; it has been helpful, but I don’t think it emphasises quality enough. 

Should the MDG successors be an extension of the current goals, an expansion/revision of the current goals, or something different altogether?

Gustav Ranis: Well, I don’t think just changing the date is a good idea. I think we should have a new start and keep some of the goals, but basically get away from this eight major objectives, and be much more country-specific, as I said, and be a little more involved in institutional issues, rather than quantitative. The problem with the goals is that too much is quantitative, and not enough is qualitative; and [we ought to consider] different institutional issues. What kind of institutions do we need to create-domestic and international-to further the objective of poverty and other things? And we should probably reduce the number of things we are trying to do to a smaller number, which we focus on more rigorously. I think one problem is how to generate technology. It’s not there. And I think, ultimately, countries need to be innovative, and not necessarily with technology of the rich countries, but with their own adaptive technology, which is labour-intensive and, therefore, will help poverty alleviation. There is still too much emphasis on what we know and that we should transfer from us to them, and so I think that adaptive technology, building institutional R&D and in the small-scale sectors—that, I think, is where we should be heading.

Professor Ranis, the first general question I would like to ask you has to do with where there is already a broad consensus among informed people concerning global poverty and its alleviation. In your mind, where do we already now have a strong agreement especially among academics on global poverty and how it should be alleviated especially along the explanatory and reform recommendation dimension?

Gustav Ranis: We should remember that poverty is multidimensional. If we are talking about income poverty, which is the most common definition, then we do have some agreement on what is the rate of growth, the income distribution and institutional features such as proximity to harbors, the water, and so on. But basically, we know the elasticity of poverty alleviation relative to growth depends very much on income distribution. That much we have some agreement on. For example, in China now we have more capital intensity and a worsening distribution as a result poverty alleviation has declined. And sometimes you can have a decline in poverty even when growth is quite good if income distribution is good. So on that we have pretty much agreement.

Globalization is general helpful, especially if policies are even handed with respect to different income groups. There’s the question of other dimensions is important. For example, you want to know how education is distributed, that’s poverty in education. And poverty of health, Amartya Sen would be interested in capabilities. Is there a deprivation of certain capabilities? That people cannot have certain public goods, like security, freedom, and other such public goods. And that has not been handled very well, the other dimensions of poverty. But, there is agreement on the income side of it, of course you know we have different definitions of poverty. We have different poverty lines, which are somewhat arbitrary. You have headcount ratios, you have headcount squared, headcount turtle square, which takes into account income distribution when you get headcount square poverty gap. Headcount poverty gap and then poverty gap square, the further you get into squares you get how far you are from the poverty line, which gets into income distribution. So you have different measure issues as well, which we can talk about but not necessarily.

From areas of consensus, let’s move to areas of disagreement. So the question here is, what are areas in which there still is remaining disagreement among people who are arguing in good faith based on evidence? And the though here is to focus on those disagreements that are particularly a hindrance to advancing a coherent academic position recommending the next step for global poverty alleviation.

Gustav Ranis: Well, I think there is disagreement no matter how important the dimensions of poverty. Many people do not in fact pay attention to other dimensions. If you are talking about income poverty, I think there is a good deal of consensus now. And, I don’t see much disagreement, even though there is disagreement on the poverty line, whether it should be an international one, the World Bank’s poverty line, $1.25 or it should be national poverty lines, which would be a bit heterogeneous on the agreement that you have. And whether or not we should talk about poverty gaps as well as the headcount, there is disagreement on that. Some people have begun to compose poverty indices, which are multidimensional. There is a lot of controversy about the usefulness of that. The value that the World Bank doesn’t like them, the people at Oxford, who are working on them, like them. A man in Theo study said, you can always like them, decompose the various components, there is no need to have a composite index. There is controversy about that.

What steps do you think academics can take in order to resolve some of these disagreements, especially those that we need to dissolve in order to have a coherent academic policy recommendation?

Gustav Ranis: Well, my feeling is we should probably make things not too complicated if you are not going to have an impact particularly. We should probably stick to the income poverty and resolve some of the issues I mentioned about poverty lines, about income distribution as opposed to poverty. And, the question of should we in fact have poverty gaps as well as headcounts. Those are issues, which are resolvable and understandable by policy makers.

So we talked about informed disagreement, now let’s move to uninformed disagreement. This question about those false beliefs that have a strong purchase in public debate and policy debate, false, or as I should say partially true, although we already have enough knowledge to refute them, still play an important role in these discussions and allows people to justify doing less than should actually be done to alleviate global poverty? What in your mind, do you think are the most important false truisms that are prevalent in public debates and are a hindrance to poverty alleviation?

Gustav Ranis: One of the problems is that people talk very generally about poverty, and don’t get very down to the specifics and don’t differentiate between the problem in Latin America, the problem in Asia, and Africa. They are quite different, even countries are quite different from each other and I think we have to get down to specifics. And for example, in Africa, we have 3 different types of countries. We have landlocked countries, we have natural resource rich countries were poverty is a serious problem because wealth is distributed very unequally, and then you have countries, which do a lot of exporting. You have water, and their situation is much better in general. So, one has to distinguish by region and even by country and that’s very useful.

So, do you feel that conceptions that poverty a monolithic problem, is a strong purchase in public debate? Because some might say now that, you know that the common wisdom in the journalistic discussion and the public discussion is that poverty is very much locally determined. And if anything, there is a trend against the case that poverty globally has global solutions.

Gustav Ranis: It is a global phenomenon but I think any policy conclusion would be locally sensitive. It goes, one size does not fit all shoes.

What I mean to ask, so, this false belief that poverty is a monolithic problem. Is this a belief that you think now is a very prevalent problem in public debate?

Gustav Ranis: I think it is quite limited, the World Bank is committed to poverty. The three candidates for the World Bank presidency, all emphasize poverty as the main objective. There is no doubt about that, and even the bilateral agencies are concerned with that. I think that sometimes the countries themselves are less interested in poverty than the donors. That is an issue, I think the requirement for poverty alleviation should really come more from those who own the programs, rather than the ones who preach the programs. So, I think it is very important to get countries to decide how they view their own poverty while.

This a good transition to questions about global poverty and international institutional factors. Do you think there are features of our international economic political order that are contributing the persistence of severe global poverty, and if you do, what are these features?

Gustav Ranis: You mean persistence being encouraged by the international institutions?

Well not perhaps encouraged, but being brought about by their structure.

Gustav Ranis: Well my big complaint with donors in general, multinational and bilateral, is that they talk a good deal about local ownership, they don’t really mean it or are really able to mean it. They still preach it and can’t relieve it to the recipients to determine what poverty problems are and how it should be addressed. I think as long as we preach and have conditionality, rather than self-conditionality, I will have a problem. My view is that there ought to be self-conditionality by the recipients. We don’t want to give up on conditionality because you don’t wants to just throw money down the rat hole, but it should be their own proposals poured into the international community.

So according to you, the main harmful feature of the way international institutions are designed is in the way aid is distributed. And aid is distributed in a way that is not sensitive to the needs and special interests of particular recipient countries. Other people have argued in addition to flaws in aid mechanisms, there are also more direct ways in which the international order is causing harm. Of course, Thomas Pogge argued through the borrowing and resource privileges, poor countries are harmed through unjust property rights, trade agreements, access of poor individuals to innovations in medicine, for example. And of course, there are classic arguments that protectionist policies have a detrimental effect on global poverty. What is your take on this line of thought? That the international institution is part of what perpetuates global poverty.

Gustav Ranis: I agree, we should not only concentrate on aid flows, or government flows in general. There are many variations in trade, in capital movements, private capital movements as well including international behavior, transfer-pricing behavior. The things that Pogge talks about are all part of the package. But I think all of it has to do with, who plays the music? Whether it’s the outsiders or the insiders, I think it is terribly important that the music be orchestrated by the insiders. And they have much more bargaining power than they give themselves credit for. They can refuse to have certain foreign investment. They can refuse to have certain trade agreements which, are unfair to them and yet they often have in the past have cutout to the magic of the foreigner, which I think is a mistake.

How would you suggest that this problematic feature can be changed?

Gustav Ranis: What I think is by convincing people that they do have the capacity, the human capacity and the bargaining power to get their own housing and to not cutout to the donors. I think that is the basic problem, because they do have human capacity now, that they didn’t have 20 years ago. They are very good people, they are still, there is a question of perhaps moving the decision making away from the finance industries to the ministries which are considered with education, health, and other basic needs which are the most sensitive to most of the issues. While the finance industries, which are very dominant in most countries, continue to think about the money. And the money is not the issue, the issue is the quality that is done with the money.

Moving away now from the institutional international order, what could you consider to be the most serious impediments facing us in the challenge to eradicate global poverty?

Gustav Ranis: Well, I think most seriously the impediment is what is mentioned before, that we do not listen enough and don’t give initiative enough to the recipient countries. We still in spite of ourselves, like to condition aid, condition flows, we have our own self interest at heart. We have other strategic aid when we claim to be helping poverty alleviation. And they know that we kind of have a ritual dance where the donors insist on certain conditions, which may be well intentioned for reform and then the recipients knows that soon or later that they are going to be dispersed anyway, no matter what happens. So, while the intention to change policies, the recipient knows that ultimately the donor and the donor agent’s own career depends on dispersments. And therefore, they don’t take it seriously and the money comes anyway and we have kind of a ritual dance which goes on and on and on without any much impact on poverty or any other good thing.

Now let’s move to positive policy recommendations, this is a top three kind of question. Taking into account the constraints of political and economic feasibility, what do you think are the top three policies on a global level that you would like to see implemented towards eradicating global poverty?

Gustav Ranis: I think freer trade is a good thing. Getting away from renewed import substitution, which are now in the road. I think it is a mistake, I think that the encouragement of remittances is a very important issue. Remittances are very helpful for poverty alleviation. These are both internal remittances, for internal elaboration and international remittances for international migration. And you probably know, remittances are now bigger than foreign aid, they are very important. And they should be encouraged, and any obstacle in terms, of course self remitting should be eliminated.

Now, let’s take away the constrains of political feasibility, so suppose Gustav Ranis was nominated dictator of the world for the next five years, what would be the top three polices that you would use towards eradicating poverty?

Gustav Ranis: Well as I already mentioned, I think we should have free movement of goods, because comparative advantage is still the best way to inter activity involved with employment. And employment is critical to poverty alleviation. We should encourage agricultural development, we have been neglected that somewhat. And also household enterprises, which are very important especially in sub-Saharan Africa, which are important because they provide some wear with all, for people who cannot find a job in the official organized sector. So I would encourage household enterprises, which are really a form of disguised unemployment, but very important contributors to both income and poverty alleviation. I would also as I said before encourage and devolution of this very decision-making for the donors to the recipients. The structural adjustment programs of the World Bank did not work very well. And the so-called PRSP’s, which followed, which are somewhat better, still are very much dominated by the approval of the IMF for a PRSP to be fashioned in a country. We still have not been willing to give in or give up our willingness to preach policy to countries.

Editorial assistance by Lea Blanchard