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Rae Lesser Blumberg, a William R. Kenan, Jr. Professor of Sociology at the University of Virginia; and Samuel Cohn, Professor of Sociology at Texas A&M University, spoke with Jide Akintunde, Managing Editor, Financial Nigeria Magazine, on their new book, Development in Crisis: Threats to human well-being in the Global South and Global North, and contemporary global development issues.

Q: Your new book – Development in Crisis – is a collection of real-world case studies on development and globalization. Are these two concepts mutually reinforcing; can they be?

A: In the Global South, development does not have to depend largely on globalization or what happens outside a country's borders. This is not the standard orthodoxy – but it is worth thinking about.
    
Yes, countries that sell petroleum or agricultural commodities have higher export earnings when the global economy is good. Yes, countries that use low wages to export labour-intensive manufactured goods also do better during the upside of the business cycle when the wealthy foreign customers are buying.

A substantial amount of growth, however, comes from manufacturing and growing goods for one's own population. This is how Latin America grew in the early twentieth century. (Argentina did this when the international market for meat was failing.) China has long supported many domestic sectors such as the tobacco and food sectors. Brazil, despite its macroeconomic mismanagement, has led the world in its promotion of local small business, notably through the exemplary work of SEBRAE, its microenterprise agency.

How do you build the domestic sector? You increase the multiplier effect, the extent to which external earnings from export sectors are translated into employment and income at home. Some of the ways this can be achieved are as follows:
1.     Reduce poverty and turn the poorest of the poor into consumers and entrepreneurs. Anything that increases the size of local markets raises economic activity. Capital markets need both capital and business people to create potential projects. Micro-sales and micro-firm-formation are what build economies from the roots up.
2. Empower women economically. Create both more female entrepreneurs and more paid jobs for women. Dozens and dozens of empirical studies support the proposition that women who control income invest disproportionately more in their children's education, nutrition and health than do men. The educational and demographic effects (empowered women have lower fertility) insures that these gains extend into the long term.
3. Create lots of cheap programmes to build up small businesses – with low budgets and fiscal conservatism about maintaining responsible levels of overall expenditure. States are not always capable of picking winners. But having a lot of agencies with small budgets that make many small bets produces a more diversified portfolio than one agency making a few big bets. This increases the chances of hitting a few big winners.
4.    Build infrastructure that gives entrepreneurs the transportation and human capital tools they need to grow their companies.
     
Q: You made the near-expired United Nations Millennium Development Goals a point of reference in recent global development efforts. What are the key lessons of the last 15 years that should inform implementation of the next global consensus on development, since the Sustainable Development Goals have been drafted now?  

A: The new SDGs emphasize sustainability but they are weak on women's economic empowerment (as were the MDGs). Our book shows a strong negative link between women controlling income/assets and environmental destruction. This comes from conservation efforts by rural women who experience how deforestation makes getting water and firewood much harder, women's tendency to farm more sustainably and women's higher participation in cleaner industries. Ignoring women proves an ecological mistake. The primary target of MDG 3 (promote gender equality and empower women) ignored adult women, merely calling for the elimination of the gender gap in education.
    
Under-attention to adult women's economic position also compromised the MDGs' growth component. Female labour force participation is strongly linked to national and global GDP growth. Conversely, World Bank President Jim Yong Kim cites data that women's low economic participation created income losses of 27% in the Middle East-North Africa region and 23% in South Asia. These are sizable losses.

Q: What is increasingly clear is that the market framework can deliver growth, but the gains are often reversed by cyclical crises. Do you contemplate in your book how growth and a stable world system can be co-occurring?

A: Cyclical crises are a basic fact of capitalism. Soviet planners and technocrats toiled in vain to create an economy without cyclical downturns that would grow forever. It remains an idle dream.

Sensible development policy involves having plans that can work in both global booms and global busts. Jeffrey Williamson documented the surprisingly beneficial effects of global busts in early 20th Century Latin America. Global booms made currencies strong – which led local elites to spend vast sums on foreign luxury goods. The Great Depression made local currencies worthless. Import substitution was forced on Latin America, not by government fiat, but by money no longer sufficient to acquire goods overseas. Locals were forced to patronize local merchants, which spurred dramatic industrialization.

One doesn't have to wait for a currency crisis to support local producers and entrepreneurs. Effective programmes that reduce poverty put money in the hands of the spending poor – who use it on local goods and services. But poverty programmes done badly can lead to government waste and fiscal imbalances. And attempting to stimulate local industry by pouring money into a few poorly chosen projects can lead nowhere.

However, locally-focused poverty programmes done cheap, as well as broadly dispersed small-investment stimuli and “best practices” microfinance, both managed with budgetary restraint, can produce growth that will not create macroeconomic imbalances. Rather, they can prove bulwarks against the inevitable storms generated by the global economic climate.

Q: I believe that the global development community has been too obsessed with class-inequality, which to me is not even a problem, precisely because there is no soothing solution for it. Markets are not likely to function well without the prospect of personal distinction by wealthiness. Whether or not you agree with me, how can class-inequality become less problematic or less perceived as such?

A: Calls to reduce inequality contain two components: one is political and unreasonable, the other is economic and reasonable. Attempts to attack the rich are often impractical and poorly conceived; attempts to improve the well-being of the poor are more feasible and can produce significant economic benefits to all. Overt attempts to punish the rich lead to perverse consequences. Investors move money overseas. Managers hide income. Even-handed transparent taxation of income or economic activity is generally benign when applied to all regardless of scale. “Soak the rich” campaigns, however, are not always even-handed or transparent.

But poverty elimination generally produces benefits for all classes. Most obviously, consumption goes up and GDP rises in response. At a less obvious level, crime goes down. Crime produces enormous transaction costs for business. Poverty reduction also promotes the education of children, and with it the future human capital stock of the nation. Poverty reduction increases public health: Germs know no boundaries and an infected mosquito can bite anyone. Organized crime benefits from poverty; few other businesses do.  

Q: Gender-based inequality is in every sense anti-progress. You are very concerned about it. What targets do you think global development should pursue with variation around the world, over the next decade?
    
A: Female entrepreneurship and employment are crucial. Focusing only on education is not enough. For the poor, microfinance programmes have had a substantial impact. In countries where women have traditions of earning income by entrepreneurial or other activities, they have reaped significant benefits from small loans. In countries where women lack such traditions, microloans are less likely to remain in women's hands but even there, women are recognized as the source of the money and also benefit from the increased contacts and training offered by many such programmes. Because women with access to income are more likely than men to promote education for daughters as well as sons, the effects are long-term and likely to grow over time – since with more education both their daughters and sons are likely to earn more.

Thus, promoting income and assets under women's control begets a “virtuous circle.”  Over the next decade, countries where women already are economically active might promote STEM (Science, Technology, Engineering and Mathematics) education for girls as well as boys, since this is a proven path to climbing the world's value chain. Countries where women have low labour force participation should focus on smoothing the path for women with education to get jobs.         

Q: You also talked about falling state capacity to mediate development. Perhaps it is the very fact that global development agenda are discussed at supra-national level where developing countries make marginal contribution that results in the abdication of the responsibility of governments in developing countries, with the consequence of loss of capacity because of lack of practice. The voice and quota reform has remained deadlock at the IMF and World Bank. How can this issue be resolved?

A: Transnational organizations vary in their rationality. Some are good; many are terrible. When transnational organizations make the wrong call – be this from unrepresentative decision-making processes or simply misguided beliefs on the part of their staff – local countries have more power than most imagine to avoid having to “take the poison pill.”  Transnational organizations do not control the judiciaries of individual nations. Diplomatically adroit individual negotiations are often possible – and some negotiations do benefit from a credible threat to exit.
Greece, however, is no example of how to deal with a hostile transnational community. One does not create 1000 obstacles and then come, begging cup out, asking for money.

Malaysia is a wiser example to follow. After the 1997 Asian Financial Crisis, their response to unreasonable IMF demands was simply to disobey the IMF and not take further IMF money. They imposed temporary capital controls and maintained previously successful government programmes for simulating the economy. Malaysia recovered far faster than did the other Asian nations.  

This does not mean that financial orthodoxy is never called for. Nor does it mean that transnational organizations are always wrong. Significantly, both the IMF and the World Bank have moved away from their previous “austerity orthodoxy.” The IMF, for example, has been urging Europe to adopt expansionary programmes such as quantitative easing to get their economies out of the doldrums. It does mean, however, that responsibility for local economic development rests significantly with each individual nation itself. The behaviour of transnational organizations can be infuriating. However, this is not an excuse for local financial ministries and economic development agencies to ignore the potential of their own economies, and fail to develop those sectors that are under their own control.

Q: What is your outlook of how much progress can be made in global development by 2030?

A: Global development has been steadily increasing for the last 500 years. Both GDP rates and standards of living go up through cyclical booms and busts. They have gone up under a wide variety of social and economic regimes. Individual nations may have better and worse years. Regardless, somewhere, some set of nations will be growing in nearly any global conjuncture that can be imagined.

Nevertheless, individual nations can ruin the prospects of their own populations. The American sociologist Greg Hooks has argued that “war is development in reverse.” Nations that choose to wipe out twenty years of their own progress can do so, simply by killing enough of their own people.

Nations can have terrible macroeconomic policies. Nations can rely on one commodity exclusively with no back-up plan for when that sector runs dry. Nations can fail to invest in women's economic empowerment. Nations can underfund education. Nations can underfund infrastructure. Nations can tolerate economic desperation and the high levels of crime that go with that. Nations that do any of these things can undercut their own development.

Note that war, the toleration of poverty and restricting women's economic opportunities are related. The link of poverty to armed conflict is known. But armed conflict also is correlated with low female labour force participation. In sum, money in women's hands is more likely to produce global development than weapons in the hands of men.    

More likely than not, however, the world will be better off in 2030 than in 2015. Each nation gets to choose whether it will share in the improvements that the world as a whole will enjoy.

You can know more about the new book "Development in Crisis" here, and how to purchase it.