Comments

oh and a couple of papers for those interested in quantitative analysis of aid effectiveness. "Aid and Growth: What Meta-Analysis Reveals," Tseday Jemaneh Mekasha and Finn Tarp: http://www.wider.unu.edu/publications/working-papers/2011/en_GB/wp2011-022/ I think meta-analysis does little more than aggregate the problems of individual aid/growth regressions, but, nevertheless it's interesting to see the much touted Doucouliagos and Paldam findings being challenged. Also, "The Politics of Public Health Aid: Why Corrupt Governments Have Incentives to Implement Aid Effectively" Simone Dietrich, World Development Vol. 39, No. 1, pp. 55–63, 2011, Gated link here: http://www.sciencedirect.com/science/article/pii/S0305750X10001166 Which looks to be a very interesting example of certain types of aid working well in environments when others struggle.

Thanks Owen - I definitely agree, the interesting question is "'which' aid works and for what"? And - consistent with what I've said above - I think it's the height of folly to focus an aid programme on economic development when we don't really know which aid does work for what. Far better to keep our options open at a mandate level, I think, and then let context, experience, research and M&E drive what we do.

I'm not a great fan of cross country growth regressions, whether they are used to 'prove' or 'disprove' the effectiveness of aid. But if I had to summarise the literature, I would say this: almost every time somebody reports looking for a linear relationship between aid and growth, they haven't found one. Almost every time somebody reports looking for a non-linear relationship, they find a small but statistically significant relationship. The interesting question is not 'whether' aid works but 'which' aid works and for what.

Thanks for this post Jon, really interesting. I'd argue that if there is even to be the prospect of democratic elections, media censorship must be addressed initially - obviously any election within such a heavily censored media landscape cannot be considered democratic at all. As it is increasingly clear that current international responses such as sanctions and other measures are not working, can you think of any other strategies to address this (specifically the freedom of the media)? Should the APF look at re-admitting the Fiji Human Rights Commission (contingent upon measures to ensure its impartiality) and increase its capacity to address this and other human rights violations? What else might the Aus govt or other governments / organisations do to remove media censorship in particular?

Andrew, I very much enjoyed this well-argued and well-written piece. I find it hard to disagree with nearly everything you say. You are right about Australia’s three comparative advantages. The lone and minor addition I would make to your story is the success of the peace-keeping intervention in Bougainville that Australia and New Zealand jointly led. The six-year window of peace that ended with the departure of the regional peacekeepers in 2003 has stuck to now. And much credit to the peace sticking since the departure of the peacekeepers goes to communities in Bougainville. Agree that Bougainville is not a blue-print for peacekeeping operations but it has lessons for pacification strategies elsewhere.

An excellent piece. It is still unclear who should supercede Grand Chief. In my view there is still no possible replacement of PM. It will take a while for current political leaders to be groomed. NA leadership may face critical challenge given the current tussle over who should repalce Grand Chief, M.T. Somare.

Thanks Peter. That's an excellent comment! And one which deserves a good reply. I'm stuck with terrible internet access at present, but will try and reply as soon as I can (maybe with a post on poverty and poverty measurement). Thanks again Terence

Terence - you've summed up some pretty complex issues very succinctly. The link between economic development and poverty is very contentious. A starting point for a clearer understanding of the link should be to recognise that poverty has many dimensions and cannot be simply summed up by per capita income. As Amartya Sen has repeatedly pointed out, people have a range of needs, many of which are essentially non-economic in nature. This of course puts him at odds with many of his fellow economists, who would like to label such non-economic priorities as irrational and for whom a more complex notion of poverty threatens the relevance of empirical studies correlating economic growth and poverty as measured in terms of per capita income. Economists who take issue with the concept of non-economic priorities may argue that, with money, anything is possible. There is insufficient space here to do justice to this debate. Two examples serve to illustrate that poverty is too complex to allow income levels to serve as a reasonable proxy. First, two households may have similar levels of income but one may have lower access of essential services such as health care, on which you have focused. This may be for a variety of reasons such as location or social class but the result is the same – the two households are not equal in terms of their level of vulnerability or deprivation - i.e. on their real poverty. The second example goes to the heart of the problems of using quantitative measures of poverty. It may be easier to track progress of development through levels of per capita income but this index ignores what might at the same time be happening to the distribution of incomes about the average - the point you make towards the end of your blog. Distribution about the average may be greatly increased as a result of growth, and any amount of rhetoric about "trickle down" or "a rising tide lifts all boats" cannot hide the grim reality that, for the losers in a process of economic development, it can be quite literally a matter of life or death. Additionally, we need to bear in mind that, if we see happiness, dignitity or security as objectives rather than simply "poverty reduction", relative poverty can be as potent a problem as its absolute level. In a society where everyone is poor, there will tend to be less sense of poverty than in a society where there are marked (and potentially increasing) differences. I look forward to your follow-up piece on aid and economic development.

Hi Matt, Thanks for an interesting post and reply. I always enjoy discussion on this topic, and good to see the harm of volatility enter your post! I also would not consider myself an expert by any means, but I just wanted to add that as usual, I was disappointed that the negative effects on - and challenges to - social development (say proxied by health, education, 'other' skills development, civil society, interest groups and weakened institutions, efficient cross-sectoral allocation of all this etc.) were omitted. These are closely related to the TFP declines associated with these booms; when married together, I (persionally) think (only think at this stage - no proof) this is one of the key culprits behind any long-run 'curse' and should all be crucial factors in any discourse in this area. Cheers for encouraging discussion on this and providing all the links, which I'll be sure to look into. Ryan

Interesting development, update much appreciated. One obvious outcome would be the PNG government changing the existing Informal Sector Development and Control Act. That defines the Informal Economy as businesses which are below the tax threshold - microbusiness rather than SME businesses - and not conducting particular activities like gambling. Inflation since 2004 has eroded the size of the group benefitting from protection of that Act. However, like many things PNG there is the form and the substance. One wonders what education activity will exist for the NCDC inspectors armed with iron bars around the proposed reforms, if they eventuate.

Thanks for an interesting comment/question. I must admit that I am not an expert on the Australian economy, but I can reply briefly on the macroeconomic advice and extractive industries transparency for developing countries. Others can perhaps comment on their relevance to Australia's mining boom. First, there is the textbook macroeconomic advise. The IMF provides this to many developing countries on how to manage resource booms. (A more detailed analysis for petroleum booms in Africa can be found <a href="http://www.imf.org/external/pubs/nft/2004/loc/index.htm" rel="nofollow">here</a>.) The IMF advice is to be cautious and transparent, tax rents in the sector, and save windfalls revenues to manage revenue volatility and inflation. I had a quick look at the most recent IMF <a href="http://www.imf.org/external/pubs/cat/longres.aspx?sk=24313.0" rel="nofollow">Article IV report for Australia</a> and it made recommendations along these lines: <blockquote>Staff recommended saving revenue windfalls…this would build a buffer against a sharp fall in commodity prices.. Because of the growing importance of commodity prices for the budget, staff suggested preparing downside scenarios.. The planned introduction of the mineral resources rent tax (MRRT) in 2012 is a step in the right direction.</blockquote> What is interesting, especially for an IMF report, is that there are very few numbers on the mining sector in their 2010 analysis, and this possibly highlights a data availability issue. A second important initiative for developing countries is the <a href="http://eiti.org/" rel="nofollow">Extractive Industries Transparency Initiative</a>--a global standard for information on revenues from oil, gas and mining. EITI also helps resource-rich developing countries improve their systems for publishing details of the revenues that they receive from the mining and petroleum sectors. EITI compliant countries include Norway, Nigeria and Timor-Leste. Australia doesn't implement EITI, and nor does PNG--the other country that you refer to in your comment. Nevertheless PNG does publish data in its annual budget on tax revenues and dividends from the mining and petroleum sectors. Based on this, PNG Treasury officials, with support from Australian counterparts, calculate a base scenario (normal mineral revenues), from which they can calculate the windfall (additional mineral revenues). For further details see the PNG <a href="http://www.treasury.gov.pg/html/publications/files/pub_files/2008/MTFS%202008-2012.pdf" rel="nofollow">Medium Term Fiscal Strategy</a>. I was curious to see if there is data on mining and petroleum revenues in Australia? I had a quick look in the Federal budget but didn't find it. I did find some data on the ABS site, which they get from industry sources and this is summarised in the chart below. (I don't know how comprehensive it is.) <img src="https://devpolicy.org/wp-content/uploads/2016/01/screen-shot-2011-05-19-at-2.41.13-pm.png" alt="" /> If anyone has any better time series data on government revenues from the mining and petroleum sectors, please let me know. First this would give a clearer idea of the volatility of this revenue flow and it's importance to the overall budget. Secondly, it would enable us to calculate the non-mineral balance for the budget--a crude indicator of underlying fiscal sustainability. Thirdly, it would give us an idea of how much revenue that is per person. This could inform some of the policy questions--such as on resource curse, sovereign wealth funds and cash transfers--that you mention in your comment.

I am the first to admit that this is not my area, so really I am asking a question, on an issue that has been troubling me for some time.  And that is related to Australia's mineral boom. In short, there are ideas like those in your post, on marshalling boom financial in-flows for the broadest development good.  In previous booms, various countries have established sovereign wealth funds, to ensure that the short-term (and one-off) gain has long term national benefit (e.g. Norway, Mexico, Kiribati).  We know that the Australian Government is conceptually supportive of sovereign wealth funds for other countries (i.e. PNG), as shown by a recent press release from Richard Marles' office (28 March 2011). So, my question: why is there no debate domestically about establishing a sovereign wealth fund, to similarly ensure that the short-term (and one-off) gain from the current Australian mineral boom has long term national benefit?  To me, the super-profits tax and similar tax initiatives are a distraction, if the tax windfall simply lands in the current account.  Australia should instead be thinking about its long-term fiscal health, by (potentially) establishing something akin to the Norway Oil Fund. Apologies for launching into this!  I just find it amazing that there has been (seemingly) no debate of this option domestically, especially since it is on the agenda for PNG (and elsewhere), and given that the Australian Government is supportive of such an approach internationally.