This Year’s Annual Conference: The Intersections of Business Education and Economic Development

News from GBSN

This year’s annual conference (gbsn.org/2017dc) will go back to the raison d’être of GBSN: the intersections between business education and development. Everyone knows what “business education” is, but “development” is one of those fuzzy Alice-in-Wonderland words that mean very different things to different people. Sociologists, psychologists, engineers, economists, political scientists and others each think of “development” in very different ways; not even within academic disciplines is there consensus on what constitutes “development”. One of my economics professors used to say that, like a giraffe, it is very hard to describe a developing country but when you see one, you know it.

Having worked most of my life as a “development economist”, let me share some thoughts about “economic development”. To me, the most basic and important measures of “development” are longevity and the quality of life. For centuries, life, for most people, was, in Hobbes’ famous words, “solitary, poor, nasty, brutish, and short”. As the graph for the United Kingdom shows, it is only quite recently, towards the middle of the 19 th century, that longevity began to increase, and to increase remarkably steadily at that.

 

Perhaps most remarkably, longevity increased even faster in some of the poorest countries. The second graph shows changes between 1800 and 2012 in the shares of the world population by life expectancy. Today, people in Somalia, Nigeria, Sierra Leone and Mozambique can expect to live ten years longer than was the case for the populations of the United States, the Netherlands and Belgium back in 1850.

Source: https://ourworldindata.org/life-expectancy/

Leaving aside the quality of life, which it would take whole books to trace between countries and over time, the key question in “development economics” is: how do societies go about improving their standards of living, or as Francis Fukuyama put it so strikingly: “getting to Denmark” ?

Social scientists have been mulling this question for centuries, pointing in turn to various “fundamental factors” associated with “development”. There is consensus on the most basic enablers of progress: peace; clean water and eradication of mass diseases, but beyond that, when it comes to government “development policies”, there have been many different views over time and the debate continues today. Differences focus on government policies; on the respective roles of state, businesses and civil society organizations; and on “development priorities”.

I would argue that in spite of the sound and fury surrounding core government policies, there is, in practice, broad consensus about major macroeconomic policies (high inflation is a bad thing, excessive protection harms consumers). Also, while in some countries the boundaries are still changing, the vast majority of countries have “mixed economies” in which government, private firms and NGOs all play fairly well-defined roles. There is much less consensus when it comes to “development priorities”. In the wake of the Marshall Plan, there was a strong belief that more than any other factor, capital investment would fuel development, a strategy that had worked well in post-war reconstruction of Europe and Japan. This emphasis on infrastructure investment didn’t work so well in the developing world, and eventually the focus of academia and aid programs shifted to education – what today we call “human resources”. Later still, the emphasis moved to meeting “basic needs” such as health and caloric intake, and “integrated rural development”. As always, these approaches worked in some places but not in the majority of developing regions, especially Sub-Saharan Africa. Especially when it came to restructuring the economies of the former Soviet Union, attention centered on “institutional economics” – rule of law, property rights, modes of governance and such; the word “corruption” came out of the official development community’s closet as well as human rights and became a prominent part of the aid discourse. Meanwhile, infrastructure investment declined steadily until China revived it big time across the developing world. These successive “fads” tell me that it is quite easy to draw up a list of policies and interventions that are necessary ingredients of successful sustainable development, but that so far, nobody has been able to list sufficient conditions.

Paul Romer’s development framework speaks to me.¹ He contrasts “objects” and “ideas”. In simplistic terms, there exists in the world a phenomenally large store of accumulated knowledge. The challenge for developing countries is to nurture the domestic conditions needed to draw selectively from that store of knowledge, transferring and adapting the most relevant ideas in order to solve local problems. In Romer’s words: “It is ideas, not objects, that poor countries lack… If a poor nation invests in education and does not destroy the incentives for its citizens to acquire ideas from the rest of the world, it can rapidly take advantage of the publicly-available part of the worldwide stock of knowledge”. What works for poor nations also applies within nations, from capital cities to remote villages. Romer adds: “Perhaps the most important ideas of all are meta-ideas – ideas about how to support the production and transmission of other ideas.”² One can readily see how a knowledge network such as GBSN fits well in such a development framework.

¹ Currently Chief Economist of the World Bank.
² Paul Romer, Stanford Graduate School of Business: “Economic Growth, the Concise Encyclopedia of Economics” (http://www.econlib.org/library/Enc/EconomicGrowth.html)

Guy Pfeffermann is the Founder & CEO of the Global Business School Network.