Excerpts from Lant Pritchett interview with Shruti Rajagopalan-3

 Now I come to the first part of Lant Pritchett interview. My take away: There is a hockey stick like growth in the West,now mainly represented by OECD countries, which have sustained growth of around two percent for more than a hundred years. Some other countries like China, India, Vietnam, South Korea, Singapore too have entered this hockey stick growth, often with larger growth rates for some periods exceptChina which had long sustained growth. India is essentially a deals economy. The divergence between the western economies and the rest which was already large is increasing. The reasons may be 'institutions' and their relative well functioning. When the state capacity is low, it may be good to simplify rules which cannot be implemented.

For the next parts, I have already posted the quotes; these are about the educational system. There is also a long discussion on RCT in which Lant Pritchett does not have much faith.

Excerpts from the first part of Lant Pritchett interview:

Hockey stick

 "In part because, as you know, if I had to name my biggest contribution to the economics of growth, it’s the emphasis that for whatever reasons—and we can get back to that—the growth process in the OECD countries, conditional on the takeoff that has since solidified by about 1870, has been just amazingly stable over time. The rich world is now rich not because they ever actually had super rapid growth like India and China we’ve seen, but because they had steady growth of about 2% per capita for 100 and more years."

"Then, of the countries that were lagging, more and more of them have gotten into the hockey stick growth themselves. The pace at which their growth happens, conditional on getting into the hockey stick, is actually much faster—much, much faster than anything that happened in history. Anyway, I think, overall, it’s been a period in which several very big and very important countries like China and India, but also Vietnam and others, have gotten into and stayed in a sustained GDP per capita growth. It’s still the case that India is probably at a tenth of the leading countries in the world in terms of levels."

"That said, precisely my contribution to the growth literature is that growth in the non-OECD countries has been extraordinarily episodic, in the sense that it’s chugged along, again, at slightly the same, if slightly lower than the OECD on average across countries, but the dynamics have been very different. There’s been many more episodes of very rapid growth, followed by a whole variety of different outcomes in terms of just moderately slowing growth as one converges on the leaders, as we saw with Japan. "

"I’ve written a paper called “Asiaphoria Meets Regression to the Mean” that argues, even if there isn’t something called a middle-class trap—which we’ll get back to; maybe there is—but even if there weren’t a middle-class trap, just regression to the mean would suggest that if you’ve seen a country growing very fast for a very long time, what we should expect is a very substantial deceleration of growth rather than a continuation."

"The quickest way to not get a routine government to work is to say, “Do you know who I am?” That line will get you treated worse than any other thing you can say [in the west]. Whereas in India, in the past and maybe more so today, it’s a deals economy."

"What happens to your investment has to be indexed on you either in terms of identity or indexed on you in terms of the accommodations you are taking to adapt yourself to the rules. There isn’t, in fact, a completely neutral, predictable rule of law. Deals on investments are not completely and totally secured by rule of law. Again, this is what has made episodic growth so pronounced, in my view—in the developing world versus the OECD—is that in a deals economy, shifts across deals become a major source of uncertainty in the growth process.

You can easily get stuck because the further you dig into a growth process secured by deals around a particular regime, the harder it is to reconstitute those deals when the regime shifts—even in a democracy."

"One of my views is, very strongly, up to about 25,000 GDP per capita countries just need growth in order to be able for all their citizens to have access to what anybody would reasonably consider the material basics of an adequate lifestyle. I think the focus on dollar-a-day poverty has just been morally obscene. To act as if our aspirations for humankind is for every person to get to what is now in inflation terms $1.90, that’s just morally obscene. And we could go on about how terrible poverty has been for the development crowd.

Second, I think the potential for redistribution to improve livelihoods is just radically overestimated for poor countries. One of the things about being poor is your economy tends to not be in the position to have the levers to generate large amounts of revenue. One way in which developed countries generate 40% of GDP in revenue is they have a large, formal, highly productive economy that, therefore, is easy to observe, easy to tax in relatively low-cost economic ways. That’s precisely what poor countries don’t have, so we should expect total revenue yield to be low as a fraction of GDP."