PRESENTATION ABSTRACT: "Why are there so many poor people in Africa and South Asia?" by Shantayanan Devarajan

Despite rapid economic growth in Africa and South Asia-triggered at least in part by economic reforms-poverty in these two regions is declining very slowly. This presentation will try to show that the reason poverty has not declined faster is not economic reform, but the lack of it. When water is underpriced, water utilities rely on politicians for operating subsidies, which means water pipes go where politicians want them to go. Meanwhile, poor people have to buy water from vendors paying 5-16 times the meter rate. Road transport prices along major corridors in Africa are some of the highest in the world, although vehicle operating costs are no higher than in France. The difference is the monopoly rent earned by trucking companies, thanks to regulations that prohibit entry.

Despite subsidies, agricultural productivity in India has grown very slowly. Not only do they create distortions, but these subsidies crowd out public investment, undermining productivity growth. India and Sri Lanka have some of the most restrictive labor regulations in the world, making it very costly to dismiss workers. Consequently, there has seen very slow growth in formal-sector manufacturing employment. Over 90 percent of children in Africa and South Asia are enrolled in primary schools. But a majority may not be able to read or do simple arithmetic. One reason is absenteeism among teachers, estimated at 25 percent in India and 27 percent in Uganda. Health outcomes are appallingly low in both regions. In Chad only one percent of non-wage health expenditures reaches primary health centers.

Inasmuch as all of these problems are political, reform will come about only if there is a political consensus in favor of reform. And that consensus can only be reached through an evidence-based debate, to which this presentation is a modest contribution.