Where making the ubiquitous shirt was once a key step towards development, poor countries now are going to have to depend on new and often experimental interventions to break out of poverty, he says.
Davidson, co-founder of NPR’s “Planet Money” and a New York Times Magazine columnist, shared his thoughts about global poverty, inequality and the direction of international development in a talk last week at the Mercy Corps Action Center in Portland, Ore.
Holding up a black t-shirt made in Bangladesh that he bought that morning at Macy’s, Davidson argued that whether a country has manufactured t-shirts is an indicator of where it stands on the development ladder.
“When we talk about global poverty, we’re talking about the countries that haven’t had their t-shirt phase.”
But the t-shirt phase, he argued, remains a mixed blessing. On one hand, textiles were the first industrial products manufactured in the United States and United Kingdom that helped launch them out of poverty. Now, Bangladesh is the home of cheap labor and production, where garment workers make a minimum of $38 per month and the per capita income is about $1,940. Yet a factory job there provides income to workers that they otherwise wouldn’t have.
On the other hand, an economic base of manufacturing textiles or other low-skill products leaves workers and economies vulnerable to the forces of technology and trade–which can sometimes be damaging.
According to Davidson, technology increasingly eliminates the need for low-skill work, and the ease of trade can hurt low-wage countries because the entire supply chain of a production process no longer needs to be in the same place. For example, before a t-shirt is sewn in a Bangladeshi factory, the yarn has been spun somewhere else and the dye added in a third country, both jobs that require higher levels of skill and add more value to the product than what happens in Bangladesh. That undermines the ability of a country like Bangladesh to fully develop its manufacturing capacity, and helps to cement inequality in place.
Moving up the supply chain means higher wages and profit margins, Davidson explained. But industries like textile manufacturing require increasingly precise equipment and labor training, both expensive investments. Due to technology and trade, a country like Bangladesh can’t amass the capital required, despite its efforts. That means the t-shirt phase isn’t what it used to be, and there’s no guarantee that it will catapult a country higher up the economic ladder.
“Just making t-shirts doesn’t cut it,” Davidson said.
Beyond t-shirts, Davidson spoke more broadly about development economics and what’s happened to the big theories about global poverty over the past half-century. According to Davidson, economists are largely past what he calls the ‘big theory phase.’ The ‘big takeoff’ of the 50s, which called for an influx of outside aid and investment to poor countries, never succeeded and the ‘Washington Consensus’ of the 90s and its movement towards less government involvement didn’t do the trick.
“The outside, top-down theory did not work at all. Dependency theory is seen as a political dead end,” Davidson said.
“Right now we don’t have a big theory — and that’s the best news we’ve had in development in a long time.”
Uncertainty breeds experimentation, Davidson pointed out, and he thinks the international development field is primed for an explosion of experimentation. That’s a good thing, he says, since it will lead to effective interventions that wouldn’t be discovered otherwise.
‘”We are entering the most exciting period where we are really going to know some things,” he said. Moving forward Davidson envisions not the rise of another big theory, but instead a growing ‘menu of interventions’ that can be applied to development challenges.”We’re going to have thousands and thousands of answers.”
But he expressed a note of caution. “Some of the best interventions are those that are going to take decades and decades to pay off,” he explained.
Comparing development economics to medical advances, Davidson pointed out that medical historians say 1890 was the first year that going to a doctor didn’t make people sicker. Ailments like leukemia, AIDS and even heart attacks don’t mean today what they did 30 years ago. None of these ailments are curable yet, but their treatments have come a long way. So it will be, he said, with ideas to end poverty as well.
While economists haven’t solved global poverty, experimentation with measurable interventions holds significant promise for advancement, just like in medicine.
“Admitting you don’t know is the beginning of knowledge,” Davidson said.
And absent big theories these days, that means a better chance to stumble upon solutions to poverty beyond just making t-shirts.
In Portland? Visit the Mercy Corps Action Center for more lectures, exhibits and workshops about global development.