Economic development in advanced and developing democracies

The past 4-6 weeks have been incredibly hectic, as I’ve recently been embroiled in many weeks (and weekends) of busy work, online studies and two full weeks of field missions to the border areas of Indonesia and Timor-Leste (I will share more about the field experience in a separate blog post).

Now that I am fully back in Jakarta, it’s only from this weekend that I’ve been able to take a deep breath and catch up with many saved readings.

A recent long-read article by The Atlantic highlighted the issue of social mobility, in terms of equality of opportunities in advanced democracies, more specifically in the United States: “Raj Chetty: The Economist Who Wants to Save the American Dream“. In this context, social mobility is a measurement for how children can enjoy the same opportunities for economic success as anybody else, no matter their background.

The article digs into recent research that have been arduously attempting to address, for instance, how poverty can be defeated by treating the need for creating more higher-opportunity locations as the starting point, as opposed to a common, single-minded focus on moving people to higher-income locations where opportunities to climb the social ladder for children born in relatively more disadvantaged families are not necessarily high (in fact, low in most cases).

From the studies that have been conducted so far, according to Raj Chetty and his team at Harvard University’s Opportunity Insight, factors that are statistically associated with higher-opportunity locations have been found to typically be: (1) good schools, (2) greater levels of social cohesion, (3) many two-parent families, (4) low levels of income inequality, and (5) little residential segregation, by either class or race. Complementary insights from sociology have also brought attention into the role of social capital in the presence of opportunities in different localities.

Social capital is a broad term that refers to a set of connections, networks, aspirations and institutions that “ease people’s way through the world”. The reason behind a focus on children is because various social programs targeting children, especially from low-income families, have been found to have the biggest payoff in terms of the children’s own self-development by health and education indicators and government revenue in the long term.

The interplay of fatal economic and social policies and history have transformed the United States into becoming the “sick man” of advanced democracies in terms of social mobility. Using administrative government data, their findings are even more staggering when broken down by states, cities, districts, towns, neighborhoods, and race:

“Opportunity is not the same as affluence. Consider a kid who grows up in a household earning about $27,000 annually, right at the 25th percentile nationally. In Beverly Woods, a relatively wealthy, mostly white enclave in South Charlotte with spacious, well-kept yards, he could expect his household income to be $42,900 by age 35. Yet in Huntersville, an attractive northern suburb with nearly the same average household income as Beverly Woods, a similar kid could expect only $24,800—a stark difference, invisible to a passing driver.”

The bottom shows Raj Chetty’s “Opportunity Atlas”, with red areas associated with poor upward mobility.

A separate survey has also identified differences in social mobility by mere behavioral perceptions: Within the United States, Southerners were found to be the most optimistic about their prospects for climbing from the bottom to the top of the income ladder. In reality, social mobility today is the worst in the Southern states. In addition, Americans were found to have a pattern for overestimating their own prospects, whilst Europeans demonstrated a pattern for underestimating.

I found the article to be quite relatable to my past weeks on two fronts. The first is my recent completion of a 5-week intensive online course offered by MIT: “Evaluating Social Programs“. My undertaking of this course was aimed at retooling myself for the data collection and survey activities in the field.

Contrary to Raj Chetty and his team’s application of quasi-experiments into their studies, the course drilled me in the logics and practicalities of evaluating different program interventions using randomized experiments. Although these two methods are different in terms of sample selections, they more or less share the same objective: making sure that impacts can be causally traced to the program intervention alone. What attributions truly work? The following saying reflects the sense of fulfillment that comes more rigorous measurement, regardless of how tedious the process can be:

“If upward mobility can be measured with enough precision, it can be understood”

In fact, my favourite lecture from the MIT course was by Prof Nava Ashraf (LSE) on measurement of outcomes and why this stage of a program evaluation is so critical. In addition, how can we put greater and more creative efforts into measuring things that are seemingly immeasurable? While also being the most boring and daunting stage, measurement reflects your strategy of your organization in terms of being able to have the impact that you are looking for.

Secondly, the article reminded me of another conversation that I had with other colleagues the other day about where our hearts are: for international development (mostly in the developing world), problems occurring at home (in the developed world), or both? Out of sheer courtesy, I expressed the last option, although at times I can admittedly confess that I think more about the ongoing social ruptures that are happening at home in Europe.

I keep contemplating about what we, as young professionals and social scientists, can do to inject some political, logical and moral sanity into our advanced, but broken democracies. I keep thinking about this issue whilst spending most of my “professional” hours at work trying to create and facilitate practical solutions for Indonesia and many other developing democracies.

I wouldn’t go as far as saying that there is some sense of guilt being carried, as my range of interests is extremely broad: spanning from developing democracies in Southeast Asia to developed democracies elsewhere, from rigorous measurement to anecdotes. But when trying to make life decisions, I often crave to find an answer to where my heart truly is placed. This dilemma often leaves me undecided about what I could imagine to be a fulfilling, intellectual life.

From my recent field missions, which dealt with cross-border local economic development issues in the least developed areas of Indonesia and Timor-Leste, to the piece on Raj Chetty and his Harvard Opportunity Insights’ arduous efforts to save the American Dream, I was timely reminded that economic development concerns even the most advanced democracies now more than ever.

The policy problems may be very different to those faced by many developing democracies today: while in Indonesia, policymakers may be more concerned about inadequate skills acquisition among young people (e.g. low human capital), back home in Europe, policymakers may be more concerned about the lack of good and secure jobs. It brings us back to the question: how is poverty felt in different contexts?

I’m quite clear in my view that the human pain experienced from the pitfalls of any society is universal, meaning that issues can no longer be seen as peculiar to either “advanced” or “developing”. This fact, somehow, justifies my broad interests as mentioned above, which I find equally relieving and worrisome for what’s happening at home, in my part of the world.

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