Poverty fighters must target economic growth-report

from the Guardian

By Peter Apps
LONDON, Governments, aid agencies and others who want to cut poverty in the world's poorest countries and elsewhere must concentrate more on boosting headline overall economic growth, a World Bank-backed report said on Wednesday.

But it warned any rise in protectionism which might be fuelled by rising food and energy costs could jeopardise a generally positive global picture.

Report author and Nobel economics laureate Michael Spence said humanitarian agencies and others concentrating on micro-finance and schemes to help the poorest should pay more attention to macroeconomics and not view global markets as the enemy.

"We spent too many years looking around and talking about poverty reduction without any reference to growth," he told Reuters in an interview before the report's launch. "That just doesn't make sense to me. It's the only thing that works."

The "Growth Report", which is also funded by Australia, Sweden, Holland, Britain and a private foundation, looked at the 13 states to sustain 7 percent growth over 25 years.

Those were Botswana, Brazil, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Malta, Oman, Singapore, Taiwan and Thailand, it said, with India and Vietnam nearly qualifying.

There were differences between the countries but also common lessons, it said.
These lessons were that all fully exploited the world economy; they sustained microeconomic stability while mustering high rates of savings and investments; they let markets allocate resources; and they had committed, credible and capable governments.

The report said the poverty was likely to continue to decline in the coming few decades with India set to grow fast for another 15 years to catch up with where China was at present -- and with China having another 600 million people in agriculture who could still come into more developed urban employment.

EFFECT AND EXAMPLE

Beyond that, Spence highlighted a new tranche of countries including Mexico, South Africa, Nigeria and Egypt that had the capacity to hit high growth.

"If they hit that then I think through direct economic effect and the power of example they would pull a lot of others with them," he said. "If they go wobbly, the opposite is true."

Spence said World Bank and International Monetary Fund advice to developing countries in previous decades simply to "stabilise, privatise and liberalise" -- including slashing subsidies on which many relied -- was perhaps too inflexible.

Spence said the most productive use for international aid was building essential infrastructure, followed by education.

Also key was finding a route to bring the informal economy of small street businessman and entrepreneurs into the more developed sector without jeopardising labour rights or falling into practices such as poor safety standards or child labour.

Resource-rich developing countries would only prosper in the long term if they captured an appropriate share of the profits, saved a judicious amount overseas and set clear, growth-focused priorities for spending the rest at home.

Climate change posed a serious threat to developing growth in a string of countries, it said. But it setting harsh targets on emissions growth in emerging economies -- rather than richer countries are better able to absorb them -- might do more harm.

Soaring global food prices -- currently the principal economic worry along with high energy costs and the developed world's credit crunch -- would hopefully be met with increased supply that might benefit poorer countries, Spence said.