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Thread: Conditions for sustained high economic growth

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    Site Caretaker Dave A's Avatar
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    Conditions for sustained high economic growth

    A study of the dynamics of 13 high-growth countries reveals that economic policies are not the only factors in a nation's prolonged success.

    Good governance, as well as healthcare and education, are among the crucial issues that contribute to sustained growth, according to Michael Spence, the chairman of the World Bank's commission on growth and development.

    Spence said governments had to act in the interests of all their citizens, not their own interests or those of subgroups.

    He underscored the importance of investment in human capital. "Early childhood malnutrition produces a near permanent reduction in children's ability to acquire cognitive and non-cognitive skills. If malnutrition is widespread, it puts limits on growth."

    He also spoke of the need for quality in education.
    full story from Business Report here

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    T Mbeki: Annual Bank Conference on Development Economics

    Address of the President of South Africa, Thabo Mbeki, at the Annual Bank Conference on Development Economics, Cape Town

    9 June 2008

    Dr Justin Lin, Senior Vice President and Chief Economist of the World Bank,
    Trevor Manuel, Minister of Finance,
    Professor Michael Spence,
    Distinguished delegates,
    Ladies and gentlemen:

    I am honoured to welcome you to the Annual Bank Conference on Development Economics. We are proud to host you here in Cape Town during this first ABCDE meeting in South Africa and Africa. We have a vibrant community of economists in South Africa as is the case in Africa as a whole, and our economists have a most engaging and challenging subject in seeking to contribute to policies targeted at the economic development in Africa.

    The ABCDE 2008 South Africa web page says that you have convened here to consider the over-arching theme - People, Politics & Globalisations. It says further that you will discuss this with reference to the three challenges:

    Globalisation, Investment and Growth;
    Human Development for Equitable Growth; and,
    the Political Economy of Shared Growth.

    I have come among you today as one of the much-maligned human animals described as "the politicians". I must therefore accept that some in this audience will, even sub-consciously, see in the talking head currently standing at this podium what in the United States came to be known as a "carpet-beggars".

    Whatever might be the truth in this regard, I would like to say that I and the rest of our Government are intensely interested in the outcomes that will issue from this important Conference.

    The simple reason for this is that the matters on your agenda - Globalisation, Investment, Economic Growth, Human Development, Equitable Growth and Shared Growth are all matters of deep interest to all Africans, and I dare say, even to whosoever might fit the contemporary edition of the peculiarly African carpet-beggar.

    As we prepared what I had to say this morning, I read an article published in April this year written by Jan-Peter Olters, who is described as the World Bank Representative in Montenegro. Among other things Olters said:

    "The recognition of both globalisation’s inherent potential and the accompanying risk has become the starting point in the ongoing policy dialogue between national governments and international financial organisations. In Robert Zoellick’s words: "It is the vision of the World Bank Group to contribute to an inclusive and sustainable globalisation - to overcome poverty, enhance growth with care for the environment, and create individual opportunity and hope." The World Bank’s emphasis on social inclusion - apart from reasons valid in themselves - stems from global experiences that social tension and large income inequalities lead to lower rates of potential growth, weaken political cohesion, contribute to environmental degradation, and add considerable costs to societies in terms of foregone opportunities. The principal challenge of economic policy-making thus consists of increasing the overall productivity of invested capital and employed labour with the instruments that governments have at their disposal - public institutions, laws, regulations, and mechanisms ensuring their rules-based application."

    (On the Agenda: Inclusive Globalization: Author: Jan-Peter Olters, World Bank Representative in Montenegro, Published in Monitor, Vol. 19, No. 911 (April 4, 2008).

    As I read this, I remembered some of my own education in Economics at an English University more than 40 years ago, whose Economics Faculty sought to drill into our heads a sound understanding of Development Economics.

    In this context I recalled that we learnt to be supremely sceptical of the teachings of such economists as Peter Bauer and Milton Friedman, who as I remember, were presented to us as proponents of what some, today, would characterise as "market fundamentalism", which was and is fundamentally opposed to the very notion of "development economists".

    What was happening then, and later, was captured subsequently by the African public intellectual, Thandika Mkandawire. In an undated Draft Paper written within the last eight years, and carried on the website of the UN Institute for Social Development, Mkandawire said:

    "For two decades, starting from the beginning of the mid-1970s, the status of development economics in both academia and policy circles was not enviable…The "pioneers" of development economics were forced into a defensive posture as they fended off accusations of providing the intellectual scaffolding for dirigisme, which had failed, as well as of downplaying the role of the market.

    "The "death" of development economics was not merely an academic "paradigm shift". It was given official sanction by the United States government. The US representative to the Asian Development Bank is reported (Newsweek 13th May, 1985) to have announced that the "United States completely rejects the idea that there is such a thing as ‘development economics’ (cited in Toye, John 1987: page 73).

    "Development economics became, as John Toye remarks, "an Orwellian un-thing" in the eyes of the most powerful nation. The Spartan certainty of the ascendant neoliberalism as to what was required left no room for specialized knowledge of the problems of development. Mrs. Thatcher’s strident "There is no alternative" was echoed in international financial organizations through a standardized set of policies that was applicable to all economies."

    With regard to the famous Peter Bauer of my student years, the Internet Wikipedia Encyclopedia says:

    "Bauer revolutionised thinking about the determinants of economic advance. Indeed, the World Bank, in its 1997 World Development Report, stated that the notion that "good advisers and technical experts would formulate good policies, which good governments would then implement for the good of society" was outdated: "the institutional assumptions implicit in this world view were, as we all realize today, too simplistic...Governments embarked on fanciful schemes. Private investors, lacking confidence in public policies or in the steadfastness of leaders, held back. Powerful rulers acted arbitrarily. Corruption became endemic. Development faltered, and poverty endured." This reflected the sort of arguments Bauer had been advocating for years.

    "For Bauer, the essence of development was the expansion of individual choices, and the role of the state to protect life, liberty, and property so that individuals can pursue their own goals and desires. Limited government, not central planning, was his mantra. Bauer placed himself firmly in the tradition of the great classical liberals."

    I must presume that this Conference has convened here in Cape Town as it has, to address the Agenda it has set itself, because you have made the determination that the proclamation about the death of development economics, including the apostolic pronouncements in the 1997 World Bank World Development Report, amount to nothing more than an opportunistic advertisement by a commercial funeral undertaker, driven by the objective to maximise his or her profit, as would any self-respecting carpet-beggar.

    At the same time, it may be that you consider the fact that I have raised the questions I have about development economics as being somewhat arcane or archaic.

    Let me explain myself.

    As I have already said, I have to earn my keep as an African politician.

    Almost by definition, especially because I represent desperately poor communities which absolutely cannot lift themselves out of poverty without the assistance of the rich countries of our universe, I have an obligation to implement the advice of those without whose support my people cannot achieve progress, and the necessary advance towards achieving the celebrated Millennium Development Goals – the MDGs.

    The advice I get, which I must accept, is conveyed by well-funded and immensely educated civil society organisations and a very vocal media, which, together, serve as the "vox populi" and therefore the "vox dei"!

    To this day, the message is very simple and straightforward - Long live Peter Bauer!

    To celebrate Peter Bauer, without this being stated explicitly, which in any case would make no sense except to the helpless and trapped Cognoscenti, we are told that we must:

    * Limit state intervention in the economy, to expand individual choice as part of the process of the great flowering of open democratic systems and the attendant and resultant putative exponential growth and development of the economy!

    * More broadly, aim to build a minimalist state which should focus on providing such public goods as the protection of life, liberty, property and the environment, leaving all else to the market, except to the extent that the state must intervene as a regulator to correct the imperfect functioning of the market!

    * Create maximum space for the domestic and international entrepreneurs to invest and make profit, understanding that this will release the immanent national energies necessary to create the wealth needed to achieve the objectives stated by the President of the World Bank, Robert Zoellick – "to overcome poverty, enhance growth with care for the environment, and create individual opportunity and hope"!

    * Trust and follow the advice we will get from ‘good advisers and technical experts, which, as a good government we would then implement for the good of society’, provided that what the advisers and experts advise is consistent with the preceding prescripts!

    * Always bear in mind that given the fact of globalisation, we would fail to attract the foreign direct investment we desperately need, especially because we are too poor to generate the investment capital we require to achieve the required rate of growth, unless we abide by the rules set by the international capital markets and recognise the fact that we are competing with other possible investment destinations!

    * Take into account the fact that the overwhelming bulk of investible capital in the world economy is privately owned. Foreign Investment for growth and development will therefore not come from Overseas Development Assistance funds, but from private investors whose central goal is not the understanding of unique national public imperatives, but identification of profitable business opportunities!

    * Above all, we must take into account the fundamental demands of the global economy – privatise, deregulate, open up to free trade!

    I am confident that the development economists and other participants present here today understand very well that the prescripts I have mentioned do not fully address the overall theme and the sub-themes of this Conference, suggested by the topic - People, Politics & Globalisation.

    However, the point I am making is that the dominant, immediate and material voice that bears on the African politician, such as the talking head standing at this podium, is the voice that proclaims, insistently – Long live Peter Bauer!
    Last edited by Dave A; 13-Jun-08 at 07:38 AM.

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