Sunday, June 01, 2008

Economic Growth As We Know It

Like Arya Gaduh, I also haven't yet got time to read a new report on growth by The Commission on Growth and Development. But it seems that problem of growth and development economics now resurface in public discussion, thanks to the books of Sachs, Easterly, and Collier.

After some years of detour to more exotic agendas and plans for the developing world such as Millenium Development Goals and Bono-type of Aid; economic growth, the most crucial element for developing countries, yet hard to understand, is back

It was an ambitious research, probably to the scale of another report on global warming by Nicholas Stern. So it is surely worth to read the whole report. But for the time being, let use the interview to its chief, Michael Spence, from the Foreign Policy, to catch a glimpse on what's inside the report.

He said that:
This report is really more about a framework. How do the growth dynamics work, and what kind of policies tend to support it? When you get to the country level, it has to get very specific and depends entirely on history and the initial conditions and things like that
I am actually rather surprised with this kind of stating-the-obvious argument. In an earlier posting, I wrote that we already pretty much had an idea what make a good espresso economic growth, and as the Report's summary for Asia says:
These nine high-growth countries all share common characteristics: engagement with the global economy, macroeconomic stability, high rates of saving and investment, the market allocation of resources, and credible and capable governments.
But each characteristic is, alas, minutely variable. And it is not really clear to me the degree of importance of each variable: say, the market allocation or capable government?

The better question, I guess, is not how to find recipes for sustainable growth, but how to get into a turnaround from a low growth trap to an accelerating pace of growth, the focal points in which a country then could orchestrate themselves into those desirable characteristics --hopefully without curtailing democracy.

Usually such turnaround doesn't come from much grandiose scheme, but a small but critical reform.

HT: Arya Gaduh

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