Transcript Slide 1

Some Random Thoughts on Growth
Neil McCulloch
Globalisation Team Leader
Growth in per capita
income of the poor
20%
10%
-20%
-10%
10%
20%
-10%
y = 1.17x - 0.00
R 2 = 0.52
-20%
Growth in per
capita income
Growth Incidence Curves
Reflecting big differences in real GDP Growth rates
SULAWESI
SUMATRA
KALIMANTAN
MALUKU
PAPUA
JAVA
BALI
NUSA TENGGARA
CAD vs CAF
CAD
CAF
CAD: firms in prioritised areas cannot survive
in open competitive markets because they
are in conflict with the comparative
advantages determined by their
endowments
 They need subsidies, but these can’t
be afforded, so governments use
administrative measures (e.g.
Monopolies, suppressed interest
rates, overvalued currencies, price
controls on inputs
 These controls then lead to shortages
in funds, forex and raw materials
•
Follow the comparative advantage of the
country at every stage of development
 As countries develop, their
endowments change, as to relative
factor prices and so the strategy can
also change
Processes for effective growth policy
• Ensuring that all voices are heard, including those of the poor
and marginalised
• Accountability mechanisms
• Dialogue – between public and private sectors
• Do good technical analysis
• Monitor, evaluate and kill things that aren’t working
• Build effective systems for domestic resource mobilisation
Gross domestic product
or ‘grossly deceptive product’?
• Non-market transactions
– The ‘care’ economy (underestimation of housewives/husbands work)
– Subsistence agriculture
• Distribution, nature and quality of goods produced
• Leisure time
• The hidden economy
– Illegal activities
– Informal sector
• Economic ‘bads’
– No distinction between green and polluting industries
Complements to GDP
Name
Year
Producer/Developer
Index of Sustainable
Economic Welfare/
Genuine Progress Indicator
Green GDP
1989
Herman Daly, John B. Cobb
1993
Bureau of Economic Analysis, USA
Genuine Savings
1995
The World Bank
Ecological Footprint
1990
William Rees, Mathis Wackernagel
Subjective Well-being
1967
Warner Wilson
Gross National Happiness
1972
Human Development Index
1990
Happy Planet Index
2006
King Jigme Singye Wangchuck King of Bhutan
Mahbub ul Haq, Amartya Sen
(UNDP)
New Economics Foundation
Living Planet Index
1998
World Wide Fund for Nature
Conclusions
• We all know that growth is important
• We also know that we don’t really know how to create it (far
less pro-poor, inclusive, sustainable growth)
=> focus on building effective processes for deciding growth
policy
• Growth is not the ultimate objective
• There are several well developed measures which provide
more rounded assessments of progress
=> standardise their use in the UK, EU and G20
Thank you