Growth and development—for whom?

Innovations in measuring poverty and inequality

Today’s post is from Stephen Groff, Deputy Director of the OECD Development Co-operation Directorate.

UNDP’s Human Development Report, launched this morning at OECD headquarters in Paris, stresses that today’s development challenges require a new outlook. There are no silver bullets or magic potions for human development. Rather than trying to replicate past experience, we need to focus on new opportunities. Rather than attempting to apply policy prescriptions, we need to adapt general principles and guidelines to the local context. And we must address major new challenges—in particular, climate change—and build democratically accountable global institutions to deal with them. Our analysis must go deeper, and we must consider carefully the multidimensionality of development objectives.

The Human Development Index was one of the first serious attempts to broaden the debate around just how we measure development. Over time, the development community has moved from an initial, rather simplistic stance of increased GDP as synonymous with development, to an array of indicators for ranking how countries and people are faring. In recent years, the debate has become much more pronounced with the Stiglitz-Sen-Fitoussi commission and the OECD’s work on measuring the progress of societies.

At OECD we recognize how important measurements are; they are, quite simply, our means of defining success. And as such, we feel that it is vital to consider development outcomes in their multiple facets—not just poverty or income growth levels.  Growth is a means to an end, and not an end in itself. The Human Development Report confirms this central truth, and also makes it clear that there is no single pathway to success. Each country must have the ownership, capacity and resources to find their own solutions to their own development challenges.

In this respect, it is very positive to see the G20’s growing focus on development. Having just attended the G20 Summit in Seoul, I was fortunate to witness as global leaders confirmed the challenge of closing development gaps as a core element of their economic o-operation.

This is good news for at least two reasons. First, the G20 countries are the largest global economies and major partners of low-income countries (LICs), and what they do matters a lot for LICs’ growth. Second, G20 countries bring to the development debate new perspectives and fresh ideas—in particular, they bring their own development experiences and skills, enriching the menu of options available to LICs for the design of their development strategies and policies.

In Seoul, the G20 adopted the Seoul Development Consensus for Shared Growth and an action plan comprising nine pillars to promote LICs’ growth. The G20 is uniquely placed to provide leadership in advancing the international development agenda and achieving the MDGs. They can do this by: improving their own policies; sharing their development experiences; providing assistance to build capacity; and offering strategic guidance to international organizations, thereby enhancing the effectiveness of the multilateral system.  It is essential that all these work together toward the ultimate objective of improving the impact of G20 policies on LICs’ growth.

The OECD—like the G20—takes a comprehensive approach to development and to knowledge sharing, cross-fertilisation and policy coherence, placing development at the core of our work and engaging our full range of policy communities. With decades of experience in development, we are pleased to be mandated by the G20 to work closely with the UN, the World Bank and other international organisations to contribute to implementing the action plan. We believe that our contributions will help the G20 to identify what works when promoting growth and poverty reduction, to better assess the impact of G20’s own policies on LIC growth, and to find ways of maximizing positive impacts.

The G20 approach to development is underpinned by a fundamental belief in the core importance of growth.  This is the right perspective as growth is a necessary component of development but it is also important to remember that the rate of poverty reduction depends on the pattern, and not only the pace, of growth.  One of the key messages of the HDR—and one that I know the G20 will heed—is that growth does not automatically equate to other aspects of development.  Nor is there a minimum threshold of growth required for countries to develop.

At OECD, we are keen to share our experience regarding what makes growth benefit the poor—something we have been exploring for years in the DAC and its Network on Poverty Reduction. More generally, we will continue to put a strong emphasis on measuring the progress of societies, because people, as the HDR says, are the real wealth of nations.

Useful links

Human Development Index

OECD work on G20 issues

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2 comments to “Growth and development—for whom?”

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  1. Baye Kambui - 23/11/2010 Reply

    I like this…a different way of looking at the “Wealth of Nations.”

  2. Lena Bäcker - 23/11/2010 Reply

    Last friday 20101121 The European Association of European Public Banks (EAPB) convenes its second Chief Economist Meeting in Brussels, Belgium

    Chief economists and experts of EAPB Member Banks and partners from 14 European countries took part in the meeting and gave their opinion on the current economic situation. Further contributions by
    delegates of the European Central Bank, KfW, Caisse des Depots et Consignations and the Romanian Banking institute were scheduled.

    Two main blocks were tackled. On the one hand the macroeconomic outlook for Europe with a still vulnerable but progressing recovery, a flat employment, exit strategies and imbalances of public deficits. On the other hand a special emphasis was laid, amongst others, on the implication and effects
    of the new waves of regulation, Basel III and G-20 discussions, in the financial sector after the crisis.

    With regard to the latter it was mentioned that Basel III is expected to effect the real economy by, amongst others, creating higher rates for loans and by reducing the Gross Domestic Product by approximately 0.2% to 0.8% in the EU area. The assessment is that the regulations increase importance of public funding as a financial resource.

    After the financial crisis there is a broader economic recovery taking place at different speeds in the world. It is Asia which is the locomotive of the recovery. Growth remains sluggish in many of the old industrial countries.

    Lena Bäcker
    Chief Economist Kommuninvest in Sweden, Initiator of the EAPB Chief Economist Network
    and moderator at the meeting.

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