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Driving economic growth

>> Foreign Aid in the National Interest >> Overview >> Driving economic growth

Acknowledgements Foreword Overview: Promoting Freedom, Security and Opportunity Chapter 1: Promoting Democratic Governance Chapter 2: Driving Economic Growth Chapter 3: Improving People's Health Chapter 4: Mitigating and Managing Conflict Chapter 5: Providing Humanitarian Aid Chapter 6: The Full Measure of Foreign Aid Last updated: 35     Jump to Overview Sections: >> 50 years of development gains >> Promoting democratic governance >> Driving economic growth >> Improving people's health >> Mitigating and managing conflict >> Providing humanitarian assistance >> The full measure of U.S. development assistance-official and private >> Notes >> Background papers >> References Success in the global economy comes to countries that maintain fiscal discipline, open their borders to trade, privatize inefficient state enterprises, deregulate their domestic markets and invest in the health and education of their people. -U.S. President George W. Bush U.S. economic growth has been moderate, averaging only about 1.7 percent a year per person since 1776. But despite a civil war and periodic recessions, it has been continual. Over 225 years, average annual growth of 1.7 percent means a 44- fold increase in per capita income.6 So the miracle of high U.S. living standards has been persistence, not speed. And it has been the result of strong institutions and sound economic governance that permit individuals to become a bit more productive and a bit wealthier each year, and to be confident that the fruits of their efforts will not be arbitrarily taken from them. One of the biggest challenges facing developing countries is to sustain growth-promoting conditions over a long period, because a growing economy offers the only long-run hope for reducing poverty. There is scope for implementing growth policies that benefit poor people. But most developing countries have trouble achieving any type of sustainable growth. At least for the next generation, U.S. strategy for reducing poverty in developing countries must focus on economic growth. Self-sustaining growth is difficult for developing countries because generating knowledge and developing sophisticated human capital depend at least as much on institutions that protect property rights and ensure low transaction costs as on specialization and trade. No simple alternative has been found to the gradual evolution of such institutions. For many developing countries, the quest for growth remains elusive. page 2

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