 |
A Strategy for Economic Growth
3. Much Has Been Accomplished
Worldwide growth since 1950 has been unparalleled in human history. Global GDP per capita nearly tripled over that period; average real incomes rose by at least half in all regions of the world; and all except Africa and the former Soviet Union more than doubled their per capita GDP. As a direct result, the share of the world’s population living in extreme poverty fell from 55 percent in 1950 to 18 percent in 2004.10
Progress in other dimensions of wellbeing has also been dramatic. Life expectancy has risen by more than 50 percent since 1950, from 41 years to 63 years. Equally dramatic gains were made in literacy, nutrition, infant mortality, gender equality, and access to water and electricity. 11 Gains were achieved in all regions, including those that grew more slowly. With few exceptions, however, countries that grew faster achieved greater gains in other dimensions of human wellbeing.
There has been considerable variation in the rate of progress, both among and within regions and over time. Specifically:
- Asia has made the most progress. First Japan, then South Korea, Taiwan, Hong Kong and Singapore made the leap from poverty to affluence in little more than a generation. Rapid growth began in the 1970s in Thailand, Malaysia, and Indonesia, and then during the last two decades in China, India, and Vietnam. Pakistan and Bangladesh have grown more slowly over the past 20 years, though exceeding the 2 percent per capita growth benchmark suggested earlier.
- At the other extreme, Sub-Saharan Africa has had the slowest overall growth and most severe declines in individual countries. Only four small countries – Mauritius, Botswana, Lesotho, and Cape Verde – have consistently achieved per capita growth of 2 percent per year or more since 1960. Many initially promising countries were taken over by “rent-seeking” elites. In others, flawed economic policies led to dependence on mineral exports and economic collapse when commodity prices fell sharply in the 1980s. Elsewhere, civil wars have created states of extreme economic insecurity.
- However, Sub-Saharan Africa’s performance and prospects have improved significantly. Since the mid-1990s, 17 out of 40 African countries have maintained per capita growth of 2 percent annually or better, rising to 24 of 40 countries since 2001. Improved economic policies in most countries were key to the turnaround, with additional support from debt relief and stronger commodity prices.
- Latin America has proved a disappointment. The region grew rapidly from 1950 to 1980, stagnated during the “lost decade” of the 1980s, and has since achieved at best modest growth. Even this has often involved short spurts of growth followed by economic crisis and decline. Only 8 out of 22 countries maintained per capita growth of 2 percent or more over the decade ending in 2006. Explanations for this poor performance range from unstable macroeconomic management and poor microeconomic policies, to extreme inequality in income and asset holdings, to weak educational systems.
- In Eastern Europe and the former SovietRepublics, the transition from Communism has generally involved sharp declines followed by recovery. The initial declines resulted from products and production methods that were years or decades behind those in countries that had competed with the rest of the world. As entrepreneurs scrapped obsolete technologies and mind-sets, entrepreneurs in these countries found new ways to compete, resulting in very rapid growth in almost all countries since the mid- or late 1990s.
- The Middle East and North Africa offers a generally positive picture. Among countries currently or previously receiving aid, Tunisia, Morocco, Algeria, Egypt, Jordan, Turkey, and Cyprus all grew at rates above 2 percent per capita over the past decade; only Yemen and Lebanon fell short of that benchmark.12
Thus, global progress since 1950 has been enormous. At the same time, progress in some countries has been uneven or slow, and a few have retrogressed. The fact that “only” 18 percent of the world’s population still lives in extreme poverty means that 1.2 billion people remain on the margins of subsistence. USAID’s strategy for addressing those problems must be shaped by what we have learned, by the changing global environment for economic growth, and by a clear assessment of what we do best.
10 For the global incidence of extreme poverty in 1950, see Bourguignon and Morrison (2002). The estimate for 2004 is from Chen and Ravallion (2007). Both sources use the same threshold of extreme poverty: per capita expenditure of $1.08 per day or less, calculated at 1993 Purchasing Power Parity.
11 USAID (2002), Foreign Aid in the National Interest.
12 Based on data from International Monetary Fund (2007). See also Crosswell (2007).
Back to Top ^ |
