The Commission on Growth and Development released its final report,The Growth Report: Strategies for Sustained Growth and Inclusive Development,which looks at how developing countries can achieve fast sustained and equitable growth.

According to the Commission, fast sustained growth is not a miracle; it is attainable for developing countries with the "right mix of ingredients." Countries need leaders who are committed to achieving growth and who can take advantage of opportunities from the global economy. They also need to know about the levels of incentives and public investments that are necessary for private investment to take off and ensure the long-term diversification of the economy and its integration in the global economy.

Introduction:

The Commission and Its Mandate

What do we know about economic growth? And what practical implications can policy makers draw from that knowledge? Those are both daunting questions, no easier to answer than they are to ignore. Since April 2006, they have guided the work of the Commission on Growth and Development, an independent group of policy makers, business leaders and scholars, supported by the World Bank, the Hewlett Foundation, and the governments of Australia, Netherlands, Sweden, and the United Kingdom. Drawing on academic research, case histories, and practical experience, the Commission has weighed what is known about generating and sustaining fast growth in developing countries.

This assessment is meant to be useful to senior political and policy leaders, those whose job it is to craft a developing country’s economic reforms. We hope it provides a framework within which policy makers can develop country-specifi c growth strategies of their own. We do not give policy makers all the answers, but we hope to help them ask the right questions. To this end, the majority of the members of the Commission are leaders from developing countries. Our intention is to share their experiences, priorities, successes, and failures with their peers and the next generation of leaders.

The Commission understands that growth is not an end in itself. It is instead a means to several ends that matter profoundly to individuals and societies. Growth is, above all, the surest way to free a society from poverty. Without it, a stark lack of material resources will tend to dominate everything else, narrowing people’s horizons, consuming them in a daily struggle to get by, and depriving them of the chance to fulfi ll their potential.

Prosperity, on the other hand, frees people to make choices, and allows a more equal distribution of opportunities. Human development, understood in its broadest sense, is both an “output” of growth and one of the most important inputs. We have focused on sustained growth because it creates options for individuals and societies that are diffi cult or impossible to achieve otherwise.

In the developed world, the great questions of growth and poverty are inseparable from debates about aid. Many believe foreign aid can help raise growth and fi ght poverty. They are probably right. Aid, however, is not the focus of this report. Donors can help governments in some poor countries by relaxing their fi nancial limitations. But in many countries, the lack of aid dollars is not the binding constraint and in others it is only one constraint among many. It is not a substitute for leadership, good strategy, and effective implementation.

A great deal of aid is not intended to raise growth per se. It makes a contribution to the fi ght against disease and other social ills—worthy goals in themselves, whatever their effect on the economy. Other categories of aid do try to lift growth, by providing fi nance or expertise or both. If the logic of this report is compelling, it will be useful to these donors as they look for rewarding areas of investment.

The Commission asked distinguished academics and practitioners to assess the state of knowledge in a wide range of policy areas, from exchange rate intervention to school feeding programs. The result is a rich collection of papers, country case studies, and workshop deliberations available on the Commission’s Web site.1 In some cases there is widespread agreement.

In others our knowledge is incomplete. In still others there are controversy and ongoing disagreement about the benefi ts and risks of a policy. This report is not a summary of all those assessments, but a distillation of them, guided by the commissioners’ own experience. Our goal has been to identify the key insights and policy levers that help countries raise and sustain the pace of growth and poverty reduction.

The Organization of the Report

The report has four main parts. In the fi rst, we review the 13 economies that have sustained, high growth in the postwar period. Their growth models had some common fl avors: the strategic integration with the world economy; the mobility of resources, particularly labor; the high savings and investment rates; and a capable government committed to growth. The report goes on to describe the cast of mind and techniques of policy making that leaders will need if they are to emulate such a growth model. It concludes that their policy making will need to be patient, pragmatic, and experimental.

In the second part, we lay out the ingredients a growth strategy might include. These range from public investment and exchange rate policies to land sales and redistribution. A list of ingredients is not enough to make a dish, of course, as Bob Solow, a Nobel Prize-winning economist and a member of the Commission, points out. We, however, refrain from offering policy makers a recipe, or growth strategy, to follow. This is because no single recipe exists. Timing and circumstance will determine how the ingredients should be combined, in what quantities, and in what sequence.

In India, for example, policy makers must concentrate on infrastructure investment and improving the quality of education. In China, on the other hand, policy makers should try to wean the economy off exports and investment and give freer rein to consumption.

Formulating a full growth strategy, then, is not a job for this Commission but for a dedicated team of policy makers and economists, working on a single economy over time. Instead of a country-specifi c recipe, we offer some more general thoughts on the opportunities and constraints faced by nations in Sub-Saharan Africa, countries rich in resources, small states with fewer than 2 million people, and middle-income countries that have lost their economic momentum.

In the fi nal part of the report, we discuss global trends that are beyond the control of any single developing-country policy maker. Global warming is one example; the surge in protectionist sentiment another; the rise of commodity prices a third. In addition, we discuss the aging of the world population and the potential dangers of America’s external defi cit. These trends are new enough that the 13 high-growth economies of the postwar period did not have to face them. The question is whether they now make it impossible for other countries to emulate that postwar success.

The developing countries today have a collective importance in the world economy that is impossible to ignore. They leave a sizable imprint on commodity prices, infl ation, capital fl ows, and greenhouse gas emissions, to name just some of the ripple effects. Their collective importance has, however, yet to be fully refl ected in the few international institutions that help steward the world economy. This should change. The developing world has benefi ted enormously from the global economy and contributed a great deal to it. Now their policy makers need to assume a bigger role in managing it.

Download The Growth Report: Strategies for Sustained Growth and Inclusive Development

Pdf format, 10.3MB, 180Pages.

COMMISSION ON GROWTH AND DEVELOPMENT
Conference Edition
© 2008 The International Bank for Reconstruction and Development / The World Bank

“At a time when industrialized countries are experiencing a sharp slowdown in growth, many of the world’s poorest countries have found growth to be elusive. It is our belief, however, that sustained, high growth can be explained and repeated,” says Michael Spence, Commission Chair and Nobel Laureate in Economics.

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Ideas Informing Action

Launched in April 2006, the Commission on Growth and Development brings together twenty-one leading practitioners from government, business and the policymaking arenas, mostly from the developing world. The Commission is chaired by Nobel Laureate Michael Spence, former Dean of the Stanford Graduate Business School, and Danny Leipziger, Vice-President, World Bank, is the Commission's Vice-Chair.

Over a period of two years the Commission will seek to gather the best understanding there is about the policies and strategies that underlie rapid and sustained economic growth and poverty reduction. The Commission's audience is the leaders of developing countries.

The Commission is supported by the Governments of Australia, Sweden, the Netherlands, and United Kingdom, the William and Flora Hewlett Foundation, and the World Bank.

Members of the Commission on Growth and Development:

Montek Ahluwalia, Deputy Chairman, Planning Commission, India
Edmar Bacha, Director, Casa Das Garças Institute for Economic Policy Studies, Brazil
Dr. Boediono, Governor, Central Bank of Indonesia, Indonesia
Lord John Browne, Former CEO of British Petroleum p.l.c., United Kingdom
Kemal Dervi¸s, Administrator, the United Nations Development Program
Alejandro Foxley, Minister of Foreign Affairs, Chile
Goh Chok Tong, Senior Minister in Cabinet and Chairman,
Monetary Authority of Singapore
Han Duck-soo, Former Prime Minister, The Republic of Korea
Danuta Hübner, Commissioner for Regional Policy, European Commission, Poland
Carin Jämtin, Former Minister for International Development, Sweden
Pedro-Pablo Kuczynski, Former Prime Minister, Peru
Danny Leipziger, Vice President for Poverty Reduction and Economic Management, the World Bank Group (Vice Chair)
Trevor Manuel, Minister of Finance, South Africa
Mahmoud Mohieldin, Minister of Investment, Arab Republic of Egypt
Ngozi N. Okonjo-Iweala, Managing Director, the World Bank Group
Robert Rubin, Chairman, Citigroup, the United States
Robert Solow, Nobel Laureate in Economics and Professor Emeritus,
Massachusetts Institute of Technology, the United States
Michael Spence, Nobel Laureate in Economics, and Professor
Emeritus, Stanford University (Chair)
Sir K. Dwight Venner, Governor, Eastern Caribbean Central Bank, St. Kitts and Nevis
Ernesto Zedillo, Director, Center for the Study of Globalization, Yale University, and Former President of Mexico
Zhou Xiaochuan, Governor, People’s Bank of China

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