Can Donors Help Cook Up Growth?

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Making an economy grow should be easy. Just invest in technology (to raise labour productivity — a new seed variety for instance). Add lots of education (especially high quality primary schooling). And then a dash of institutions (protecting the property rights of investors). Oh, and don’t forget the infrastructure. Voilà! 10 per cent growth year-on-year, and before you know it everyone will be rich (and moaning about how unhappy they are).

So, all you need is a growth cookbook (maybe this is Nigella’s next opus?). You could pick up a US one (a bit tired around the edges, but well-tested homely fare). Or an Asian takeaway (select from Malaysian, Korean, Chinese, or Vietnamese). Or how about Scandinavia’s rather bland — but very successful — growth Smörgåsbord? (Finnish being our favourite).

What you will not find is much from Africa. Indeed the shelf is largely bare, Botswana and Mauritius excepted. And it is Africa that aid donors are mostly concerned about (although the Pacific islands and Haiti are huge challenges too). True, Africa is now growing, pushed ahead by rising commodity prices. But Africa has been here before (the 1970s, when it largely squandered the fruits of the last commodity boom — resulting in economic turmoil, spectacularly so in Nigeria). Nobody is yet writing up Africa as a growth success-story — because recent growth seems so fragile.

And a lot of that growth doesn’t reach the people who need it: GDP is rising fast in Angola and Equatorial Guinea but the average person doesn’t see much benefit, let alone the poor (on Angola see my book here). Nigeria looked more hopeful last year, especially after the debt deal. But never underestimate the ability of Nigeria’s politicians to clear the pot before anyone else gets a turn (see recent back-sliding on corruption).

So what’s an aid donor to do? This is now becoming urgent — we hear that donors are pushing growth up their priority list. Seems sensible: countries will remain aid-dependent until they get their GDP up. And growth can reduce poverty, especially when new jobs and tax revenue (for pro-poor public spending) are the result (however, the chronically poor can miss out, and some types of growth harm poor people — see our recent post).

But which growth cook-book will donors turn to? And will the recipes be palatable to aid-recipients? We’ll return to this theme in a future post. Meanwhile, over to Nigella.

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