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Growth and Policy in Developing Countries: A Structuralist Approach resources

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CH A P T E R 1 Economic Structure, Policy, and Growth Almost a de cade into the twenty- fi rst century, absolute poverty stillpervades outside the industrialized world. Helping poor people in devel- oping countries improve their standards of living is on the short list of interna- tional policy goals. Th ere are a multitude of ideas about how poverty should be analyzed and attacked. Although there have been some success stories, partic- ularly in East Asia, the unhappy truth is that anti- poverty programs in devel- oping countries have quite oft 1 en failed or have had limited success. Th e reason is that they did not enable poor economies to generate long- term growth of real per capita income. A useful rule of thumb is that develop- ing and transition economies should sustain at least 2 percent annual per capita real growth of gross domestic product (GDP). Th is would stop the gap separat- ing their standards of living from the industrial world’s from widening even further, and 3 percent or more would gradually reduce it. A 2 percent per capita growth rate can make a big dent in poverty by increasing average income by 22 percent over 10 years and 49 percent over 20. In addition, growth can only address poverty concerns if it generates new jobs to keep pace with a rising labor force. Relatively few developing and transition economies have been able to mount steady growth at 2 percent or higher for long time periods. Th e quarter century or so aft er the second oil and interest rate shocks of 1979 was particu- larly critical in this regard, as many developing countries started to face long- term stagnation or even regression. Our task in this book is to ascertain the reasons and to suggest policy initiatives to off culties that we will un- set the diffi cover. Our focus is the links between economic structure, policy, and growth. Th e emphasis on the term “structure” is essential, as our analysis is deeply em- bedded in a “structuralist” tradition of development economics, which we view as providing the best way to understand the problems that the people in poor countries have to confront in trying to reshape their national economies.

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