Friday, November 16, 2007

Rising poverty and the volatility of economic growth

The World Bank's African Development Indicators 2007 raises an important point that may shed some light on the economic growth - persistent poverty question: the volatility of this growth.

Quoting from the report:

This essay explores the patterns of growth in Sub-Saharan Africa over the past 30 years.
It fi nds that the volatility of growth—a product of confl ict, governance, and world commodity prices—has been greater than in any other region. That volatility has dampened
expectations and investments—and has obscured some periods of good performance for
some countries. Th e analysis here fi nds that pickups in growth were seldom sustained—
indeed, that they were often followed by ferocious declines. Hence, Africa’s flat economic
performance over 1975–2005. Where an economy started in 1975 is pretty much where it ended in 2005. Th e reason: when things go well they do not last, and when they go wrong they go very wrong. So, avoiding a decline from 2 percent GDP growth to –3 percent is as important as going from 2 percent to 7 percent. Indeed, it may be more important for poor people, who gain much less during growth pickups and suffer much more during the declines. The question for economic policymakers in Africa, then, is how best to sustain the pickups in growth. The answer: avoid the crushing declines.

The report does not say a lot on the relationship between stable economic growth and poverty alleciation, but does highlight that absolute poverty has declined in Africa:

Human development outcomes are improving across the region, and progress toward
the Millennium Development Goals is picking up. In 1990, 47 percent of Africans lived
in poverty. In 2004, 41 percent did, and on present trends 37 percent will in 2015.

Poverty gets more complex every day.

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