Monday, June 9, 2008

More growth, less poverty, less environment? - Commission on Growth and Development

This morning I had the privilege listening to Michael Spence, chair on the Commission on Growth and Development, and 2001 Nobel Prize Laureate,  whom delivered a keynote address at the Annual Bank Conference on Development Economics in Cape Town.   

According to their website the Commission has been brought together by the belief that the world's challenges - poverty, environment, misunderstandings within and between nations, vast differences in living standards within and across countries - are best met in conditions of rising and sustained prosperity, and expanding economic opportunities. The Commission was established "to take stock of the state of theoretical and empirical knowledge on economic growth with a view to drawing implications for policy for the current and next generation of policymakers." 

The Commission recently released its final report.  Specifically with regards to Africa, the main highlights are that economic growth is the strongest in decades, but that poverty remains persistent.  

If there is one thing the Commission does argue for is that it is impossible to lift large amounts of people out of poverty without growth.  However, much more attention is needed on the distinguishing features of that growth: amongst others it should be inclusive - sharing the benefits of globalisation and within a context of leadership and support from the population. 

On the topic of natural resources and the environment the report is refreshing.  The report does not support the misplaced idea to grow first and pay attention to the environment at a later stage.  It is recognised that this approach is expensive in the long run and has largely adverse effects on the poor.  Cleaner growth is by definition better growth for all. 

Subsidies on the consumption of energy, and implicitly on carbon, need to be phased out and correct signals given to the market to support higher energy efficiency and longer-term mitigation of carbon.

With regards to food, and although understandable that short term emergency relief measures are needed, the report argues that the long-term solution to ensure continued supply is not to impede price signals in the market, but to rely on high supply-side elasticities.  According to Spence, agricultural productivity and output can still be increased a lot (also in Africa) and correct price signals will certainly do its part.

An interesting recommendation is that Africa needs to adopt best practices in the exploitation of natural resources, such as the setting up of a fund for resource rents, paying out the percentage of the total each year to all its citizens.

Not less growth, but more (inclusive, transparent and environmentally friendly) growth is what Africa needs.  The poor are knocking at the gate.

More economic growth, less poverty, and more environment - there is no other sustainable option for Africa.

No comments: