LONDON – It is fair to say that the world economy in the round has never done as well as it’s doing now, even as oil prices continue to rise. As it chugs upward a lot of old shibboleths have to be thrown out of the window.
Serious recessions that used to plague the industrialized economies with the regularity of the business cycle seem to be a thing of the past, as is the rapid inflation and sometimes stagflation that accompanied them. America’s Clinton boom did run out of steam just as he left office but the Bush Administration’s tax cuts appear to have made the U.S. slowdown extraordinarily short, although that is still no excuse for weighing them so heavily towards the rich.
Countries as diverse as Sweden, Denmark, Britain, Spain and Ireland have backed up America’s argument that freeing up markets and burdensome controls and regulations produces good rates of economic growth. Yet they have also countered America’s more naked capitalism with successful programmes of social justice, universal health services and poverty eradication. Indeed, the most socialist of them all, Sweden, is currently the fastest growing economy on a per capita basis in the Western world.
India has shrugged off the “Hindu growth rate” and is soaring towards Chinese rates of growth, with a better chance of all round success than China because its institutional, legal and political institutions are more developed and sophisticated. Japan is back in the growth game after a decade of “bubble repair”. Russia and Brazil, not that long ago written off after horrific setbacks, are probably set to become major economic powers within a couple of decades.
Many middle-income developing countries from Peru to Indonesia to Nigeria are purring along at a good speed thanks to a combination of fiscal reform, macro economic stability and a healthy export market. Able to leap frog the development process with computer technology, cell phones, airplanes and all the paraphernalia of modern industrial technology, they are growing at two to three times the rate that the present industrialized economies did when they were first developing in the nineteenth century.
All this suggests that the idea that only the Protestant ethic could work the development wonder is a lot of old nonsense. Since the death of Franco many of the southern Catholics have done well. The Muslims have shown their spurs in countries as varied as Indonesia, Malaysia, Pakistan and Bangladesh.
I have not mentioned Africa- the world’s backwater for as long as anyone can remember. But it is no longer. Nearly twenty countries have achieved rates of growth of 5% or more in recent years. Indeed the best news of this gloomy month is the one published last week by the UN Conference on Trade and Development (Unctad) which shows that a good number of the 50 countries known as “the least developed countries” are beginning to show reasonable rates of growth. Most of the 50 are in Africa but 13 of them are in Asia, including Afghanistan, Nepal and Laos.
During the 1980s and 90s this group grew at under 1% a year, well under their rates of population growth. Growth these days is now around 6% in 15 of these countries. For the least developed countries as a group the average rate of growth is over 5%, a healthy figure. And, for the first time, the African countries are doing rather better than the Asian ones. (Nevertheless, 15 countries such as Haiti and Guinea continue to stagnate or decline).
The countries which are making it are those that are attracting unprecedented levels of foreign investment and foreign aid. This is very different from the 1990s when the rich world seemed to have given up on the very poorest, despite successfully persuading them to reform their economies with trade and financial liberalization and privatisation. Aid inflows have doubled since 1999. Important progress has been made in debt relief and there has been an effort to expand duty-free and quota-free access for their exports.
Unctad is talking bullishly in a way it hasn’t before that “the least developed countries have the potential to achieve very high rates of growth and to reduce poverty rapidly.”
If the West continues to increase its aid and private investment, limits its recruitment of the poorest countries’ best and brightest (one in five of their highly skilled are working in the West) and delivers on the trade opportunities it has so long talked about, many of these countries would surge forward.
It would be a wonderful thing to be able to throw the shibboleth of the “no-good, helpless poor” out of the window once and for all.
I can be reached by phone +44 7785 351172 and e-mail: JonatPower@aol.com
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