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					       Growth II:
The Long-Term Economic
  Failure in Developing
        Countries

 CEPR Basic Economics Seminar Series
           Mark Weisbrot
           October 6, 2005
                 Growth II
• Economic growth is important
  (see Seminar 2)
• In general, it is even more important for low
  and middle income countries than for high
  income countries such as the United States
• Basic measure: Gross Domestic Product
  (GDP) per capita
• Need benchmark: compare growth
  (and progress) to past decades
        Economic Reforms
       Over the Past 25 Years
• Reduced restrictions on international trade
  and financial flows
• Tighter fiscal and monetary policies (higher
  real interest rates)
• Privatization of state-owned enterprises
• Labor market and public pension reforms
• Abandonment of state-directed industrial
  policies or development strategies
• Increased accumulation of foreign
  reserve holdings
Over the last 25 years, there has
  been a sharp slowdown in
 economic growth for the vast
 majority of low- and middle-
       income countries
 As would be expected in a period of
reduced economic growth, there has
  also been a decline in progress on
 health and education outcomes for
     the vast majority of low- and
       middle-income countries
Policy mistakes have contributed
     to the growth failure –
    here are some examples:
   China’s reforms are different from
     those implemented elsewhere
• Liberalized trade after it could compete in world
  markets. (Average tariff still over 40 percent in
  1992)
• Gradual and careful transition
• Banking system dominated by state-owned banks
• Government shapes and uses foreign investment
  in accordance with development goals
• Strict controls over international currency flows
              Conclusion
• Sharp slowdown in economic growth in the
  vast majority of developing countries
• Social and human consequences are very
  important
• Most of the reduced progress on social
  indicators probably due to growth slowdown,
  rather than any increases in inequality
• Economists and policy makers should be
  trying to figure out what has gone wrong
                      Reading List
• Milanovic, M (2005). “Why Did the Poorest Countries Fail to
  Catch Up?” Washington, DC: Carnegie Endowment, Carnegie
  Paper No. 62.
  http://www.carnegieendowment.org/publications/index.cfm?fa
  =view&id=17557

• Milanovic, B (2005). “Worlds Apart : Measuring International
  and Global Inequality,” Princeton, NJ: Princeton University
  Press.

• Weisbrot, M, Baker, D and Rosnick, D (2005). “Scorecard on
  Development: 25 Years of Diminished Progress,” Washington,
  DC: Center for Economic and Policy Research.
  http://cepr.net/publications/development_2005_09.pdf
              Reading List (continued)
• Weisbrot, M and Sandoval, L (2006) “Bolivia's Challenges,”
  Washington, DC: Center for Economic and Policy Research.
  http://www.cepr.net/publications/bolivia_challenges_2006_
  03.pdf

• Weisbrot, M and Cibils, A (2002) “Argentina's Crisis: The
  Costs and Consequences of Default to the International
  Financial Institutions,” Washington, DC: Center for Economic
  and Policy Research.
  http://www.cepr.net/publications/argentina_crisis.htm

• Cibils, A, Weisbrot, M and Kar, D. “Argentina Since Default:
  the IMF and the Depression,” Washingon, DC: Center for
  Economic and Policy Research.
  http://cepr.net/publications/argentina_2002_09_03.htm
           Growth II:
   The Long-Term Economic
Failure in Developing Countries

           Mark Weisbrot
          weisbrot@cepr.net

Center for Economic and Policy Research
             www.cepr.net

				
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posted:7/2/2013
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