The Emerging World and Poverty - Where Next?

Notes taken from the Marshall Society Economics Conference - this panel session focused on growth and development issues in South Korea and sub Saharan Africa

Professor Agit Singh

• The present state of the world economy departs radically from previous historical experience
• South Korea is the most successful industrialisation story in the history of mankind
• Since 2000, developing countries have expanded at a much faster rate than developed countries - India has been growing at more than 7%, there are others too with a stellar growth rate - this is of huge economic and geo-political significance. Developing / emerging countries have largely become the locomotive driving the world economy out of the crisis since 2007.

Developing countries have an increasing resilience - defined as an ability to absorb domestic and external shocks - developing countries have improved their macroeconomic management and have built up larger external currency reserves to cope with volatile trade balances / current account imbalances

Average annual GDP growth for advanced nations 2006-2012

• 0.47% Japan
• 1.05% in USA
• 0.4% in UK

South Korea

• Until 1990, economic history scholarship was dominated by neo-classical ideas and IMF & other institutions
• Crucial role of government in building institutions and infrastructure to support domestic industries and export growth
• Industrial policy increased the growth of exports - subsidies socialised the entrepreneurial risk when making investment decisions
• South Korean government went further than Japan in actively building industrial conglomerates - they wanted to establish enterprises of large scale and diversity
• The long struggle to build democratic institutions has been more protected and difficult but Singh argues that without the expansion of a large working class in manufacturing industry, that would have been much more difficult

Korea and Taiwan, Malaysia and Indonesia have adopted similar industrial models - Singh argues that there are important lessons and models to follow here for other middle income countries

South-south economic cooperation including expanding trade and capital flows is and will be an important contribution to the future development of these nations (See HSBC research - a new Southern Silk Road - http://www.hsbc.com/~/media/HSBC-com/about-hsbc/in...)

Stephen King: "The original silk road was across Asia. This was an extraordinarily important trading route across land. And what I’m really talking about is a 21st-century version of that trading route, but, rather than being confined to Asia, it’s including Asia but also Latin America, Sub-Saharan Africa, the Middle East. And all these kinds of connections begin to come through and of course, where the original silk road was very much based on land, this one’s based on land, sea, air, the electronic ether, all these extraordinary connections being made."

Revision presentation on economic growth and inequality

Professor Andy McKay: http://www.sussex.ac.uk/economics/people/peoplelis...

Growth and Living Conditions in Africa in the past 20 years

African growth - something has changed - but there remains huge diversity in performance

• 1970's -1990's was a development disaster - in part due to very poor management of resource wealth
• Recovery starts in the mid 1990s, particularly fast in the last ten years
• 30% rise in real per capita GDP over the last 15 years in a region with fast population growth and including the basket-cases of Zimbabwe and the DRC.

Economist feature on African growth reflects some of the recent surge in interest in African economic development - a strong cluster of African countries features in a league of the world's fastest growing countries

Radelet Emerging Africa - 17 African countries have emerged, four ready to emerge (links to follow)

Radalet does not include oil-producers among his group

Important factors (according to Radalet)

1. More democratic accountable governments
2. More sensible economic policy
3. New technologies
4. New generation of political leaders, activists and business people

Add in

• Favourable commodity prices
• Natural resource discoveries

Living standards

Possible to have growth without improved living standards (Economist: http://www.economist.com/blogs/freeexchange/2014/0...)

Are people feeling growth in their pockets? Is growth inclusive? For millions the experience is of being excluded from growth

• Health, education and poverty outcomes are key to this
• Under 5 mortality rate is falling in almost all countries - e.g. Rwanda and Senegal - although the rates are still very high
• Secondary school attendance has increased almost everywhere - Ghana and Nigeria has been big increases
• Monetary poverty is harder to measure - but again the trend is favourable

Afrobarometer survey - picked out concerns over rising wealth and income inequality (African Development Bank: Inequality in Africa - http://www.afdb.org/fileadmin/uploads/afdb/Documen...)

• Job creation remains one of the major growth and development barriers in Africa - especially for young women leaving school
• Rate of extreme poverty reduction in Africa has been slower than East Asia - the latter tends to be better at growing
• Continued conflicts e.g. South Sudan, Central African Republic
• Issues of political succession e.g. Rwanda and Uganda
• Political stability is not guaranteed - e.g. contested result of the Kenyan elections in 2007. Ghana on the other hand has managed two changes of regime in their democratic period

Biggest challenge is probably sustaining growth, building the structural transformation of the economy and sharing the benefits of growth more equitably. Also many African countries are not achieving the same levels of capital investment growth and there remains a huge amount to do in increasing the degree of export sophistication.

Suggestions for further reading:

World Bank (October 2013): Africa Continues to Grow Strongly but Poverty and Inequality Remain Persistently High:

http://www.worldbank.org/en/news/press-release/201...