Summary

To sum up, this section has examined the complex interrelationships between economic growth, employment, poverty and income distribution that policy makers need to take into account. With respect to the Social Summit, a central policy implication of the analysis is that developing countries need to attain a trend increase in their growth rates, possibly to their pre-1980 long-term rates of about 6 per cent per year. This would enable them to achieve and maintain meaningful full employment in the spirit of the Copenhagen Declaration with rising real wages and increasing standards of living. Although faster growth will help to reduce poverty, the latter is affected by other important variables as well - notably inflation, inequality of income and asset distribution, instability of economic growth and fiscal policies of the government. Women in particular are adversely affected by macro-economic instability as, in the absence of adequate social security systems, the burden of women’s paid as well as unpaid work increases in economic downturns²⁷ So what is required for meeting the employment and poverty reduction goals set out at the Social Summit is not just fast, but also better quality growth.

²⁷ For a detailed discussion of this issue, see Singh and Zammit (forthcoming).

There can clearly be tension between the quantity and quality of growth with respect to poverty reduction. Obviously, high quality growth is better than low quality growth in that a great deal of low quality growth is needed to achieve the same level of poverty reduction. To illustrate this point, between 1950 and 1980, Brazil and Mexico are generally regarded as having achieved fast but low quality growth, in the sense that they had a very unequal distribution of income and assets, and there was considerable inflation. Nevertheless, this growth did lead to a sizeable reduction in absolute poverty in both countries. However, high quality growth may in itself induce more growth through the principle of “shared growth” - that is, if the fruits of growth are seen to be more equally shared, this may lead to more social cohesion, and social and economic stability - hence greater investment and still faster economic growth. So countries should strive to achieve high quality growth to the extent that their institutions permit.

A very important analytical and policy question is whether a trend increase in economic growth of the size required to meet the Social Summit goals is possible for developing countries under the new institutional arrangements of liberalization and globalization of the world economy. This question will be taken up in the final section. Before that, other issues in the development policy debate relating to the new global economic environment, the reasons for the Asian crisis, the Washington Consensus and the new international financial architecture will be briefly reviewed.