Information and news about economic growth


In a 2013 paper published in the World Bank Research Observer, Martin Ravallion hypothesizes two possibilities in answer to the question, “How Long Will It Take to Lift One Billion People Out of Poverty?” In a pessimistic scenario, only factoring the developing world outside of China, he estimates that it would take 50 more years to achieve the task of lifting a billion relying on less than $1.25 per day. In a more optimistic scenario, he estimates that poverty reduction for a billion people could be achieved by 2025-30. At present, there are about 1.2 billion people globally subsisting on $1.25 per day.

Ravallion reasons that the optimistic scenario is possible if we continue with “staying-on-the-path” as seen in the 20 years between 1990 and 2010 in which the developing world halved its poverty rate. At this pace, it could be halved again in ten more years. This is not only because of China and India’s growth. Since 2000, gross domestic product (GDP) in the developing world has grown by 6% a year. The highest rates of GDP growth over the past decade have been in East Asia (8%), South Asia (7%), and Sub-Saharan Africa (5%) — “the three regions which account for the bulk of absolute poverty” globally. Ravallion’s findings defy the theory that developing countries are stuck in a poverty trap.

Ravallion points out that there are multiple solutions for lifting a billion people out of poverty such as fostering rapid economic growth, avoiding major financial and agro-climatic crises, and assuring that poor people are able to participate fully in that growth through access to schooling, health care, employment, and financial resources. The most sustainable solution for poverty reduction will vary from country to country and hence strategies to combat poverty should be derived at the country level.

But of course, why wait until 2025? If each country were given a boost in resources from foreign aid, each could expedite their poverty reduction efforts. Currently, the U.S. only contributes less than one percent of its federal budget to foreign aid.

– Maria Caluag

Source: World Bank

rwanda cooperation ituze us uadf agriculture cassava development

In 1980, the U.S. Congress established the  U.S. African Development Foundation or UADF to provide grants to support solutions to economic problems in Sub-Saharan Africa. The solutions are made and led by Africans. Till date, UADF has provided $3.5 million in grants to Rwanda that have provided increased economic independence and increased food security for more than 200 cassava farmers in southern Rwanda by giving them better access to markets and higher incomes.

A crop purchase fund was set up under Cooperation Ituze so that it can grow and buy more cassava (or manioc) to process into high-quality flour in its milling factory. Cooperation Ituze has become self-sufficient and profitable by purchasing disease-resistant plants, expanding its drying facilities, and setting up rainwater harvesting systems. The rainwater harvesting systems establish a reliable water supply which enables Ituze to process cassavas year round. The Rwandan government constructed additional drying facilities because of Ituze’s success. Additional progress was made with agricultural training in cassava multiplication, modern agronomic practices, and soil maintenance.

Ituze’s sales revenues increased from $8,300 to 2012’s total of $115,000 in less than three years. This is an increase of 2,700% since its inception in 2010. Land cultivation has doubled to 175 hectares which allows farmers to grow cassavas for both their families’ consumption and processing into flour. The flour is packaged in Kigali, the nation’s capital, and sold in local supermarkets.

This breakthrough with Cooperation Ituze has far-reaching effects: more people are able to afford a nutritious meal and more children are free to go to school.

– Essee Oruma

Source: IIP Digital

Frank Braeken, the executive VP of Unilever in Africa, believes that Western companies have long underestimated Africa’s consumers. He believes that Western companies have failed to realize Africa’s potential as a diverse, multifaceted market and that African consumers have been, “underestimated, underserved, and underserviced.” He feels the West has maintained a patronizing and generic outlook about the opportunities available in Africa.

Unilever has been working in and with African communities for more than a century. They have a presence in 15 countries, employing thousands of African workers.  Yet, even Braeken acknowledges that Unilever struggled to utilize the diversity of consumers across the continent.

Unilever is just now beginning to vary their company policy and strategy, breaking Africa into several distinct chunks, such as East Africa, West Africa, and South Africa. They are working to make their products and distribution strategies relevant for the different types of consumers across the continent.

Nielsen recently released a survey about the types of consumers in African markets. The results indicate that instead of simply being viewed as a continent, Africa should be viewed as, “54 separate and distinct countries with a wide array of political, economic, geographic, cultural, and social features.” They have indicated that Western companies need to stop thinking of Africa as one single consumer.

Western markets would be smart to tap into the African market as it has been and is projected to continue growing in spending on consumer goods, telecoms, and banking. This growth sets Africa apart as an attractive new business proposition for Western companies.

While economic growth and increased knowledge of the prospect of Western companies investing in Africa is growing, there are still problems that Braeken warns need to be addressed. Africa, for the most part, lacks adequate infrastructure, good governance, and states free of corruption. However, Braeken believes that if Western states continue to talk about Africa and the real issues then not only will his company grow, but many other companies will as well.

– Caitlin Zusy 
Source: CNN
Photo: Bloomberg

World Bank Places Africa as One of the World's Fastest Growing Regions
In the World Bank’s latest bi-annual publication on the economic climate in Africa, called Africa’s Pulse, the organization asserted that economic growth in various African countries remains at seven percent or higher, making the region “one of the fastest-growing in the world.”

The publication stated that due to the improving global economic situation, high commodity prices, and increased foreign investment in several countries on the continent, prospects for continued economic growth remain very strong.

The World Bank did concede that in order to continue current levels of growth, higher levels of foreign investment in infrastructure, particularly in energy, were needed to push developing African nations forward. The report also cited increased levels of agricultural production and food security as the main concern in reducing poverty.

The World Bank Vice President of Africa, Makhtar Diop, said, “Without more electricity and higher agricultural productivity, Africa’s development future cannot prosper. The good news is that governments in Africa are intent on changing this.”

Africa’s Pulse specifically cited a boom in the industrialization of Africa’s natural resources, including mineral extraction, natural gas, oil, and mining as a vital factor in promoting continued economic growth, and expects that by 2020, all but four of five of all African countries will be participating in industrial mining of some kind.

The World Bank went on to acknowledge the importance of African governments using increasing revenues to re-invest money back into regional infrastructure, education, and health care.

Punam Chuahan-Pole, the co-author of Africa’s Pulse and economist at the World Bank stated, “If properly harnessed to unleash their full potential, these trends hold the promise of more growth, much less poverty, and accelerating shared prosperity for African countries in the foreseeable future.”

Christina Kindlon

Source: World Bank

World Bank president has claimed that economic growth is essential to tackling poverty and creating jobs. The Guardian interviewed him following a recent keynote speech. In his speech, he announced poverty reduction and shared prosperity are to be the focus of his five-year World Bank presidency.

Economic growth provides monetary stimulation to economies, allowing people living in developing countries to buy more products, create jobs, and develop. Jim Yong Kim has emphasized that if we want to create global growth, we have to invest in human capital. This means we need to work to eradicate poverty, keep children in schools, and focus on programs like public health education.

Kim also touched on the Millennium Development Goals. Kim has stated that they are and were very important to focusing our international agenda. While we may not achieve them by 2015, they have given us concrete goals to work towards.

Targets are essential to help change people’s behavior. Kim has expressed his opinion that in order to reduce poverty, and achieve measurable outcomes, we need to focus on specific elements of the MGDs. Kim believes we need to do more in women’s and children’s health- the two groups most widely impacted by poverty.

While he praises the many successes in the elimination of poverty, Kim warns that reaching the goal of reducing the percentage of global poverty to 3% will be extremely difficult. It is encouraging, however, to see vocalized commitment from one of the most influential poverty reduction agencies in the world. Stating intent creates accountability- something the international community could do more of.

-Caitlin Zusy
Source Guardian
Photo Telegraph

Colon Misses Out on Panama's Economic Growth
The Panama Canal is framed by Panama’s two largest cities. At one end is Panama City, a vibrant, bustling metropolitan center that is currently experiencing some of Latin America’s greatest growth. At the Canal’s other end, just forty miles away, lies the city of Colon, where potable water, electricity, structurally sound buildings, and meaningful work are all in short supply for the city’s 220,000 residents.

Panama has had an average economic growth of nine percent every year for the last five years. This is due in large part to foreign investment and development in Panama City, where Central America’s first subway is currently under construction. The tallest building in Latin America, a 70-story Trump hotel and condominium, is not out of place among newly constructed skyscrapers, malls, and restaurants.

But Colon has not enjoyed the same booming industrial and commercial development. The city has the largest duty-free trade zone in the Western hemisphere, which has long been a point of contention between residents and developers. Recent development within the zone has benefited businesses there, but not the city at large. The duty-free zone caused social unrest last year when Panama’s president passed a law allowing sale of land in and near the zone. Residents feared this would displace them from their homes and hurt their incomes. Several were killed in the protests.

The economic inequality between Colon and Panama City stems in part from racial segregation and discrimination. Racism is a long-standing problem in many Latin American countries, and Panama is no exception. Those with light skin are often viewed more favorably than those with dark skin in terms of wealth, attractiveness, and ability.

Colon is predominantly black, while Panama City has a larger percentage of European descendants. Many believe that racial discrimination has played a role in Colon’s economic depression.

The stark disparity between Panama City and Colon is an example of the unequal economic growth occurring all over the world. In many places, wealth remains concentrated where it is already abundant, while the poor remain poor, and grow poorer. Correcting this imbalance will require a multifaceted, in-depth, strategic approach that the world’s poor are unable to implement themselves. Therefore, those who have the means to do so are responsible for working to make humane living conditions and economic security realities for every person on the planet.

Kat Henrichs

Source: NY Times
Photo: AP

Landesa Helps People Gain Property Rights

Landesa is a rural development institute devoted to securing land for the world’s poor.  The company “partners with developing country governments to design and implement laws, policies, and programs.”  These various partnerships work to provide opportunities for economic growth and social justice.

Landesa’s ultimate goal is to live in a world free of poverty.  There are many facets of poverty.  The institute focuses on property rights.  According to Landesa, “Three-quarters of the world’s poorest people live in rural areas where land is a key asset.”  Poverty cycles persist because people lack legal rights to land they use.

The company was the world’s first non-governmental organization designed specifically for land rights disputes.  Then known as the Rural Development Institute (RDI), the institute was the first to focus exclusively on the world’s poor.

Roy Prosterman founded the company out of a deep passion for global development.  Prosterman is a law professor at the University of Washington and a renown land-rights advocate.  He began his lifelong devotion to property rights after stumbling upon a troublesome article.  In 1966, he read a law review article “that promoted land confiscation as a tool for land reform in Latin America.”  Prosterman recognized the policy’s ills immediately.   He quickly authored his own articles on how land acquisitions must involve full compensation.

These articles led him to the floor of Congress and eventually the fields of Vietnam.  Prosterman helped provide land rights to one million Vietnamese farmers during the later part of the Vietnam War.  The New York Times claimed that his land reform law was “probably the most ambitious and progressive non-Communist land reform of the 20th century.”

Prosterman traveled the world to deliver pro-poor land laws and programs.  His most notable work was in Latin America, the Philippines, and Pakistan before founding the institute.  Today, Landesa focuses mostly on China, India, and Uganda.

He aims to “elevate the world’s poorest people without instigating violence.”  The company negotiates land deals with the government and landowners who received market rates.  Landesa helps people gain property rights, so people can focus on health and education efforts instead.

Whitney M. Wyszynski

Source: The Seattle Times

Top Priorities for Africa in 2013The Africa Growth Initiative (AGI) at Brookings released a report of top priorities for Africa.  The AGI “brings together African scholars to provide policymakers with high-quality research, expertise, and innovative solutions that promote Africa’s economic development.”  The Foresight Africa report shows promising opportunities in Africa.  It outlines the top priorities for Africa in 2013.

Moving from “economic stagnation to above 5 percent GDP growth on average,” Africa is prospering.  Ethiopia, Ghana, Mozambique and Tanzania are some of the fastest-growing economies in the world, and African governments are embracing this growth by lowering transaction costs.  Africa’s economic growth is creating a new middle class.  This middle class means new markets for goods and services.  The Foresight Africa report notes that it is a prime time for investors.

Some African countries are mirroring Asian models and engaging their diasporas for economic and social development.  South Africa, for example, is using TalentCorp’s model.  TalentCorp is a partnership between the government, the private sector and the overseas diaspora.  The model aims to bring highly skilled Malaysians living abroad back to their home country.

Countries everywhere recognize the potential in harnessing Africa’s diaspora.  In 2011, the United States Congress proposed the African Investment and Diaspora Act.  The bill was designed to support African development.  Ghana and Kenya are on the cutting-edge and have already “established units within their respective governments to oversee diaspora affairs.”  AGI’s Foresight Africa report points to these examples as models for other countries.

Check out the full report for more information.

Whitney M. Wyszynski

Source: Brookings
Photo: Daily Maverick

End Poverty 2015
Over the past decade, the developing world has seen much progress in the fight to end absolute poverty. Recent research has predicted that the end of absolute poverty could occur within our lifetime by the year 2030.

Drawing on previous research done, Martin Ravallion, former director of the World Bank’s research department, assessed how long it would take to “lift one billion people out of such extreme poverty.” In 1990, 43 percent of the population of the developing world lived on less than $1.25 a day. By 2010, that number had dropped to 21 percent. This was attributed to strong GDP growth over the past decade in East Asia, South Asia, and sub-Saharan Africa, three regions accounting for the bulk of absolute poverty. If this rate of growth continues, we may expect to see as little as 0.2 billion people in absolute poverty by 2027.

As of 2012, 1.2 billion people around the world still live on less than $1.25 a day. Essentials such as shelter, clothing, and proper health care and education have to be forgone to afford food to eat. Though Ravallion’s research indicates a good outlook, there is still much work to be done. To maintain this path, what is needed is ongoing success in poverty reduction, including maintaining “the conditions for continued, reasonably rapid, economic growth.” Poor people need ongoing access to schooling, health care, job opportunities, and financial resources in order to sustain this economic growth.

Charles Kenny, Senior Fellow at the Center for Global Development, believes that it should be the concern of the rich world’s policymakers to keep this outlook consistent. He cites a need to continue providing financial aid and support to poverty reduction policies, along with increasing economic trade with the developing world, increasing immigration from poor countries, and supporting the development of new technologies. Ivan Lewis, Shadow Secretary for International Development, emphasizes a need to focus on this goal of ending absolute poverty. “In the next 20 years we should judge the scale of our ambition and our commitment primarily by whether we can change the life chances for the poorest 20 percent in every country, and those trapped in the misery of conflict-ridden states,” said Lewis.

Rapid economic growth is occurring throughout the world. The world average GDP per capita and life expectancy is increasing and infant mortality is declining. Literacy and access to the internet and safe drinking water is on the rise. Matt Ridley, a British author and journalist, writes in his book, The Rational Optimist: How Prosperity Evolves, “I am a rational optimist: rational, because I have arrived at optimism not through temperament or instinct, but by looking at the evidence.” For now, we can all be rational optimists.

– Rafael Panlilio

Source: FAO The Globe And MailThe GuardianWorld Bank
Photo: End Poverty 2015