The “Washington Consensus” – stabilise, privatise and liberalise – is dead. Long live the new pragmatism. That is the message of “the growth report” released this week by the commission on growth and development chaired by the Nobel laureate, Michael Spence.
No single recipe will secure sustained and rapid economic growth in poor countries, it argues. Governments have to choose from a variety of ingredients. Yet only governments can do so. They “are sometimes clumsy and sometimes errant”, but “active, pragmatic governments” are indispensable.
This pragmatism is one of the two principal contributions of this report. The other is its focus on growth itself. This is not to suggest that growth alone matters. But without it sustained improvements in human welfare are impossible: one cannot redistribute nothing. The report forces us to refocus attention on this overriding goal.
The great majority of the commission’s members are policymakers from developing countries. Naturally, they are interested in learning from the few countries (13, in fact) that have managed growth of 7 per cent a year, or more, for at least 25 years. They have come to two broad conclusions: first, fast and sustained growth “requires a long-term commitment by a country’s political leaders”; second, it depends on sustained engagement with the global economy, as a source of both knowledge and demand.
Beyond this, the report identifies a number of ingredients in the growth pie. No country, it notes, has sustained rapid growth without high rates of public investment in infrastructure, education and health. Furthermore, growth means profound structural change. Policy must allow this to happen, while doing what it can to protect people.
The commission also emphasises that “growth strategies cannot succeed without a commitment to equality of opportunity” and action against extreme inequality of outcomes. Meanwhile, the inclination to leave the environment aside at the early stages is a huge mistake.
The scale of the challenges is daunting. Among them is how to embed sustained growth in those countries with particular disadvantages – the small and landlocked – and also those with dangerous opportunities – the resource rich. Among them, too, is how to sustain momentum in middle-income countries. Among them, not least, is how to meet the new global challenges of high energy costs and global warming. But the report makes one thing quite clear: however difficult it may be to succeed, there is no alternative to trying even harder.