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Jump to Chapter 2 Sections:
>> New thinking on drivers of growth >> Income inequality is declining >> More trade and investment mean faster growth >> Increasing U.S. imports through the African Growth and Opportunity Act >> A microeconomic agenda for development >> How can the U.S. support growth in developing countries >> Background papers >> References
The United States has been growing economically ever since 1776, while most of the world has not. Per person, economic growth in the United States has averaged only about 1.7 percent a year. But over 225 years this growth has caused a 44-fold increase in per capita income. Thus high U.S. living standards are explained by the persistence of growth, not its speed. Sound institutions and economic governance allow individuals to become wealthier and more productive over time, secure that the fruits of their efforts will not be arbitrarily taken from them.
The challenge for developing countries is to promote growth long enough to achieve prosperity. In many ways it is easier for them to do so than it was for the United States. Many productivityenhancing tools discovered during the course of American growth can now be easily acquired and applied. They do not need to be reinvented. But political, ethnic, tribal, and religious rivalries and predatory governments impede coherent, sound economic policies supported by the rule of law. Such policies offer the best hope for rapidly reducing poverty.
Effective economic governance makes development possible. Growth policies can be made to have
the benefits reach the poor. But in most developing countries the real challenge is achieving any kind of sustainable growth and over the long term, a growing economy is required to reduce poverty. At
least for the next generation, U.S. efforts to reduce poverty in developing countries must focus on promoting growth in developing economies.
This chapter examines long-run patterns of economic growth in developing countries, identifying
reasons for sustained growth in certain countries and for its absence in others. Supporting agriculture is crucial for many developing countries and for many poor people. In addition, ntegrating with the world economy through trade and foreign investment helps economies become
more competitive. Ultimately, however, a nation’s productivity is determined by the productivity of
its workforce and their success is intertwined with the quality of the business climate.
New thinking on drivers of growth
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