sba.gif (25753 bytes)
Click here!   

  headermenu.gif (2323 bytes)

Discussion Board

[ New Contents | Search | Post | Reply | Next | Previous | Up ]

Re: We hear a lot of talk about Globalization in the marketpl...
Chapman, Spira & Carson - Disscusion

From: U. S. Agency for International Develpment
Date: 4/24/99
Time: 11:03:22 AM
Remote User:


U.S. Agency for International Development -- Select -- About USAID USAID in the News Business/Procurement Publications Democracy Education & Training Econonmic Growth Environment Humanitarian Response Information Technology Population & Health Regions & Countries Development Links Videos Site Index Get information about the Humanitarian Crisis in Kosovo or dial 1-800-USAID-RELIEF for assistance


Encouraging Broad-Based Economic Growth

The Challenge

The world economy has grown by an average of 3.5 percent per year during the last quarter century. However, the pattern of growth has been uneven among countries and within countries. A significant number of developing nations have achieved broad-based economic growth and thereby reduced poverty substantially, but many others have not. A quarter of the world's people remain on the margin of survival, struggling with malnutrition, poor housing, illness, and unemployment. Poverty on this scale is a global problem that makes other global problems worse. Economic stagnation and persistent poverty in developing countries directly affect the interests of the United States and other industrial nations. Developing countries that have achieved sustained economic growth and substantial reductions in poverty are the fastest-growing market for U.S. exports. But opportunities to expand into new markets cannot materialize where growth does not occur and where poverty limits the demand for goods and services.

Slow or inequitable growth and widespread poverty feed political instability and civil strife. They can drive economic migrations, as people flee economic hardship and political conflict for safer, more prosperous countries. They cause unplanned, unmanageable urbanization, as economic refugees flee rural areas for the city. They figure prominently in environmental degradation. Moreover, privation, poor health, and illiteracy contribute to high fertility, rapid population growth, and food insecurity.

The keys to economic growth and reduced poverty are an appropriate policy environment, sound institutions, good governance, adequate investment and savings, the availability of appropriate productive technologies, and access by the population to adequate food, health care, education, and housing. But beyond these basic requirements, there is no single best way to promote economic growth. USAID believes that a strategy for economic growth should be shaped by strategic objectives, not specific methods. What then is USAID's vision of economic growth?

USAID will help developing nations permanently enhance their capacity to improve the quality of life. Our fundamental goal is to help individuals within those societies improve the quality of their own lives and share equitably in the benefits of economic growth. We will concentrate on helping nations remove the obstacles that interfere with their economic vitality. We will concentrate on helping people unleash their creative and productive energies. The inevitable result of these endeavors, we believe, will be broad-based and sustainable economic growth.

Strategic Goals and Areas of Concentration

USAID aims at helping the people of developing nations become participants in the economic and political lives of their nations, thus creating markets and reducing global poverty. We believe we can measurably contribute to this by supporting policy reforms in key economic sectors; by strengthening economic and political institutions critical to good governance; by encouraging the effective functioning of markets; by investing in human resources, especially the education and health of people; and by aiding projects designed to promote sustainable growth.

USAID will promote broad-based, sustainable growth by addressing the factors that enhance the capacity for growth and by working to remove the obstacles that stand in the way of individual opportunity. In this context, USAID will concentrate its efforts in three areas:

Strengthening markets: Healthy market economies offer the best prospects for sustained, broad-based growth, expanded individual opportunity, and reduced poverty. USAID will address policy and regulatory impediments to the development of local markets and exports. This would include the enabling environment of policies, regulations, and laws; this environment affects agriculture and commerce, especially small farms, microenterprises (including poverty lending), and small businesses. USAID will also address weak or absent institutions of a market economy; inadequate infrastructure (including markets, storage, and transport); and technical assistance for the privatization of state-owned enterprises.

Expanding access and opportunity: USAID will pay particular attention to expanding economic opportunities for the less-advantaged in developing countries by helping to promote microenterprises and small businesses; by focusing on the development and delivery of technology, including agricultural technologies appropriate to small farmers; by enhancing food security at the household and community level; by increasing the access of women to employment, land, capital, and technology; and by supporting social sector development intended to enhance the well-being of poor and disadvantaged peoples.

Investing in people: Building human skills and capacities throughout a society is essential for sustained growth, poverty reduction, and improved quality of life. USAID will support programs that address inadequate health services, particularly in the area of basic, preventive, and reproductive health care; education systems, especially primary education for girls and women; technical and business skills and access to technology; and other related social services and institutions that facilitate broad-based participation, especially by women, indigenous peoples, and other disadvantaged groups.

Operational Approaches

USAID's efforts to promote broad-based economic growth will be shaped by these thematic approaches:

Participation. Fundamental to broad-based economic growth is the widespread involvement of individuals in the economy and society at large. USAID programs will foster participation in this broader sense, ensuring that efforts to promote economic growth involve and enhance the prosperity of people throughout the productive sector, especially microentrepreneurs, small business owners, smallholders, and members of cooperatives.

Institutional Development. Development must rely on local capacities. Foreign donors can assist, but the fundamental burden rests with the people and institutions of developing countries. USAID seeks to strengthen public and private institutions in developing countries, so that they can manage their own development process, consistent with the wishes and needs of their citizens. The objective should not simply be more institutions, but better institutions -- legal codes that are more coherent; courts that can enforce their decisions; and bureaucracies that are more effective and more responsive to the individual.

Sustainability. USAID has an interest only in economic growth that is sustainable. Growth that occurs without regard for degradation of the natural resource base impoverishes future generations. Growth that depends on constant infusions of grants or subsidized financing from abroad is inherently unsustainable.

Sustainability entails transformations. It requires the transformation of the work force so that it is healthier, better educated, and more inclusive. Concomitantly, sustainability entails increases in productivity that do not rely on the increased exploitation of workers. Sustainability requires an indigenous capacity to generate technology appropriate to local needs, as well as policies and institutions that facilitate the transfer and adaptation of technology from abroad. In predominantly agrarian societies, sustainability entails the transformation of subsistence farming into an agriculture that can create surpluses and increase rural incomes. It depends upon a viable urban sector that can generate jobs, provide essential services, accommodate migration, and boost productivity. Most important of all, sustainability mandates the greater involvement of individuals and communities in the decisions that affect their well-being.

Programs and Methods

In planning and supporting programs, USAID will ask: What is needed to unleash the productive capacity of this society? To strengthen markets, invest in people, and expand access and opportunity, especially for the less advantaged, USAID will support the following kinds of programs and methods:

In the Area of Strengthening Markets: The foundation of economic growth is a favorable policy and institutional environment. This creates and strengthens markets, which, in turn, increase efficiency, encourage broader participation, and reduce poverty. Few foreign assistance projects can achieve their goals in an unfavorable environment.

Our objective is to work with host country governments, local authorities, communities, individuals, and other donors to create an enabling environment, comprising policies and institutions, that systematically and consciously encourages both individual initiative and choice in the private sector. USAID's programs to strengthen markets will pay close attention to improved governance and local empowerment, because these factors, more than anything else, determine the success or failure of policy reforms and institutional investments.

USAID will assist host nations in building indigenous institutions and developing policies that promote openness to trade and investment, support agriculture and rural enterprise, strengthen infrastructure and delivery of services in cities, provide adequate incentives for exports, reinforce the effectiveness and transparency of fiscal and monetary policy and regulations, avoid inefficient import substitution and unwarranted protection, and strengthen the enabling environment for development of the private sector.

USAID's programs for policy, regulatory, and legal reforms will help governments address such areas as tariffs and other trade restrictions; tax codes; investment; privatization; pricing mechanisms; the informal sector in both rural and urban economies; financial markets and services; agricultural production, marketing, subsidies, and land tenure arrangements; labor laws and policies; formalized property rights, including intellectual property rights and patents; contract and property law; and business regulations. Particularly at the macroeconomic level, USAID will coordinate closely with the reform programs of the World Bank and the International Monetary Fund. USAID will assist recipient governments in their efforts to formulate and implement adjustment policies that are consistent with the country's development and can be supported by its people.

The Agency will help to build institutions by addressing the restructuring and development of local, provincial, urban, and regional markets; reform of the education and health sectors; and reforms that encourage efficient private and public investments in infrastructure, especially capital projects such as roads, ports, housing, water supplies, sewage and waste systems, and electrical grids.

USAID will encourage the establishment of flourishing agricultural sectors by addressing policy issues, marketing factors, and technologies. Programs will focus on factors that are pivotal to agricultural success: market-oriented pricing and trading policies; access to inputs, such as seeds, fertilizer, credits, technologies, information, and land; access to domestic and export markets; and crop production and marketing choice. USAID will continue to support agricultural research -- work that has had a global impact and is indispensable to developing new methods and technologies that enhance growth and productive employment opportunities.

In the Area of Expanding Access and Opportunity: Local groups and individuals must take part in identifying problem areas, suggesting solutions, planning and designing projects, organizing intermediary institutions, overseeing implementation, and evaluating successes and failures. This, in turn, requires a commitment to leveling the playing field and empowering individuals so that they can fully participate in the development of their nation.

This is especially true for people who are mired in extreme poverty. Their primary need is the wherewithal to acquire sufficient food, a modicum of assets, and access to markets so that they can join the productive economy. Microenterprise development, including poverty lending, can be an effective way to address this need -- the overriding, daily concern of more than a billion people.

USAID's programs thus will emphasize microenterprise and small business development. Our microenterprise programs will address three elements that are critical to broad-based economic growth and participation: removing obstacles that impede the creation of new businesses that provide incomes; helping existing enterprises to expand; and supporting the transition of small businesses and microenterprises to the formal sector.

To help microenterprises and small businesses become established and grow, and to assist the poorest men and women to become economic participants, USAID will support programs to simplify regulatory procedures and increase access to markets and technology. We will work with national and local authorities and private groups to enhance access to capital through cooperatives, village and neighborhood banks, and other poverty lending institutions. To help poor individuals and communities accumulate assets, finance their own development, and lessen their dependence on external sources of capital, USAID will support the development of banks and other self-sustaining financial institutions, including credit unions, that service small savers and borrowers.

Finally, because the protection of human rights, including the rights of workers, is fundamental to sustainability, USAID will support programs that seek to expand and safeguard these basic rights. USAID programs to promote economic growth will take into account labor conditions and worker rights, especially those of women, the poor, indigenous peoples, economic and political migrants, and those vulnerable to debt servitude and indentured labor.

In the Area of Investing in People: USAID believes that sustainable, broad- based development requires investing in people to improve their health and productivity, enhance their skills, protect their rights, and help them be full participants in society.

The acquisition of economically valuable skills plays a central role in the empowerment of individuals. Education increases social mobility and thus serves as a formidable mechanism of conflict resolution. Moreover, rising education levels are critical to democratic governance and peaceful political discourse. USAID's education programs will give particular emphasis to the quality and availability of primary education, especially for the poor, women and girls, and minorities. The Agency will also support targeted, market-oriented interventions, aimed at technical and vocational training; the freer flow of technology and technical information; and training in business skills.

Recent World Bank findings show that a package of basic health care services can dramatically enhance societal productivity, especially among the poor. Such services alleviate many curable but endemic and debilitating illnesses that prevent people from earning a living or participating in society. Thus, USAID will support the creation and improvement of systems that provide basic, reproductive, and preventive health care. USAID will also focus on maternal health; child survival, including nutrition, immunizations, and treatment of diarrheal diseases and acute respiratory infections; access to clean water; control and elimination of endemic tropical and infectious diseases; prevention of HIV/AIDS and other sexually transmitted diseases; and the training of professionals and technicians in basic, reproductive, and preventive health care.

Measuring Results

Programs will be designed to produce results that demonstrably affect and enhance the way people live. In their conception and implementation, programs to stimulate economic growth must benefit local populations. In evaluating the impact of programs, the overarching concern should be whether standards of living have improved and whether improvements have been manifested broadly within society. While no program can touch every aspect of economic life within a society, individual programs in each of the three areas of concentration need to be structured to produce affirmative answers to these kinds of questions:

Has the incidence of poverty declined? Have incomes and employment risen for the key groups that comprise the poor? Are countries better able to address poverty using their own resources?

Are employment, incomes, and productivity in the informal sector rising? Have a significant number of microenterprises expanded their scale of operations or made the transition to the formal sector? Have women, minorities, and indigenous peoples participated in this expansion?

Have agricultural incomes and disposable rural incomes improved? Have increases in agricultural incomes been spread broadly among the rural population? Do small farmers have increased access to improved seeds, farming methods, purchasing and marketing structures, technology that allows them to increase their productivity, and export markets? Have these improvements increased farm income?

Are markets working more efficiently, with increased levels of activity and broader participation?

Have governments implemented and maintained agreed sectoral reforms? Have those reforms had the positive economic effects intended? Do the reforms enjoy sufficient public support so as to make them sustainable?

Has the quality of primary education improved? Has the number of children with access to primary education risen? Is the proportion of girls in primary schools increasing? Is the proportion of children of indigenous peoples in primary schools increasing?

Has the availability of capital to the poor increased? Are more community- based lending institutions operating? Has the number of small savings institutions, such as credit unions, increased? Has the ability of these institutions to attract deposits increased? Are they viable and sustainable?

Do indigenous NGOs, including labor unions, PVOs, cooperatives, and consultative planning councils, function in ways that empower the poorest people in society and enable them to participate in national economic and political life?

Has agricultural productivity increased? Have market prices for food remained stable or decreased? Do individuals and communities have greater access to food, either through increased production or easier acquisition through markets?

Have the flow and availability of technical and support services to small businesses and microenterprises improved, and have they had a measurable effect on productivity, job creation, and profitability?

Has public health improved? Are improvements evident among all sectors of society? Have these indicators improved: the rate of infant mortality? Access to family planning services, including programs for prenatal care and maternal health? Number of cases of communicable diseases? Rate of childhood inoculation? The rate of malnutrition among children? Access to basic health care services? Equal access to health care by gender? Access to clean water?

By supporting programs that produce positive answers to questions like these, USAID can enhance the political and economic interests of the United States and materially assist the emergence of a more peaceful, more prosperous world.

Last changed: March 17, 2000