Retooling Global Development and Governance

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This publication provides a whole new set of ideas on how to overcome the deficiencies in the ongoing process of globalization and in the existing mechanisms for global economic governance. It points out promising directions for reform, including: strengthening government capacities for formulating and implementing national development strategies; doing more to ensure that official development assistance is aligned with national priorities; strengthening the international trade and financial systems so that countries with limited capabilities can successfully integrate into the global economy; and creating new mechanisms for dealing with deficiencies. The authors do not pretend to offer a blueprint, but aim instead at presenting ideas that could become the basis for a new, coherent “toolbox” designed to guide development policies and international cooperation.



Retooling poverty reduction strategies

While it was always an underlying aspiration, poverty reduction was not an explicit direct goal of initial development programmes. Rooted in modern growth theory which dominated early development theory, development policies of the 1950s and 1960s focused on promoting modern industrial development to accelerate overall economic growth. Industrial growth was supported through trade protection, cheap credits and subsidies and largescale public investments in infrastructure. Output growth was expected to “trickle down” to the entire population and reduce poverty through rising wages and employment generation, even if initially poverty reduction might not be commensurate with the rate of output growth, as rising income inequality was expected to be an inevitable, although temporary side effect of industrialization. Capital productivity growth would lead to rising profit shares and allow for higher savings to finance domestic investment. Over time, at higher levels of development, gains from growth would be shared more broadly with faster real wage growth and dynamic employment expansion.


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