Trade and Development Report 2003

Capital Accumulation, Growth and Structural Change

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Trade and Development Report 2003 offers a distinct perspective on global economic trends and prospects and raises some disturbing questions about the frail state of the trade-development nexus - particularly critical in the aftermath of Cancún. It traces the difficulties back to the surges in global trade and financial flows in the 1990s and warns that pushing liberalization at a time of sluggish global growth and unemployment runs the danger of rekindling mercantilist reactions in advanced countries and false expectations in developing countries.



Industrialization, trade and structural change

It is generally accepted that capital accumulation can help raise per capita income and living standards in an economy simply by allowing a fuller use of underutilized labour and natural resources without altering the efficiency with which resources are utilized. Long-term economic success, however, depends on sustained improvements in productivity; each worker producing more from any given level of effort provides the basis for rising incomes and living standards. In this sense, it is productivity gains, and not simply additional jobs, that characterize a virtuous process of accumulation and growth. Such a process is invariably associated with structural changes in output and employment as a result of both shifts in economic activities across agriculture, industry and services and upgrading to higher value-added activities within each sector through the introduction of new products and processes.


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