Inclusive global growth: a framework to think about the post-215 agenda François Bourguignon Paris School of Economics Angus Maddison Lecture, Oecd, Paris, April 213 1
Outline 1) Inclusion and exclusion in global growth: past and present 2) Sub-Saharan African development as the key for future inclusive global growth 3) Global and national policies for inclusion 4) Some implications for the post-215 agenda 2
1) Inclusion and exclusion in global growth: the evolution of global inequality Measuring the global inequality of living standards i. Statistical unit World citizens ii. Standards of living National mean = GDP per capita (USD, corrected for purchasing power parity, WDI) Within country distribution: disposable income per consumption unit in national household surveys Population size (UN) iii. Global inequality = inequality between countries + inequality within countries 3
Per cents (Gini) Trend reversal in global inequality Figure 1. Evolution of global inequality : 191-21 (various measures) 8 75 Historical series 16. 7 14. 65 6 Gini Coefficient 12. 55 1. 5 45 4 35 Top 1% to bottom 1% income 8. 6. 4. Income ratio 3 2. 19 191 192 193 194 195 196 197 198 199 2 21 4
Per cents (Gini) Trend reversal in global inequality Figure 1. Evolution of global inequality : 191-21 (various measures) 8 75 Historical series Recent period 16. 7 1989 1997 14. 65 Gini Coefficient 26 12. 21 6 55 5 45 4 Top 1% to bottom 1% income 1989 1997 26 21 1. 8. 6. Income ratio 35 P9/P1 quantile ratio 4. 3 2. 19 191 192 193 194 195 196 197 198 199 2 21 5
Per cents The drop in extreme poverty : MDG1 will be reached 6 Evolution of global extreme poverty (1.25$ ppp a day): 198-28 2 5 Number of poor people (right axis) 18 16 4 3 Proportion of poor people (left axis) 14 12 1 8 2 6 1 4 2 198 1985 199 1995 2 25 21 Year Source: World Bank 6
Per cents Trend reversal in national inequality 4 Share of top 5% income in total income: 192-29, selected developed countries 35 USA 3 25 UK Japan France 2 15 Sweden 1 5 191 192 193 194 195 196 197 198 199 2 21 Year 7
Trend reversal in national inequality Change in the Gini coefficient : mid 198s to mid 2s, developed countries Finland Portugal New Zealand United Kingdom Norway Italy Germany United States Netherlands Sweden Austria Canada Belgium Luxembourg Japan Denmark Korea, Rep. Australia Greece France Ireland Spain -3-2 -1 1 2 3 4 5 6 Source: OECD Percentage points 8
Trend reversal in national inequality Change in the Gini coefficient : mid 198s to mid 2s, Other emerging and developing countries China urban Poland Kyrgyz Republic Ghana Botswana China rural Albania Philippines Indonesia Slovenia Mozambique Vietnam Tajikistan India urban Morocco Tunisia India rural Slovak Republic Madagascar Hungary Mongolia Moldova South Africa Yemen, Rep. Panama Pakistan Lesotho Algeria Iran, Islamic Rep. Malaysia Kenya -1-8 -6-4 -2 2 4 6 8 1 Source: World Bank, Povcal 9
2) Sub-Saharan African development as the key for future inclusive global growth Catching-up by emerging countries likely to continue, (but not necessarily in an inclusive way) Concern about growing gap between emerging countries and poor countries i.e. Sub-Saharan Africa SSA growth as the main challenge for the continuing inclusiveness of global growth Will SSA growth continue at the present pace? Could it accelerate? 1
Governance? Mean CPIA for 4 clusters: Sub-Saharan Africa, 25-211 4 3.5 3 2.5 Economic management 2 1.5 Macroeconomic policy Property rights Structural policies 1.5 25 26 27 28 29 21 211 11
2= 1 per cent or terms of trade? Sub-Saharan Africa: Terms of trade and GDP per capita growth, 1981-28 16 8 14 6 Terms of trade (arithmetic mean) 12 4 1 2 8 6 GDP pc regional growth rate -2 4-4 2-6 1981 1986 1991 1996 21 26 211-8 12
2= 1 per cent or terms of trade? Sub-Saharan Africa: Terms of trade and GDP per capita growth, 1981-28 16. 8 14. 6 Terms of trade (arithmetic mean) 12. 4 1. Real commodity price index: agriculture 2 8. 6. GDP pc regional growth rate -2 4. -4 2. Real commodity price index: energy -6. 1981 1986 1991 1996 21 26 211-8 13
Per cents SSA's lack of industrialization 6 Sub-Saharan Africa: Sector shares of GDP, 197-211 (arithmetic means across countries) 5 4 3 2 Agriculture Industry (excl. Manuf.) Manufacturing Services 1 197 1975 198 1985 199 1995 2 25 21 Year 14
Commodity exports as a long-run development engine for SSA countries? Commodity prices will not increase forever Fast population growth will make it difficult to rely exclusively on commodity rents In terms of GDP per capita In terms of employment Imperative need to diversify activity but how? Trade with developed and emerging countries Regional integration within custom unions 15
GDP growth does not always imply (immediate) poverty reduction 14 8 25 8 12 7 Poverty headcount 7 1 Poverty headcount 6 2 6 8 6 GDP per capita (PPP $, 25) 5 4 3 15 1 GDP per capita (PPP $, 25) 5 4 3 4 2 2 5 2 UGANDA 1 NIGERIA 1 198 1985 199 1995 2 25 21 198 1985 199 1995 2 25 21 16
3) Global and national policies for inclusion Global level International 'redistribution' from rich and emerging to the poorest countries: Official Development Assistance Cutting trade restrictions (along AGOA lines for more products) Helping regional integration within custom unions (limitations of EPAs) Encouraging capital flows (FDI) outside extractive industries Investing in region-specific technological progress (agriculture, health) 17
Promoting inclusion at national level Global forces towards more inequality within nations unlikely to disappear Inclusive global growth requires containing inequality within countries, including fast-growing emerging countries where very much global poverty still concentrates Growth is not necessarily inclusive (doubts about the Kuznets- Lewis model) Pro-poor growth strategies: macro level (trade, subsidized credit to specific sectors, infrastructure policy, etc.. or micro level 18
The key role of redistribution policies Equalizing opportunities enhances both inclusion and economic efficiency: Human capital policies (Education, health care, social protection..) Taxing bequests Fighting discrimination Taxation: Needed to finance growth and opportunity equalizing policies Make it as progressive as possible in view of potential disincentives Broad scope for progressive taxation in emerging countries as financial development makes it easier to monitor individual incomes 19
Some implications for the post-215 agenda In retrospect, the MDG agenda has promoted: Global inclusiveness through enhanced ODA National inclusiveness by promoting anti-poverty goals and opportunity equalizing expenditures ( education, health) The MDG initiative has been reasonably successful, but: Many countries still lag behind the goals despite the acceleration of growth in developing countries Achievement of quantitative goals often hide qualitative weaknesses (education, health) Most importantly, many of the constraints on inclusive global growth analyzed above are simply absent from the MDGs (inequality, employment, trade, FDIs, ) An increasing number of developing countries will graduate from development assistance and the MDG framework 2
Some features of a post-215 agenda No reason to stop the pursuit of the MDGs where they will not have been reached Be more ambitious in terms of poverty (from 1.25 $ to 2 $) and other goals (e.g. secondary education) Include qualitative elements in the evaluation of the goals Expand the dimensions of the whole strategy: By monitoring other aspects of development within developing countries (inequality, employment, infrastructure, governance) By including other instruments than aid in development assistance (trade in particular), possibly within a policy development coherence framework By including emerging countries with the development assistance system These are not new 'goals' but a more complete framework to monitor inclusive global growth. Do we need more? 21
Thank you 22