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Supporting Sustained Economic Growth & Poverty Reduction

Supporting Sustained Economic Growth & Poverty Reduction

Supporting Sustained Economic Growth and Development: Lessons from Successful Countries and Implications for Mozambique (Steve Radelet, 2004)

During the last forty years about two dozen low-income countries have achieved either moderately high or very high rates of economic growth, sustained productivity increases, and poverty reduction. The best known are the East Asian “Four Tigers,” China, Malaysia, Thailand, and Indonesia, but other countries have achieved steady growth and poverty reduction as well, including Botswana, Mauritius, Tunisia, Chile, the Dominican Republic, Lesotho, and more recently India. For some the growth was spectacular, while for others it was more modest, but still important. For example, the Dominican Republic has recorded a seemingly modest growth rate of 2.5 percent per capita, but since this average growth was sustained for 40 years it resulted in a tripling of average real income.

Initiating and sustaining economic growth over long periods of time is one of the most difficult challenges facing governments of low-income countries around the world, but the achievements of these countries shows that it can be done. Experience shows there is no single recipe for success in development. Each country faces different circumstances and obstacles, and has different endowments (positive and negative) of geography, natural resources, and human capital. The strategy that worked in small, urban, resource poor, strategically located Singapore is different in many ways from that used in rural, resource rich, landlocked Botswana. The highest priorities for one country are not the same as for another; moreover, the highest priorities and challenges within a country change over time and during the course of development.

Yet there are several broad similarities across the countries that have been most successful in achieving rapid development over the past forty years. While the specifics varied across each country (and within each country during the process of development), there were several common elements across the development strategies pursued by the most successful developing countries. Four key elements stand out: macroeconomic and political stability, significant investments and efficient service delivery in health and education, establishing strong governance and institutions, and providing an environment conducive to private sector development. These four "pillars of development," in one form or another, have been the cornerstones of the growth strategies of essentially all of the successful countries.

This note examines some of the key characteristics that have distinguished the most rapidly growing low-income countries from the slower growing countries over this period. It then gives special focus to one of the key elements: establishing a strong environment for private sector investment and entrepreneurship, especially for labor-intensive manufactured exports. Finally, it draws from these trends some possible implications for Mozambique.

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