World Development at a Glance

Reports Detail Work Still to Be Done

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NEW YORK, SEPT. 17, 2005 ( Reports published ahead of this week’s U.N. 2005 World Summit detailed the progress made, and the challenges still facing, developing nations. On Sept. 2 the U.N. Conference on Trade and Development (UNCTAD) published its «Trade and Development 2005» report.

The good news was that the world economy grew by almost 4% in 2004, the best performance since 2000. Growth was even higher among developing countries, 6.5%. UNCTAD noted that the main growth engines are China and India, where rapid economic development has reduced poverty. In 2005, developing countries are expected to grow between 5% and 5.5%.

The report commented that the progress made in China and India means that there is important progress toward achieving the Millennium Development Goal of halving global poverty by 2015.

Challenges remain

Even China and India, however, still have a long way to go. The report observed that China’s per capita purchasing power in 2003 was around 10% that of the United States, and the figure for India was even lower.

There was positive news on Latin America, where the report noted there has been «a rebound from its deep economic crisis, and a return to faster growth, fueled by export expansion.»

Africa, beset by economic problems for many years, posted a 4.5% growth rate, and is expected to approach 5% this year. But despite recent positive developments, the report judged that growth in sub-Saharan Africa «is still too low to make decisive progress.»

The report also expressed concern over the lack of growth in euro-area European countries as well as in Japan, where domestic economic demand remains weak. And the report expressed concern that the main engine of growth in the developed world, the U.S. economy, may run out of steam before other countries or regions are able to take over that role.

Another concern is the increase in oil prices, which by mid-July reached $58 per barrel, double the mid-2002 level. Developing countries in particular are expected to suffer from the higher prices given that their industries require higher levels of oil to produce the same amount of goods than the more advanced economies.

Daily toll

Sept. 7 saw the publishing of the Human Development Report 2005, by the U.N. Development Program. This report too noted that important progress has been made in the last few years, with poverty falling and far greater international attention being paid to improving the state of developing countries.

Since 1990, life expectancy in developing countries has increased by two years. There are now 3 million fewer child deaths annually and 30 million fewer children out of school. As well, more than 130 million people have escaped extreme poverty.

Nevertheless, the report added: «Every hour more than 1,200 children die away from the glare of media attention.» The causes of death vary, «but the overwhelming majority can be traced to a single pathology: poverty.»

Highlighting the contrasts between rich and poor, the report commented: «One-fifth of humanity live in countries where many people think nothing of spending $2 a day on a cappuccino. Another fifth of humanity survive on less than $1 a day and live in countries where children die for want of a simple anti-mosquito bed net.»

The world is at a crucial stage, the report argued, in determining if the undertakings set out in the Millennium Development Goals (MDGs) are to be fulfilled by the target date of 2015. The report called on governments in rich countries to keep their side of the bargain.

Aid, the report commented, is sometimes thought of in rich countries as a one-way act of charity. In any case aid is a «moral imperative,» the report stated. Yet, aid is also an investment in the future, one that will not only improve prosperity but will also ensure greater security for all.

Progress has been made in increasing aid. Following the 2001 Monterrey Conference on Financing for Development, aid has increased by 4% a year — $12 billion (in constant 2003 dollars). And while rich countries dedicate only 0.25% of their gross national income to aid this is on an upward trend since 1997.

However, the report continued, even if projected increases are delivered in full, developing countries will need more funds in order to finance the MDGs. The shortfall will reach $52 billion by in 2010 and is particularly large for sub-Saharan Africa. On a more positive note the report welcomed the increase of $8 billion since 2000 in aid by the United States, which is now the world’s largest donor to sub-Saharan Africa.

Perfume or water?

Even though the sums of money are large, the report argued that they are modest by the scale of wealth in rich countries. For example, the $7 billion needed annually over the next decade to provide 2.6 billion people with access to clean water is less than Europeans spend on perfume, and less than Americans spend on elective corrective surgery. This investment would save an estimated 4,000 lives each day.

The report argued that overcoming poverty needs a variety of actions, what it termed, «three pillars of cooperation,» each of which are in urgent need of fortifying. They are:

1. Development assistance. International aid is vital to reduce avoidable sickness and deaths, and to help create the conditions for economic growth. Improvements have been made, but both the quantity and the quality of aid need to be increased.

2. International trade. Too often, the report contended, the trade policies by developed nations «continue to deny poor countries and poor people a fair share of global prosperity.» Even more than aid, trade has the potential to improve the lot of the world’s poorest countries.

3. Security. Violent conflict and systematic violations of human rights «blights the lives of hundreds of millions of people,» the report charged. More effective international cooperation is needed in order to remove this impediment to growth.

A joint responsibility

But the report also acknowledges that developing countries must play their part as well. «No amount of international cooperation,» the report said, «can compensate for the actions of governments that fail to prioritize human development, to respect human rights, to tackle inequality or to root out corruption.»

And in a nod to those who argue in favor of building working market economies in developing countries rather than simply giving more aid, the report noted that reducing poverty involves more than just simply transferring money from the rich to the poor. «Achieving sustainable poverty reduction requires dynamic processes through which poor countries and poor people can produce their way out of extreme deprivation,» the report affirmed.

In addition to promoting growth, another recommendation for developing nations is that they need to tackle income inequality. «More equitable income distribution would act as a strong catalyst for accelerated poverty reduction,» argued the report. Citing Brazil as one of the countries most affected by inequality, the report calculated that by concentrating growth among the poorest, the country could shorten the time needed to halve poverty by no less than 19 years.

Reducing inequality is no easy task, the report admitted. But for many countries, especially in sub-Saharan Africa, a key step would be to improve the productivity of smaller agricultural producers. As well, improving education is a key step to ensuring greater equality. And financial aid from the government can help give the poor the productive assets they need to escape poverty.

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