Speech
‘Growth at the heart of development’ - Speech by Douglas Alexander, Secretary of
State for International Development, on Monday 31st March 2008, at the Institute
of Directors, London
31 March 2008
Varda (Shine, Managing Director of De Beers’ Diamond Trading Company), thank you very much indeed for that kind introduction. I would also like
to say a warm thank you to both Business Action for Africa and the Overseas
Development Institute for hosting tonight’s event.
Business Action for Africa, as we’ve heard, demonstrates the knowledge and the
commitment that many businesses – from large multinational corporations to small
businesses – have to the continent of Africa.
And I pay tribute to its work - an example of exactly the kind of effort we will
need to see more of from across the private sector, governments, civil society
and faith groups if we are to meet the Millennium Development Goals by 2015.
Let me also say a word about Simon Maxwell - and the Overseas Development
Institute - who I’ve come to know well since becoming International Development
Secretary last Summer. Simon always has a valuable contribution to make to any
debate on development issues – I’m sure we’ll hear as he chairs the session
later – and the ODI has an excellent record of stimulating lively discussion,
notably, and as he said earlier, opening up discussion in its recent series of
events on growth, which I’m sure many of you will have attended. So let me also
thank Simon and the ODI for their participation this evening.
Growth at the heart of development
My remarks today will focus on the importance of economic growth as a vital tool
for tackling poverty and reducing suffering. And in this view I judge I’m in
good company, as the Prime Minister said last July in an address to the United
Nations, and I quote: “For too long we have talked the language of development
without defining its starting point in wealth creation.”
Tackling poverty brought me into politics more than 20 years ago. Over those
years we’ve been reminded of what many of us had always known - that a job is
the surest route out of personal poverty. In the same way, we have also affirmed
that economic growth is the surest route out of poverty for nations. Indeed,
growth has accounted for as much as 80% of the poverty reduction around the
world since 1980 – helping as many as half a billion people to lift themselves
out of poverty in those decades.
Indeed, I’d be surprised if anyone in this room would argue against the
contribution that economic growth can make to human development. Yet I believe
that many people who care most about development still feels somewhat
uncomfortable about arguing the progressive case for growth. I’ve thought about
this since my appointment and I’d venture to suggest three reasons for this lack
of comfort within the community.
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First, as a response to the development orthodoxy of the 1980s and early 90s,
which is often seen as having pursued economic growth as an end in itself –
indeed to the detriment of the people and the communities it was supposed to
benefit.
Second, some in the development community are uncomfortable discussing economic
growth without caveats such as ‘sustainable’ and ‘pro-poor’. And let me say that
concern for the equitable distribution of scarce resources is also, of course,
central to my politics. Yet as Paul Collier has argued, the great problem of the
bottom billion is not that they have had the wrong type of growth, it is that
they have not had any growth in many circumstances.
And third, the other explanation for the lack of comfort is the lexicon of
economic growth – of GDP levels, growth indicators and economic analysis – does
not lend itself to building support among the general public in the same way as
those issues we can all immediately relate to. Giving every child a right to
education. Giving a mother the care she needs to ensure that her baby is
delivered safely. Ensuring that no child goes to bed on an empty stomach.
My contention this evening is not that we should value economic growth as an end
in itself. Indeed, as Aristotle wrote, “wealth is evidently not the good we are
seeking; for it is merely useful and for the sake of something else.”
Rather, I believe that - as Amartya Sen has argued - we must clearly understand
and articulate the role of economic growth in advancing development. We must
ensure that we give appropriate prominence to economic freedoms alongside
political and social freedoms.
Now of course, the social and political environment will play a major role in
either constraining or enhancing economic opportunities. But extending
opportunities for individuals to increase their prosperity will be central to
overcoming the inequality that still persists in the world today.
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I would suggest that the pursuit of this trinity of freedoms - social, political
and economic - lies at the heart of social justice. And these three, beyond
their intrinsic value, are mutually reinforcing. Political liberties help to
provide the stability necessary for economic growth. The provision of basic
social services, from health care to education and social protection, help to
facilitate economic participation. And the proceeds of economic growth help
finance the public services that so many of us see as crucial to human
development.
So the Department for International Development will continue to put support for
good governance at the heart of what we do. And we will of course continue to
support our partners to extend social opportunities – indeed at least half of
all our direct support to developing countries will go to public services.
But in the remainder of my remarks this evening I will set out specifically how
we will support our partners to extend economic opportunities. For this is what
developing countries have asked us on many occasions for many years. And
supporting economic growth is vital to ensuring that our aid is used as it
should be – to make further aid redundant over time.
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A hierarchy of needs
The priorities for action will of course depend on the country’s particular
circumstances – for history has demonstrated that there is no single ‘model’ for
economic growth.
For the countries identified by Paul Collier as home to the world’s “bottom
billion” people, trapped in poverty, a priority must be, as I suggested, to
stimulate growth. For those economies have been in reverse for a generation –
poorer indeed in the year 2000 than they were back in 1970.
For countries that are beginning to achieve growth, the priority is surely to
sustain it. Recent years have seen strong growth in Africa – with 17 countries
growing at more than 5% a year and another seven countries at more than 7% a
year in the 10 years to 2005.
In many countries, this growth has been stimulated by good economic policies.
But much of this growth has been driven by high commodity prices – vulnerable to
changes in global markets, it cannot be a sure guide to future success. African
countries will therefore need support to ensure this promising growth lasts not
for years but for generations.
And finally, for those developing countries that are successfully sustaining
growth, the priority should be to build inclusion – both to ensure that as many
people as possible are pulled out of poverty, and to strengthen growth’s
virtuous circle by increasing productivity across the entire economy, not just
in sectors and pockets.
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India has sustained high growth rates yet remains home to some 390 million
people living on less than a dollar a day. I welcome the focus therefore on
inclusive growth in the Indian Government’s Budget last month, and the United
Kingdom is supporting it by providing major programmes of support to rural
livelihoods, microfinance and education.
Indeed, each developing country – whether India or Sierra Leone – will need to
take the right policy decisions specific to its own circumstances in order to
stimulate growth and tackle poverty.
Yet I would suggest that the international community can support developing
countries in two important ways: first by creating a global environment in which
they can compete and succeed; and second by supporting countries to overcome
their internal barriers to growth.
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Global environment for growth
There are two international negotiations currently underway that are of course
critical to the opportunities of every country – whether developed or developing
– to increase their prosperity. Those are the Doha talks at the World Trade
Organisation, and the climate change negotiations to create a post-Kyoto deal.
The United Kingdom is committed to fulfilling the on-going promise of the Doha
development trade round. An ambitious, balanced Doha deal could bring
significant gains to the global economy and boost growth and jobs across entire
continents. The next few weeks are vital if we are to achieve success - the
window of opportunity is small but also closing.
The time for technical negotiations is now drawing to an end, and the decisions
that now need to be made are often going to be made at ministerial and political
levels. The Prime Minister has been at the forefront of the global drive to
secure a deal, and is in regular touch with President Bush, President Lula of
Brazil and Prime Minister Singh of India to push efforts forward. I have
similarly discussed with Peter Mandelson, US Trade Representative Susan Schwab
and WTO Secretary General Pascal Lamy. And we helped to organise and fund a
conference very recently in Lesotho for Trade Ministers from the least developed
countries to meet and agree what they – representing a third of the WTO’s
membership – actually wanted to see from a deal that could be concluded.
So I call on all countries now to support Pascal Lamy in bringing Ministers
together in the weeks ahead to forge an agreement that could provide a much
needed boost for the global economy.
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Indeed, beyond the benefits that such a deal would bring for all, world leaders
have a duty to address the protectionism that prevents developing countries from
playing a full part in global markets today. For although the global flow of
trade has more than doubled since 1990, protectionism and trade-distorting
subsidies have resulted in developing countries losing some $24 billion a year
in agricultural income alone.
At the same time, as I reflected at the introduction to this section, the
international community must meet the urgent challenge of climate change. I
outlined my views on development and climate change in a speech at the LSE last
month – when I argued that unless we address the challenges presented by climate
change we threaten to see undone much of the progress made in recent years in
tackling poverty.
Doing so will require the creation of global low-carbon economy that enables
sustainable long-term growth in both developed and developing countries. The
building blocks of such an economy will be major institutional reform at both
national and international levels; the establishment of a global carbon market
that increases the flow of finance to the least developed countries; and
policies to support the development of new technologies.
Trade and climate change are two truly global issues with local impacts. The
private sector, as an engine of growth, can bring both global and local
opportunities – which the Department for International Development will of
course support.
Globally, through helping major businesses to strengthen their links with
developing countries, we can help to increase investment and to create jobs
within these marketplaces.
That is why I will join business leaders from around the world at an event in
May to discuss how the private sector can use its expertise to support growth
and help developing countries to accelerate their progress towards meeting the
Millennium Development Goals.
Locally, we will support developing countries to develop more competitive
markets and improve access to economic opportunities for the poor within these
countries.
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Local environment for growth
This will be a part of our broader efforts to support developing countries to
create a positive local environment for growth.
Firstly, countries need the right political and institutional environment to
stimulate investment and prevent corruption. Of course the principal
responsibility for this lies with the government, civil society and citizens of
each country – yet we can provide help.
The Extractive Industries Transparency Initiative, launched of course by the
United Kingdom, brings together global business, governments and NGOs to show
how much money governments receive from oil, gas and mining contracts. The
Nigerian Government estimates that in one year alone, this new transparency
saved $1 billion that would have been lost otherwise through corruption.
Secondly, the international community must ensure that we provide aid in order
that developing countries can invest in the capacity necessary to grow. That is
why the United Kingdom has committed to spend $750 million on aid for trade each
year by 2010 – to build the infrastructure, the communications and the skills
needed to take advantage of trading opportunities.
But thirdly, and most importantly, we can support developing countries to
develop their own growth strategies. We have learned that there is no ‘one size
fits all’ approach that can be applied from country to country.
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So the reforms, as I suggested earlier, needed in Sierra Leone – where the cost
of opening a current account is more than half of the average annual income –
will be different to those needed in Nigeria, where less than a third of the
population have access to electricity. And the needs will be different again in
Burundi – where it takes on average 71 days to comply with all import
procedures.
These collective requirements – policy reforms, institutional reforms and
investment in infrastructure – must be driven by developing countries
themselves. Yet we can, and we will, provide the support necessary to drive
growth.
And that is why I can announce this evening that the Department for
International Development will commit at least £37 million over the next three
years to establish a new International Growth Centre. This virtual network of
world experts on growth, from academics to investors, will provide we believe a
world-class resource for Governments of developing countries.
The Growth Centre will not push a – I would suggest – ‘one size fits all’
approach to growth – but will instead support governments to address their own
particular needs, whether that means: stimulating growth for countries emerging
from conflict; sustaining periods of rapid economic growth; or ensuring that
poor people can participate in and benefit from the economic growth that is
achieved.
So whether the priorities are increasing agricultural yields or extending
financial services, expanding the energy sector or ensuring that the next
generation has the skills it needs to compete, the growth centre will help
countries to put in place the hard analysis needed in order to make often
difficult choices.
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Conclusion
Let me close my remarks this evening on a note of optimism. The proportion of
the world’s population living on less than a dollar a day has fallen from a
third in 1990 to a fifth today.
Of course much of this progress has been made in East Asia. Indeed China alone
has seen over 450 million people out of poverty since 1979. India’s impressive
growth since the mid-1990s is set to continue. Over 400 million new jobs have
been created globally since the early 1990s, almost all of them in developing
countries.
So, economic growth is not, I would suggest, simply an area of academic
interest. It is a critical debate for anyone who cares about development. I
believe that the growth centre that we are launching this evening can and will
play a critical role in helping more people around the world to lift themselves
out of poverty. Indeed, I would suggest in conclusion that economic growth is
not the enemy, but an ally in the fight to make poverty history.
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