When Bob Geldof, Bono and their chums from the music industry filled Hyde Park to represent our wealthy collective conscience, worrying about poverty became fashionable. But, a year on, and with another crisis in the Middle East, with the price of oil breaking records, with markets still shaking after crashing just two months ago, and with energy and the rate of interest hogging the headlines, Africa and the least developed countries across the globe have slowly slipped off the agenda.
Maybe we don’t need to worry about the poor. After all, 2004 saw the world’s 50 least developed countries (LDCs) grow by 5.9 percent, the highest growth rate in twenty years and the doubling of aid to the levels seen in the ’90s.
But just because it’s not fashionable to worry about something, it doesn’t mean the problem has gone away. UNCTAD, that’s the United Nations Conference on Trade and Development has at last come up with solid ideas about how the LDCs can actually grow and pull out of poverty in a sustainable way.
The big underlying problem is this: poor productivity. During 2000-2003, it required five workers in LDCs to produce what one worker produced in other developing countries and 94 LDC workers to match the productivity of one worker in a developed country. It is basic infrastructure that is really holding the world’s poorest back. Apparently, the stock of roads in in 1999 was worse per capita than in 1990, while access to electricity is poor. The average number of years schooling of adults in the LDCs was just three years in 2000, which that was less than the level achieved by other developing countries in 1960.
And when education is good, brain drain saps the skill base. In 2000, one in five of the stock of LDC workers with tertiary educations was working in an OECD country.
In the developed world, if a business wants to grow, first port of call is the bank. But, bank credit to the private sector in LDCs was only 15% of GDP 2003, compared with 60% in low - and middle-income countries.
And, perhaps not surprisingly, given the low level of bank funding available, machinery and equipment imports into LDCs were at almost the same level in real per capita terms during 2000-2003 as they were in 1980.
When countries start to grow, they can often enjoy a virtuous circle. Extra growth creates more wealth, consumers go out and spend, creating more potential profit for producers, leading to greater investment. But at the moment, the LDCs are just not seeing this upward spiral in wealth. Where growth does occur, if it’s not coming from aid, it’s being isolated in those countries which have strong natural resources. Unfortunately, this is not the kind of growth that is sustainable. Leakages back into the economy are smaller when oil exports grow compared with a boom in the manufacturing sector.
So, whenever the world’s leaders talk about increasing aid, or whenever you read about LDCs receiving benefit from the high price of oil, just remember that what these countries need is investment in infrastructure, and until this happens, they are destined to remain poor.
For further information
The Least Developed Countries Report, 2006 UN
To subscribe: visit this link
Comments
Trackbacks