Stepping out of the shadows

PUBLISHED : Friday, 28 July, 2006, 12:00am
UPDATED : Friday, 28 July, 2006, 12:00am

It is fair to say that the world economy in general has never done as well as it's doing now, even as oil prices continue to rise. As they chug upward, a lot of old shibboleths have to be thrown out the window.

Serious recessions that used to plague the industrialised economies with the regularity of the business cycle seem to be a thing of the past, as is the rapid inflation that accompanied them. America's 'Clinton boom' did run out of steam just as president Bill Clinton left office, but the Bush administration's tax cuts appear to have made the US slowdown extraordinarily short. That is still no excuse for weighing them so heavily towards the rich.

Countries as diverse as Sweden, Denmark, Britain, Spain and Ireland have backed up America's argument that freeing up markets and easing burdensome controls and regulations produces good rates of economic growth. Yet they have also countered America's more naked capitalism with successful programmes for social justice, universal health services and poverty eradication. Indeed, the most socialist of them all, Sweden, is currently the fastest-growing economy, on a per-capita basis, in the western world.

India is soaring towards Chinese rates of growth. It has a better chance of all-round success than China because its institutional, legal and political establishments are more developed and sophisticated. Japan is back in the growth game after a decade of post-economic-bubble repairs. Russia and Brazil - written off not that long ago after horrific setbacks - are probably set to become major economic powers within a couple of decades.

Many middle-income developing countries, from Peru to Indonesia to Nigeria, are purring along at a good speed thanks to a combination of fiscal reform, macroeconomic stability and a healthy export market. They have been able to leapfrog the development process through computer technology, mobile phones, airplanes and all the paraphernalia of modern industrial technology. As a result, they are growing at two to three times the rate that the present industrialised economies did when they were first developing in the 19th century.

In Africa, nearly 20 countries have achieved annual rates of growth of 5 per cent or more in recent years. The UN Conference on Trade and Development (Unctad) reported this month that a good number of the 50 least-developed countries are beginning to show reasonable rates of growth. Most of the 50 are in Africa, but 13 of them are in Asia - including Afghanistan, Nepal and Laos.

During the 1980s and 1990s, this group grew at less than 1 per cent a year, well under their rates of population growth. Now the average rate of growth among the least-developed countries is over 5 per cent, a healthy figure. And, for the first time, the African countries are doing rather better than the Asian ones.

The countries that are succeeding are those that attract unprecedented levels of foreign investment and foreign aid. This is very different from the 1990s, when the rich world seemed to have given up on the very poorest - despite persuading them to reform their economies with trade, financial liberalisation and privatisation. Aid inflows have doubled since 1999. Important progress has been made in debt relief, and there has been an effort to expand duty-free and quota-free access for their exports.

The Unctad report said, with a new optimism, that 'the least-developed countries have the potential to achieve very high rates of growth and to reduce poverty rapidly'.

Many of these countries would surge forward if the west continued to increase its aid and private investment, limited its recruitment of the poorest countries' best and brightest, and delivered on the trade opportunities it has so long talked about.

It would be wonderful to be able to throw the shibboleth of the 'no-good, helpless poor' out of the window once and for all.

Jonathan Power is a London-based journalist