1. Growth: The Long-Term Economic Failure in Developing Countries
Mark Weisbrot

2. Growth Economic growth is important
In general, it is even more important for low and middle income countries than for high income countries such as the United States
Basic measure: Gross Domestic Product (GDP) per capita
Need benchmark: compare growth
(and progress) to past decades

3. Over the last 25 years, there has been a sharp slowdown in economic growth for the vast majority of low- and middle-income countries

5. As would be expected in a period of reduced economic growth, there has also been a decline in progress on health and education outcomes for the vast majority of low- and middle-income countries

9. The Economic Failure in Latin America

10. Economic Reforms Over the Past 25 Years
Reduced restrictions on international trade and financial flows
Tighter fiscal and monetary policies
Privatization of state-owned enterprises
Labor market and public pension reforms
Abandonment of state-directed industrial policies or development strategies
Increased accumulation of foreign
reserve holdings

12. Growth in GDP per capita, Latin America
Start of 25-year period

17. Fuente: Lora, Eduardo (2001)
Fuente: Lora, Eduardo (2001). “Structural Reforms in Latin America: What Has Been Reformed and
How to Measure it,” Banco Interamericano de Desarrollo.

31.                               
                                             
For developing countries, the main selling point of new commercial agreements such as the Free Trade Area of the Americas (FTAA) or the Central American Free Trade Agreement (CAFTA) has been the lure of increased access to U.S. markets.

32.                               
                                             
-- But will most developing countries will be able to increase their exports to the United States in the foreseeable future?
Problem: US now running an unsustainable current account deficit -- about 6 percent of GDP.
This means that the dollar will have to fall, and the markets for exports to the U.S. will shrink.
Result: Over the next decade, countries will have to displace others (e.g. China, Mexico) to gain access to a shrinking U.S. market for their exports.

34. Mark Weisbrot – www.cepr.net
                              
                                             
Mark Weisbrot –

35. They may well make sacrifices for no gain.
                              
                                             
Result:
Developing country governments should be cautious about making costly concessions in order to gain access to the U.S. market.
They may well make sacrifices for no gain.

36. Policy mistakes have contributed to the growth failure – here are some examples:

41. China’s reforms are different from those implemented elsewhere
Liberalized trade after it could compete in world markets. (Average tariff still over 40 percent in 1992)
Gradual and careful transition
Banking system dominated by state-owned banks
Government shapes and uses foreign investment in accordance with development goals
Strict controls over international currency flows

42. Conclusion
Sharp slowdown in economic growth in the vast majority of developing countries
Social and human consequences are very important
Most of the reduced progress on social indicators probably due to growth slowdown, rather than any increases in inequality
Economists and policy makers should be trying to figure out what has gone wrong

43. Center for Economic and Policy Research
Mark Weisbrot
Center for Economic and Policy Research