World Bank’s Prescription for Sustained Economic Growth: Governance Committed To A Market Economy

The World Bank recently made a prescription for an ideal sustained growth; notes the Economist (highlight mine)...

“SINCE 1950 13 countries have grown at an average rate of 7% a year, or more, for 25 years or longer. Were these exceptional “economic miracles”, or models for others to follow? On Wednesday May 21st a new study on the subject, “The Growth Report: Strategies for Sustained Growth and Inclusive Development”, was published by a body of thinkers and policymakers brought together by the World Bank (one of our Delhi correspondents was involved in editing the final report). The report notes that the causes of breakneck growth varied significantly between countries, but it identifies five points of broad resemblance:

1. FULL EXPLOITATION of the world economy (importing bright ideas and technology; producing exports that others want);

2. MACROECONOMIC STABILITY;

3. HIGH RATES of saving and investment;

4. letting the MARKET ALLOCATE RESOURCES; and

5. COMMITTED, CREDIBLE, CAPABLE governments.

courtesy of the World Bank

“Given their steady years of growth, India and Vietnam may be on their way to joining this select group.

The 13 economies as listed by the World Bank…

courtesy of the Economist

The common characteristics of these high growth countries, to quote the World Bank,

``The high-growth countries benefited in two ways. One, they imported ideas, technology, and knowhow from the rest of the world. Two, they exploited global demand, which provided a deep, elastic market for their goods. The inflow of knowledge dramatically increased the economy’s productive potential; the global market provided the demand necessary to fulfill it. To put it very simply, they imported what the rest of the world knew, and exported what it wanted.”

In short, governance committed to the Market Economy which benefits from a global division of labor buttressed by exchanges of ideas, technology and optimum resource allocation as dictated by the market forces.