Growth with equity is good for the poor

Review of the report written by David Dollar and Aart Kraay of the Policy Research Department of the World Bank entitled 'Growth is good for the poor'. The report argues that economic growth is closely associated with poverty reduction, and that globalisation and openness bring the same benefits to the poor as to the non-poor. The clear message of the report is that standard economic policies on liberalisation will generate the growth and distribution patterns needed for success in poverty reduction.

Oxfam argues that:

• 'Growth is good for the poor' reflects an ideological hankering for a return to the golden age of free market economics in the 1980s. It is an attempt to radically change government policy, attempting to undermine poverty-focused growth
• 'Growth is good for the poor' is defective on two counts:
  • It is anti-poor because it ignores the critical role of income distribution in shaping opportunities for poverty reduction
  • It is anti-growth because extreme inequality and the poverty associated with it, wastes productive potential on a vast scale

• That growth is good for the poor is a statement of the obvious. The real question is what type of growth is best for poverty reduction, and which policies will help to bring about more equitable patterns of growth
• For policy makers concerned with poverty reduction, the aim should be to sustain high growth, but with the poorest 20 per cent capturing a proportionately larger share of the increment to growth
• Improved income distribution would strengthen the linkage between growth and poverty reduction. Unfortunately, there is evidence from many countries that wealth gaps between rich and poor are widening
• Governments have a key role to play. Poor people are frequently excluded from the opportunities created by globalisation by inadequate access to productive resources, weak marketing infrastructures, illiteracy and poor health. Government action in these areas is vital to achieve a wider distribution of opportunity. Redistribution through fiscal transfers is one option. But the real challenge is to create the conditions in which poor people can produce their way out of poverty, contributing to national wealth creation in the process
• Growth is good for the poor fails to address the real challenge facing policy makers in this area. The challenge is to establish which types of growth are more likely to improve income distribution, and to develop policies to achieve more equitable patterns of growth

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