Educated for What
UNICEF, the World Bank, UNESCO and United Nations Development Program worked together to form World Conference on Education for All which aims to promoting education to all countries. The hard work of these entities in promoting and spreading information about education paid off when the its growth soared from 1960 to 1990. Countries in Africa and East Asia demonstrated an unbelievable increase in the percentage of primary education enrollment while 23 countries established college level during this time. However, despite the intense support and unbelievable rants about education, it still did not suffice to achieve its so-called essential task to revamp the worlds affliction.
Several studies were conducted by economists to further explain the relationship between education, productivity and economic growth. In a study conducted in African and East Asian countries, the economic growth varies despite the similarity in the human capital growth. African countries did not show improvement in their economies while some East Asian countries have demonstrated evident advancement in their economy. More studies have validated that such relationship does not exist at all. Surprisingly, the countries with notable growth in education did not show any development in their GDP per capita and workers productivity. Moreover, if it can really trigger an increase in GDP growth, then it can assumed that younger workers with higher educational attainment during the educational explosion deserve higher wages than those who have experience but this is not happening in the real world. It is the complete opposite.
Economist like Gregory Malkiv of Harvard believed that physical and human capital are determinants of income as demonstrated in Solow framework. By expanding both, economic growth will be achieved based on his study conducted with a percentage of secondary school students. However, the scope of this study is limited and therefore it cannot be regarded as valid. Furthermore, he speculated that poor countries can fulfill accelerated growth by managing their capital accumulation and education which implies that those who stash more will be prosperous. If his speculations were true, skilled workers from poor countries like India would not want to migrate to the US because job opportunities and wages are higher in their country but this is far from the truth.
Education was packaged and projected as the key to affluence and economic advancement. Appealing as it may seem, certain factors have tainted its image and it ceased to play its role. Corruption and lobbying in the government and lack of resources and technology ruin the appeal of education amongst people. Who would devote time and money to study if there is scarcity in opportunities to benefit from it In addition, the rapid growth of education has failed to provide the opportunities for the skills it created.
In conclusion, education is good but it is not the antidote for poverty and the answer to economic growth. Emphasis on the rewards of growth and creating demands for certain skills will create motivation for people to invest and work hard for the incentives that education can provide.
Cash for Condoms
Population growth gained a negative portrait worldwide when Thomas Maltus started a campaign to hinder it in the 1900. Paul Elrich, Lester Brown, USAID, Zero Population Growth and International Conference in Population and Development in Cairo jumped in the bandwagon and spread their dreadful predictions on the effects of overpopulation. According to them, the growth in population will bring about famine, hunger, scarcity of water and alarming unemployment percentage if the world population will continue to accelerate thereby affecting economic growth or per capita GDP. To prevent this scary prophecies to occur, they conspired the same Band Aid solution to this predicament
Cash for Condoms
As a form of reproductive contraceptive, condoms are used to reduce the probability of pregnancy and to deter overpopulation in nations, condoms were given away like candies. Family planning was promoted worldwide while more condoms are distributed to satisfy the demand of 150 million couples. This demand was proven invalid when a study was conducted and it resulted that these couples really want to have a certain number of children. This solution fell short in acknowledging the problem at all.
As opposed to the beliefs of the anti-population growth activists, there are certain factors that contradict the so-called negative relationship between rapid increase in population and economic growth. If history can speak for itself, it can attest to that as the population grows in the world, advancement and development in technology and knowledge were observed as through the centuries which connotes that there is a lack in relationship between population growth and per capita GDP growth. Some institutions may find that an additional child per family in a poor country can attribute to scarcity in food, shortage in water, unemployment and lower per capita income but if we look at the other side of the coin, another child may contribute to the society by being a productive worker or a talented musician or just a simple taxpayer. Moreover, because of this family planning campaign, Third world countries showed a distinct decrease in population growth but the expected improvement in per capita income and economic growth did not materialize.
With all these arguments regarding the relationship between per capita income growth and population growth, there are still some gray areas that should be contemplated like the disadvantage and advantages of population growth. The damage that overpopulation can cause to our environment cannot be ignored as well as the significant contribution of each baby in the society. Population increase can also trigger creativity among people who will result to finding new technological ways to subsidize the needs of the population. However, it can be noted that rich people from rich countries tend to have lesser children as compared to the poor people from poor countries. This is a classic example of motivation to gain rewards and incentives because even if the rich people have fewer children, they spend a lot on developing their skills through better education. Again, this trend is similar to intensive growth where in a worker have higher outputs because he is motivated to improve his economic status and his employers maximize his skills by giving him more job responsibilities. However, intensive growth cannot be confidently credited to formal schooling because as studies have shown, it was not a determinant of economic growth. Intensive growth is enticing but it is not spread all over the world. The Third World countries have failed to enforce mandates to achieve such. Disappointingly, governments have overlooked the secret to intensive growth and did not support financial loans in their countries and let their people hoard their money.
The Loans That We Were, the Growth That Wasnt
The debt crisis in middle income countries started in Mexico when they began to fail in paying their debts from commercial banks. Overspending and overborrowing were the culprits behind this dilemma. Like an outbreak, the crisis spread in different countries in no time at all and this scared the compassionate people of World Bank and IMF. Hence, they came up with adjustment lending that will help these countries to recover and then grow economically. Adjustment loans are unlike the old loans offered by the World Bank or IMF because they are combined with conditions that would contribute to economic growth. The purpose of this financial assistance is humanitarian but somehow too ambitious.
The results of this venture varied. There are some notable triumphs and some disappointing downfalls. Some of the remarkable successes of adjustment lending are Mauritius, Thailand and Korea. Similarly, Ghana, Argentina and Peru grew some percentage points in their per capita GDP after 3 to 10 years of numerous attempts and tries.
With these not-so-many wins demonstrated by adjustment lending in countries to aid and to promote economic growth, some may speculate that the variation behind the differences in the outcomes depended on the actions taken by the countries to respond to reform and to meet the policies attached with the loans. Moreover, there are some factors that were carelessly overlooked by the donors. One of these factors is inflation. In Zambia, the World Bank optimistically approved several adjustment aids to the countrys continuous increase in the inflation rate but the aftermath was not what it should be. Ironically, the inflation rate soared higher and whats more baffling is the fact that it did not stop the donor to stop giving these adjustment loans to Zambia. It also showed that sometimes the donors lack timing and initiative. They are more inclined to act after the existence of the problem instead of proactively coming up with preventive measures.
But before blaming the donors, let us scrutinize the recipients. One of the aspects behind these disappointing results are the bad policies that does not offer incentives for growth. In Mauritania, the donors gave adjustments aid without advising them to amend their black market premium. Some countries even benefited from these loans despite not meeting the conditions of the loans such as reducing budget deficit and negative real interest rates that generally rob the bank depositors interests. To top it all, the donors do not even discriminate countries with corruption issues and cannot even influence the choices of policies of countries.
On the other hand, the countries receiving this adjustment loans mislead the donors by pretending to achieve adjustment and improvement as stated in the policies. Moreover, they focus on short term solutions to their problems without taking into consideration the implications of these decisions in the future. For example, to cut the budget deficit, a government will reduce the cost of projects that would bring about income in the future or would sell lucrative government enterprises. These senseless tactics are even plagued with corruption among government officials. Sometimes they resort to controlling taxes like advancing tax collections to meet the targets. There are even some cases where in the government would guarantee a commercial loan instead of providing aid to its enterprises to create an illusion of decrease in budget deficit. Moreover, these tactics can even go as far as manipulating their pension funds. All these tricks are short term answers to long term problems. Sadly, the aim of World Bank and IMF is to extend help to countries experiencing difficulties in their economy and to hinder these problems from arising again was not met by providing adjustment loans. Instead, countries find themselves in a cyclical situation where problems are just stashed away temporarily and solutions become more intangible as time goes by.
Forgive Us Our Deaths
Poor countries all over the world received adjustment loans from World and IMF to aid their need to improve their economy and these loans have grown bigger each year. However, some borrowings were not intended for economic enrichment but for military expansion or other government projects. Sometimes the proceeds of the loans are even pocketed by the government officials.
At the start of the 20th century, a campaign was launched by celebrities and even the Popes to forgive the debts of poor countries which was called Jubilee 2000 . Unsurprisingly, the World Bank already came up with a project, Highly Indebted poor Countries Initiative (HIPC) which was designed to provide humane fragmentary amnesty of debts to HIPC. This time the Jubilee 2000 or HIPC or debt relief is then considered to be the final remedy to all economic fiascoes and the start of a better beginning for all countries.
The IMF and World Bank never ceases to be optimistic about its programs. Unfortunately, the history in debt relief programs in the past exhibited failure but that did not stop the program HICP from taking place.
Rich countries felt the humanitarian calling and formed the G7. On their summits, they proposed for longer terms of payment, lower interest rates and partial forgiveness for poor countries. Different institutions and even personalities came up with their own debt reprieve projects from left to right. With all these activities debt forgiveness programs for two decades, the highly indebted countries still remained indebted.
So what are the reasons behind all these atrophy Some people view the debts of the countries as some kind of natural setback that just came popping out of nowhere. They failed to see that these might be the fruits of irresponsible jurisdiction, corruption or pure selfishness of these countries to sustain the needs of the present generation at the expense of the next generation of people who will suffer because of their actions.
If the record of the HIPCs are checked, it will reveal that the countries with the highest debt relief forgiveness also has the highest amount of new borrowing. Its just another cyclical thing. Debt relief did not lower debt burdens at all but even triggered new borrowings and during the time when the debt relief was actively enforces, privatization and selling of government enterprises still took place among the HIPCs to probably generate funds to cover budget deficit and decrease in income were noted which connote that their enterprises are abused. The most baffling of them all is that after 20 years of debt forgiveness, some of the HIPCs remained in the negative level of economic growth.
Who should be blamed for all the debt relief fiasco It is very evident that the debts of the HIPcs can definitely be blamed from its self inflicted problems due to poor judgement and irresponsibility but the donors can also take a part of the blame for continuously financing them despite their bad policies and corruption habits. Sadly, the loans provided by IMF, World Bank and its likes have generated more debts and problems.
World Bank and IMF should have implemented stricter rules and better implementation of these rules to those who were given the aid. They should set a credit rating and prerequisites for loan grants and they should rigorously execute these conditions. There should be mandates and limits on providing financing assistance on all countries.
A debt forgiveness program is not the answer to help the poor. It is like opening the window for abuse and exploitation.
Tales of Increasing Returns Leaks, Matches and Traps
Growth is associated with setting aside the income earned today for tomorrows consumption with the advantage of earning interest from savings but at some point it is linked to technological progress because new technology can help in decreasing cost and expenses thereby causing an increase in income.
In this technological world, knowledge is considered as an asset or a form of investment. As years go by, new inventions and technological advancements were created by people to improve business operations and processes. Knowledge doesnt always mean coming up with something original but also by finding ways to alter and enhance existing technology. However, knowledge as a source of growth and income is never exclusive to its creator. Like in the case of Daewoo, a Korean company which subcontracted a Desh Garments in Bangladesh in its shirt production. Employees of Desh were trained by Daewoo and the new technology was shared. After a few years, Desh operated independently and some of its employees left to form their own garment factories. The productivity of garments business in Bangladesh boomed and remained steady as of today.
Leaks in new know knowledge and discoveries can be beneficial to our society because it can enhance existing practices that can sum up to better applications and operations thereby increasing returns. The more ideas brought together, the more possibilities of creating new knowledge and the higher the return. For Desh, its owner was not fully recognized for his contribution to Bangladesh garment industry in terms of return or royalties, nonetheless, it was the society that gained so much from this knowledge leak.
If a certain invention or knowledge was kept exclusive, the investor will reap all the reward or returns on his knowledge. A lot of investors will be attracted to establish business with the inventor because of the exclusiveness of his creation and his empire will grow even bigger. Such growth comes with power to conquer a market or even an economy.
Leaks can be advantageous to our society most of the time, however, before a knowledge leak incurs income, the assistance of the government is needed. Similarly, investment to knowledge is dependent on a governments support, without it, a countrys knowledge remain in a cyclical phase and income from knowledge will be non-existent. If a country remains low in terms of knowledge and skills, it seems pointless to invest on it. There will be no demand for the skills that a student worked hard for. With the help of a countys government and good policies, new skills can be developed and new opportunities can be created to increase income. Ironically, the government can also hinder its peoples growth through corruption and bad policies.
A workers productivity can increase when he works with people of the same skills which reveal that a group of people with the same skills function better. In the real world, workers who work in the cities have demonstrated higher productivity than their counterpart in the rural areas. As productivity increases, the wage and income also increases. In terms of real property, more business activities in the location means higher value.
It can also be noted that poor countries with unskilled workers tend to produce raw materials while rich nations with skilled workers are at liberty to develop and manufacture goods from these raw materials. Another factor that affects a workers productivity is his ethnic origin which sometimes accounts for some behaviors like unwillingness to learn new skills.
Sadly, a poor country is trapped in circles and hostaged by inevitable circumstances. If changes in policies and goals are not changed, they will remain to where they are today.
Creative Destruction The Power of Technology
The technological revolution cannot be stopped. From bulky computers, laptops were developed and continuously improved. Dial-up connection became obsolete when broadband Internet connection was launched. From brewed coffee to instant coffee. From hard to prepare meals to microwaveable and ready to eat food. Technology became apparent in almost all areas. New medicines were developed to cure diseases. New machines were made while the old ones are enhanced. However, the remarkable growth in technology assassinated the old or obsolete technology that is available in some countries.
The tremendous development of technology is remarkable but it cannot be considered as the cure-all solution to economic problems. If we will look at the history of China, we will see that China started it all when it comes to technology. They have invented iron plow, gun powder and ships which were soon copied or just enhanced by other countries. Despite its discoveries, China remained the same because it prefers to close its doors.
The technological stage of a country is a birds eye view of its GDP income per capita. Like in the US, technology is abundant and available and it contributes to higher productivity and GDP income per capita. However, technological progress is not always constructive. It destroys old technology and replace it with an improved one. Sometimes technology becomes a workers competitor. Some machines can take over a workers job. On the other hand, it takes time for industrial countries to adopt new technologies which can result to slower economic growth. Similarly, some industries are afraid to take the first step towards innovating equipment and new technology if its competitors are not joining the fold. This reluctant and slow switch to new innovations have delayed the opportunities for higher productivity and income.
Rich industries and countries are often the benefactors of technological revolution and on the other side of the coin, are the underdogs or the defeated. These are the ones who are stuck with the old technologies. New and advanced technology has induced a need among these workers and entities to demand for a protective barrier against new innovations and simililarly, a government may fear a possible decline in their power if new technologies are adapted. The older generation is in fact resisting change and that means technology. It was noted that countries economy grow faster after a war. The reason might be because these countries started with new government leaders and ousted the old ones.
Poor countries lack funds to finance studies and experiments to develop new technologies but they have the option to copy and adapt the technologies created by the rich countries and take advantage of it. While some countries can come up with new inventions, the success is not always theirs because if they fail to foresee future potential of their inventions, other countries would develop it and reap the fruits of its success.
Technology does not always kill the old technologies develop before but rather complement its uses and productivity. A printer complements a personal computer as much as it enhances its uses and capabilities. It can also complement a workers skills by contributing to the workers accuracy and productivity.
In this light, rich countries must support technology and refrain from blocking new innovations to protect its own welfare while the poor countries must take a step forward and get a piece of the technology available in the world and focus on moving forward to reform and economic growth.
Under an Evil Star
Poor families from poor countries are suffering because of lack of knowledge, skills and opportunities. Tragically, these poor countries are also prone to natural disasters like earthquakes, tornados and volcanic eruptions and disease epidemics like AIDS. Their situation is frustrating, economic-wise and opportunities-wise.
Luck plays a good role in achieving economic growth. If a country takes the very first big step towards economic growth and was successful, it has better chances to succeed. Trust and confidence from others can also bring about investments and support. However, growth on the onset of reform cannot be a determinant of growth in the future. If luck is the only thing that controls economic growth, there are no ways to determine ways to improve it. In forecasting economic growth, mean reversion theory can be used. Mean reversion suggests that after such a period of time, returns and growths will move back to the average or mean. This simply implies that if an economy was doing greatly in terms of economic growth for a certain period time, there is a big possibility that it would revert back to its average. Some people dont believe in mean reversion like Robert Waterman.
According to him, a companys or an economys success can be maintained by continuously doing the activities that made them successful. But then again, its never easy to forecast success in economics as well as any other industry for that matter.
There are certain things that are beyond the control of countries like import and export prices which directly affects its per capita income. Luck can really play its tricks in economies. Lets take the example of Venezuela. The negative per capita income growth of Venezuela was attributed to its bad policies but if we look at history, its economy began to decline the same time as oil prices dropped in the world market. Tough luck.
A poor countrys terms of trade were predicted to decline over time and the demand for basic goods will decline while others affirmed that there was a shortage in basic commodities. However, both can be considered correct because of the possibility that both can increase or decrease its value at the same time.
War happens among countries or a country among its people and this can kill an economy and reforming a country after war is like starting from scratch.
There is a chain reaction in the economic growth between industrial countries and developing countries. It is the industrial countries that set the phase of growth because they act as leaders in technological advancement and the developing countries are their followers.
What if all the economic successes and disasters just happened randomly without pattern It would definitely drive the economists crazy. Nonetheless, in Mathematics, random numbers have a certain probability to act habitually which is a bit similar to mean reversion theory but possibilities of different events to occur are greater when it comes to the former.
Having said all these, luck can sometimes affect per capita GDP growth as anything else. Poor countries randomly display variations in their economy and determining its determinants is also out of pure luck. As much as a poor country wants to move towards economic growth, if luck is not on its side, it will always remain a dream.
Governments Can Kill Growth
In this chapter, the role of governments in economic growth or decline will be elaborated. There are certain circumstances when a countrys government can attribute to its negative economic status like high inflation and budget deficits.
When a country is in a war and no revenue is expected, they come up with an alternative to survive by printing money and this action result to high inflation. Once inflation is voluntarily started, breaking away from it is the toughest part. After a war, countries like Israel tend to rely on printing more money to lower down budget deficit that would cause further increase in the inflation rate. A classic example of this is Israel. It took a lot of hard work from a well known Israeli economist Michael Bruno to cease inflation by freezing wages, foreign exchanges rates and commodity prices.
Money meltdown is one of the disadvantages of inflation thereby causing fear among people to hold on to their money because it loses its value as time goes by. It is the exact opposite to the old belief that saving money can make us richer. However, growth during and after inflation is far from achievable. This paints an ugly picture of what inflation can do to an economy.
On the other hand, black market premiums can also cause decline in economic growth. Some countries like Jamaica controls the access of its people to US dollars which creates an illusion of non-devaluation in their currency. Moreover, black market premiums is an indirect tax to exporters because of the unavailability of US dollars with official rates. Having said that, black market premiums can really sabotage an economy or industry like what happened to Ghanas cocoa industry as well as its income.
Budget deficit also contributes to low economic growth. In some cases where governments want to help the poor by equally distributing income among its people may cause budget deficit and inflation rate to shoot up. The purpose of such endeavor is very humanitarian but not sensible. It was more of a short-term solution to a problem with long-term implications and negative effects. This happened in Mexico and the problem became worse when foreign currency fell and the government was forced to devaluate its currency. What saved Mexico from all these crises was the success its oil industry which grew at that time but then again, the income generated from oil was misused by the next government officials in power.
Governments have control over a countrys banking industry and one way to kill an economy is by killing banks. In order to allure people to invest their savings in banks and for banks to accommodate loans with these deposits, attractive return on investment must be provided by the banks. Nevertheless, low interest rates in banks also results to limited funds will be allocated for financing businesses that would help in the economy.
Closing the economy to the global market can also cause slow growth among poor countries. Chances of growth are slimmer if opportunities are hindered like in the case of closed economies.
In conclusion, bad government actions and decisions can kill growth but sometimes unfortunate decline in the economy caused government to resort to drastic measures that can cause further decline in the countrys economic growth. To create good rewards for growth, countries must do everything in its power to avoid poor incentives that would cause demotivation among its people.
Corruption and Growth
For decades, corruption in poor and rich countries remained unnoticed by economists, experts and some institutions like the World Bank. In fact, corruption in government was not a hindrance in getting financial aid from IMF and World Bank. Its implications in economic growth were ignored and it took some time before it was taken into consideration.
Some businessmen provide financial support to those who are running for government positions in order to lobby for favors in case the candidates they supported wins the election while some policemen were caught in the act of accepting bribes from those who broke the law. Some government officials drove luxury cars, live in fabulous homes and have unexplained sudden increase in their assets. These ill-gotten wealth are the fruits of questionable government contracts, red tape, bribery in government biddings and auctions.
Corruption is everywhere and a study showed that countries who were under communist government were more inclined to suffer from corruption. There are two types of corruption decentralized and centralized corruption. Centralized corruption is manipulated by a government leader while the latter is not supervised anyone and each individual or group operate on its own. With decentralized corruption, individual corrupt officials become so greedy to get as much revenue as the next person and that increases the corruption activities in a country.
Both types of corruption are damaging to the economy. Revenues and tax collections intended for infrastructure projects or educational expansion are robbed from the people thereby causing an increase in budget deficit and slow economic growth. However, decentralized corruption is considered damaging because the governments power to reprimand or punish corrupt officials is faint because these corrupt people can conspire with each other and prevent punishment. Possibility of stopping corruption is very slim. Furthermore, in centralized corruption, a leader more careful on his actions because he knows that he can be ousted from his position if the economy suffered because of his deeds.
Bad policies like high black market premiums are voluntarily made and enforced by corrupt officials to accommodate graft and corruption in a country. Moreover, controlling trade activities also makes an economy vulnerable to it.
A study showed that countries with weak law enforcement and jurisdiction low bureaucracy and poor institutional quality are prone to corruption and to control corruption, institutional reform should be done. It may not seem achievable but it is. Countries with severe corruption problems should revamp old institutions and establish quality institutions. Policies should be formulated to remove the catalyst for corruption. Without the rewards of corruption, government officials will not be tempted to engage in graft and corruption. The scope of power of governments should also be limited and reasonable to prevent the use of power to manipulate government activities where corruption is very rampant like in government contracts and auctions. The governments discretionary power can open doors for corruption and it should be limited in order to obstruct it among officials of the government.
Polarized People
Economic growth can be achieved by people with common goals and culture but societies with different perceptions and aspirations fight over power and wealth. In Ghana, the cocoa industry was killed by the tug-of-war between two ethnic groups. In their quest for control and power, bad policies like high black market premium was continuously practiced thereby resulting to a disappointing drop of GDP from 19 percent to 2 percent after two decades.
Another way to kill economic growth is graft and corruption. Certain bad policies can make corruption possible and easy to do. These policies beget corruption. So what motivates a government official to commit graft and corruption To simply answer that, government officials are human who are vulnerable to greed and they respond to incentives. Who is responsible for these bad policies A country is sometimes comprised of people with polarized interests and goals who act independently to satisfy their own needs and welfare. If people with opposed interests and aims work together, bad policies will be formulated for their own gain and advantage. Having said that, it can be said that polarized and differentiated interest among people can contribute to slow economic growth through bad polices that give way to graft and corruption and budget deficit. Contradicting beliefs and interest among people can clarify the reason why governments sometimes commit economic suicide. It sometimes show that the more polarized groups in a government, the higher the budget deficit because these groups can conspire to determine a larger budget to satisfy their own needs.
Polarized groups exist due to inequality and ethnic origins. Land or income inequality is often associated with slow growth but in the case of Argentina, economic growth started to decline when Vita Peron redistributed income toward the shirtless one. On the other hand, countries in Asia like Japan and Taiwan with good economic growth have lower land and income inequality.
Another barrier that separates people is cultural differences which trigger ethnic polarization. Ethnic wars started eons ago but it is still existing. Ethnically diversed societies are prone to conflicts and their public services are fewer than others which connotes slower growth in education, technology and economy.
If a society is suffering from polarization in high inequality and high ethnic diversity, it is hard to create good policies to promote economic growth. Conflicts will torment the government and freedom will be elusive.
To alleviate the burden of polarization, an independent central bank should be established as well an independent budget control department that can monitor deficits and debts.
Some countries have good institutions with high inequality and high ethnically diverse society and the secret behind this is having good policies that would not hinder economic growth and stability. Ethnic bloodshed should be eliminated in order to have a good institution. Differences among people cannot be eliminated promptly and it may take a lot of time to do reach such level but a consensus can be done to unify the people towards a common goal economic growth.
Having said all these, a good institution should also work in equally distributing income. If the poor are not given the chance to grow and develop, they will remain trapped in the cycle of poverty.
Conclusion The View from Lahore
Throughout the book, several issues were arise and scrutinized in order to determine the true determinants of economic growth. With all the point of views argued and figured out, it can be said that it is quite true that incentives motivate people towards a certain goal. In terms of economic growth, the suitable incentives should be given to those who play a role in an economy. The three entities that play important roles in an economy are the government, the donors and the private individuals.
The government is often or not at all given incentives for managing a country and people run governments which simply means that government officials are also driven by rewards. The right incentives for the government can bring about good policies, remarkable infrastructure, admirable public services, high quality of education and humane assistance to the poor.
The donors (World Bank, IMF and the likes) should not always regard giving loans as helping the poor. Adjustment loans and aids for countries should be based on the countrys situation, intention, capacity and accomplishment. Helping the poor doesnt always mean spoonfeeding them with financial assistance that would not help them in the future but rather put them in a cyclical situation that would only make things worse than they already are. Giving the right help would definitely contribute in the quest for growth.
Lastly, the people or the private individuals who are victims of bad policies created by bad government and graft and corruption committed by public officials. These problems have resulted to limited opportunities for the poor. If the poor people are given the right incentives and the much needed aid to reform, we can look forward to seeing growth and development among them.
The World Bank and International Monetary Fund were greatly mentioned in the books. Their decisions and actions were criticized and scrutinized to come up with conclusions about the determinants of economic growth. These entities are working so hard to aid in economic growth but their decisions are not always right. However, we must salute them for trying and for investing so much time and money to really learn about economic growth.
Having said all these, it can be concluded that there is no magic formula or cure-all medicine for alleviating poverty and promoting economic growth. The problems that poor countries are experiencing right now are really tough. It may take a lifetime to come up with the right solution. The journey continues. The quest for growth will continue and hopefully, it will succeed in the near future.