Growth Policies

Carolyn Chisadza

University of Pretoria

February 2017

C Chisadza (University of Pretoria) February 2017 1 / 18

Introduction

Why are some countries rich and others poor?Growth models =) investment (physical and human) =)technology =) opennessWhy do some countries invest more than others? Why do peoplein some countries spend more time learning new technologies?Several explanations include geography, culture, historicaladvantages in technologyA key explanation is found in the quality of institutions =)growth policies

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What’s the big fuss??

What are growth policies? Why should we care about policies?Lead to sustained growth =) alleviate povertyPromote macroeconomic stability (fiscal and monetary policies)Protects citizens =) intellectual property rightsEncourages industrialisation, opennessMakes administrative governments accountable and so on...

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Policy ingredients of Growth Strategies (M. Spence -World Bank Report ’08)

There is no right model for policy making because each country isdifferent.BUT there is a general framework with guidelines to formulatingpolicies (it is not a question of simply copying the characteristicsof high-growth countries)Policy ingredients of growth strategies in a country -accumulation, innovation, allocation, stabilisation and inclusion.

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Policy ingredients of Growth Strategies

Accumulation - public investment (infrastructure, education,health), capital flows, FDI, productivityInnovation / imitation - adopt and learn to use new technologiesAllocation - efficient distribution of resources (capital and labour)Stabilisation - macroeconomic stability (fiscal and monetarypolicies =) taxes, inflation, interest rates, debt)Financial developmentInclusion - equal opportunity across gender, race, minorities.

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13 success economies identified in the report that had highsustained growth in postwar period6 continued to high income levelsOthers lost growth momentum

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What should policymakers be targeting

-50

510

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r

1960 1970 1980 1990 2000 2010t

EU SSA

GDP growth (annual)

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2000

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ap

1960 1970 1980 1990 2000 2010t

EU SSA

GDP per capita

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ent

1960 1970 1980 1990 2000 2010t

EU SSA

Investment (% of Gdp)10

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ngs

1960 1970 1980 1990 2000 2010t

EU SSA

Savings (% of GDP)

4050

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trade

1960 1970 1980 1990 2000 2010t

EU SSA

Trade (% of GDP)

5060

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1960 1970 1980 1990 2000 2010t

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Primary completion

C Chisadza (University of Pretoria) February 2017 8 / 18

What should policymakers be targeting (M. Spence -World Bank Report ’08)

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What should policymakers be targeting (M. Spence -World Bank Report)

C Chisadza (University of Pretoria) February 2017 10 / 18

What should policymakers be targeting (M. Spence -World Bank Report ’08)

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What should policymakers be targeting

Continued support in education attainments.Diversifying primary exportsIncreasing investments in infrastructure to support agriculturalproductivity growthRethink channeling of aid into AfricaEncourage savings across classes of citizensAdopt best practices in exploitation of natural resources tochannel rents into growth promoting activities (The ExtractiveIndustries Transparency Initiative).

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Policy syndromes that mitigate growth (Fosu 2012)

state controlsstate breakdown (conflict)adverse redistribution - favour gvt leaderssub-optimal resource allocation

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South African government policies since 1994

RDP - Reconstruction and development programme (inception1994)GEAR - Growth, Employment and Redistribution framework(inception 1996)AsgiSA - The Accelerated and Shared Growth Initiative for SouthAfrica (inception 2004)NGP - The New Growth Path (inception 2010)NDP - The National Development Plan 2030 (inception 2010)

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National Development Plan 2030

Demographic trends (demographic dividends, migration,mortality)Economy and employment (challenges and creation)Economy infrastructure (access to water, electricity, sanitation,housing, public transport)Environmental sustainabilityFighting corruption, building a capable state

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NDP contd.

Integrated and inclusive rural economyPositioning S.A in the world economy (regional, BRICS)Education, innovation and trainingHealthTransformation and uniting country

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Group presentation - Outline

contributes to the 10% class work indicated on study guideOne week to prepare 20 min presentation on selected growthstrategies in South AfricaHighlight challenges / issues raised with regards to the sectorHighlight solutions suggestedPolicy(ies) implemented to target / address the problemIs policy working or not? Why? What would be your suggestion?Formulate your own policy recommendation if necessary?Be prepared to answer questions from mock Parliament?

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Group presentation - Topics

Youth unemploymentEducationHealthRural developmentAccess to housing, electricity, transport, water and sanitationGlobal integrationGovernance and transparencyBBBEE policy (who is brave enough to tackle this??)

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