Commission on Growth and Development

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The Growth Commission’s reports identify the ingredients that, if used in the right country-specific recipe, can deliver growth and help lift populations out of poverty. The Commission, consisting of 19 experienced leaders and 2 Nobel prize-winning economists, has released several commission reports, thematic volumes, and background working papers. The spring 2010 volume is the final book from the Commission. The Commission is succeeded by The Growth Dialogue.

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  • Publication
    Equity and Growth in a Globalizing World : Commission on Growth and Development
    (World Bank, 2010) Kanbur, Ravi; Spence, Michael
    The commission on growth and development was established in April 2006 in response to two insights: people do not talk about growth enough, and when they do, they speak with unearned conviction. The workshops turned out to be intense, lively affairs, lasting up to three days. It became clear that experts do not always agree, even on issues that are central to growth. But the Commission had no wish to disguise or gloss over these uncertainties and differences. And it did not want to present a false confidence in its conclusions beyond that justified by the evidence. While researchers will continue to improve people's understanding of the world, policy makers cannot wait for scholars to satisfy all of their doubts or resolve their differences. Decisions must be made with only partial knowledge of the world. One consequence is that most policy decisions, however well informed, take on the character of experiments, which yield useful information about the way the world works, even if they do not always turn out the way policy makers had hoped. It is good to recognize this fact, if only so that policy makers can be quick to spot failures and learn from mistakes. In principle, a commission on growth could have confined its attention to income per person, setting aside the question of how income is distributed. But this commission chose otherwise. It recognized that growth is not synonymous with development. To contribute significantly to social progress, growth must lift everyone's sights and improve the living standards of a broad swath of society. The Commission has no truck with the view that growth only enriches the few, leaving poverty undisturbed and social ills untouched.
  • Publication
    Macro Crises and Targeting Transfers to the Poor
    (World Bank, Washington, DC, 2010) Kanbur, Ravi
    A central question for policy makers concerned with helping the poor through a macro crisis is how to target scarcer resources at a time of greater need. Technical arguments suggest that finer targeting through tightening individual programs or reallocation resources towards more tightly targeted programs uses resources more efficiently for poverty reduction. These arguments survive even when the greater informational costs and the incentive effects of finer targeting are taken into account. But political economy arguments suggest that finer targeting will end up with fewer resources allocated to that program, and that looser targeting, because it knits together the interests of the poor and the near poor, may generate greater resources and hence be more effective for poverty reduction despite being 'leakier.' Overall the policy advice to tighten targeting and to avoid more loosely targeted programs during crises needs to be given with consideration caution. However, the advice to design transfer systems with greater flexibility, in the technical and the political economy senses, is strengthened by the arguments presented here. The case for external assistance to design flexible transfer systems ex ante and to relieve the painful tradeoffs in targeting during a crisis is also shown to be strong.
  • Publication
    Leadership and Growth : Commission on Growth and Development
    (World Bank, 2010) Brady, David; Spence, Michael
    In May 2008, the commission on growth and development (the growth commission) issued its report entitled 'the growth report'. In it the commission attempted to distill what had been learned in the past two decades, from experience and academic and policy research, about strategies and policies that produced sustained high growth in developing countries. It became clear in the course of the work that politics, leadership, and political economy (the interaction of economic and political forces and choices) were centrally important ingredients in the story. Dealing with the politics and the interaction of political and economic forces is a work in progress in research, an important one. Given this breadth, one of the editors' roles is to focus the reader's attention on what they take to be common issues across these chapters. These common problems are fourfold: (1) promoting national unity; (2) building good, solid institutions; (3) choosing innovative and localized policies; and (4) creating political consensus for long-run policy implementation. This report represent an excellent first step toward understanding the role of leadership in generating economic growth, and the author hope that they generate ideas and lead to new research on the problem of leadership in economic growth.
  • Publication
    Globalization and Growth - Implications for a Post-Crisis World : Commission on Growth and Development
    (World Bank, 2010) Spence, Michael; Leipziger, Danny
    The commission on growth and development was established in April 2006 as a response to two observations. While the author felt that the benefits of growth were not fully appreciated, the author recognized that the causes of growth were not fully understood. Growth is often overlooked and underrated as an instrument for tackling the world's most pressing problems, such as poverty, illiteracy, income inequality, unemployment, and pollution. At the same time, understanding of economic growth is less definitive than commonly thought, even though advice sometimes has been given to developing countries with greater confidence than perhaps the state of our knowledge will justify. Consequently, the commission's mandate was to 'take stock of the state of theoretical and empirical knowledge on economic growth with a view to drawing implications for policy for the current and next generation of policy makers.' This mandate has even more significance in the aftermath of the financial and economic crisis of 2008. As developing countries seek to repair the damage to their economies and to re-launch themselves on a sustained high-growth path, there has never been a greater need for fresh new ideas and approaches to achieving sustained high growth. There has been no dearth of commentary about what the crisis may mean, but in reality, until the bottom has been reached and the path to recovery is clear, it will be difficult to draw general lessons for the future. This collection of essays encompasses a variety of viewpoints and covers both medium- and long-term policy issues. It is said that more textbooks have become obsolete in 2009 than in any year since the great depression. As a corollary, much has been written that is worth reviewing in a volume on globalization. The papers look at the issue of globalization from diverse points of view and add insights and perspective to the recommendations of the growth report.
  • Publication
    Financial Crisis and Global Governance: A Network Analysis
    (World Bank, Washington, DC, 2010) Sheng, Andrew
    This paper attempts to use network theory, drawn from recent work in sociology, engineering, and biological systems, to suggest that the current crisis should be viewed as a network crisis. The author surveys the concepts of networks, their defining characteristics, applications to financial markets, and the need for supervision and implications for national and global governance. Then, author briefly examines the current financial crisis in the light of the network analysis and surveys the recent reforms in financial regulation and architecture. The paper concludes with an analysis of the policy implications of network analysis.
  • Publication
    Africa's Growth Turnaround: From Fewer Mistakes to Sustained Growth
    (World Bank, Washington, DC, 2009) Page, John
    After stagnating for much of its postcolonial history, economic performance in Sub?Saharan Africa has markedly improved. Since 1995, average economic growth has been close to 5 percent per year. Has Africa finally turned the corner? This paper analyzes growth accelerations and decelerations-that is, country level deviations from long?run trend growth. Seen from this perspective, Africa's record of slow and volatile growth reflects a pattern of offsetting accelerations and declines, and much of the improvement in economic performance in Africa post 1995 turns out to be due to a substantial reduction in the frequency and severity of growth decelerations. The fall in economic declines since 1995 is largely due to better macroeconomic policies, but changes in such 'growth determinants' as investment, export diversification, and productivity have not accompanied the growth boom. Lack of change in these variables and the significant role played by natural resources in sparking growth accelerations suggest that Africa's growth recovery was fragile, even before the recent global economic crisis. The paper concludes by setting out four elements of a strategy that can help move Africa from fewer mistakes to sustained growth: managing natural resources better, pushing nontraditional exports, building the African private sector, and creating new skills.
  • Publication
    Macroeconomic Policy: Does It Matter for Growth? The Role of Volatitliy
    (World Bank, Washington, DC, 2009) Fatás, Antonio; Mihov, Ilian
    Recent academic research has questioned the role of economic policy as a determinant of long term growth rates. While there seems to be a correlation between several policy variables and growth rates, this correlation disappears when controlling for other factors. As an example, the significance of key economic policy variables such as inflation or government size disappears if we account for the quality of institutions. This paper looks at recent empirical research that questions the conclusion that macroeconomic policy does not matter for growth. By looking at the volatility of economic policy (whether it is fiscal policy or exchange rates), the authors find that policy is still a relevant and robust explanatory variable of cross country differences in economic growth. These results have strong policy implications. Improvements in the conduct of macroeconomic policy can have beneficial growth effects even if institutional reforms are not taking place. These results do not deny the importance of institutional reforms. By setting the right institutions one can ensure the proper conduct of macroeconomic policy without having to rely on the 'quality' of the decision maker.
  • Publication
    What Do We Know about Monetary Policy that Friedman Did Not Know?
    (World Bank, Washington, DC, 2009) Wyplosz, Charles
    This paper offers a personal review of the current state of knowledge on monetary policy. In a nutshell, what Friedman knew-have survived, but that modern monetary policy departs in some important ways from older principles? The older wisdom that monetary policy determines inflation in the long run but can have systematic shorter run effects has survived a major challenge. Most of the new ideas stem from the recognition of the crucial role of expectations. In today's world, this observation lies behind the spectacular trend toward ever greater central bank transparency. Then it is more than likely that ideas will change in the wake of the global financial crisis. Early debates challenge the old wisdom that central banks ought to be mainly concerned with price stability. In particular, financial stability has always been part of a central bank's mission, but it has occupied limited space in theoretical and empirical studies.
  • Publication
    Explaining China's Development and Reforms
    (World Bank, Washington, DC, 2009) Hofman, Bert; Wu, Jinglian
    China's remarkable economic performance over the last 30 years resulted from reforms that met the specific conditions of China at any point in time. Starting with a heavily distorted and extremely poor economy, China gradually reformed by improving incentives in agriculture, phasing out the planned economy and allowing non-state enterprise entry, opening up to the outside world, reforming state enterprises and the financial sector, and ultimately by starting to establish the modern tools of macroeconomic management. The way China went about its reforms was marked by gradualism, experimentation, and decentralization, which allowed the most appropriate institutions to emerge that delivered high growth that by and large benefited all. Strong incentives for local governments to deliver growth, competition among jurisdictions, and strong control of corruption limited rent seeking in the semi reformed system, whereas investment in human capital and the organizations that were to design reforms continued to provide impetus for the reform process. Learning from other countries' experience was important, but more important was China's adaptation of that experience to its own particular circumstances and needs.
  • Publication
    Health and Growth : Commission on Growth and Development
    (World Bank, 2009) Spence, Michael; Lewis, Maureen
    The commission on growth and development was established in April 2006. It felt that the benefits of growth were not fully appreciated, but also recognized that the causes of growth were not fully understood. Growth is often overlooked and underrated as an instrument for tackling the world's most pressing problems, such as poverty, illiteracy, income inequality, unemployment, and pollution. At the same time, grasp of the sources of growth in developing countries is less definitive than commonly thought even though advice is sometimes given to policy makers in these countries with great confidence, perhaps greater than the state of knowledge will justify. Consequently, the commission's mandate is to 'take stock of the state of theoretical and empirical knowledge on economic growth with a view to drawing implications for policy for the current and next generation of policy makers. Good health improves the capacity to learn and work, which dramatically improves income and welfare at the household level even if the effects at the aggregate level may be harder to discern. The methodological problems in capturing these gains deserve attention and further work. More attention also needs to be paid to upgrading healthcare institutions, as more of the same is neither affordable nor desirable.