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CLOBBERED BY COMMODITIES. Size and geographical location also have an impact on the ability to foster growth. For example, countries with access to the sea can ship exports to foreign markets. Meanwhile, even though landlocked Bolivia and Uganda embraced World Bank-prescribed policies, "neither have reaped the returns that were expected," says Malloch Brown.
Similarly, big nations like China, India, and Brazil, all with provinces and states wealthier than others in their countries, saw growth as dynamic development spread from richer coastal regions into the more backward, often heavily populated areas in the interior.
Dependence on exports of a single commodity can also set economies back in harsh ways. Unable to compete in manufacturing, many poor countries still rely heavily on oil, coffee, copper, timber, or other mining and agricultural goods for most of their foreign exchange. But prices for most of these commodities have dropped sharply over the past decade as global production rose.
Uganda, for example, has had a hard time maintaining growth despite economic reforms because it still relies heavily on exports of coffee, whose price has plunged in recent years because of oversupply. Even in agricultural goods where African nations are competitive, high trade barriers or subsidies for domestic farmers in the U.S., Europe, and Japan also make it difficult to export.
Other factors at work in holding developing nations back:
• Contagious diseases. More than 10 million people die of preventable illnesses such as tuberculosis, malaria, and respiratory infections every year. More than 90% of 42 million people living with AIDS are in developing nations. In some nations, 40% of the adult population have AIDS. And infection rates are rising. Little wonder that labor productivity in Africa is abysmal, and foreign investment in manufacturing is minimal.
• Adverse environmental conditions. Some of the poorest nations in Africa and Central Asia are plagued with terrible conditions for agriculture. An estimated 1.7 billion people live in nations with fresh-water shortages, while soil degradation affects 1 billion people living in arid lands. Many of these countries cannot grow enough food to feed themselves, much less export.
• Social inequity. Countries with the most persistently high poverty rates also tend to have the biggest gaps between the richest 20% of the population and the poorest 20%. Low education levels (just 57% of children in sub-Saharan Africa are enrolled in primary school), discrimination against women, lack of access to credit, and low levels of property ownership for common people are among the factors that foster inequitable income distribution. So even though some poor nations post economic growth, the gains often don't trickle down to the masses.
Case in point: Bolivia. This South American nation grew by 3.5% annually during the '90s. But with its huge income gap, it would have to expand by at least 6% a year to reduce poverty.
The bottom line of the UNDP report is that before the world's poorest nations can begin to escape their poverty traps, they need much more than better economic policies. They also need huge infusions of resources. And since foreign investment isn't coming, for now it will have to come through foreign aid by rich nations.
It's unlikely the 2003 Human Development Report will spark a massive increase in foreign aid from rich countries, which have grown deaf to such pleas. But at the very least, it could prompt Western governments and donor agencies to craft more realistic and sophisticated strategies for helping the world's poorest nations.
Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
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