Stronger economies
Reducing poverty through economic growth
Growth
Economic growth is the most powerful means of reducing poverty and improving the quality of life in developing countries.
There is overwhelming evidence that sustained growth is critical to making faster progress towards the Millennium Development Goals – and not just the first goal of halving the global proportion of people living on less than on dollar a day.
Growth creates prosperity and opportunity. Strong growth and employment opportunities improve incentives for parents to invest in their children’s education by sending them to school. This may lead to the emergence of a strong and growing group of entrepreneurs, which should generate pressure for improved governance. Growth also improves government revenues which enables spending on basic services such as education. Thus strong economic growth therefore advances human development, which, in turn, promotes economic growth.
But under different conditions, similar rates of growth can have very different effects on poverty and the job prospects of the poor. The extent to which growth reduces poverty depends on how much the poor participate in the growth process and share in its proceeds.
Growth policies need to make labour markets work better and remove gender inequalities. Policies need to promote effective competition which benefits consumers directly, through lower prices.
Policies that give people access to financial services such as banking and loans are creating safe channels for savings and long-term investments in health and education. Financial services such as microfinance loans make it possible for the poor to build or expand businesses and become self-reliant. Over time, financial inclusion creates opportunities to reduce poverty and empower the poor.
Asian countries are increasingly tackling this agenda of ‘inclusive growth’. India’s most recent development plan has two main objectives: raising economic growth and making growth more inclusive. Similar approaches are being taken elsewhere in South Asia and Africa.
Future growth will need to reflect an increasingly globalised world that offers new opportunities but also new challenges. New technologies offer not only ‘catchup’ potential but also ‘leapfrogging’ possibilities.
Future growth will also need to be environmentally sustainable. Improved management of water and other natural resources is required, together with movement towards low carbon technologies by both developed and developing countries.
DFID is working for inclusive growth through a number of programmes and continues to spend heavily on health and education, which have a major impact on poor people’s ability to take part in growth opportunities.
Links
- Growth policy paper - Building jobs and prosperity in developing countries
(628kb) - Private sector development strategy (2,063kb)
- Business Call to Action
-
Business fights poverty - Research4development - Growth
- Encouraging growth in Africa's seed industry
- Summaries of DFID Growth Research from IDS Knowledge Services
- State-Business Relationships and Economic Growth in Sub-Saharan Africa. (264kb)
- African Growth - forgotten issues.
Financial inclusion creates opportunities to reduce poverty
We will support developing countries to develop more competitive markets and improve access to economic opportunities for the poor within these countries.
Douglas Alexander Secretary of State
