From Poverty to Power Green, Oxfam 2008 - weman

FROM POVERTY TO POWERTwenty years on, China’s take-off is mesmerising policy makerseverywhere, while Latin America continues its centuries-old cycle ofboom and bust. Sustained growth has reduced the number of Chineseliving in poverty from one in three in 1990 to one in ten in 2005. 172Since Latin America embarked on a massive trade drive, increasing itsexports from $96bn in 1981 to $752bn in 2007, the number of poorpeople (defined as those living on less than $2 a day) actually rosefrom 136 million to 209 million between 1980 and 2005. 173 Shocktherapy turned out to be all shock and precious little therapy.Advocates of rapid trade liberalisation rely heavily on the ‘bignumbers’ generated by computer models seeking to quantify thebenefits accruing from tariff and subsidy reductions, but such modelsoften assume away the problems that dog markets in most developingcountries. 174 An increasing number of analysts are turning forevidence and guidance to a different discipline – history, in particularthat of economies that have successfully ‘taken off’ in recent decades.Harvard economist Dani Rodrik has identified 83 episodes ofgrowth ‘take-off’ in developing countries since 1950, spread throughoutthe world. 175 On average, such episodes increased economic output byalmost 40 per cent within a few years. Even more significant than thegeneral sense of possibility that such surveys awaken are their radicalimplications for development policy. Rodrik found that ‘the vastmajority of growth take-offs are not produced by significant economicreforms, and the vast majority of significant economic reforms donot produce growth take-offs’. Instead, the triggers have oftenbeen small reforms aimed at freeing bottlenecks in the economy,defying economic orthodoxy but going with the grain of existinginstitutions.In India, for example, following his landslide election victory in1984, Rajiv Gandhi relaxed industrial regulations and rationalised thetax system, and the economy surged. 176 China reformed its rigidlyplanned economy incrementally (rather than abandoning planningaltogether), underplayed private property rights (relying instead ona mix of state ownership, collective local enterprises, and privateownership), and opened up to the world in a carefully monitored andgradual way (complementing its highly protectionist trade regimewith special economic zones). Viet Nam, a fellow socialist country,182