The Growth Commission has published a report (Post-Crisis Growth in Developing Countries) assessing the financial meltdown and its own fallout on economic development in the developing countries. I was planning to read it last month but couldn’t do this. This statement assesses if the prior recommendations in The Growth Report still is true following the 2008 financial crisis.
The conclusion is that the recommendations remain relevant however, much restraint on capital controls and financial liberalization might be successful. The report stresses the crisis does not show the failure of market-based system but that of the financial sector. The outward-looking strategy is still relevant, but it may not be as rewarding as it was before the turmoil because of slower growth in trade, costlier capital, and a more inhibited American consumer. Are records from the record Below? Fully exploited the world economy; imported ideas, technology, and knowhow; produced goods that meeting global demand, customized and expanded without saturating the marketplace quickly. Maintained macroeconomic stability; inflation under control and lasting fiscal paths.
High rates of investment (25% of GDP), including public investment, financed by similarly impressive rates of local cost savings. Strong, committed, capable, and credible governments; their macroeconomic strategies and macroeconomic regulations provided the setting where market dynamics could work; provided a range of open public goods such as infant and schooling diet that market segments under-provide. What did the crisis teach us?
The crisis delegitimized an influential school of thought, which held that lots of financial marketplaces could be left … Read the rest
