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Fridays Academy: Aid and Growth - Developing Country Experience 1950 - 2005

Ignacio Hernandez's picture

Like every Friday, from Raj Nallari and Breda Griffith's lecture notes.


The Period from 2000 to 2005

The table below compares per capita GDP growth for high income, low income and middle income countries from 2000 to the present.  It is clear that developing country performance has been much stronger throughout the period. Contributing to the positive growth performance has been buoyant trade—world exports grew by 14 percent in 2005, low interest rates, higher commodity prices, and strong growth among the Organisation for Economic Cooperation and Development (OECD) countries.


Per capita growth rates by income group, 2000 to 2006 (forecast)

                  2000-4       2003        2004e         2005f           2006f

H. I.                 1.6            1.4            2.7              1.9                2.0

M.I.                 4.0             4.5           6.3              4.9                4.6

L.I.                  3.2             5.1           4.5              5.3                4.7


Dev. count     3.6             4.3           5.7              4.7                4.5

Compiled from Table 1.1 Global Economic Monitor 2006


Furthermore, macroeconomic performance among developing countries in terms of inflation, current account balance, external debt and fiscal balance has been significantly better than in the 1990s, contributing to the good growth performance.


Improvements in world economic growth during 2000–05 continued to help sustain poverty reduction. According to the Global Economic Monitor (WB, 2006), simple projections based on aggregate income growth suggest a 10 percent reduction in poverty, a movement of over 100 million people out of poverty.  However, the overall good performance masks significant regional differences in the poverty response.  Poverty decline among the regions has been most rapid in the East Asia and Pacific region as stronger growth resumed after the financial crisis.  South Asia has made improvements in poverty reduction and also is expected to achieve the poverty reduction goal of the MDGs. Less favorable is the experience of Eastern Europe and Central Asia and Sub-Saharan Africa. The proportion of the population living on less than US$1 a day in Eastern Europe and Central Asia increased over the 1990 to 2002 period from 0.5 percent to 2.1 percent due to the recessions among the transition economies. In Sub-Saharan Africa, the proportion of the population living on less than US$1 a day in 2002 is far higher (about 44 percent) and substantially above the MDG target of 22.3 percent.


Development Aid

Net capital flows reached US$324 billion, a record high, in 2004, increasing by US$42 billion on the previous year and maintaining the recovery that began in 2003.  However, the picture is less rosy when flows are measured as a proportion of GDP – equaling 4.5 percent of GDP in 2004, a marginal increase from the 4.3 percent share in 2003 but significantly below the shares reached in the mid-1990s when net flows as a proportion of recipient country’s GDP reached 6 percent and higher on average (GDF, 2006). Inflation, economic growth and the sizeable depreciation of the US dollar in recent years account for the less robust nature of net capital flows measured relative to economic activity.  


Submitted by Michael Olufemi Sodipo on
I believe that the of NGO to development cannot be underestimated. Being the third sector of the economy they play a paramount role in developmental efforts global.

Submitted by Dr. Sidney O. Okolo on
From the desk of Dr. Sidney Okolo, Professor, Business Consultant/Strategist, and Expert in Africa. Grand Canyon University and International Business Associates… Aid and Growth - Developing Country Experience 1950 - 2005. Dr. Godwin O. Igein developed a leadership model for developing countries that contain assumptions, which "help to lay a solid foundation for a very successful leadership framework for developing countries where social change has become overdue. Social change can happen in a flash or slowly, depending on the circumstances leading to it and the nature of the driving force. It is often a function of a change of leader in a country, especially in developing nations where the historical patterns of leadership have been characterized by coups, counter coups, corruption, instability and military, political and religious conflicts. Many developing countries have struggled through economic colonialism political instability for centuries with no end in sight. Most of the countries are male dominant societies. The intellectual capacities of women have been severely underutilized to the detriment of economic, social and political developments". Dr. Igein named it after his first name, Godwin’s Leadership Model, which "provides an opportunity for developing countries to view leadership from inside out where their views and preferences as to how they want to be led originates from within their societies and culture". IGEIN'S LEADERSHIP MODEL ASSUMPTIONS IS AS FOLLOWS: 1. There are several major encumbrances that inhibit stable, capable, and creditable leadership in developing countries that include, but are not limited to: · Insufficient, inadequate, or limited viable leadership role models · Knowledge, skill, and/or educational gaps of the leader and the leader’s associates. · Poor, inadequate, or insufficient leadership preparation. Factors related to emotional, experiential, and personality of potential leaders created or exacerbated by revenge, war, and famine. 2. Unstable leadership impedes economic and social development as it: · Creates uncertainty · Makes foreign investors reluctant to take risks · Generates low expectations of citizens · Leads to limited outcomes to meet the needs to influence economic choices 3. Leadership theories geared toward helping developing countries must recognize their unique cultures and respective ways of thinking. · Where does our process of leadership mirror the thinking in our culture? How does it influence our views toward other cultures? · How is our cultural thinking driving the way we work collaboratively, cooperatively, and communally? What are the positives and negatives of how we do things? · What keeps us included in the process vs. being excluded? What are the benefits or costs of either course of events? 4. Some leadership models are universal; leadership theories geared toward developing nations have limitations, and potentially great consequences, if these theories do not originate within these nations’ cultures. 5. Economic development can be an unbalanced approach to national development and change; thus, potential leaders must utilize cultural capital to build national capital. 6. Some developing countries inadvertently mismanage foreign aid, as it is currently structured; consequently, such action breeds national co-dependency, not independence or interdependence, and these cycles repeat themselves. 7. Most developing countries have been receiving foreign aid for many years; however, for some, there is little evidence of advancement. 8. Economic advancements have been fractured or negated by social, economic or political conflicts. 9. Most leaders of developing countries can become more effective, efficient, and humanitarian leaders when they have experienced mentors, training, education, and role models. 10. Many leaders have the ability to become more efficient and effective in managing their countries’ economic resources and foreign aid when they have solution-focused feedback and guidance; adequate resources and accountability; a morale code; specific social and financial goals; and the internalized will to change their thought paradigms and governance. 11. Most countries whose leaders have capable mentors can enjoy a higher level of national, communal, cultural, economic prosperity and sustained stability in leadership. 12. Most leaders who have fully capable, responsible, and dedicated mentors will have less chance of overthrow. 13. Increased utilization of the intellectual capacity of women can add value to the leadership process in developing countries ------------------------------------------------ Dr. Sidney O. Okolo, PhD. Organization and Management. Professor, Business Consultant/Strategist, and Expert in Africa., Ph: 312-671-4721 Fax: 708-891-4721

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