Policy Innovations The central address for a fairer globalization

A publication of the Carnegie Council

Pro-Poor Development: Distribution, Growth and Policy Interactions

By J. Mohan Rao

February 1, 2002

This paper explores the main lines of interaction between growth and distribution to shed light on the potential for pro-poor growth. The historical record over the last twenty years indicates that standard stabilization and adjustment policies, based on the Washington Consensus, have been successful in neither fostering growth nor promoting equity in a majority of developing countries. Problems have arisen in the short run primarily due to an inflexible stance on inflation and public sector deficits preventing the full recovery of both private investment and complementary public investment. Problems in the longer term are due both to excessive faith in the efficacy of markets to deliver growth and poverty reduction and to adjustment with anaemic investment. Pro-poor growth must involve more growth oriented (or investment-stimulating) stabilization policies in the short run and more poverty-reducing egalitarian adjustment policies in the long run compared to most prevalent policy regimes.

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