Developing countries are engine for growth

September 24 2010

Not a poster for the film.

The World Bank has released an intriguing press release today headlined “Developing countries come to the global economy’s rescue”. It’s to coincide with the publication of a report called “The Day After Tomorrow: A handbook on the future of economic policy in the developing world”.

I’m reading through the 466 page PDF now. The salient points, according to the World Bank, are that developing countries are growing their economies at the rate of 6.1%, while rich countries are relatively stagnant at 2.3%. It puts it down to:

“Faster technological learning, larger middle- classes, more South-South commercial integration, high commodity prices, and healthier balance sheets that will allow borrowing for infrastructure investment.”

An interesting problem presents itself here, as high growth in developing countries usually coincides with all the anti-moneterism things the World Bank doesn’t usually like – high interest rates, high inflation, large state involvement.

The chapter on Latin America, which I’ve skimmed, is particularly telling. It talks a lot about how South America has so far been relatively unscathed by the financial crisis, but puts it down to low interest rates and inflation and savings made during the boom times. I’ve so far not seen a single mention of the closed group ALBA bartering system or other economic initiatives which have arguably helped South America withstand the crisis in the financial markets, but run counter to World Bank policy.

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