on the part of both the developed and developing world. OECD governments are working to ensure that their development policies are coherent so that, for example, they do not give aid to boost agricultural production for export and then block imports of the product. Developing countries are increasingly determined to build their own strategies for growth and social improvement. But it is often a question of where to start. Take infrastructure, where insufficient investment deprives the economies of sub-Saharan Africa of an estimated two percentage points of growth each year. But which infrastructure projects give the broadest returns? Targeting foreign investment to build roads, for example, can help boost women’s participation in work and education by reducing their journey time fetching water or getting to school. Investing in water sanitation in a city can dramatically reduce water-borne illness. Africa is the world’s youngest continent, with 70% of its population under the age of 25. Giving them a good education is just the start; beyond that the policy and governance framework needs to be in place that will attract investment and create jobs, as Marie Gad reminds us. To cite just one example, Nestlé has tapped into the expertise of African university graduates to develop locally-sourced onion powder for its African factories, replacing imports from Asia and Europe. Developing economies can also benefit from the more recent experience of the emerging economies on what works to lift a country out of poverty, as well as the opportunities of trade and foreign investment that they have to offer. The key issue is to how to make best use of co-operation. Traditional partners are seen as most effective in improving education and governance, while the emerging partners’ potential clearly lies in infrastructure, transport and innovation. But the emerging economies still face problems of their own in maintaining the momentum of social and economic development.
Growing the middle Successful economies and societies need a middle class to earn the money to pay the taxes that drive development and keep government functioning. A stable middle class can provide a solid foundation for economic progress and social stability, notes Mario Pezzini. But a precarious middle class can undermine all these elements, risking a slide back towards increased poverty. 62
OECD Yearbook 2012 © OECD 2012
The middle classes have yet to consolidate their status in many emerging countries, and governments need to beware that development does not become synonymous with increased social inequality. Latin American countries made important progress in reducing poverty during the turn of the century boom years, but one in three Latin Americans, or 180 million people, still live below the poverty line and 10 Latin American economies rank among the world’s 15 most unequal economies. If development is not to lead to social unrest, such issues must be dealt with, and the middle classes need to consolidate their position. That means Aid alone is not enough to investing windfall deliver sustainable growth gains from high commodity prices in infrastructure, education and social safety nets and in switching to more exports of finished products, not just raw commodities. Around half of the Latin American population falls into the middle income bracket (40-56%) but they differ in many respects from their OECD counterparts. They are particularly vulnerable economically, since few have university degrees and many of them work in the informal sector, which deprives the government of their taxes and deprives them of the support of social safety nets. To decrease this vulnerability and increase the middle class role in economic development, policies to promote upward social mobility are needed. For example, the high level of informal labour could be reduced if social safety nets were widened. Governments can also focus on better access to high-quality education and ensure that today’s middle class children have a more secure livelihood than their parents. And, as in the developing countries, more could be done to make tax and public spending fairer and more effective. We are a long way from the ultimate goal—a world where no country will depend on aid—but we can ensure that we are at least on a path taking us towards it.
2012 OECD Yearbook