The Commission on Growth and Development (“Growth Commission”) was launched in April 2006 “to gather the best understanding there is about the policies and strategies that underlie rapid economic growth and poverty reduction.” The Growth Commission is chaired by Nobel laureate Michael Spence, former dean of the Stanford Graduate School of Business, and comprises 21 members representing government and business from industrialised and developing countries, including senior minister and chairman of the Monetary Authority of Singapore, Goh Chok Tong. All commissioners work pro bono. The work of the Growth Commission is sponsored by the World Bank, the governments of The Netherlands, Sweden and the UK, and the William and Flora Hewlett Foundation. The Commission’s secretariat is housed at the World Bank.

Building on previous work by the World Bank -- as captured in its publication, Lessons of the 1990s, which reviewed the impact of institutional and policy reforms on economic growth over the decade – the Growth Commission aims to look ahead to the next 10 years and beyond. A key conclusion of the previous bank report was that more country specific analyses and solutions were needed rather than the application of common formulae and strategies across widely differing developing country conditions.

Over the past 18 months, an 11-member working group of economists has been closely engaged with academics and policymakers from developing countries to examine the factors that enable or prevent growth and development. The group has commissioned a number of country case studies as well as thematic reports on topics ranging from “The Nature of the Growth Challenge”, “Our Understanding of Growth”, and “Projecting Future Trends” to “Infrastructure and Growth”, “Agriculture” and “Income Equality” amongst others. These background papers will be compiled into a final report by 2008.

On a recent visit to Singapore, Commission chairperson Spence addressed an audience of business leaders and academics at the Singapore Management University on the topic, “Growth Strategies and Dynamics: Insights from Country Experiences,” in which he highlighted some of the findings of the Commission, drawing on examples from the developing world as well as Singapore. Spence later talked to Knowledge@SMU about the activities of the Commission with specific reference to emerging Asian economies.

Knowledge@SMU: Is the work of the Growth Commission on track, and how will your findings feed into the World Bank’s programs and the UN Millenium Development Goals (MDGs)?

Spence: I imagine that most of our output will come in the course of 2008. The target audience is leaders and policy makers in developing countries, not the World Bank. The commission is independent. We are not focused on the MDGs but rather on inclusive growth and poverty reduction. The achievement of the latter will aid in achieving other goals including many of the MDGs, because the resources will be there. Achieving progress on the goals without a sustainable growth path is likely to lead to backsliding and an unsustainable result.

Knowledge@SMU: You said that we are in “completely unchartered territory” as far as understanding how economic growth happens. What are some of the necessary and sufficient conditions which are evident in rapidly growing economies?

Spence: The sufficient conditions are what no one knows. The necessary conditions are openness to the global economy in the sense of taking advantage of global technology and demand and investment. It does not mean complete openness. The other necessary conditions are a stable macroeconomic and investment environment which means competent economic management, high savings and investment, and resource mobility, especially labour.

Knowledge@SMU: Do you see the financial sector as a key driver of economic development, especially in addressing income inequality and imbalances in regional growth?

Spence: The financial sector is important. Access to capital at reasonable capital costs, efficient allocation of capital, facilitating saving and investment are all important.  This, however, should not be interpreted as a requirement that financial markets need to be mature to achieve growth. China is a counter example to this notion. 

Knowledge@SMU: You mentioned the importance of “intangibles” in planning for growth. What are some of these?

Spence: They are human capital and institutions in the private and public sectors that enable an economy to do complex things efficiently, invest, innovate, spread risk, provide insurance, regulate.  Also [they are] a host of things we do not normally think of [such as how to] move cargo in and out of ports, or manage the traffic flows in a city. 

Knowledge@SMU: In post-Washington Consensus thinking, imposing ‘one-size-fits-all’ formulae, such as the modern market economy model, do not always fit developing country situations. How does this apply to Asia?  

Spence: The Washington Consensus envisioned a limited role for government (macro- and monetary management, and the provision of key public goods) on the ground that the private sector can do the rest. Government tends not to do well if it goes beyond these areas because of corruption, capture, lack of expertise and so on. In the high growth Asian economies, the government was perceived as crucial and had a more complex role and that was accepted. Though mistakes were made, on balance the performance has been impressive. 

Knowledge@SMU: Given the dominance of countries like China and India in the region, what paths to progress are open to smaller Asian countries seeking to grow their economies? 

Spence: It depends on the level of development. More advanced Asian countries will be suppliers of complex capital and other goods and services to China. China is Korea’s largest export market. Other less advanced countries will also supply the Chinese market but will compete in global markets. Vietnam is growing quickly beside China and doing well.

Knowledge@SMU: You mentioned that moving from low to middle stage growth is a challenge, but it is even tougher to grow from middle to high level. Could you give us an example? 

Spence: Probably Korea is the best example. Korea grew to the mid 1980s with exports in high quality low cost manufacturing products. By then incomes had risen and it was no longer a low cost location. It shifted its public sector policies to promoting engineering, science, education, IT infrastructure and the like. Korea then let the domestic and international private sectors look for new areas of comparative advantage for the country. 

Knowledge@SMU: The commission has funded a number of country cases and thematic studies. How will they contribute to our current state of knowledge?  

Spence: The country case studies are very useful in illustrating the wide variety of initial conditions and, therefore, challenges in various countries. For example, the revolution in China in 1949 led to low growth and poor economic management for 30 years, but it did give the country a commitment to education and an inclusive approach to economic growth. South Africa emerged from apartheid just over ten years ago and, as a result, has wide differences among people in terms of education that represent a continuing challenge for development and growth.

Knowledge@SMU: How will the commission translate its findings from ‘knowing’ to ‘doing’ at the country and intergovernmental level in the coming years?

Spence: Good question. Basically we will try to provide practical ideas that we hope will give decision-makers new possibilities for achieving enhanced growth and poverty reduction.