Economic goals, poverty, and hard facts

Murray McCully has a column in today’s Herald on overseas aid, where he defends his view that economic growth leads to poverty reduction and thus should be the focus of our Aid dollars through NZ AID. He says that the NGO's who disagree with him are self interested and disinterested in "hard facts" - but he refuses to meet with them. Lifting people out of poverty depends directly on increasing economic growth and strengthening trade, McCully says, and no country in the world has achieved one without the other.

Sounds good, but it's how economic growth is increased that is the sticking point.

Economic growth is one of many instruments in development, it is not a development goal in its own right.Hard fact number one. Therefore constraints on development - not constraints on growth, should underlie effective strategies in decisions on how to allocate taxpayer aid money. And a part of the development community must contribute to that analysis.

But in New Zealand, the Government has shut down dissenting views - like the views of Caritas, TEAR Fund and other aid agencies who were refused the opportunity to discuss their views with the Minister, who instead, has effectively told them to get stuffed.

Now to hard fact number two. In order for McCully's plan to work three things must happen: Policies have to generate growth, that growth has to lead to development - to reduce poverty - and that development has to be greater than if the focus was on poverty reduction.But the reality is that when economic growth is prioritised over development and poverty reduction, the actual development progress that results is less than it world be had development been the priority. It would be different if McCully could determine the desired level of growth, but he can't. Hard fact number three. Furthermore, countries that pursued growth without changes in sustainable development can't sustain either. WHich doesn't do much for poverty reduction. Hard fact number four. Therefore countries that focus on development are more likely to see development sustained and poverty reduced. Hard fact number five.

But while McCully bangs on that economic growth is a goal to poverty reduction, our aid dollars are likely to be corrupted as they will be less likely to be as efficient in assisting the poor.

That's probably a fact, too.