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GrowingEmployment

Thebestantidotetopovertyiseconomicgrowth.Thereismuchevidencelinkingpovertyreductiontoeconomicgrowth–theso-called‘trickledown’effect.Itisassumedthateconomicgrowthwillautomaticallyleadtojobcreationthatinturnwillleadtopovertyreduction.Contemporaryhistoryclearlyshowsthatitistheprivatesectorthatisthebestengineofjobcreation.Forexample,Chinahasmadethesinglelargestcontributiontoglobalpovertyreductioninthelastthreedecades.Sincethebeginningofreformsin1978,morethan250millionpeoplehavebeenliftedoutofpovertyinChina.Theprivatesectorhasbeenthefastestgrowingsegmentoftheeconomy,growingat20%peryearforthelast25years,morethandoubletheeconomy’saverage.Since1992,theprivatesectorhascreatedthreequartersofalljobscreated,accordingtotheInternationalFinanceCorporation.Thereis,ofcourse,nosimpleanswertohowtostimulatethegrowthoftheprivatesector.TheWorldBankmeasurestheeaseofdoingbusinessin183countriesbyfocusingonindicatorsintendifferentareasrangingfrom‘startingabusiness’to‘protectinginvestors’to‘closingabusiness’.Thishelpsunderstandingofhowvariouspolicies,lawsandregulationscanfacilitatethegrowthoftheprivatesector,especiallytheSMEsector.

Itistruethatnocountryhassignificantlyreducedpovertywithoutexperiencing

economicgrowth.But,economicgrowthhashadwidelydifferentimpactonpoverty

reductionacrosscountries.A1percentincreaseinpercapitaGDPcanreduceincomepovertybyasmuchas4percentoraslittleas1percent.Thelinkbetweeneconomicgrowthandpovertyreductionismediatedbyjobcreation.Itispossibletohaveeconomicdevelopmentwithoutsignificantjobcreation,whichthenleadstolesserimpactonpovertyreduction.Inrecentyears,manyleastdevelopedcountrieshaveachievedhigherratesofeconomicgrowththaninthepastandevenhighergrowthofexports.Butthereisawidespreadsensethatthisisnottranslatingeffectivelyintopovertyreductionandimprovedhumanwell-being.AnalyzingtherecenteconomichistoryofMexico,Zepedaconcludes,“mainstreampoliciesmanagedtogenerat