simultaneously focused on reducing poverty (Mkandawire 2006,
Deacon 2010). This differs radically from today’s standard
development formula based on growth that benefits the highest
income quintiles accompanied by a few targeted safety nets for the
poorest.
Box 3. Lessons from the Late Industrializers
The development trajectory of most of the “late industrializers” was
predicated on a strong integration of economic and social policies.
Social policies tended towards universalism, benefiting all citizens and
financed by tax contributions (providing public services only to the
poor undermines the middle class commitment to pay taxes). Some of
the late industrializers opted for universal services and social security
from the outset, such as Holland and the Nordic countries. Others
introduced universalism gradually, like Germany and Japan, where
welfare was first directed to groups whose cooperation in economic
modernization and nation-building was deemed indispensable by the
government—the “productive” working and middle classes—and,
over time, new beneficiaries were added by specifying new eligibility
criteria.Sources: Mkandawire (2006) and UNRISD (2010)Former World Bank Chief Economist F. Bourguignon stresses that
income distribution matters as much as growth for poverty
reduction and that redistribution is a legitimate goal of public policy
for balancing the tendency of the market to concentrate resources
(Bourguignon 2004). Viewed in this light, sustained poverty
reduction is a twin function of the rate of growth and of changes in
income distribution, whereby more equal distribution tends to have
faster impacts on reducing poverty than growth, but economic
growth is also necessary to sustain the process over time. It is
important to note that more equal distribution is not antagonistic to
growth; in fact, it tends to stimulate consumption, raise productivity
and help sustain growth itself (World Bank 2006).
Finding the right combination of instruments and policies to deliver
both growth and equity remains the key to 21st century