Productive Capacities and Poverty Reduction: Links and Processes Charles Gore UNCTAD

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Productive Capacities and Poverty
ReductionLinks and ProcessesCharles
GoreUNCTAD

• UN International Forum on Poverty Eradication
• New York, 15-16 November 2006

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Key Challenges in Poverty Analysis

• International Analysis of Poverty
• New global facts.
• 1.2 billion 1/day poor
• Global income inequality. Poorest 40 per cent
  gets 5 per cent of world income richest 20 per
  cent gets 74 per cent
• New forms of explanation
• Trade and poverty
• Global interdependence and global inequality
• New forms of global interdependence
• Global financial flows and instability
• Development policy space
• Technological opportunities and challenges
• Climate change
• Re-linking Production and Poverty

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Statistical versus StructuralistApproach to
Poverty Analysis

• Distinction based on Graham Pyatt it has
  informed UNCTADs LDC Report 2002, 2004 and 2006
• Statistical approach poverty line
  characteristics of the poor growth elasticity of
  poverty
• Structuralist approach generation and
  sustainability of jobs and livelihoods locate
  livelihoods within the changing structure of the
  economy relate the changing structure of economy
  to insertion in international economy.

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Orthodox versus Heterodox Approaches to Economic
Growth

• Orthodox Approach Views the growing economy as
  an inflating balloon, in which added factors of
  production and steady flows of technological
  change smoothly increase aggregate GDP (Ocampo)
• Heterodox Approaches Various
• Heterogeneous agents, technological capabilities
  and their institutional matrix
• Importance of sectoral structure
• Importance of demand

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WHAT ARE PRODUCTIVE CAPACITIES?

• Productive resources natural resources, human
  resources, financial capital, physical capital.
• Entrepreneurial capabilities core competences
  technological capabilities.
• Production linkages exchange of goods and
  services flows of information human and
  financial resource flows between sectors and
  between enterprises.

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The Core Processes through which Productive
Capacities Develop

• Capital accumulation increasing capital stocks
  of various kinds through investment
• Technological progress introducing new goods
  and services or methods of production through
  technological learning and application of
  knowledge in production (innovation)
• Structural change change in the inter- and
  intra-sectoral composition of production and
  pattern of linkages amongst sectors and
  enterprises

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Why Production Capacities Matter for Poverty
Reduction

• The expansion, development and utilization of
  productive capacities are at the heart of
  processes of economic growth
• The growth-poverty relationship depends on the
  way in which productive capacities expand,
  develop and are utilized.
  Empirical studies on
  "pro-poor growth" show that the growth-poverty
  relationship depends on the generation of
  productive resources the dynamics of production
  structures the nature of technological choices
  the level of utilization of productive resources,
  particularly unemployment and underemployment of
  labour and access to productive assets.

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Important differences amongst the LDCsLong-term
growth performance closely associated with
patterns of structural change (1980-2003)
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Focusing on the Development and Utilization of
Productive Capacities Requires a Paradigm Shift
in Poverty Reduction Policies

• FROM
• Integration/Exchange
• Consumption
• Framework
• Supply-side
• Tradables
• FDI
• Welfare State

• TO
• Production
• Employment
• Ingredients
• Supply and Demand
• Tradables and Non- tradables
• Private Domestic Investment plus FDI
• Development State

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Key Policy Ingredients and Institutions

• FINANCE
• Domestic firms
• Domestic financial systems
• International financial architecture and
  international trade regime

• KNOWLEDGE
• Domestic firms
• Domestic knowledge systems
• International regimes for technology acquisition
  and international migration

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Thank YouThis presentation draws on UNCTADs
work on East Asian development success (see
UNCTADs Trade and Development Reports) and also
UNCTADs Least Developed Countries Reports since
2002 (see www.unctad.org/ldcr)