A Strategy for Economic Growth
Economic Growth Strategy in Context
The United States Agency for International Development (USAID) promotes economic growth in accordance with the 2006 National Security Strategy of the United States 1 and the goal of transformational diplomacy. Economic growth, in tandem with the promotion of democracy, is an important key in achieving the Secretary of State’s goal of transforming the developing world, which includes most of the world’s countries and most of its people. Free markets and free societies are vital to achieving the development goals of the United States. As stated by Secretary Rice,
…the United States must assist the world’s most vulnerable populations through our transformational diplomacy—using our foreign assistance and working with our partners to build state capacity where little exists, help weak and poorly governed states to develop and reform, and empower those states that are embracing political and economic freedom. These are three main goals of our country assistance programs, with the ultimate purpose being “graduation” from foreign economic and governance assistance altogether. Vibrant private sectors in free, well-governed states are the surest form of sustainable development.2
Economic Growth Transforms Societies
In 1950, South Korea’s per capita income was roughly $770 in dollars of 1990 purchasing power; Ghana’s was considerably higher, at $1,122.3 Over the next five decades, per capita income in South Korea rose dramatically to $14,343, while Ghana’s crept upward to just $1,280.
The consequences for ordinary people have been enormous. In 1950 life expectancy in South Korea exceeded that in Ghana by four years. The gap has since grown to 20 years. Most citizens of both countries lived on less than $2 per day in 1950. By 1998, 78 percent of Ghanaians, but less than 2 percent of South Koreans still lived in such poverty. Similar gaps emerged in education, health, and other measures of well-being. Due largely to their contrasting records in economic growth, Korea has achieved transformational development, whereas Ghana remains at a much earlier stage of this process.
The consequences for U.S. interests have been dramatic as well. South Korea has become a significant and constructive actor on the world stage as well as one of America’s top trading partners, with two-way trade exceeding $70 billion in 2005. U.S. trade with Ghana remains less than $0.5 billion. Korea supports development in other countries through its own foreign aid program; Ghana remains dependent on assistance.
How can more countries be transformed through economic growth? Country experience provides important insights into the way that growth takes place. These insights form the basis for practical advice for assisting partner countries to achieve faster, more sustained, and more broad-based growth.
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1 White House (2006). National Security Strategy of the United States of America.
2 Condoleezza Rice, Secretary of State, Testimony Before the Senate Foreign Relations Committee, Washington, DC, February 15, 2006, http://www.state.gov/secretary/rm/2006/61209.htm
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