Growth and Development – Catching Up

Economists think they know a great deal about economic growth, both about why countries differ so much in their growth experience, and what needs to be done to get a country on track for faster growth, raising living standards. However, while there are many important theories about growth, and numerous country case studies of outstanding and sustained performance, there are also still too many countries that grow slowly if at all, where economic performance has somehow become ‘stuck’ at a low level. In the development context, a major policy concern is often to create enough jobs in a given period to employ all or most of those entering the labour force, preferably productively. Thus growth is not just about expanding aggregate output (GDP) but also about large-scale job creation. In the transition economy context, there was not only the complex matter of switching to a market-type economy in quite a short time, but generating growth and employment to catch up with more prosperous neighbours to the West. This has proved harder than many expected. Kolodko himself has written much about many aspects of economic growth, and has also contributed in important ways to concrete policy formation in Poland (especially when he served as Minister of Finance). In this paper I shall explore the ideas and challenges indicated above, drawing on Kolodko’s work as appropriate, but also developing some new ideas that seem to be needed to understand better both growth successes and growth failures around the world.