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FROM VICIOUS TO VIRTUOUS CIRCLES
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Economic growth is necessary to meet the millennium development goals for two reasons. First, economic growth directly reduces income poverty for many households, increasing their savings and freeing resources for investments in human development. Without economic growth countries cannot expect to halve the proportion of people living in income poverty, the first target of the goals. Second, economic growth tends to increase government revenue...

But while economic growth is necessary for increased public spending on human development, it is hardly sufficient. Some governments neglect such investments or discriminate in their provision among population groups, weakening the potential benefits that overall economic growth can provide for meeting the goals. Past Human Development Reports have used the term “ruthless growth” to describe growth that does not reach poor people, either because richer households receive most of the increase in income or because governments do not use the additional revenue to invest in the human development.

Economic growth is important for achieving all the millennium development goals, but it relates most directly to the first target, which calls for halving the proportion of people in poverty between 1990 and 2015...

In countries with higher per capita incomes, a smaller proportion of people fall below the poverty line, suggesting that higher incomes are required to reduce poverty. But while there is an inverse relationship between a country’s income poverty and income level, the relationship is far from perfect. Poverty rates can vary considerably across countries with similar per capita incomes: Tanzania and Niger have similar incomes, yet Tanzania has a much lower poverty rate. Per capita income is also closely linked to non-income poverty. Still, some countries (such as Vietnam) have good levels of human development for their income, while other countries (such as Zimbabwe) are performing worse than others with similar levels of economic development. Thus the strong links between economic growth and poverty reduction are mediated by policy choices and structural factors...

Good education and health have intrinsic value for people’s well-being. And the two are closely linked: education helps improve health, and good health contributes to better education. Moreover, education contributes to economic growth and raises poor people’s incomes. Improvements in health also generate significant economic returns...

For many countries...achieving the millennium development goals will require breaking out of vicious circles (or poverty traps, to use a closely related concept) and entering virtuous circles. The synergies among various aspects of human development are also important: improving health and education requires related interventions in schooling, family planning health care, nutrition and water and sanitation...

Underlying many of these synergies are agency and equity. When poor people have political power protected by civil and political rights, they can be more effective in pressing for policies that create social and economic opportunities. Such power is especially important for women, as well as for ethnic and racial groups that face discrimination. Promoting gender equity and women’s capabilities is crucial to advancing economic development and to achieving the Goals...

To understand why some countries face higher hurdles in reaching thresholds for economic growth, first consider the structural implications of physical geography. For the reason Adam Smith explained more than two centuries ago, a country’s ability to sustain the complex division of labour required for internationally competitive manufacturing depends on the extent of the market.

Since Bangladesh’s birth in 1971, it has evolved into a democracy, achieving major reductions in income and non-income poverty... Moreover, most of the population is becoming literate. The positive changes unleashed by an export drive reinforced the need for better-educated people. Growth in manufacturing was a major source of this success. In addition, government agencies have supported the private sector through investments in infrastructure and skills, crucial for launching and sustaining the export drive...

But though Bangladesh has achieved impressive success in growing out of deep poverty and advancing maternal and children’s health over the past 30 years, its experiences may not be universally replicable...Moreover, even with its successes Bangladesh is still far from reaching several of the millennium development goals-including those for hunger and sanitation. So the central recommendation of the millennium development compact still applies: a multi-pronged approach is required to achieve the goals across sectors.

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