| Productive investment
A first step in economic progress often involves increasing the productivity of poor small farmers. This can happen when market forces yield agricultural advances or governments invest in research and development...It also enables poor households to invest more in their children’s health and education. Many of these children end up migrating to urban areas, particularly since food needs can now be met by fewer (but more productive) farmers...
Though good economic governance and sound economic policies are needed to escape poverty traps, they are not enough. In most cases enormous structural constraints must also be overcome to reach the thresholds for sustained growth...So what can be done for countries stuck in poverty traps' This report’s millennium development compact, building on a baseline of sound macroeconomic management, aims to bolster human development by combining six clusters of policies:
Investments in the social sectors: major progress can be made in health, nutrition, education and water and sanitation in low-income settings when additional donor resources are available, because the needed interventions are well known and long proven, and the main investments can be made by the public sector backed by donor financing. Big gains in health and education are required before per capita incomes can be raised substantially.
Investments to raise agricultural productivity: agricultural productivity can be raised by introducing better technology (improved seeds, tillage and crop rotation systems, soil nutrient management, pest management) and improving rural infrastructure (irrigation projects, storage and transport facilities, roads connecting villages to larger markets). In addition, security in land holding can protect farmer rights and encourage them to invest in land improvements that raise long-term productivity.
Investments in infrastructure: reaching an adequate threshold of roads, power, ports and communications to support economic diversification into non-traditional areas will be relatively easy in some areas, such as coastal port cities. But it will be much harder elsewhere, such as landlocked or mountainous countries suffering from high transport costs.
Industrial development policies to bolster private activities: Successful development of non-traditional activities often requires special industrial policies, including selective, temporary and well designed tax holidays, export processing zones, special economic zones, science parks, investment tax credits, promotion of science and technology, targeted research and development funding and public grants of infrastructure and land.
A broad emphasis on equity throughout society: political institutions must allow poor people — especially women — to participate in decisions that affect their lives and protect them from arbitrary and unaccountable actions by governments and other forces. Thus strategies for achieving the millennium development goals must ensure women’s rights to education, reproductive health services, property ownership, labour force participation and secure land tenure. Strategies must also focus on eliminating all other forms of discrimination, including by race, ethnicity or regional origin.
An emphasis on environmental sustainability and urban management: many of the world’s poorest places are in regions of enormous climatic variability and vulnerability, requiring sound ecological management...These policies can trigger a takeoff out of poverty.