Productive Capacities and Poverty
Reduction:
Links and Processes
Charles Gore
UNCTAD
UN International Forum on Poverty Eradication
New York, 15-16 November 2006
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
Statistical versus Structuralist
Approach to Poverty Analysis
• Distinction based on Graham Pyatt; it has
informed UNCTAD’s 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.
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
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.
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
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.
Important differences amongst the LDCs:
Long-term growth performance closely associated
with patterns of structural change (1980-2003)
Converging Weak-growth Regressing
economies economies economies
Agriculture/ GDP
Industry/ GDP
+
++
Manufacturing
+
Non-manufacturing
+
Services/ GDP
+
Agricultural labor productivity
+
Non-agricultural labor productivity
+
Total labor productivity
+
+
+
+
+
++
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 Nontradables
• Private Domestic
Investment plus FDI
• Development State
Key Policy Ingredients and
Institutions
• FINANCE
• KNOWLEDGE
• Domestic firms
• Domestic financial
systems
• International financial
architecture and
international trade
regime
• Domestic firms
• Domestic knowledge
systems
• International regimes
for technology
acquisition and
international migration
Thank You
This presentation draws on UNCTAD’s
work on East Asian development success
(see UNCTAD’s Trade and Development
Reports) and also UNCTAD’s Least
Developed Countries Reports since 2002
(see www.unctad.org/ldcr)