In search of workable growth strategies

To understand the weak, deteriorating and fragile growth patterns seen in many countries nowadays and in the global economy as a whole, one should compare what is actually happening with what reasonably comprehensive growth strategies might look like. Of course, there are many policies that sustain high growth, and to some extent they are country-specific. But a few key ingredients are common to all known successful cases.

The first is high levels of public and private investment. In successful developing countries, investment is at or above 30 percent of GDP. The public-sector component (infrastructure, human capital, and the economy's knowledge and technology base) is in the 5-7 percent range. And public and private sector investments are complementary: the former raises the rate of return to the latter, and hence its level.

Private domestic and foreign investment is influenced by a host of other factors that affect risks and returns. These include the skills of the workforce, the security of property rights and related legal institutions, ease of doing business (for example, the process and time required for starting a business, and the absence of rigidities in its product and factor markets (those for labor, capital and raw materials).