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Thursday, 07 October 2010

It’s the End of the Export-Led Growth Model, Says UNCTAD

While the recovery from the financial and economic meltdown remains fragile in especially the developed world, the outlook for Africa inspires optimism, according to UNCTAD. The global economic and financial crisis has marked the end of the model of export-led growth for everybody, since "there must be somebody who imports and somebody who exports", Dr. Supachai Panitchpakdi, UNCTAD secretary general, stated at the presentation of the report in Geneva. With the major industrial countries not being able to consume as much as before, export-led growth – mainly by encouraging investment in cheap labour-intensive industries - has no future.  Developing countries, especially in Africa, should therefore boost domestic consumption and allow wages to increase in line with productivity growth, according to UNCTAD (United Nations Conference on Trade and Development). The findings are contained in the agency’s Trade and Development Report 2010, entitled "Employment, Globalisation and Development, which went public on Sep 14. Export-led growth prescriptions are associated with the neoliberal capitalist Washington Consensus. Now that the debt-financed consumption boom in the U.S. has ended, the U.S. economy will no longer serve as an engine of growth for the global economy. China, the euro area and Japan are unlikely to assume that role in the near future.  "Domestic demand in China is only one-eighth of that in the U.S.," Panitchpakdi continued. It has been demonstrated that keeping wages low is not correlated with employment creation, Panitchpakdi argued. "We have to look at wages and income as a source of demand and with the lifting of wages, in line with productivity growth, demand could increase and lead to more investment."There is not a shortage of employment in absolute terms in African countries, but a lack of productive and decent jobs, states the report. Agriculture still absorbs more than 60 percent of the labour force and there has been a rise in employment, mainly informal, in urban services and small-scale commerce.

Source: Inter Press News Service Agency