Arrested development; Early warnings?

Arrested development

There are just six years to go to the deadline set by the international community for achieving the Millennium Development Goals (MDGs). The trouble is, reports now indicate that no sub-Saharan African country will attain all the goals by 2015.

The good news is that civil conflict on the continent has cooled and several African nations have launched reforms to accelerate growth and moves towards democracy. But forces beyond governments’ control, such as world food prices, the global slowdown in economic growth and climate change are undermining efforts to attain the MDGs by the 2015 target date. Nearly half the countries on the continent are considered below average in their bid to eradicate extreme poverty and hunger (Goal 1). Child mortality rates are still unacceptably high in the majority of African countries (Goal 4).

Early warnings?

Productivity had been plummeting in OECD economies for a few years before the advent of the financial crisis. According to recent OECD statistics, the downward slide indicates several things. First, that the US has lost its lead in labour productivity, with a sharp decline in growth since 2004 putting it behind Europe by 2007. Second, that certain sectors at the heart of the crisis, such as the construction industry, were showing signs of exhaustion even at the height of the housing boom in 2005. Labour productivity growth had been decreasing since 2002; in the construction sector, it dived from -4% in 2005 to -10% in 2006 and -12% in 2007. In fact, productivity was already declining strongly just when the bubble was at its most inflated. Missed goals

Distribution of countries’ status by MDG

Source: www.africaneconomicoutlook.org

And the scenario looks no brighter in the short term. Following half a decade of above 5% economic growth, the continent can anticipate only 2.8% growth in 2009, less than half of the 5.7% expected before the economic crisis. That slower rate translates into people sliding back into poverty. But that slide can be slowed, even averted, if developed countries honour their aid commitments. In 2008, total net official development assistance from members of the OECD’s Development Assistance Committee (DAC) rose by 10.2% in real terms to US$119.8 billion–the highest dollar figure ever recorded and one which crisis-squeezed governments should do all they can to beat in 2009.

For more on the MDGs, visit www.oecd.org/dac/mdg. African Economic Outlook 2009 is available at www.oecd.org/bookshop

Productivity decline

Labour productivity growth in euro area, US and Japan

Source: OECD Productivity Database, OECD system of unit labour cost and related indicators database

By comparison, productivity in the euro area also dropped after 2006, while labour productivity in construction, at near-zero levels in 2006, slid slightly by 0.5%, while overall EU productivity edged up by 1%.

The convergence among OECD countries, albeit based on downward trends, also affects innovation, as measured by multifactor productivity (MFP), which captures the way labour, technology and know-how interact. The drop reflects weaker innovation, which needs to be reversed for a sustainable recovery to take hold.