Global Governance and Growth for Human Development
This paper analyses policies to enhance inclusive growth and human development through two key institutional dimensions: the articulation of multilateral, regional and national development banks, and the coordination of fiscal and monetary policies at the global level. On the one hand, the 2007/8 global financial crisis showed that the private financial system is not performing well enough to support the real economy, particularly in the context of a human development-based model. The private financial sector has been pro-cyclical, over-lending in boom times, and rationing credit during and after crises, limiting working capital and, especially, long-term finance crucial for investment. The paper explains how public development banks play a key role catalysing additional long-term private finance and thus leveraging public resources for inclusive and sustainable development, and providing counter-cyclical financing in times of crisis. It identifies some key characteristics of “good” development banks and underlines that it is desirable to expand their role in countries where they are already present and to set them up in the ones where they still do not exist. On the other hand, the paper emphasizes that large economies’ policies have important externalities on the rest of the world, and especially on developing and emerging economies’ growth and human development prospects. It recommends increased global coordination of macroeconomic policies with an expansionary bias, which could significantly increase global growth, favouring low income countries.