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What Worked and What Didn’t: Policies and Institutions that Affected the European Growth Model

December 7, 2012

Astana, December 7, 2012 – During his visit to Kazakhstan to present findings of the World Bank Flagship Report “Golden Growth – Restoring the Lustre of the European Economic Model, Indermit Gill, World Bank Chief Economist for Europe and Central Asia, spoke to students and staff of Nazarbayev University and representatives of other educational and research institutions and the diplomatic community about the unique achievements of the European growth model over the past 50 years. In this new report by the World Bank’s Europe and Central Asia Region Mr. Gill and a team of experts underscore the importance of policies and institutions that governed trade, finance, enterprise, innovation, labor and government in the European growth performance (“Brand Europe”). 

Earlier this year, the World Bank's Europe and Central Asia Region published a report entitled "Golden Growth" on the strengths and weaknesses of the European economic model.  The report was championed by the Polish Presidency of the European Union, and has influenced the debates on the future direction of European integration,” said World Bank Chief Economist for Europe and Central Asia Indermit Gill in the beginning of his lecture. “Next year, the World Bank will launch a report on Eurasian growth that identifies successful strategies for economic diversification and development. Kazakhstan will be featured prominently in the report, and it is expected that it will play an influential role in the debates about economic diversification not just in Eurasia but around the world.”

During the lecture, Gill emphasized that the Golden Growth report noted that Europe had an economic model with many good attributes, but also that there have been changes in the world that require changes in this model.  For example, a billion Asians have entered the global labor market while the Americans have engineered an information and technological revolution, and besides that populations have been aging everywhere, and public debt levels have risen in Europe. The report also saw as a risk the possibility that in responding to these changes, Europe might get rid of the stronger components of the economic model.  So the motivation for the Golden Growth report was to inform the debates about what has been working well and should be kept, and what has been weakening Europe and should be changed.

The Eurasia Growth report will play a similar role in looking at the experience of Kazakhstan and its neighbors in promoting economic development and diversification. Gill noted that in 2000, emerging Asia’s contribution to global growth was around half of Western’s Europe’s contribution and a third of that of the US.  But in 2010, the world economic growth was led by emerging Asia and other developing countries whereas the contribution of rich countries in Western Europe and the US turned out to be negative. He said that competitive pressures are increasing but so are opportunities. Gill also noted the flip side - the existence of fast growing neighbors - that creates new demand for products made in the region. In trying to look at the options for the countries in the region to diversify their economies, Gill said that the Eurasia Growth report answers the following important questions: (i) why has the integration, including trade flows, between the region and fast growing countries in Asia been so low?; (ii) why has the observed diversification failed to lift productivity over the last ten years?; and (iii) what can be done to increase the region's institutional capital?

Indermit Gill is currently the Chief Economist for the Europe and Central Asia Region of the World Bank.  He was the Director and principal author of the World Development Report 2009, Reshaping Economic Geography. He is the principal author of “Golden Growth: Restoring the Lustre of the European Economic Model, and Keeping the Promise of Social Security in Latin America and An East Asian Renaissance reports.  He has also co-authored a number of articles and books, including Closing the Gap in Education and Technology (World Bank Latin American and Caribbean Studies). His research on public finance, development economics, national social security programs, labor economics and economic geography has been published in several books and academic journals. He holds a Ph.D. from University of Chicago.

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