The world's poor countries, which are the worst sufferers of the current global economic crisis, need to rethink their development model, a UN report said on Friday.
The development model, which they have followed for the past several decades, has failed to substantially reduce poverty and achieve long-term growth, the report released by the UN Conference of Trade and Development, said.
"The crisis should be grasped as a turning point" for the least developed countries -- a classification grouping for the 49 poorest States around the globe, the UNCTAD report said, adding the magnitude of the crisis offers both the necessity and an opportunity for change.
LDCs are particularly vulnerable to the current crisis because they have small economies and are so dependent on international trade, capital flows and finance, it said.
Noting that in recent decades, many LDCs have severely reduced the role of government in promoting development, the report said the current crisis has 'exposed the myth of self-regulating markets' and neo-liberal economic policies have also not succeeded in tackling other problems such as bottlenecks in production, chronic deficits and shortages of skills and knowledge among the labor force.
The report argues that the roles of the state and the market must be rebalanced. Many affluent countries have already started shifting to include a much bigger role for the state in economic management, especially through fiscal stimulus packages, it said.
The report recommends that poor countries 'build a new developmental state' that ensures much greater collaboration between the state and the private sector, and boosts investment and technological capabilities so that a more diverse range of products can be made.
Wealthy countries must boost their support for struggling nations as well, the report emphasises. "This is not simply a question of more and better aid, but also the design of rules that govern international economic relationships with regard to trade, finance, investment and technology flows."
Photograph: Dipak Chakraborty
