6 developing countries than for developed countries.‘ Most of the developing countries show distinctive starts and stops in their pattern of development. The mcxt famous case, Argentina, grew slightly above the OECD average over 1870-1913, but has lagg.‘d well behind ever since (with a particularly alarming decline after 1973). Ghana had respectable growth in 1913-50, then lagged badly in 1950-73, and finally went into catastrophic negative growth after 1973 (from which it is now recovering). Of the !1 developing countries shown, only 2 show reasonably steady growth -- Brazil and Colombia. Aside from the disruption of wars and other exogenous shocks, it is plausible that changes in policy regimes had much to do with shifts in growth performance. By contrast, the greater steadiness of growth in developed countries may reflect a more stable policy regime.

has For other developing countries, there is some doubt whether sustained per capita growth ever taken place. The incisive study of Reynolds (1985) concluded that per capita growth had definesnoi begun in 7 out of the 4U countries he was analyzing.’ The 1996 DevelopmentWorld Report while the level of “extreme poverty" as US$275 per capita consumption in 1985 PPP prices, US$370 per capita defines simple "poverty". According to data from Summers and Heston (1988), there are 8 countries below the extreme poverty line, while there are another 14 countries below the upper poverty line.° If we assume that the poverty line (or the extreme poverty line) approximates the range of minimum subsistence income, this would imply that income in these countries today is not much different from what it was in the distant past.’ Government policies may help to explain why countries have failed to grow. The analysis of the growth-poverty reiation will be discussed in a later section.

# B. Contribution to knowledge of policy-related issues

If specific policies help explain a significant portion of the substantial differences in longTun growth shown here (and thus iuge differences in per capita income), this should help convince even th- most reluctant statesman to adopt reforms. As Robert Lucas said, "The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them, it is hard to think about anything else.” Whether policy has growth effects has long been a controversial issue. In the traditional neoclassical framework, based on the work of Solow, policies have an effect only in the transition after a policy change, not in the long run. Recent theoretical models have extended the Solow model by endogenizing technological change, making it either another form of capital or ‘ The only exceptions to the steady growth pattern of the developed countries are Japan and Spain, both of whom made the transition from developing to developed countries over the period shown.

> 5 The countries were Afghanistan, Bangladesh, Ethiopia, Mozambique, Nepal, Sudan, and Zaire.

> § The "extremely poor" countries are Zaire, Chad, Ethiopia, Somalia, Malawi, Tanzania, Ghana, and Rwanda, while the “poor” countries are Zambia, Burundi, Liberia, Niger, Burkina Faso, Guinea, Uganda, Angola, Mali, Sierra Leone, Central African Republic, Togo, Kenya, and Nigeria. It is significant that all of these countries are in Africa, suggesting there are region-wide factors that need to be considered, as will be done in one of the proposed case studies described below. ” This argument was suggested by Lant Pritchett.

5Lucas (1988), p. 5.