Using Human Capabilities: Recapturing Economic Growth and Reducing Human Poverty

85 Building and using human capabilities effectively represent the engine of sustainable growth and poverty reduction. At the same time, economic growth (or lack of it) influences prospects for enhancing human development, of which persistent poverty is the antithesis. Thus, achieving sustained and equitable economic growth is intimately connected with both the process and the goals of human development. This chapter continues the discussion of the use of human capabilities in the region by reviewing the record with respect to growth, unemployment and poverty and proposing a way forward for Arab countries. It begins by examining the pattern of economic growth in the region in the last three decades, observing that sensitivity to oil markets, the low efficiency of physical capital and poor labour productivity resulted in fluctuating performance and, during the 1980s, a period of quasi-stagnation. It next considers the interrelationships between growth, average income levels, income distribution and inequality, unemployment and poverty. In doing so, it illustrates and discusses an apparent anomaly between the relatively low levels of extreme poverty in Arab countries compared to other regions and some indications of widening income disparity. After characterizing the extent, main causes and different forms of unemployment in Arab countries, it suggests that renewed growth is a necessary, although not a sufficient, condition to meet the challenge of full employment, fully use human capabilities and overcome poverty. The latter part of the chapter proposes specific policy measures towards these ends, based on mobilizing the full human and economic potential of the region. ECONOMIC GROWTH