C.5	An Institute of Economic Growth and Society
	5.1	Earlier in this report, we have argued that the mission of AKU to serve the developing world ought not to be diminished in the foreseeable future. The needs of huge populations in the developing countries remain grave and difficult, worthy of AKU's commitment and such educational and analytical powers as it can muster.
		There are many ways for AKU to carry out its mission to serve the developing world. It is already doing so in health and education and the future we have depicted would deepen and strengthen these commitments in several ways. The Institute of Islamic Civilisations is particularly concerned with the Muslim world and should certainly illuminate ways to its contemporary development; and the Institute of Human Development is broadly devoted to making better lives for the human beings who populate developing societies and provide their human energies.
		One of the Commission's tasks has been to ask : What else? In one sense, practically all we are proposing serves AKU's mission to the developing world. But we now turn our attention to a component (or components) of AKU that would address the challenges of development more strategically and frontally.
	5.2	We recall an earlier section of this report in which we have described the remarkable changes in conceptions of development and the developing world that have come about in recent decades. It is one of the curiosities of social and intellectual history that there was very little attention to the subject of economic growth in this century until after the Second World War. The public mind and the minds of economists were then focused on business cycles and the distribution of wealth. [cf. H. W. Arndt, The Rise and Fall of Economic Growth, Chicago, 1978] After the War, the tasks in the official title of the World Bank -"reconstruction" and "development" - became dominant concerns all over the world. The liberation of nations from colonial subjection and the application of egalitarian principles to peoples everywhere brought forth aspirations of universal economic progress and there was confidence that it was quickly possible. President Truman in Point Four proclaimed one essential basis of that confidence : the diffusion of the technical and scientific knowledge that had made some countries rich to those still poor. For whatever reasons, the years after World War II saw what Professor Lloyd Reynolds has called the "greatest boom in history". Both rich and poor countries grew at rates that were historically unprecedented and economists and statesmen could be excused for thinking they understood at least some of the principles of economic development.
		As Professor Bell has described in paper prepared for the Commission, a subject called "economic development", which focused on the economies of underdeveloped countries, grew up and flourished for 20 to 30 years. This subject no longer has a distinct status in the corpus of economic knowledge; loss of faith in economic planning and the state as a prime agent of development was an important reason; heightened conviction that the conditions of economic progress are essentially the same in all countries is another. Both of these reasons were course, related to revived faith in the market. The former has also contributed to a faith in private organisations and initiatives of many sorts, as exemplified in the efforts of public development aid agencies and private foundations to reach past governments and deal directly with "the people". The strategies of the Aga Khan Foundation exemplify these policies.
		We are thus now in an era when macroscopic consideration of the whole economics and societies of developing countries is less popular than it was a decade ago. It is of course inevitable that governments and international agencies like the World Bank and IMF must do so, but the 4 exercises are little applauded. If governments are generally unpopular, the World Bank and IMF are even less so among the citizenries of developing countries and the international development community. Denunciations of pernicious structural adjustment programmes are everyday rhetoric and a movement has even been mounted to tret IMF back "where it belongs", out of development.
	5.3	Despite all this change, the fundamental importance of economic growth for the future well-being of the peoples of the earth has not changed. If the developing countries of the world are to lift their populations out of abject poverty, there is no other course than to raise incomes per capita. And at present rates of growth it will be a very long time before massive poverty is eased. In describing the plight of Africa earlier, we noted the dismaying calculations that it would take at least 40 years at rates of growth optimistically projected by the World Bank for average incomes in tropical Africa to get back to the low levels they had attained in the mid-1970s. Also, at its average rate of growth from 1980 to 1991 (3.2%) it would take Pakistan about 14 years to reach the present per capita income of Indonesia and more than 30 to reach Jordan's - to mention no more prosperous targets for comparisons.
	5.4	Whatever the unpopularity of Inacroscopic views of the growth of economies, the need for them seems inescapable. The effect of changing perceptions of conditions and strategies for economic growth has certainly not been to inake the paths to prosperity look easier. There is a set of fundamental issues that need to be faced and clarified :
		- In the first place, there is the question why there should be such large disparities in rates of growth in different regions with different cultural backgrounds.
		- These disparities are clearly related to political stability and effectiveness of government. Whatever the arguments over the role of the "developmental state" in the successes of the East Asian "tigers" no one doubts that an effective political frame has been a necessary condition for the successes of these burgeoning economics. Conversely, the "softness" of African governments has been seen as "the dominant single cause of the [economic] crisis". Similarly, we have noted the common view that the economic future of Pakistan depends more on the stability Lnd effectiveness of its government than on underlying economic conditions. With old dispositions to an economic determinism that would make good government flow from economic development now in retreat, the problems of economic growth now become entangled with the problems of achieving good governance.
		- Heightened awareness of the essential role of a governmental and legal frame for economic growth has been generalised to other institutional frameworks for economic activities. As Professor Bell puts it, "To achieve sustained economic growth in any society requires, in this view, deep understanding of the institutional basis of economic activity and creative thinking about how to modify institutional frameworks". Among these, frameworks that make possible exploiting the potential of scientific and technological advance are crucial. Whatever else is clear about the history of economic growth the central place of technical progress stands out. As we have argued earlier lagging scientific and technical competences are a serious handicap for the developing and Muslim world in their pursuit of economic growth. Remedying this lack is not simply a matter of training appropriate talent, but of institutional development as well. Other institutional developments are needed for the reconciliation of private and collective interests, for constraining the grosser forms of rapacity and greed, and more broadly, for promoting growth with equity.

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