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Breaking Down USAID's Economic Growth Policy

A critical (and perhaps overarching) element of USAID's Journey to Self-Reliance will be sustainable and long term economic advancement. ​Across the hundreds of countries where USAID supports humanitarian response, conflict resolution, poverty alleviation, global health provision, climate change and gender equity, the agency will be laser focused on how its efforts are transforming markets, local and regional economies, job creation and economic access for vulnerable populations.

​Below we break down the new Economic Growth Policy and share some highlights relevant for those working in international development.
 
For decades it was understood what economic growth meant for development; it was about growing GDP, advancing incomes and creating an equal playing field among workers across the world. The complexity of an interconnected global marketplace, fast adoption of technology, reliance on mobile communication, and an ever-expanding gap among "rich" and "poor" has created a different scope to consider for USAID and its network of partners. Economic advancement is no longer measured in simple terms. There's a complexity to the market-based development focus for the agency that is now being clarified and shared in their new Economic Growth Policy.

To stipulate how the agency will support, measure and expand economic growth worldwide, USAID's Economic Growth Policy combines its heavy focus on Private Sector Engagement, lead role in the Women's Global Development and Prosperity Initiative (W-GDP) and New Partnership Initiative (NPI), to describe the underlying mechanisms of growth necessary for countries to achieve self reliance.

This journey, as USAID refers to repeatedly, will be different in each region where USAID has a presence, but the mechanisms USAID will depend upon remain the same.

In summary USAID will promote:
  • Market systems that drive development: USAID will increasingly look to the private sector to create new jobs, stabilize markets and respond to economic growth trends. USAID will help build solid and formidable markets that allow the private sector to create linkages necessary for job creation, and economic advancement for communities where the need for new business development is critical. USAID will also support governance and infrastructure development for business creation and private sector engagement.
  • Building a growing demand for U.S. Goods and Services: USAID can facilitate market development and uptake for U.S. goods and services through policy making and advocacy, helping advance issues like traceability, safety, standard setting and adherence to peace, stability, government transparency and investment readiness.
  • Measuring growth effectively to ensure the greatest impact: USAID will continue to track the progress its country partners make in advancing traditional economic measures (like GDP, income, and jobs) but will also add new ways of measuring economic success as part of its self-reliance pledge. This may include statistics like gender metrics, access to services, government accountability, and market strength, with the aim of tracking impact leading to a suitable exit strategy for the agency once its country partners are able to manage growth for the foreseeable future. 

USAID has indicated that the core policy tenets are:
  • "Primacy of private enterprise," which puts private sector companies in the drivers' seat as key partners to lead countries out of poverty.
  • Innovation and investment, which encourage incentives for programs to advance productivity, transform labor and increase reliance on local human capital.
  • Growing local tax bases by increasing job availability, social services, governance and competition.
  • Resiliency measures, both economic and environmental (climate).
  • Inclusive economies, which means creating ways for economic advancement across all groups of people, in conflict areas, and where social strife has been an ongoing challenge.
  • Helping strengthen markets and avoid constraints from the environment, social conflict, lack of productive capacity and governance.

Additionally, USAID has laid out "Six Central Principles to Guide USAID’s Economic-Growth Programs." which include: 

  • Enabling self financing: USAID will help countries with issues around taxes, subsidies, market strengthening, competition and investment.
  • Prioritizing inclusion, sustainability and resilience: These measures currently ensure support for marginalized groups, and also environmental sustainability along with protection of natural resources.
  • Being systemic or catalytic: The idea here is that programs will be scalable and replicable when success is demonstrable.
  • Be cost-effective: Show evidence that all investments made in USAID programs have a ROI (impact and financial) which also incentivize others (i.e. private sector) to act.
  • Be adaptive: Encouraging testing new approaches, taking risks and not being afraid to fail, but shifting course and documenting lessons learned.
  • Show the results for the American people and benefit the United States: This helps promote two-way trade and reciprocity in sale and consumption of goods and services, advancing U.S. standards and other capacity and ensuring the interests of the U.S. Government policy are advancing. 

For additional insights, please reach out to us at [email protected]

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