Economic development, growth and employment
Economic policy – creating an enabling environment for development
The economic systems in many developing countries are far from being fully functional: there is a lack of competition, and access to resources is inequitable as is the distribution of wealth and income, all of which hamper growth and development.
The precondition for inclusive economic growth and for boosting public income in these countries is the introduction of an enabling environment for private-sector activities. The prospects of success and the efficiency of economic policy depend essentially on the quality of state structures and institutions. State actors must be able to draft pro-growth economic policy and to translate this policy into practice.
German development cooperation aims to support cooperation countries as they adopt policies that will encourage sustainable economic growth and economic stability. In the long term this will make the economies in these developing countries more competitive and more resilient to crises.
The guiding vision – a social and ecological market economy
German development cooperation takes its lead from the guiding vision of a social and ecological market economy.
The fundamental idea behind the social market economy is to ensure economic efficiency and protect the liberty of all citizens, while redressing social inequalities. The social market economy combines the principle of performance with the principle of equal opportunity and a social safety net, and allows as broad a section of the population as possible to benefit from growth. This makes the concept particularly attractive for developing countries.
The concept has now been expanded to embrace ecological sustainability. Economic development must not be bought at the expense of the environment. Rather it must take into account the stress limits of local and global ecosystems. This is vitally important for developing countries, because they tend to be disproportionately hard hit by the impacts of climate change and pollution. Yet many of these countries have a vast potential to be both economically successful and ecologically sustainable. One aspect is their potential for harnessing renewable energies.
In any development advisory services, the specific economic and cultural background of the cooperation country must be taken into account. This is why German development policy does not deliver a one-size-fits-all solution. It always takes into account the specific circumstances prevailing in a country when devising and realising development strategies.
In the field of economic policy German development cooperation pursues the following strategy:
- We support cooperation countries in their efforts to put in place economic-policy analysis, planning and implementation capacities.
- We foster the establishment and consolidation of the institutions and processes required in a social and ecological market economy (including properly functioning competition and ecological tax reforms).
- We help develop appropriate economic-policy reforms.
- We support adjustment and transition processes, such as those required in countries that have hitherto had centrally planned economies.
- We deliver advisory services on how to put national poverty reduction strategies into practice.
In the field of economic policy, Germany is most active in countries that demonstrate the will to reform and have good prospects of achieving tangible results. Since the advisory services we deliver are based on the model of the social and ecological market economy, special attention is paid to ensuring that economic growth is inclusive and environmentally sustainable. German development policy is also active in integrating cooperation countries better into global markets and regional economic areas. And Germany fosters sustainable development at decentralised level and in disadvantaged regions.
German development cooperation has at its disposal various options for pursuing its economic-policy approaches. Alongside technical and financial cooperation (involving political dialogue, capacity development and providing financial support), these include in particular the secondment and placement of experts.
The overarching nature of economic policy means that many interfaces exist to other areas of development cooperation, such as governance and human rights, as well as social and environmental policy.
To complement the bilateral measures undertaken by German development cooperation, the German government brings its positions, interests and values to multilateral and international debates on policy design. Germany works closely with other donors on issues of economic policy within international bodies, including the Working Group on Green Growth of the Donor Committee for Enterprise Development (DCED).
- Good work worldwide – Vision paper by Federal Minister Dr Gerd Müller and Federal Minister Andrea Nahlesnew window, PDF 1.5 MB, accessible 02/2015 | pdf | 1.5 MB | 12 P. | accessible
Social and Ecological Market Economy Principles in German Development Policy
Strategies 158 new window, PDF 234 KB, accessible 07/2007 | pdf | 234 KB | 6 P. | accessible
- Fighting Poverty More Effectively – Worldwide | Cross-Sectoral Strategy on Poverty Reduction new window, PDF 1.7 MB, accessible 11/2012 | pdf | 1.7 MB | 16 P. | accessible
- Green Economy new window, PDF 1.1 MB, accessible 02/2011 | pdf | 1.1 MB | 27 P. | accessible
Developing markets, creating wealth, reducing poverty, taking responsibility – The private sector as a partner of development policy
BMZ Strategy Paper new window, PDF 265 KB, accessible 04/2011 | pdf | 265 KB | 15 P. | accessible
Forms of Development Cooperation Involving the Private Sector
BMZ Strategy Paper new window, PDF 190 KB, accessible 03/2011 | pdf | 190 KB | 18 P. | accessible