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F R E D E R I C K S. P A R D E E C E N T E R FOR THE STUDY OF THE LONGER-RANGE FUTURE

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F I R S T -C LA S S M A I L P ER M I T N O . 1 8 3 9 B O S TO N , M A P O S TA G E W I L L B E P A I D B Y A D D R E S S E E : F R ED ER I C K S . PA R D EE C EN TE R F O R TH E S TU D Y O F TH E LO N G ER -R A N G E F U TU R E B O S TO N U N I V ER S I TY P O B O X 1 5 7 1 6 B O S TO N , M A 0 2 2 1 5 -9 6 3 2 N O P O S TA G E N E C E S S A R Y I F M A I LE D I N TH E U N I TE D S TA TE S

S P RIN G 2 0 0 5

A series of occasional papers published by Th e Fre d erick S. Pard e e C e nter for th e Study

N A M E :

A D D R E S S :

Please includeme on your mailing list for futurePardee Center occasional papers.

S E R I E S

Which Way?

pamphlets highlight emerging controversies at the crossroads:

the crossroads where decisions must be made about choices that

will affect the future of humankind through the twenty-first century andinto the next. They are intended to illuminate,inform, arouse interest, and inspire debate among opinion-molders, decision

-makers, and an informed and thoughtful public.

Which Way?pamphlets are published by Boston University’s Pardee Center for the

Study of the Longer-Range Future, established in 2000 to produce intellectual analysis of options for confronting inevitable change looking out 35 to 200 years. Pardee Center studies are intended to be international, interdisciplinary, non -ideological, and realistic.

The views expressed herein are those of the author(s) and do not necessarily express those of the Pardee Center or Boston University.

For more on the Pardee Centerfor the Study of the Longer-Range Future, see www.bu.edu/pardee.

PardeeCenterPublications

inthe“WhichWay?”Series

Fall 2003

Must Runaway Science Be Regulated? By David Fromkin

Winter 2004

Can Technology Help Solve

the Arab Israeli Conflict in Palestine? By Dr.Frank P. Davidson,

S E R I E S

Controversies A bout the Future

A P A R D E E C E N T E R P U B LIC A TIO N

Thoughts

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A native of Massachusetts,Frederick S. Parde e

received both a bachelor’s and a master’s degree

from the Boston University School of Management.

He worked for 13 years atthe RAND Corporation as a systems analyst, studying long-term economic

forecasts. He then spent several years working as an independent consultant, primarilyfor the U.S.

government.In 1974, he turned his professional attention to managing his real estate investments,while actively maintaining his interest in studying the future.

In 2 0 0 0, atthe turn of the millennium, Mr. Parde e established the Frederick S. Pardee Centerforthe Study ofthe Longer-Range Future at

Boston Universitywith an endowed professorship and annual visiting professorship to considerthe challenges that lie ahead for mankind in the decades to come.

For more information aboutthe Pardee Center at Boston University, visit our website atwww.bu.edu / pardee,

1 ThePardeeCenteratBostonUniversity,whichbeganlifeonlyafewyearsagowith thenewcenturyandthenewmillennium,alreadyisknownforthequalityofits

workshop-symposiaeachsemesteranditsvisitingprofessorlectureseries

eachyear.Thesehavevindicatedthegenerosityandtheimaginativevisionof

FrederickS.Pardee,whofoundedthisCenterin2000–2001 toexplorethe

challengesthatlieaheadforthehumanraceinthelonger-rangefuture.

Everynowandagaininthecourseofouractivities,wecomeacrossanissueoran

authororanessaytowhichwewouldliketodrawattention.Todosowehaveinau

-guratedthispamphletseriesofoccasionalpapers.

“ThoughtsAboutDevelopment:WhichAreMereFads?WhichAreHeretoStay?”

representsanimportantcontributiontothestudyofhumandevelopment.Itcomes

fromthepenofPaulStreeten,aleaderinthefield.Itisthethirdpamphletinour

“WhichWay?” series.Inrecognitionofitsimportance,theUnitedNationsHuman Developmentofficeisassistinginitsdistributiontoanetworkofpeoplearound theworldactivelyengagedinhumandevelopmentanalysisandresearch.Itis

boundto stimulatediscussionbystudentsofthefield.

I N T R O D U C T I O N

2

Dr. Stre e t en is the founder and chairman of the board of World Development, a consultant to the United Nations Development Program and to the United Nations Educational, Scientific and Cultural Organization (UNESCO). He has worked for several UN bodies. Among other institutions, he has played a major role in the Institute of Commonwealth Studies and the

Institute of Development Studies in Sussex. He is a principal thinker

behind the Human Development paradigm and has been intensely involved in the writing of all the United Nations Human Development

Reports, either as a part of the team of authors or as an advisor. Dr.

Streeten has participated in numerous conferences and conventions

worldwide. Many of his earlier lectures have been published in the book

3 Itusedtobesaidthattherearethreeformsofdiscourse:monologue,dialogue,

andBalogh.Myoldtutor,mentor,andfriend,ThomasBalogh,whoindeed

practicedauniqueformofconversation,oncewroteabookaboutfadsandfash

-ionsineconomics.HadhebeenaskedtowriteonthesubjectthatIhavechosen toattempttodiscusshere,hewouldprobablyhavebegunbysayingthatthemodels

producedbythefadsofdevelopmenteconomicsareelegantandshapely,butlack thevitalorgans.Iwouldnothaveagreed.Ibelievethatwehavemadeprogress. Itistruethatsometimesthechangesinthefashionsofthinkingaboutdevelopment

appearlikeacomedyoferrors,alurchingfromonefadtoanother,awild-goose

chase.Economicgrowth,employmentcreation,jobsandjustice,redistributionwith growth,basicneeds,bottom-updevelopment,participatorydevelopment,sustain

-abledevelopment,market-friendlydevelopment,developmentasliberation,

asliberalization,asfreedom,humandevelopment,developmentwithgood

governance;thusgoesthecarouseloftheslogans.Myownviewisthattherehas

beenanevolutioninourthinkingaboutdevelopment,thoughtherehavealsobeen periodsof regress.Both internal logicandnewevidencehaveledtotherevision

ofourviews.Abriefsurveyoftheprogressofourthinkingwillbehelpful. Ourthinkingaboutdevelopmentandtheplaceofpeopleinithas,asIsaid,under

-goneanevolution,anunevenprogress.Bothinternallogicandnewevidencehave

ledtothecontinualrevisionofourviews.Previousandpartlydiscardedapproaches

havetaughtusmuchthatisstillvaluable,andourcurrentapproachwillsurelybe

subjecttocriticismsandbeovertakenandreplacedbynewinsights.

Thinkingaboutthepurposeofoursocialarrangementsgoesbackatleastto

Aristotle.Thefulldevelopmentofhumanbeingsastheendofallouractivities

wasarecurringthemeinthewritingsofmostphilosophersfromtheancient

GreekstoDavidHume,ImmanuelKant,andJohnStuartMill,andofsuchpolitical

economistsasAdamSmith,KarlMarx,AlfredMarshall,andJohnMaynardKeynes.

T H O U G H T S

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Thediscussionwasresumedinthe 1950s,wheneconomicgrowthwasemphasized

asthekeytopovertyeradication.Evenatthisearlystage,sensibleeconomistsand

developmentplannerswerequiteclearthateconomicgrowthisnotanendinitself, butaperformancetestofdevelopment.In 1955theNobelPrize-winningWestIndian

economistArthurLewisdefinedthepurposeofdevelopmentaswidening “therange

ofhumanchoice,” exactlyastheHumanDevelopmentReportssince 1990havedone.

TheonlydifferenceisthatLewishadfaithintheefficacyofeconomicgrowthfor promotingthisobjective.

Threejustificationsweregivenfortheemphasisongrowthastheprincipal

performancetest.Onejustificationassumedthatthroughmarketforces—suchas

therisingdemandforlabor,risingproductivity,risingwages,lowerpricesofthe

goodsboughtbythepeople—economicgrowthwouldspreaditsbenefitswidelyand

speedily,andthatthesebenefitsarebestachievedthroughgrowth.Eveninthe earlydayssomeskepticssaidthatgrowthisnotnecessarilysobenign.Theymain

-tainedthatincertainconditions(suchasincreasingreturns,restrictionstoentry, monopolypower,unequalinitialdistributionofincomeandassets),growthgives

tothosewhoalreadyhaveadvantages;ittendstoconcentrateincomeandwealth inthehandsofthefew.

Thisiswherethesecondassumptioncamein.Itspremisewasthatgovernments

areconcernedwiththefateofthepoor.Thereforeprogressivetaxation,social

services,andothergovernmentinterventionswouldspreadthebenefitsdownwards.

Thereductionof povertywouldnotbeautomatic(asinthefirstassumption),

butgovernmentswould takeactiontocorrectsituationsinwhichmarketforces

by themselvesconcentratedbenefitsinthehandsofthefew.

Thethirdassumptionwasmorehardheadedthantheprevioustwo.Itsaidthat

thefateofthepoorshouldnotbeaconcernattheearlystagesofdevelopment. It wasthoughtnecessaryfirsttobuildupthecapital,infrastructure,andproductive

capacityofaneconomy,sothatitcanimprovethelotofthepoorlater.Foratime—

anditcouldbequitealongperiod—thepoorwouldhavetotightentheirbeltsand therichwouldreceivemostofthebenefits.Butiftherewardsoftherichareused toprovideincentivestoinnovate,tosave,andtoaccumulatecapitalwhichcould

eventuallybeusedtobenefitthepoor,theearlyhungryyearswouldturnout

tohavebeenjustified.Classical,neoclassical,andpalaeo-Marxisteconomists

allagreedonthis.SomeradicalliberalphilosopherssuchasJohnRawls1_would

sanctionsuchastrategy.Inequalities,intheirview,arejustifiediftheyareaneces

5 Anotherpowerfulinfluencewastheso-calledKuznetscurve.2_{NamedafterNobel}

LaureateSimonKuznets,itrelatesaverageincomelevelstoanindexofequality

andsuggeststhattheearlystagesofgrowthareaccompaniedbygrowinginequality. Onlyatanincomeperheadofabout$1,000(in 1979dollars)isfurthergrowth

associatedwithreducedinequality.Onemeasureofinequalityistheshareofthe

bottom40percentofthepopulationintotalnationalincome.Thisassociationhas

beensuggestedbytracingthecourseofthesamecountryovertime(timeseries),

andofdifferentcountries,withdifferentincomesperhead,atthesametime

(crosssection).Intheearlystagesofdevelopment,asincomeperheadincreases,

inequalitytendstogrow.Thismaymeanthatabsolutepovertyforsomegroupsalso

increases.Buteventuallytheturningpoint,thebottomoftheU-curve,isreached,

afterwhichgrowingincomeisaccompaniedbygreaterequalityand,ofcourse, reducedpoverty.Thegoldenageisusheredin.

Noneoftheassumptionsunderlyingthesethreejustificationsturnedouttobe

universallytrue.Exceptforaveryfewcountries,withspecialinitialconditions

suchasradicallandreformandspecialpoliciessuchasheavyemphasisonmass

educationandhealthmeasures,therewasnoautomatictendencyforincreasing

incomestobespreadwidely.Nordidgovernmentsoftentakecorrectiveaction toreducepoverty.Governmentswerethemselvesoftenformedbypeoplewhohad closepsychological,social,economic,andpoliticallinkswithbeneficiariesofthe

processofconcentratedgrowth,eventhoughtheirmotiveswereoftenmixed. Anditcertainlywasnottruethataperiodofenduringmasspovertywasneededto accumulatesavingsandinvestmentandtoraiseproductivity.Itwasfoundthat

smallfarmerssavedatleastashighaproportionoftheirincomesasbigland

-owners;thattheyweremoreproductive,intermsofyieldperacre;thatentrepre

-neurialtalentwaswidespreadandnotconfinedtolargefirms;andthatsomeforms ofconsumptionbythepoorwerenotonlydesirableinthemselvesbutalsomade

themmoreproductive.Prolongedmasspovertywasthereforenotneededtoaccu

-mulatecapitalandtostimulateentrepreneurship.

Tojudgebythegrowthofthegrossnationalproduct(GNP),thedevelopment

processsinceWorldWarIIhasbeenaspectacular,unprecedented,andunexpected

success.Butatthesametimewewitnessedincreasingdiversityofgrowth

betweendifferentdevelopingcountries,andincreasingdualismwithinmany

6

generaleconomicgrowth,notenoughemploymentwascreatedfortherapidly growinglaborforce.Norwerethebenefitsofgrowthalwayswidelyspread,andthe

lowerincomegroupsoftendidnotbenefit.

Inamuch-quoted,classicalarticleArthurLewishadpredictedthatpoorandlow

-productivitysubsistencefarmersandlandlesslaborerswouldmovefromthecoun

-trysidetothehigh-income,urban,modernindustries.3_{Thismovewouldincrease}

inequalityintheearlystages(solongasruralinequalitieswerenotsubstantially greaterthanurbaninequalities),butwhenmorethanthecriticalnumberofrural poorhadbeenabsorbedinmodernindustry,thegoldenagewouldbeusheredin, whengrowthwouldbemarriedtogreaterequality.Inthiswayanexplanationfor thestatisticalassociationoftheKuznetscurvewasprovided.

Itbecameevident,however,thattheLewismodel,whichstronglydominated notonlyacademicthoughtbutalsopoliticalaction,didnotalwaysworkinreality. Itdidnotapplyforfourreasons.First,therural-urbandifferentialsweremuch

higherthanhadbeenassumed,owingtotradeunionactiononurbanwages,

minimum wagelegislation,differentialsinheritedfromcolonialdays,andother causes.Thisproducedanexcessofmigrantstothetowns.Second,therateof growthofthepopulationandwithitthatofthelaborforcewasmuchlargerthan

expected:between2and3percentperyear.Third,thetechnologytransferredfrom theindustrialcountriestotheurbanindustrialsectorofthedevelopingcountries

waslabor-saving,andalthoughitraisedlaborproductivityitdidnotcreatemany jobs.Fourth,inmanydevelopingcountriesaproductivity-raisingrevolution inagriculturewasapreconditionforsubstantialandwidespreadprogressinindus

-try,andthisrevolutionhadnotoccurred.

J

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Itwasnotsurprising,then,thatattentionturnedawayfromGNPanditsgrowth.

Someevenwantedto “dethroneGNP” inthe 1960s,notforthecurrentlyfashion

-ablereasonofenvironmentalprotection,butbecauseitneglectedemployment

andincomedistribution,jobs,andjustice.Since 1969theInternationalLabor

OrganizationhadattemptedundertheWorldEmploymentProgrammetopromote

jobsinthedevelopingcountries.Ithadorganizedemploymentmissionstoseveral

countries—Colombia,Kenya,ThePhilippines,Iran,SriLanka,theDominican

Republic,theSudan,andEgypt—toexplorewaysofcreatingmoreproductiveand remunerativeemployment.Whilethiswasanextremelyusefullearningexercise,

7

itsoonbecameevidentthatunemploymentwasnotreallythemainproblem.

“Employment” and “unemployment” makesenseonlyinanindustrializedsociety wherethereareemploymentexchanges,organizedandinformedlabormarkets,

andsocialsecuritybenefitsfortheunemployedwhoaretrainedworkers,willing

andabletowork,buttemporarilywithouta job.Muchofthisdoesnotapply

tothepoorestdevelopingcountries,inwhichlivelihoodsaremoreimportantthan

wageemployment.

AnotherNobelLaureate,GunnarMyrdal,triedtoreplacetheconceptof “employ

-ment” bytheconceptof “laborutilization.” Ithasnumerousdimensionswhen

appliedtoself-employedsubsistencefarmers,landlesslaborers,artisans,traders,

educatedyoungpeople,saffron-cladmonks,beggars,caste-consciousBrahmans,

orwomen,insocietieswithoutorganizedlabormarkets. “Employment” as

interpretedinindustrialcountrieswasfoundnottobetheappropriateconcept. Toaffordtobeunemployed,aworkerhastobefairlywelloff.Tosurvive,an unemployedpersonmusthaveanincomefromanothersource.Therootproblem, itwasfound,isfrequentlypoverty,orlow-productivityemployment,notunem

-ployment.Manyofthemoderatelypoorarenotunemployedbutworkveryhardand

longhoursinunremunerative,unproductiveformsofactivity.True,among

thepoorestofthepoor,unemploymentcanbeacommonformofsuffering,buteven thenitsrootsarequitedifferentfromthoseofunemploymentinindustrialcountries. Thediscoverythattheproblemisoftenunremunerativeworkoflowproductivity drewattentiontotheinformalsector:thestreettraders,garbagecollectors,

andcasualworkers,aswellasmanyinsmall-scaleproductionsuchasblacksmiths, carpenters,sandalmakers,builders,andlampmakers.Thesepeopleoftenwork

extremelyhardandlonghours,areself-employedoremployedbytheirfamily,and

aresometimesverypoor.Attentionwasalsodirectedtothewomenwho,insome

cultures,performhardtaskswithoutbeingcountedasmembersofthelaborforce

becausetheirproductionisnotsoldforcash.Theproblemwastheredefinitionof the “workingpoor.”

Laborutilizationcoversmoredimensionsthanthedemandforlabor(thelack

ofwhichgivesrisetoKeynesianunemployment)andtheneedforcooperating factorsofproductionsuchasmachineryandrawmaterials(thelackofwhichgives

risetoMarxian “non-employment”).Thereisagooddealofevidencethatnot

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Thissuggestsothercausesforunderutilizationthansurpluslaborinrelationto scarcecapital.Morespecifically,thecausesoflowlaborutilizationcanbeclassi

-fiedunderfourheadings:consumptionandlevelsofliving(includingeducation

andhealth),attitudes,institutions,andpolicies.

Nutrition,health,andeducationareelementsoftheleveloflivingthatareimpor

-tantforfullerlaborutilization.Theyhavebeenneglectedbecauseinadvanced

societiestheycountasconsumptionandthishasnoeffectonhumanproductivity. Theonlyexceptionsthathavebeenadmittedintheliteratureuntilrecentlyare

someformsofeducation.Inpoorcountries,however,betternutrition,health,edu

-cation,andtrainingcanbeveryproductiveformsofinvestmentinhumancapital. Thisisonethreadthatgoesintothefabricofhumandevelopment.

Theseconddimension,attitudes,makesadifferenceinthekindsofjobspeople

willaccept.InSriLanka,forexample,alargepartofunemploymentistheresultof thehighaspirationsoftheeducated,whoarenolongerpreparedtoaccept “dirty”

manualjobs.CasteattitudesinIndiaalsopresentobstaclestofullerlaborutiliza

-tion.InAfricathosewithprimaryeducationwishtoleavethelandandbecome

clerksingovernmentoffices.Inmanysocietiesmanualworkorruralworkis

heldincontempt.

Thethirddimensionistheabsenceorweaknessofsuchinstitutionsaslabor

exchanges,creditfacilities,marketingorganizations,centersofinformation,

andasystemof landownershiportenancythatprovidesincentivesandability totillthesoil.Asaresult,laborisunderutilized.

Finally,thewrongpoliciesforfullerlaborutilizationareoftenadopted:laborinthe

organizedsectorisover-priced,capitalisunder-priced,foodboughtfromthesmall

growersisunder-priced,theexchangerateisover-valued,makinglabor-intensive exportsdifficult,etc.

Forreasonssuchasthese,theconceptsofunemploymentandunderemploymentas

understoodintheNorthwerefoundtobenotapplicable,andanapproachtopoverty thatassumeslevelsofliving,skills,attitudes,andinstitutionsfullyadaptedtofull laborutilizationhasturnedouttobelargelyadeadend.Unemploymentcancoexist withconsiderablelaborshortagesandcapitalunderutilization.

9 Inappropriateattitudesandinstitutionscanalsofrustratesomeapproaches

tomeetingbasicneeds.Focusingontheneedsofmen,women,andchildrendraws attentiontotheappropriateinstitutions(suchaslandreform,publicservices,

andcreditfacilities)towhichhouseholdsneedaccess,andtotheattitudes(suchas

thosetowardwomen’swelfare)thatneedchangingtosecurebetterdistribution withinthehousehold.

Theemploymentconceptwasquestionedforotherreasonstoo.Thecreation

ofmoreemploymentopportunities,farfromreducingunemployment,increasesit. Thosewhocomefromthecountrysidetothetownsinsearchofjobsbalancethe expectationofhighearningsagainsttheprobabilityofgettingajob.4_Asjoboppor -tunitiesincrease,theyattractmorepeople.Theinfluxofmigrantsinturncontrib

-utestothehighrateofurbandriftandthegrowthofshantytowns.Theemployed urbanworkers,thoughpoorbyWesternstandards,areamongthebetter-offwhen measuredagainstthedistributionofincomeintheirowncountries.

Thesedifficultiesturnedthedevelopmentdebatetothequestionofincomedistri

-bution.Oneofthelandmarkswasthebookpublishedin 1974fortheDevelopment ResearchCenteroftheWorldBankandtheInstituteofDevelopmentStudies

oftheUniversityofSussexentitledRedistributionwithGrowth.5_Amongmany

questionsaboutrelationsbetweengrowthandredistributionwerethefollowing:

doconventionalmeasuresofgrowthinvolveabiasagainstthepoor,andhowcan thisbechanged?Howcanstrategiesofredistributionbecombinedwithstrategies of growth?Isitpossibletoidentifygroupswhosemembershavecommoncharac

-teristicsandtodirectstrategiestowardthosegroups?Whataretheprincipal instrumentsofpolicy?Butapartfromthesequestions,itraisedtwosetsofques

-tions,ofspecial interestinthepresentcontext:

(1)Whatcanbedonetoincreasetheproductivityofthesmall-scale,labor

-intensive,informalsector “discovered” bytheILOemploymentmissionto

Kenya?Howcanweremovediscriminationagainstthissectorandimproveits

accesstoinformation,credit,andmarkets?Thequestionishowdoesredistri

-butionaffectefficiencyandgrowth?Doeshelpingthe “workingpoor” mean

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(2)Toturnthequestiontheotherwayaround,howdoeseconomicgrowthaffect

distribution?Itwasquiteclearlyseenthatinlow-incomecountrieseconomic growthisanecessaryconditionforeradicatingpoverty,butitalsoseems

thateconomicgrowthsometimesreinforcedandentrenchedinequalities

inthedistributionofincomes,assets,andpower.Notsurprisingly,when growthbeganwithanunequaldistributionofassetsandpower,itwasmore

difficulttoredistributeincomesandtoeradicatepoverty.Andtheresultsof

redistributingincrementalincometurnedouttobepitifullysmall.According

toonesimulationexercise,anannualtransferof2percentofGNPover 25yearsintopublicinvestmenttobuildupthestockofcapitalavailable

tothepoor—thoughttobeavery “dynamic” policy—would,after40years, raisetheconsumptionofthepoorest40percentofthepopulationbyonly 23percent;thatistosay,theirrateofconsumptiongrowthwouldaccelerate

by0.5percentayear:$1 fora$200income.Themodelexcludes,however,the

humancapitalaspectofsomeformsofconsumptionandtheimpacton

laborutilization,whicharestressedbythebasicneedsapproach.

Inspiteofitstitle,mostofRedistributionwithGrowthisconcernednotwithrela

-tiveincomesharesbutwiththelevelandgrowthofincomeinlow-incomegroups. MuchoftheredistributionliteraturemeasuresinequalitybytheGinicoefficient, whichrunsthroughthewholerangeofincomes,fromtherichesttothepoorest. Itmeasuressomewhatmeaninglesspercentilesinsteadofsocially,regionally,

orethnicallysignificantdeprivedgroups.Itdoesnottellwhoisinthesedecile

groups,forhow long,orforwhatreasons.Nordoesitindicatethescopeformobility

orthedegreeofequalityofopportunity.Normallythereisnoparticularinterest bythoseconcernedwithpovertyreductioninredistributiontothemiddle,which would reduceinequalitybutleavepovertyuntouched.Noristhefateofincome

decilesassuchof muchinterest,forthesearenotsociologically,politically,

orhumanlyinterestinggroups.

Anempiricalquestionishoweconomicgrowthaffectsthereductionofinequality

andpoverty,andhowthisreductioninturnaffectsefficiencyandeconomicgrowth. Theanswerstothesequestionswilldependontheinitialdistributionofassets,the

policiespursuedbythegovernment,theavailabletechnologies,thescopeforlabor

-intensiveexports,whichenlargestheapplicationoflabor-intensivetechnologies,

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arepreconditionsforequitablegrowth,buttheyarenotenough.Continuingpolicies andvigilanceareneededtopreventlargeinequalitiesfromreestablishingthem

-selves,eveniftheyareeliminatedinitially.Anotherimportantempiricalquestion ishowpoliciestoreduceinequalitiesandmeetbasicneedsaffectfreedomand

humanrights.

Itistruethatwedonothaveaproductionfunctionformeetingadequatestandards ofnutrition,health,education,andfamilyplanning.Itisnotknownprecisely whichfinancial,fiscal,andhumanresourcespoliciesproducethesedesirableresults. Thecausesaremultipleandinteractinacomplexandstillpartlyunknownmanner. Butatleastitisfairlyclearwhentheobjectivehasbeenattained,andthecriteria

bywhichitisjudgedarealsoclear.

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Afterthedisappointmentwithgrowth,afterthedeadendof “employment”

asinterpretedinindustrialcountries,andafterthelimitationandirrelevanceof

egalitarianismandredistribution,basichumanneedswerethenextlogicalstep

indevelopmentthinking.Thebasicneedsapproachemphasizedthat income

increases arenotenoughtoreducepoverty.Masseducation,safewater,family planning,healthservices,andotherservicesdependonpublicaction.Somepoor peopleareincapableofearningincome.Thebasicneedsapproachhasalsoalways

calledforparticipatorycommunityinvolvementandself-governinginstitutionsin thedesignandimplementationofprojectsandprograms.Thebestshorthandway

ofdescribingthebasicneedsapproachis:incomes+publicservices+participation. Thebasicneedsapproachhasatleastfouradvantagesoverpreviousapproaches

togrowth,employment,incomeredistribution,andpovertyeradication.First,the

basicneedsconceptisareminderthattheobjectiveofdevelopmentistoprovide

allhumanbeingswith theopportunityforafulllife.Howevera “fulllife” isinter

-preted,theopportunityforachievingitpresupposesmeetingbasicneeds.Inthe

previousdecadesthoseconcernedwithdevelopmenthavesometimeslosttheir wayinthetechnicalintricaciesofmeans—growthrates,production,productivity,

savingsratios,exportratios,capital-outputratios,taxratios,andsoon—andlost

sightoftheend.Theyalsoemphasizedtheeconomiccomponentofdevelopment

attheexpenseofnonmaterialonesthatcontributetohumandevelopment. Theycameneartobeingguilty,toborrowatermfromKarlMarx,of “commodity

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fetishism.” Beingclearabouttheendobviouslymustnotimplyneglectingthe

means:onthecontrary,itmeanseffortsaredirectedatchoosingtherightmeans

fortheultimateendsthataredesired.Inthepast,plannershavemovedawayfrom

oneaimofdevelopment,whichismeetingbasicneeds,tosomeconglomerationof commoditiesandservicesvaluedatmarketprices,irrespectiveofwhethertheyare

airconditionersorbicycles,luxuryhousesorruralshelters,whethertheybenefit therichorthepoor,andirrespectiveofnoneconomiccostsandbenefitssuch

ashumanrights,freedom,andparticipation.Thebasicneedsapproachrecalled thefundamentalconcernofdevelopment,whichishumanbeingsandtheirneeds. Second,theapproachwentbeyondabstractionssuchasmoney,income,oremploy

-ment.Theseaggregateshavetheirplaceandfunction;theyareimportantconcepts

and,thoughinneedofrevision,shouldnotbeabandoned;buttheyareuseless

iftheyconceal thespecific,concreteobjectivesthatpeoplethemselvesseek. Toconsiderbasicneedsistomovefromtheabstracttotheconcrete,fromthe

aggregatetothespecific,fromcommoditiestopeople.

Theevolutionsketchedaboveshowsthattheconceptshavebecomedecreasingly

abstractandincreasinglydisaggregated,concrete,and,aboveall,centered

on people.StartingwithGNPanditsgrowth,ahighlyabstractandunspecified

conglomerateofgoodsandservices,irrespectiveofwhat,how,forwhom,andfor what,developmentthinkingthenturnedtoemployment,asomewhatmorespecific goal.Thediscussionwasthennarroweddowntoparticulargroupsofunemployed: school leavers,recentmigrantstothecity,landlesslaborers,small-scalefarmers

withoutsecurewatersupply,andsoforth.But “employment” alsowasseentohave

seriouslimitations.Ideaswerenextfurthernarrowedtoidentifydeprivedgroups of individualsandfamilies—women,childrenunderfive,theelderly,youthwith

specificneeds,ethnicgroupsdiscriminatedagainst,communitiesindistantand neglectedregions.Economicgrowthisnolongertheultimateobjectiveof

economicdevelopment,butanincidentalresultofaimingattherightcomposition,

distribution,anduseofproduction,andasatisfyingwayofaccomplishingit,

13 Third,thebasicneedsapproachappealedtomembersofnationalandinternational

aid-givinginstitutionsandwasthereforecapableofmobilizingresources,unlike

morevague(thoughimportant)objectives,suchasraisinggrowthratesto6percent, contributing0.7percentofGNPtodevelopmentassistance,redistributingfor greaterequality,ornarrowingincomegaps.Peopledonotnormallysharelottery prizesorothergainsinwealthwiththeiradultbrothersandsisters,buttheydo

helpwhentheirsiblingsareill,ortheirchildrenneededucation,orsomeotherbasic

needhastobemet.Thesameistrueinthewiderhumanfamily.Meeting

basicneedshassomeofthecharacteristicsofapublicgood.Oneperson’ssatisfac

-tionfromknowingthatahungrychildisfeddoesnotdetractfromotherpeople’s satisfaction.Thebasicneedsapproachthereforehasthepowertomobilizesupport forpoliciesthatmoreabstractnotionslack.

Fourth,thebasicneedsapproachhasgreatorganizingandintegratingpowerintel

-lectually,aswellaspolitically.Itprovidesakeytothesolutionofproblemsthat

areatfirstsightseparate,but,oninspection,provetoberelated.Ifbasicneedsare

madethestartingpoint,theseotherwiserecalcitrantproblemsfallintoplaceand becomesolvable.6

Inonesense,thiswasahomecoming.Forwhentheworldembarkedondevelop

-mentmorethanhalfacenturyago,itwasprimarilywiththeneedsofthepoorin

mind.ThirdWorldleaderswantedeconomicaswellaspoliticalindependence, but independencewastobeusedforpeople’sself-fulfillment.Theprocessgot

sidetracked,butmany importantdiscoveriesaboutdevelopmentweremade:

theimportanceof makingsmall-scalefarmersandmembersof theinformal urbansectormoreproductiveandraisingtheirearningpower;thescopefor

“efficient” redistribution,thatis,redistributionthatcontributestomoreequitable

economicgrowth;thenumerousdimensionsoflabormarkets;andtheimportance

ofcreatingdemandforcertaintypesofproductsandthelaborproducingthem. Acommonminimumformulationoftheobjectivesofdevelopmentissustainable

growth(ofconsumption)withequity,or,better,withrapidpovertyreduction.

Equitymeansthatthereshouldnotbeunfairorunjustifieddiscrimination.Some

povertyreductionmayhavetobeunequal,inthesensethatnotallthepoorcan becomebetteroffatthesametime,sothatsomegroups,orsomeregions,may havetobefavored,atleastforatime.Thisisparticularlyimportantiftheselective

policyfavoringonegroupeventuallyhelpstoeradicatemorespeedilythepoverty

14

Weshoulddistinguishbetweeninequalityandinequity.IfA,whosesituation

isinallrelevantrespectsthesameasB’s,hasmorethanB,thatisinequality;

ifheorshehasmorebecauseBhasless,orifBhaslessbecauseAhasmore,that isinequitableoriniquitous.Butevenwhereexploitativeandiniquitousinequality isabsent,weshouldstillbeconcernedwiththefateofthepoor.Bothpovertyand

someformsofinequalityareevils,butpovertyisthegreaterevil.Andinequality

canalsobeasourceofhopewhenthoseleftbehindrightlythinkthatthey

cancatchupwiththoseaheadandgrasptheopportunitiestoadvancebytheir

ownefforts.7

Equalitycanrefertomanythings:income,resources,utility,achievements,primary goods,opportunities,freedom,humanrights,therighttovote,etc.Equalityinone

dimensionmeansinequalityinanother.Eventhosemostweddedtofreemarkets

whothinkthatmoreproductiveworkdeserveshigherrewardsbelieveinequality

ofopportunity;thosewhobelieveinmarketsbelieveinequalityoffreedomto

choose.Thebasicaimistofindapracticalconceptionofequalitythatcangive

peopleasensethattheyreceiveequalconsiderationfromsocietyandsohavea

stakeinit.ThekindofequalitydenouncedbyAnatoleFrancewhenhewrote “thelaw

in itsmajesticequalityforbidstherichaswellasthepoortosleepunderbridges, tobeginthestreets,andtostealbread” isnotenough.Equalityoffreedomto

chooseisgenerallyacknowledgedasdesirable.

Raisingproductionandproductivityofthepoor,althoughimportant,isnotenough. ManyproductivitygainsintheThirdWorldhavebeenpassedontoforeignbuyers (e.g.,inlowerpricesofexportcrops)ortolargemultinationalcorporations,orto

thebetter-offgroupsathome.Thegainsmustalsoberemunerativeforthepoor,as

wellasproductive.

Butbasicneedscomprisemorethaneconomicbenefits.Wemayalsowishtoadd theobjectiveofsecurityandstability:economic,political,andlegal.Greatlyfluc

-tuatinggainsandinsecurejobsarediscounted,eveniftheiraverageislargerthan

amorestable,thoughlower,level.So,asa firstapproximation,theobjective

becameproductive,remunerative,sustainable,stable,andequitablegrowthof consumption(or,toremovetheambiguitiesin “equity,” growthwithrapidreduc

15 Butthisdoesnotexhausttherangeofobjectives.Someofthemostimportant

contributionstopovertyreduction,reflectedinwhatpoorpeopleactually want,donotshowupingrowthfigures,andarenotachievedbyeconomicgrowth. Povertyismulti-dimensionalandcannotbesubsumedunderoneortwoorafew indicatorsofdeprivation.

AsthebasicneedsconceptenteredtheNorth-Southdialogue,allsortsofmiscon

-ceptionsandmisinterpretationsgrewaroundit.8_{First,itwassaidthatbasic} needsareconfinedtobasiccommoditybundlesandthatthechoicesarelimited:

educationalservices,healthservices,food,shelter,andthatitamountstoa

prescriptionof “count,cost,anddeliver”:countthepoor,costthebundle,and deliverittothe “targetgroups” (peoplewhoarenotonlygotat,but,metaphorically,

shotat,insteadofbeingregardedasactiveagents).Second,itwasthoughtthat

theroleallottedtothestatewastoopowerful,bothindeterminingwhatbasicneeds areandinprovidingfortheirbeingmet,andthatthistypeofpaternalismisboth

inefficientandunworthy.Third,itwasheldthattherewasaneglectofopening

upopportunitiestopeople:accesstojobs,income,assets,credit,andpowerwere

neglectedinfavorofsomanycalories,somanyyardsofcloth.

Oppositionindevelopingcountriesalsogrew,particularlytotheuseoftheconcept bydonorcountries.Someoftheobjectionsraisedbythedevelopingcountrieswere

justified,suchastheuseoftheconceptasanexcusetoreducedevelopmentaid

andtoputupprotectionistbarriers,oritsusetodivertattentionfromtheneedto

reformthesystemofinternationalrelations;othersreflectedthevestedinterests of therichinthepoorcountrieswhoresistattemptstoreducetheirpowerand wealth.Similarly,therichcountriesraisedbothlegitimateandillegitimateobjec

-tions.Theresultwasthattheconceptfadedawayininternationalconversations,

althoughitstillhasadherents amongmanyofthedraftersofplansinthedeveloping

countries,amongprivatevoluntaryorganizationsandactivists,andamong thinkersandthosewithcommonsense.

Retreats and Advances

The 1980swereaperiodofcrisis,ofsetbacksandretreats.Thedebtproblem,and

adjustmentandstabilizationpoliciesweretheprincipalconcerns.Stabilization wassought throughdeflationarypoliciesthatreducedoutputandemployment. Thepoorwereeitherforgottenor,insteadofseekingwaystoreducetheirnumber, waysweresoughttopreventanincrease.

16

ManycriticismswerevoicedagainsttheprescriptionsoftheInternationalMonetary

Fund(IMF).AmongthemwasthechargethatIMFrecommendationsattemptto

solvestructuralproblems,suchasanoilpriceincreaseinoil-importingcountries,

orapermanentdeteriorationinthetermsoftradefromsomeotherreason,

bymonetaryrestrictions,therebyinflictingunnecessaryunemployment,underuti

-lizationofcapacityandforgoneproduction,aswellasbeingcounterproductive

bydeprivingfirmsofthemeanstoinvestintheexplorationofnewdepositsandin relatedindustries,inoilsubstitutes,andinconservation.

AnothercriticismisthattheIMFconcentratesonreducingdemandinsteadof

increasingsupplies,oncuttingimportsratherthanexpandingexports.During

the 1980smanycountries,insteadofraisingexportsandreducingimports,found thatbothexportsandimportswerereduced.Itisalmostalwayspossibletoachieve

stabilizationandcorrectionofthebalanceofpaymentsbypoliciesthatreduce

income,demand,andemploymentsufficiently,withoutreallocatingresourcesto

investmentandexports,inotherwordswithoutfundamentaladjustment.Thecriti

-cismisthattheIMFhasadvocatedthiskindof “stabilizationwithoutadjustment.”

Atthesametime,thisperiodwitnessedaworldwidesurgetofreedom,democratic government,anddemandforparticipation.Duringthe 1980s,andwhilestabili

-zationandadjustmentpolicieswerepursued,newconcernswereincorporatedin thedevelopmentdialogue:theroleofwomen(andchildren),thephysicalenviron

-ment,population,habitation,humanrights,politicalfreedomandgovernance,

empowerment,corruption,thewasteofmilitaryexpenditureandthe “peacedivi

-dend,”andtheroleofcultureamongthem.Thebasicneedsapproachwasregarded

astoonarrowlyfocusedoncommoditybundlesdeliveredtopeoplebythegovern

-ment,andit hadtocarry theballastofpastmisinterpretations.

At thistimeinthe 1980sseveralauthorsproposedavarietyof “newgrowth theories.”Thesehaveabearingontherelationbetweenhumandevelopment

andeconomicgrowth.Theobservationthatoutputhasgrownfasterthanpopula

-tionforover200years,whiledifferentcountrieshaveremainedondifferent growthpaths,wasanimportantmotivationfortheconstructionofthesenewmod -els.Intheoldergrowththeories,growthisseenastheresultoftheaccumulation

ofproductivefactorsandofexogenoustechnologicalprogressthatmakesfactors

moreproductive.Inthenewgrowth theories,theemphasisisswitchedtothe

17

economies(benefitsfrominvestmenttoothersthanthosewhoincurthecosts)that

arepresentinmosteconomiesandtotheacquisitionofknowledge,education,and

on-the-jobtraining.Inthisframeworkthelong-termgrowthrateisnotdetermined bytheexogenousrateoftechnicalprogress,butbythebehaviorofpeoplerespon

-siblefortheaccumulationofproductivefactorsandknowledge.

Therearetwoimplicationsofthisswitch:first,growthisnotexplainedbytechno

-logical progressthatcomesfromoutsidetheeconomicsystembutbythe “endoge

-nous”behaviorofpeople.Second,educationandknowledge,particularlyinthe

formofResearchandDevelopment(R&D),incorporatedinhumanorphysicalcapi

-talorinbooksandblueprints,playanimportantpartinincreasingtotalproduc

-tivityandthusinenhancinggrowth.

Theimpactofhigherlevelsofeducationistwofold.First,abetter-educatedand trainedworkforceraisestheproductivityofthecooperatingfactorsbecause

better-educatedpeoplearemorelikelytoinnovateandtobemoreefficient ingeneral.Second,bettereducationbenefitsotherswhocannowearnmore,in

additiontotheeducatedperson.

R&Dsimilarlyimprovesnotonlytheproductivityandprofitabilityofthefirmthat investsinit,butalsothoseofotherfirmsorindividualsthatbuyitsproducts. Moreover,somediscoveriesarefreelyaccessibletoallfirmsthatcanbenefitfrom

them.Inthesewaysinvestinginhumancapitalcanovercomethediminishing

returnsofinvestinginphysicalcapital.Itfollowsfromtheexternalbenefitsof

education,R&D,andknowledgegenerallythatprivateagentswilltendtounder

-investinthemandthatpublicinterventionssuchassubsidiesarenecessaryto

ensureadequateinvestment.

A problemwithanymodelthatemphasizesasinglefactor,suchaseducationorR&D,

asthedrivingforceofdevelopmentisthatitiseasytopointtocounter-examples. Althoughitistruethat,lookingatmanycountries,acorrelationbetweeneconomic growthandeducationcanbefound,therearealsoimportantexceptions.SriLanka

hadhighlevelsofwidespreadeducationwithoutspectaculargrowth,whileBrazil

enjoyedhighgrowthrateswithlowlevelsofeducation.Realityismorecompli

18

Human Devel

o

pment and Capabilities

The 1980swerealsothetimewhenAmartyaSensetouttoproposeanalternative

approachtoutilityand “welfarism,” expandinganddeepeningthebasicneeds approach.Peoplevaluecommodities,heargues,notintheirownrightbutfortheir characteristicsandfortheneedstheymeet.Butgoingbeyondthis,henotedthat theresultsofconsumingcommoditiesdependalsoonthecharacteristicsofthe

consumer(whetherheorsheisable-bodiedordisabled)inthesocietyofwhichhe

orsheisamember.Senalsoemphasizedthatfreedomtochooseisimportantto

well-being.Thewell-beingofafastingmonkisdifferentfromthatofastarving pauper.Thestandardoflivingshouldbejudgedbyaperson’s “capability” to

leadthelifethatheorshevalues,frombeingwellfedandhealthytoachiev

-ingself-respectandparticipatinginthelifeofthecommunity.

Thetimehadcomeforawiderapproachtoimprovingthehumanconditionthat

wouldcoverallaspectsofhumandevelopment,forallpeople,inbothhigh-income

anddevelopingcountries,bothnowandinthefuture.Itwentfarbeyondnarrowly definedeconomicdevelopmenttocoverthefullflourishingofallhumancapabili

-ties.Itemphasizedagaintheneedtoputpeople,theirneeds,theiraspirations,and theirchoicesatthecenterofthedevelopmenteffortandtoasserttheunaccepta

-bilityofanybiasesordiscrimination,whetherbyclass,gender,race,nationality, religion,community,orgeneration.HumanDevelopmenthadarrived.

ThefirstHumanDevelopmentReportoftheUnitedNationsDevelopment

Programme,publishedin 1990undertheinspirationandleadershipofitsarchi

-tect,MahbubulHaq,cameafteraperiodofcrisisandretrenchment,inwhichcon

-cernforpeoplehadgivenwaytoconcernsforbalancingbudgetsandpayments. Itmetafeltneedandwaswidelywelcomed.Humandevelopmentwastheredefined

asaprocessofenlargingpeople’schoices,notjustbetweendifferentdetergentsor televisionchannelsorcarmodels,butofjobs,education,andleisurepursuits. Thesechoicescanchangeovertimeandcan,inprinciple,beinfinite.Yet,infinite

choiceswithoutlimitsandconstraintscanbecomepointlessandmindless.Choices

havetobecombinedwithallegiances,rightswithduties,optionswithbonds,liber

-tieswith ligatures.Itistruethatbondswithoutoptionsareoppressive;butoptions

withoutbondsareanarchic.Indeed,choiceswithoutbondscanbeasoppressiveas

19

Justasattheendofthe 19thcenturythereactionagainstextremeManchesterlib -eralismtooktheformof “collectivism,” notnowadaysapopularconcept,sotoday weseeareactionagainsttheextremeindividualismofthefreemarketapproach towardswhathascometobecalledcommunitarianism.Theexactcombinationof individualandpublicaction,ofhumanagencyandsocialinstitutions,willvary fromtimetotimeandfromproblemareatoproblemarea.Institutionalarrange

-mentswillbemoreimportantforachievingenvironmentalsustainability,

personalagencymoreimportantwhenitcomestothechoiceofhouseholdarticles

ormarriagepartners.Butsomecomplementaritywillalwaysbenecessary.

Amongthemostimportantchoicesistheabilityofpeopletoleadalongand

healthylife,toacquireknowledge,andtohaveaccesstotheresourcesneeded foradecentstandardofliving.Iftheseessentialchoicesareavailable,manyother

opportunitiesareopened.ThesethreebasicchoicesarereflectedintheHuman DevelopmentIndex.Butmanyadditionalchoicesarevaluedbypeople.Theserange

frompolitical,social,economic,andculturalfreedomtoopportunitiesforbeing productiveandcreative,andenjoyingself-respectandhumanrights.

Humandevelopmenthastwosides:(1)theformationofhumancapabilities,suchas

improvedhealth,knowledge,andskills;and(2)theusepeoplearewilling,able,and permittedtomakeofthesecapabilities:forleisure,productivepurposes,orpartici

-pationincultural,social,andpoliticalactivities.Therapidexpansionofthese

capabilities—includingthoseassociatedwitheducation,health,socialsecurity, credit,genderequality,landrights,andlocaldemocracy—dependscruciallyonpub

-licactionthat isneglectedbymany developingcountries.Ontheotherhand,by removingitselffromexcessiveregulationandbureaucraticinterventionsinproduc

-tionandtrade,thegovernmentcanalsocontributetoexpandingsocialopportunities. Theuseofthesecapabilitiescanbefrustratediftheopportunitiesfortheirexercise

donotexistoriftheyaredeprivedoftheseopportunitiesasaresultofdiscrimina

-tion,obstacles,orinhibitions:ifthereisnodemandfortheirproductivecontribu

-tionssothatpeopleareunemployed,oriftheydonothaveenoughleisure,orif politicaloppressionordeprivationofhumanrightspreventsthemfromfullpartic

-ipationinthelifeoftheircommunities.Therecanbe “jobless” growth,therecan be “voiceless” growth,therecanbe “rootless” growth,andtherecanbejobless,voice

20

Gettingincomeisoneoftheoptionspeoplewouldliketoexercise.Itisanimportant, butnotanall-importantoption.Humandevelopmentincludestheexpansionof incomeandwealth,butitincludesmanyothervaluedandvaluablethingsaswell. Forexample,ininvestigatingtheprioritiesofpoorpeople,onediscoversthatwhat mattersmosttothemoftendiffersfromwhatoutsidersassume.Moreincomeis onlyoneofthethingsdesiredbypoorpeople.Adequatenutrition,safewaterathand, bettermedicalservices,moreandbetterschoolingfortheirchildren,cheaptrans

-port,adequateshelter,continuingemploymentandsecurelivelihoods,andproduc

-tive,remunerative,satisfyingjobsdonotshowupinhigherincomeperhead,at leastnotforsometime.

Thereareothernon-materialbenefitsthatareoftenmorehighlyvaluedbypoor peoplethanmaterialimprovements.Someofthesepartakeinthecharacteristics ofrights,bothpositiveandnegative,othersinthoseofstatesofmind.Among thesearegoodandsafeworkingconditions,freedomtochoosejobsandlivelihoods, freedomofmovementandspeech,self-determinationandself-respect,independence, mobility,liberationfromoppression,violence,andexploitation,lessdependence

on patrons,securityfrompersecutionandarbitraryarrest,nothavingtomove

insearchofwork,asatisfyingfamilylife,theassertionofculturalandreligious

values,asenseofidentity,accesstopowerordirectempowerment,recognition,

status,adequateleisuretimeandsatisfyingformsofitsuse,asenseofpurpose

inlifeandwork,theopportunitytojoinandparticipateactivelyintheactivitiesof civilsociety,andasenseofbelongingtoacommunity.Theseareoftenmorehighly

valuedthanincome,bothintheirownrightandasameanstosatisfyingand

productivework.Theydonotshowupinhigherincomefigures.Nopolicymaker canguaranteetheachievementofall,oreventhemajority,oftheseaspirations, butpoliciescancreatetheopportunitiesfortheirfulfillment.

Economicgrowthcanbequiterapidwithoutanimprovementinthequalityoflife

of themajorityofthepeople,andmanycountrieshaveachievedahighqualityof lifewithonlymoderategrowthratesofincome.Ithasbeenobservedthatthereisa

positivecorrelationbetweenincomeperheadandtheindicatorsofhumandevelop

-ment.Somehavedrawntheerroneousconclusionthatitisonlyincomethatmat

-ters.But,first,thisrelationshipisfarfromperfect,andinterestingquestionsare

raisedbytheoutliersandparticularlybycountriesthathaveachievedhighhuman developmentatlowlevelsofincome;and,second,thisrelationdependsentirelyon

21 theextraincomethatarisesfromgrowthbeingusedforpubliceducationand

healthandforspecificattacksonpoverty.Ifthesetwoconditionsareabsent,the

correlationdisappears.9_{Muchdependsalsoontheinitialdistributionofassets.} Iflandownershipisfairlyequallydistributedandmasseducationiswidespread, thebenefitsofeconomicgrowthwillbereflectedingoodhumandevelopment. Economicgrowthisoftenconsideredtobeanessentialcomponentofhumandevel

-opment.Butgrowth(inthenarrowsenseofacontinuingincreaseofthequantity

of goodsandservicesproducedandconsumedovertime)issimplytheintertempo

-raldimensionofanypolicyobjective,althoughithasbeenwronglymonopolized by productionandconsumption:itshouldapplytopovertyreduction,employment, investment,amoreequitableincomedistribution,environmentalprotection, leisure,and,ofcourse,alsotoincome.Butonceyouspecifyforincome,consump

-tion,production—thewhat?towhom?bywhom?forwhat?andwhen?—growth

becomestheincidentalresult,nottheobjective,ofasensibleeconomicpolicy. Growthistoounspecified,abstract,aggregate,andunboundedtobeasensible

objectiveofpolicy.Italsoimpliesaninfinitehorizon,withoutlimitstoincreases

inincome.Whatmattersisthecompositionofthenationalincome,towhatusesit isput,itsdistributionamongbeneficiaries,nowandforfuturegenerations;and

withhowmucheffortandinwhatconditionsitisproduced.If,andonlyif,the

extraresourcesresultingfromgrowthgolargelytothepoor,andtheyarespent

onpublichealthandeducation,willacontributiontohumandevelopmentresult. Thenationalincomeisaquiteinadequatemeasureofhumandevelopmentfor

severalreasons.Itcountsonlygoodsandservicesthatareexchangedformoney,

leavingoutofaccountthelargeamountofworkdoneinsidethefamily,mainlyby women,andworkdonevoluntarilyforchildrenorolderpeopleorincommunities. Publicservicesarecountedattheircost,sothatdoublingthewagesofallpublic

servantsappearstodoubletheircontributiontowelfareordevelopment.National incomeaccountingdoesnotdistinguishbetweengoodsandregrettablenecessities, likemilitaryoranticrimeexpenditure,productsneededtocombat “bads.” Addictive eatinganddrinkingiscountedtwice:whenthefoodandthealcoholareconsumed,

andwhenlargesumsarespentonthedietindustryandoncuresforalcoholism.

Muchofwhatisnowcountedaseconomicgrowthisreallyeithercombatingevils,

andfixingblundersandsocialdecayfromthepast,orborrowingresourcesfromthe

22

Nationalincomeaccountingdoesnotaddleisuregainedbyfewerworkinghoursor

anearlierretirementage,anditdoesnotsubtractfromtheextraincomegenerated

andleisurelostifwomenareforced(ordesire)totakeonjobsoutsidethefamily,

ormentotakeonasecondjob.Environmentaldegradation,pollution,andresource

depletionarenotdeducted,sothattheearthistreated,ithasbeensaid,likeabusi

-nessinliquidation.Freedom,humanrights,andparticipationareignored.Itwould beperfectlypossibletoattainhighincomesperheadandthesatisfactionofall materialneedsinawell-managedprison.Mostimportant,theconventionalmeasure

doesnotallowforthedistributionofincome,countingallgoodsandservicesat

theirmarketprices.Increasingtheproductionofwhiskey,boughtbyrichmen,

countsformuchmorethanincreasingtheproductionofmilkthatwouldhavegone

toastarvingchild.Attemptshavebeenmadehereandtheretocorrectforthese

faultsandomissions,butnationalincomeremainsaquiteinadequatemeasureof

economicwelfareorofhumandevelopment.

Someoftheseshortcomingscanberemovedbyadjustmentsintheaccounting methods.Theseconcernthosecomponentsofwell-beingthatcanbe,inprinciple, brought intorelationwiththemeasuringrodofmoney.Amonetaryvaluecanbe

attachedtoleisuretime.Incomedistributioncanbeallowedforbyattaching greaterweightstotheincomesandtheirgrowthofthebottom20percentor30 percentor40percentofthepopulation.Depletionofnonrenewablerawmaterials

canbeevaluated,andameasureforsustainableincomecanbedesigned.

Forothercomponentsofchoiceandwelfare,monetarymeasurementismuchmore

difficultormaybeimpossible.Theenjoymentwederivefromanunspoiledwilder

-ness,thesatisfactionfromwork,politicalengagementthatresultsfromparticipa

-tion,thesenseofcommunity,brotherhood,andsisterhoodthatgrowsoutofsocial

activities,thefreedom,peace,andsenseofsecuritythatarecommoninawell-run

society,thesecannoteasilybereducedtodollarsandcents.Yettheyformthe

essenceofhumandevelopment.

Thecontributingtributariestohumandevelopmentcanbegroupedunderfive

headings:(1)economicgrowth,(2)humanresourcedevelopment,(3)humanrights andparticipation,(4)peaceandsecurity,and(5)sustainability.Theroleofculture

isdiscussedundertheheadingof humanrightsandparticipation.Issuesofequity

23 Wenowliveina “risksociety.” Peoplearebombardedwithassessmentsofthe

risksofdecisions(fromwhattheyeattowhethertheyshouldbuildnuclearpower

stations).Theyhavelosttheoldcertaintiesabouthowtheirliveswillturnout:

nomorejobs,ormarriages,forlife.

Humandevelopmentistheend,thetributariesarethemeans;buttheycanalso acquireendcharacteristicsthemselves.Environmentalsustainability,peace, participation,humanresources,andbysomeeveneconomicgrowtharevalued intheirownright.Totheextentthattheyareends,theyallhavetobeincludedin humandevelopment.Thefivetributariescanaugmenteachother,forexample, whenhumanresourcescontributetohighergrowth,orrespectforhumanrights

advancespeace.Therearealsofeedbacksfromachievementsinhumandevelop

-ment tofurtherimprovementsinhumandevelopment.Thesemaybeindirectby improvingthefivecomponents(economicgrowth,humanresourcedevelopment, humanrightsandparticipation,peaceandsecurity,andsustainability),orthey

maybedirect.Thelatteroccurwithinandbetweenfamilieswhenknowledge

ispassedonandwhenbettereducationofmothershasanimpactontheirchildren. Severalstudieshaveshownthatwomen’seducation,controlovercashincome,and

accesstopower,inadditiontobeingdesirableinthemselves,improvethehealth,

nutrition,andeducationofchildren,reducefertility,reduceinfantmortality,

reducehealthhazardofadultsarisingfromlowbirthweight,raiseproductivity, reduceinequality,arebeneficialfortheenvironment,andincreasetherangeand

effectivenessofpublicdebates.

Genderissuesareparticularly importantforreproductivefreedom:forpeople,

especiallywomen,tobeabletochoosethesizeoftheirfamilies.Thereisnowa

wealthofevidencetoshowthatgiventheopportunitytochoosesmallerfamilies

withoutadverse economicandsocialconsequences,smallerfamiliesareindeed chosen.Withhumandevelopment—thatis,withtheexpansionofeducation,especi

-allyof girlsandwomen—thereductionofinfantmortalityrates,andmedical facilities(includingtheopportunityofbirthcontrol),fertilityrateshavecome

downsharply.Itmayseemparadoxicalthatreducedinfantmortalityrates,more

childrensurviving,shouldcontributetoreducedpopulationgrowth.Butthere

isoverwhelmingevidencethatparentstrytoover-insurethemselvesagainstthe

deathsoftheirchildren(particularlysons)andthatmoresurvivingchildrenreduce

24

growth,andreducedpopulationgrowthadvanceshumandevelopment.Human

development,inadditiontolongerlifeexpectancy,bettereducation,andsecurer lives,makesitpossibleforpeopletooptforsmallerfamilies.

Itisthoughtthatsomeoftheselinkslendthemselvesmoreeasilytomeasurement thanothers.Thehumanresourcesofeducationcanbecapturedunderliteracy ratesandschoolenrollmentrates,ofhealthunderlifeexpectancyandinfant mortality.Itisforthisreasonthatmoreattentionhasbeenpaidtotheselinks

thantoothers,suchasthatbetweenparticipationandhumandevelopment,notso

readilybroughtintorelationwithameasuringrod.Somemayhavebecomevictims

ofthefallacythatwhatcannotbecounteddoesnotcountorevenexist.Butitmay

bequestionedwhetherthequalityofeducationortheattitudesthatagoodeduca

-tioninstills,suchaspunctuality,discipline,teamwork,etc.,arecaughtunderthe

conventionalstatisticalsocialindicators.Thesamegoesforhealthmeasures. Economicgrowth,basedonincreasesinGNP,has,ofcourse,beenthearchetypal caseofcountingandhasattractedthelimelightofattention.

The Human Devel

o

pment Index

Themosteye-catchingandheadline-makingcontributionoftheHumanDevelopment ReportshasbeentheHumanDevelopmentIndex(HDI).Itcomprises(1)theloga

-rithmofGDPperhead,calculatedattherealpurchasingpower,notatexchange

rates,uptotheinternationalpovertyline;(inReportsafterthe 1990Reportthis

wasmodifiedinvariousways);(2)literacyrates(and,sincethe 1991 Report,mean yearsofschooling);and(3)lifeexpectancyatbirth.Thesedisparateitemsare

broughttoacommondenominatorbycountingthedistancebetweenthebestand worstperformersandtherebyachievingarankingofcountries.Criticshavesaid

thatnotonlyaretheweightsofthethreecomponentsarbitrary,butalsowhat

isexcluded,andwhatisincluded.

ParthaDasguptahaspointedoutthattheHDImisrepresentsconcernsaboutthe

future,sinceitdoesnotdeductcapitaldepreciation;thatitreflectsonlycurrent well-beingandthat itisanindexonlyofhumancapital,leavingoutnaturalcapital. If theseomissionsareallowedfor,whatappearsasagoodhumandevelopment performanceturnsouttobemuchworse.11

AnotherproblemwiththeHDIistheimplicittrade-offbetweenlifeexpectancy

andincome.Foracountrywithanincomeperheadlessthantheworldaverage

25 perheadofCostaRica)anincreaseofannualGDPperheadof$99willexactly

compensateforoneyearlessoflifeexpectancy,soastokeeptheHDIconstant.12

Ifthepeopleinonepoorcountryhaveoneyearlessoflifeexpectancybut

$100higherGDPperheadthaninanothercountry,thiscountrywillhaveahigher

HDI.Thevalueattachedtolongevityrisessharplywithincome.Foracountry withtwicetheaverageincome(abouttheincomeperheadofMalta),anextrayear

oflifeisvaluedat$7,482inincomeperhead.Atthreetimestheaverage(about

theincomeintheUnitedKingdom),itisworth$31,631,abouttwicethecountry’s

incomeperhead.Atfourtimestheaverage(aboutSwitzerland’sincome),itsvalue

reaches$65,038,aboutthreetimesactualincome.Theimplicationisthatlifeisfar lessvaluableinpoorcountriesthaninrichones.Thevaluejudgmentsunderlying thesetrade-offshavebeenrightlyrejected.So “HumanDevelopment” andtheHuman DevelopmentIndexarenotultimateinsightsandotherideaswilltaketheirplace. Weareallfreetoguesswhatthesewillbe.

Anotherquestionis,shouldafreedom(orhumanrights)indexbeintegrated

withtheHumanDevelopmentIndex?Therearesomeargumentsinfavor,but

thebalanceofargumentsisprobablyagainst.First,itmightbesaidthat “freedom from” issoimportant(and,opportunitycostsapart,costless)thatnotrade-off

shouldbepossiblebetweenitslossandgainsinsomeoftheotherindicators.13

Secondly,politicalconditionsaremuchmorevolatilethaneducationandhealth. Onceamotherknowstheimportanceofeducationforherchildren,orofhygiene,

thisknowledgeisnotlostevenwhenthefamily’sincomedrops.Sohuman

indicatorstendtobefairlystable.Thereisaratcheteffectthatpreventsrapid, largedownward moves.Politicalindications,ontheotherhand,canchange

overnightwithacoup.Athirdargumentagainstaggregatingfreedomwiththe

positiveaspects ofhumandevelopmentisthatgradingismoresubjectiveandless

reliablethanmeasuringlifeexpectancyorliteracy.Usingindicatorsforfreedom

andhumanrightsisopentotheobjectionofEurocentricity.

Finally,oneofthemostinterestingquestionsishowfreedomisrelatedtohuman developmentmorenarrowlyinterpreted,orhownegativeandpositiverights

orfreedomareassociated.Thiscanbedoneonlyiftheyarerecordedbyseparate

indexes,notcomponentsofthesame.14_{Thus,wemightformulateahypothesis} thatfreedom,thoughnotanecessaryconditionofhumandevelopment,narrowly defined,isentirelyconsistentwithit,evenatquitelowlevels;andthathuman development,onceithasreachedacertainstage,leadsinevitablytothecall forfreedombythepeople.Hereisamessageofhope.

26

E N D N O T ES

1. JohnRawls,A TheoryofJustice(Cambridge,MA:HarvardUniversityPress,1971),302.

2.SimonKuznets, “EconomicGrowth andIncomeInequality,” AmericanEconomicReview45,no.1

(March1955):1–28; andSimonKuznets, “QuantitativeAspects ofEconomicGrowth ofNations,

VIII:Distributions ofIncomebySize,” EconomicDevelopmentandCulturalChange11,no.2

(January1963):1–80.

3.W.A.Lewis, “EconomicDevelopmentwithUnlimitedSupplies ofLabour,” ManchesterSchoolof

EconomicandSocialStudies22,no.2 (May1954):139–91.

4. JohnR.Harris andMichaelP.Todaro, “Migration,Unemployment, andDevelopment:ATwo

-SectorAnalysis,” AmericanEconomicReview60,no.1 (March1970):126–42.

5.Hollis Cheneryet al.,RedistributionwithGrowth(London:PublishedfortheWorldBank and

theInstitute ofDevelopmentStudies,University ofSussex,byOxfordUniversityPress,1974).

6.PaulStreeten, “Industrializationin a UnifiedDevelopmentStrategy,” inEmployment,Income

DistributionandDevelopmentStrategy,EssaysinHonourofH.W.Singer,eds.SirAlecCairncross

andMohinderPuri (NewYork:Holmes &MeierPublishers,1976).This essaywas also publishedin

WorldDevelopment3,no.1 (January1975):1–9.

7.For someimportantqualifications to this andthelinks between absolute andrelativepoverty,

seePaulStreeten, “Comment,” FrontiersofDevelopmentEconomics.TheFutureinPerspective,

eds.GeraldM.Meier and JosephE.Stiglitz (NewYork:OxfordUniversityPress,2001):87–93.

8.For a discussion ofthese, seePaulStreetenet al.,FirstThingsFirst:MeetingBasicHuman

NeedsinDevelopingCountries(NewYork:PublishedfortheWorldBankbyOxfordUniversity

Press,1981),chapter8.

9.SudhirAnand andMartinRavallion, “HumanDevelopmentinPoorCountries:OntheRole of

PrivateIncomes andPublicServices,” TheJournalofEconomicPerspectives7,no.1 (Winter1993):

133–50.

10.CliffordCobb,TedHalstead, and JonathanRowe,TheGenuineProgressIndicator:Summaryof

Data and Methodology(SanFrancisco,CA:RedefiningProgress,1995).

11.Partha Dasgupta, “ValuingObjects andEvaluatingPolicies inImperfectEconomies,” The

EconomicJournal111,no.471 (May2001):C2.

12.MartinRavallion, “Good andBadGrowth:TheHumanDevelopmentReports,” World

Development25,no.5(May1997):631–38.

13.This objectioncouldbemitigatedbyusing a geometricalratherthan an arithmetic average.

Withazeroweightforfreedom,thetotalindexbecomes zero,howeverhighthe othercomponents.

14.Itcouldbe saidthatthe same argument applies to therelationbetween,e.g.,literacy andlife

expectancy, andthatthey shouldthereforenotbelumpedtogetherin a singleHDI.Iftheymove

together, only oneis needed;ifnot, onewouldliketo knowwhy.Pioneering attempts to discuss

relatedproblems andto measurefreedomhavebeenmadebyPartha Dasgupta,An Inquiryinto