Economic growth and human development
Tuesday, 12 June 2007
Amitava Basu
POVERTY remains an enormous problem worldwide. Within the developing countries, about one-third of the population live on less than US $1.0 a day, which as defined by the World Bank (WB) is the benchmark for poverty level. The Millennium Development Goal (MDG), as internationally agreed, aims to halve global poverty by 2015. To achieve this goal, economic growth is an important factor.
Economic growth is increase in value of goods and services produced by an economy. It is conventionally measured as per cent rate of increase in Gross Domestic Product (GDP). Growth is usually calculated in real terms, i.e., inflation-adjusted terms, in order to net out the effect of inflation on the price of goods and services produced. Economic growth expands a country's choice set and provides the means by which an economy can upgrade its human development level.
On the other hand, human development is about putting people at the centre of development. It is about people realising their potential, increasing choice and enjoying freedom to lead the lives they value. Pakistani economist, Mahbub ul Haq, wrote in the first Human Development Report in 1990: "The basic objective of development is to create an enabling environment in which people can enjoy long, healthy and creative lives".
Human progress has come to the fore as a fundamental objective of development. Its relationship with economic growth is a central issue.
GDP growth and economic stability are fundamental to sustained human progress. The issue is whether economic growth is sufficient as a measure of development.
Though economic growth is an important element in improving human development, the relationship is not automatic. It depends on how much of the resources are spent on items that are likely to promote human development such as basic education, water, food, primary health care, etc. The human development outcome also depends on how efficiently these resources are deployed. For example, Qatar's Planning Council has asked the government to reconsider the spending priorities as the country's social indicators are not in line with the economic performance. The Planning Council in its report comments: "Although Qatar has achieved economic development that has surpassed all expectations and made available funds for health care, education and infrastructure, what has been accomplished in the social development does not correspond to the size and rates of development attained in 15 years". The report contends that mere eradication of illiteracy is not a sufficient evidence of excellent human quality. The report urges the government to reconsider the priorities of spending policies and focuses more attention on human development projects that could bring about qualitative changes needed by the society.
People are the real wealth of nations. This simple truth is sometimes forgotten. Influenced by GDP measure, we tend to equate human welfare with material wealth. The Greek philosopher, Aristotle, contended "Wealth is evidently not the good we are seeking; for it is merely useful and for the sake of something else". That "something else" is the opportunity of people to realise their potential as human beings. Real opportunity is about having real choices - the choices that come with sufficient income, education, good health and living in a country that is not governed by tyranny. The Indian Nobel Laureate, Amartya Sen, has written: "Development can be seen….as a process of expanding the real freedoms that people enjoy".
Mass poverty, deeply entrenched inequality and lack of political empowerment contribute to deny a large share of the world's population the freedom to make real choices. Hence, though there is a strong correlation between GDP and indicators of development such as life expectancy, infant mortality, adult literacy, political and civil rights and environmental quality, economic growth alone does not guarantee human development. Well-functioning civil institutions, secure individual and property rights and broad-based health and educational services are also vital to raising overall living standards.
In 1972 Bhutan's King Jigme Singye Wangchuk formulated the concept of Gross National Happiness (GNH) to define quality of life in more holistic and psychological terms than that measured through GDP. While the conventional development models stress economic growth as the ultimate objective, GNH is based on the premise that true development of human society takes place when material and spiritual development occur side by side to complement and reinforce each other. The four pillars on which GNH is founded are: promotion of equitable and sustainable socio-economic development, preservation and promotion of cultural values, conservation of the natural environment and establishment of good governance.
The United Nations Development Programme in its annual Human Development Report uses Human Development Index (HDI) as a standard means of measuring well-being. HDI looks beyond GDP to a broader definition of well-being. It provides a composite measure of three dimensions of human development - living a long and healthy life (measured by life expectancy), being educated (measured by adult literacy and enrolment at the primary, secondary and tertiary levels) and having a decent standard of living (measured by purchasing power parity). However, HDI is not in any sense a comprehensive measure of human development. It does not, for example, include important indicators such as respect for human rights, democracy and equality. What it does provide is a broadened prism for viewing human progress and the complex relationship between income and well-being. Because of its limitations, Amartya Sen describes HDI as a "vulgar measure". Nonetheless, it focuses attention on aspects of development and is more sensible and useful than the per capita income measure.
The normative framework for human development is today reflected in the broad vision set out in the MDG for reducing extreme poverty, extending gender equality and advancing opportunities for health and education. This normative framework and HDI form the pathway for serious researchers to find a wide variety of more detailed measures for human development.
Let us hope that new measures in future would help to more meaningfully assess whether rising tide of economic prosperity lifts all lives to the desired level of improvement; and the words of late US President John F. Kennedy that ""a rising tide lifts all boats" come true for economic growth-led human development.
(The writer is a development practitioner and can be reached over e-mail
at amitava*[email protected])
POVERTY remains an enormous problem worldwide. Within the developing countries, about one-third of the population live on less than US $1.0 a day, which as defined by the World Bank (WB) is the benchmark for poverty level. The Millennium Development Goal (MDG), as internationally agreed, aims to halve global poverty by 2015. To achieve this goal, economic growth is an important factor.
Economic growth is increase in value of goods and services produced by an economy. It is conventionally measured as per cent rate of increase in Gross Domestic Product (GDP). Growth is usually calculated in real terms, i.e., inflation-adjusted terms, in order to net out the effect of inflation on the price of goods and services produced. Economic growth expands a country's choice set and provides the means by which an economy can upgrade its human development level.
On the other hand, human development is about putting people at the centre of development. It is about people realising their potential, increasing choice and enjoying freedom to lead the lives they value. Pakistani economist, Mahbub ul Haq, wrote in the first Human Development Report in 1990: "The basic objective of development is to create an enabling environment in which people can enjoy long, healthy and creative lives".
Human progress has come to the fore as a fundamental objective of development. Its relationship with economic growth is a central issue.
GDP growth and economic stability are fundamental to sustained human progress. The issue is whether economic growth is sufficient as a measure of development.
Though economic growth is an important element in improving human development, the relationship is not automatic. It depends on how much of the resources are spent on items that are likely to promote human development such as basic education, water, food, primary health care, etc. The human development outcome also depends on how efficiently these resources are deployed. For example, Qatar's Planning Council has asked the government to reconsider the spending priorities as the country's social indicators are not in line with the economic performance. The Planning Council in its report comments: "Although Qatar has achieved economic development that has surpassed all expectations and made available funds for health care, education and infrastructure, what has been accomplished in the social development does not correspond to the size and rates of development attained in 15 years". The report contends that mere eradication of illiteracy is not a sufficient evidence of excellent human quality. The report urges the government to reconsider the priorities of spending policies and focuses more attention on human development projects that could bring about qualitative changes needed by the society.
People are the real wealth of nations. This simple truth is sometimes forgotten. Influenced by GDP measure, we tend to equate human welfare with material wealth. The Greek philosopher, Aristotle, contended "Wealth is evidently not the good we are seeking; for it is merely useful and for the sake of something else". That "something else" is the opportunity of people to realise their potential as human beings. Real opportunity is about having real choices - the choices that come with sufficient income, education, good health and living in a country that is not governed by tyranny. The Indian Nobel Laureate, Amartya Sen, has written: "Development can be seen….as a process of expanding the real freedoms that people enjoy".
Mass poverty, deeply entrenched inequality and lack of political empowerment contribute to deny a large share of the world's population the freedom to make real choices. Hence, though there is a strong correlation between GDP and indicators of development such as life expectancy, infant mortality, adult literacy, political and civil rights and environmental quality, economic growth alone does not guarantee human development. Well-functioning civil institutions, secure individual and property rights and broad-based health and educational services are also vital to raising overall living standards.
In 1972 Bhutan's King Jigme Singye Wangchuk formulated the concept of Gross National Happiness (GNH) to define quality of life in more holistic and psychological terms than that measured through GDP. While the conventional development models stress economic growth as the ultimate objective, GNH is based on the premise that true development of human society takes place when material and spiritual development occur side by side to complement and reinforce each other. The four pillars on which GNH is founded are: promotion of equitable and sustainable socio-economic development, preservation and promotion of cultural values, conservation of the natural environment and establishment of good governance.
The United Nations Development Programme in its annual Human Development Report uses Human Development Index (HDI) as a standard means of measuring well-being. HDI looks beyond GDP to a broader definition of well-being. It provides a composite measure of three dimensions of human development - living a long and healthy life (measured by life expectancy), being educated (measured by adult literacy and enrolment at the primary, secondary and tertiary levels) and having a decent standard of living (measured by purchasing power parity). However, HDI is not in any sense a comprehensive measure of human development. It does not, for example, include important indicators such as respect for human rights, democracy and equality. What it does provide is a broadened prism for viewing human progress and the complex relationship between income and well-being. Because of its limitations, Amartya Sen describes HDI as a "vulgar measure". Nonetheless, it focuses attention on aspects of development and is more sensible and useful than the per capita income measure.
The normative framework for human development is today reflected in the broad vision set out in the MDG for reducing extreme poverty, extending gender equality and advancing opportunities for health and education. This normative framework and HDI form the pathway for serious researchers to find a wide variety of more detailed measures for human development.
Let us hope that new measures in future would help to more meaningfully assess whether rising tide of economic prosperity lifts all lives to the desired level of improvement; and the words of late US President John F. Kennedy that ""a rising tide lifts all boats" come true for economic growth-led human development.
(The writer is a development practitioner and can be reached over e-mail
at amitava*[email protected])