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Development economics: changing perspectives
By Aftab Ahmad Khan
There has been a remarkable transformation in
development economics during the last five decades. The accent has shifted
from accelerated growth in output and consequent increase in Gross
National Product (GNP) per capita to reduction in poverty, generation of
employment, more equitable distribution of income and wealth,
institutional development and the satisfaction of basic human needs in the
basis of ecologically sustainable development strategies.
In the 1950s and 1960s, economic development was
synonymous with the growth of GNP per capita. The United Nations set the
target growth rate of 5 per cent in GNP for the Less Developed Countries (LDCs)
for the decade of the 1960s. This view was greatly influenced by Prof.
Rostow’s thesis of the stages of economic growth whereby development
proceeded along a linear path through a number of stages of which the most
important was the “take off”. So far as the problems of poverty,
unemployment and income distribution were concerned, they were given
secondary importance. It was believed that gains of growth from GNP would
trickle down to the poor in the form of increased employment and income
opportunities.
This linear view was further strengthened by the
Nurkesien dictum of the ‘vicious circles’ of low savings, small
markets, low investments and low incomes. For this Rosentain Rodan
advocated the Big Push; Nurkse, the balanced growth, Hirschman, the
unbalanced growth and Leibenstein, the critical minimum effort. A great
deal of emphasis was laid on international aid to provide the “missing
component” in the form of capital and know how.
As a result of the adoption of growth focused
strategies, the GNP per capita of the developing countries grew at an
average rate of 5.4 per cent per annum during 1950-75. The growth of GNP
per capita, however, failed to make a significant impact on the problems
of poverty, unemployment and inequalities in many developing countries.
It soon became evident that a totally growth oriented
approach was not desirable in the developing countries; equity has to be a
part of the programme. In the short run, this may slow the growth rate,
but it is certain that in the long run the pay off would be substantial
and would result in considerable acceleration of further growth. Equity
would contribute towards the removal of imbalances and thus towards
stability which is one of the pre-conditions of evolutionary growth. Its
contribution to human capital formation in itself would be rewarding.
Better health, education and skill formation will constitute the real
wealth of the poor and will encourage them to contribute towards raising
productivity.
Robert Mc Namara, the then President of the World Bank
admitted in February 1970 distributed the failure of the GNP growth rate
as an index of development in these words: “In the first development
decade, a primary development objective, a five per cent annual growth in
GNP did not bring satisfactory development. In the developing world at the
end of the decade, malnutrition is common, infant mortality is high, life
expectancy is low, illiteracy in widespread, unemployment is growing and
the distribution of income and wealth is severely skewed”.
Since the 1970s the emphasis has shifted from the
growth of GNP to the quality of the development process: progressive
reduction in absolute poverty, unemployment and inequalities. All those
engaged with the development process now give attention to four different
though largely complementary strategies: alleviating poverty, increasing
employment, reducing inequalities in income and wealth and meeting human
needs.
It is now crystal clear that most of the problems of
under-development are rooted in poverty. Low standards of health and high
mortality rates can be attributed directly to malnutrition and squalor;
public health delivery systems hardly touch the poor and have only
notional relief to offer. Much of what is offered to them is
non-functional if not dysfunctional. It has little relevance to the
conditions in which they live and takes little account of the learning
mechanisms among them. Education does not function among them as a
mobility multiplier, as it was originally assumed it would do.
The high correlation between poverty and fertility has
never been adequately explained, but it is a fact that fertility tends to
decline progressively as people cross the threshold into freedom from want
and later move into conditions of relative plenty. Poverty is also the
greatest pollutant – the most important single factor responsible for
environmental degradation. Conspicuous consumption and waste rub salt in
the wounds of the poor.
Poverty has now become the hot favourite of
development finance institutions like the World Bank and the Asian
Development Bank. Considerable research inputs are being made into the
investigation of this theme. These endeavours have thrown up some useful
insights, but much of the tangled skein of poverty remains unraveled.
On the economic front the problem is now beyond
charity. The productivity of the poor has to be raised and a more
equitable distribution of income and wealth brought about. Productivity
and development will pick-up if poverty is eradicated. It is evident that
in a large number of countries there is a conspiracy to politicise
poverty, not always and necessarily in the interest of the poor. The
anti-poverty programmes are just a vote catching gimmick.
From whatever little action that takes place, the real
target groups derive only minimal benefits. If the level of conflict in
society is to be minimised, promises alone will not do, they must be
matched by performance. In any case, failures on the political front to
alleviate poverty are likely to generate social and psychological trends
which may unsettle the social order.
For alleviating poverty and promoting development, the
emphasis is now on direct provision of facilities to meet basic needs in
terms of health, education, water, food, clothing and shelter. Empirical
studies conducted by the World Bank and many development research
institutes across the globe have clearly shown that there is no conflict
between economic growth and basic needs strategies. Actually this approach
to economic growth has been instrumental in accelerating growth rate in a
number of low income developing countries (LDCs).
Development experience of the last five decades as
well as recent studies in development also greatly emphasise the need to
attend to the inner limits of growth set by social structure, cultural
norms, value attitude systems, individual and collective motivations, work
ethics and organisational efficiency. These however involve such diverse
cultural specificities that each society has to seek its own solutions.
It has now become abundantly clear that successful
development is not possible without good governance. Governance may be
taken as connoting how people are ruled, and how the affairs of the state
are administered and regulated. It encompasses the state’s institutional
and structural arrangements, decision making process and implementation
capacity. It implies that public authorities play an indispensable and
creative role in establishing an environment conducive to growth and in
determining an equitable distribution of assets and benefits. Conversely,
it also implies the possibility that government may be captured by
self-seeking elites bent on plundering the nation’s wealth.
Good governance depends on the extent to which a
government is perceived and accepted as legitimate, committed to improving
the public welfare and responsive to the needs of its citizens.
An essential feature of good governance is an
impartial, efficient and reliable judicial system as well as honest law
enforcing agencies that effectively carry out court orders.
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