Development Economics

Development Economics: Changing Perspectives

There has been a remarkable transformation in development economies during the past 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 on the basis of ecologically sustainable development strategies.

In the 1950s and 196s, 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 growth whereby development proceeded along a linear path through a number of stages; the most important was the ‘takeoff'. 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 Nurksein dictum of the ‘vicious circles' of low savings, small markets, low investments and low incomes. For this Rosentein 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 focus 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 dent in 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 McNamara, the then President of the World Bank admitted in February 1970 the failure of the GNP growth rate as an index of development in these words: “In the first development decade, the 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, and illiteracy is 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 underdevelopment 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. Additionally, poverty breeds social tensions and cultural corrosion.

The notion of poverty is essentially relative and should be viewed in a comparative perspective. There can be no poverty if there is no affluence. Demeaning and de-humanising poverty is made more obvious when it co-exists with dazzling prosperity. 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 unravelled.

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 developing 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 lethal social and psychological trends which may unsettle the social order.

For alleviating poverty and promoting development, the emphasis is now on direct provision of 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 not 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 the 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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