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DYNAMIC LINKS BETWEEN ECONOMY AND HUMAN DEVELOPMENT
HIDAYATULLAH NATIONAL LAW UNIVERSITY, RAIPUR (C.G. ACKNOWLEDGEMENTS
1 | P0e
I feel feel high highly ly elat elated ed to work work on the the topi topicc Dynam Dynamic ic Link Linkss betw between een Econ Economy omy and Human Human Development because it has significant importance in the current scenario. I express my deepest regard and gratitude for our Faculty of Economics. heir consistent superv sup ervis ision ion!! consta constant nt inspir inspirati ation on and invalua invaluable ble guidan guidance ce have have been of immens immensee help help in understanding and carrying out the importance of the pro"ect report. I would like to thank my family and friends without whose support and encouragement! this pro"ect would not have been a reality. I take this opportunity to also thank the #niversity and the $ice %hancellor for providing extensive database resources in the Library and through Internet. rishna Das &emester ' I (oll )o. * +,&ection ' ./.*L.L. 0Hons.1
RESEARCH METHODOLOGY 2 | P0e
his pro"ect report is based on Descriptive (esearch 2ethodology. &econdary and Electronic resources have been largely used to gather information and data about the topic. ooks and other reference as guided by Faculty have been primarily helpful in giving this pro"ect a firm structure. 3ebsites! dictionaries and articles have also been referred.
OB!ECTIVES o study the importance of economic growth o study the factors affecting economic growth o study human development o study the Human Development Index o study the links between economic growth and human development
STATISTICAL TOOLS. Diagrams have been used to make this pro"ect on Dynamic Links between Human Development and Economic 4rowth attractive and easy to understand. It was a highly informative experience.
Da"a T#$%& &econdary data
TABLE O' CONTENTS
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/cknowledgement.......................................................................................................5 (esearch methodology66666666666666666666666.....7 8b"ectives of study6666666666666666666666666...7 &tatistical tool666666666666666666666666666...7 Introduction.................................................................................................................9 Economic 4rowth........................................................................................................: Factors in economic growth......................................................................................-*++ Human development....................................................................................................+5 Human Development Index......................................................................................+7*+, Links between economic growth..............................................................................+-*57 %onclusion...................................................................................................................59 ibliography................................................................................................................5:
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INTRODUCTION
Human development 0HD1 is increasingly viewed as the ultimate ob"ective of development in place of economic growth 0E41. ;et! ;et! the links between HD and E4 remain of critical importance since E4 would appear to be a foremost contributor to sustained progress in HD. 2oreover! not only are improvements in HD the fundamental development goal! but HD is itself an important contributor to E4 over time. HD has been des choices> 0#)D?! +@@AB +A1. his de
direction of development. The ultimate objective of all efforts is human development.
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ECONOMIC GROWTH
Economic growth is an important factor in reducing poverty and generating the resources necessary for human development and environmental protection. here is a strong correlation between gross domestic product 04D?1 per capita and indicators of development such as life expectancy! infant mortality! adult literacy! political and civil rights! and some indicators of environmental uality. However! economic growth alone does not guarantee human development. 3ell*functioning civil institutions! secure individual and property rights! and broad*based health and educational services are also vital to raising overall living standards. Despite its shortcomings! though! 4D? remains a useful proxy measure of human well*being. he world economy has grown approximately fivefold since +@:A! an unprecedented rate of increase. he industrialied economies still dominate economic activity! accounting for #&55.: trillion of the #&5-.- trillion global 4D? in +@@7 G+. ;et a remarkable trend over the past 5: years has been the burgeoning role played by developing countries! in particular the populous economies of east and south /sia. / ma"or factor in this development has been the steady integration of the global economy. &ince the &econd 3orld 3ar! international trade has grown consistently faster than output and now accounts for approximately 5: percent of world 4D?. 8ther measures of globaliation include the enormous expansion of international financial markets! the spread of new technologies that have revolutionied international communications and encouraged the development of transnational patterns of production and consumption! and the fourfold increase in foreign direct investment flowing to developing and transition economies over the past decade. However! this overall picture masks large! growing disparities among the developing countries not all countries have been able to take advantage of the benefits of globaliation. &ince about +@JA! the fastest*growing economies of /sia and Latin /merica have been characteried by high rates of domestic savings! declining dependence on agriculture! and a rapid growth in trade! especially of manufactured exports. he emerging economies of the developing world ' such as rail! %hina! Indonesia! and 2exico ' have been increasingly attractive to private finance two thirds of the #&@:.: billion foreign direct investment flows in +@@: went to "ust six developing countries. In addition! of the estimated +5 million "obs created by transnational corporations> investment in developing countries! about half are in %hina.
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F/%8(& I) E%8)82I% 4(83H
)atural (esource #ntil the +@7As! development or under development of an economy was often explained in terms of natural resources available. Kacob $iner! 3illiam K. aumol and 3./. Lewis are some of the leading economists who attach great importance to natural endowments of a country for its development. Kacob $iner has stated! 2uch obviously depends on the character of the physical environment! or the =uality> in my terminology! of the natural resources considered as factors of production.../n unfavourable physical environment can be a ma"or obstacle to development.M+ Indeed! development and prosperity of a number of countries may be associated! among other things! with the kind and sie of the resources base they have. /vailability of fertile soil with abundant supply of water for irrigation purposes provides favourable conditions for agricultural development. &imilarly! adeuate reserves of coal and petroleum and water resources for electricity generation can be profitably utilised by an underdeveloped country for its transformation into a developed economy. 2inerals like iron ore! copper! tin! bauxite and uranium! if available in plenty! can induce the process of industrialisation. &ea coast provides navigation facilities necessary for overseas trade. /s it has happened in Kapan and &candinavian countries! coast can prove to be a source of abundant supply of fish. 3ithout these resources there is not much hope for economic development. T% na")ral %n*+-%n"s + a /+)n"r# $la/% 0%n%ral li-i"s +n "% $+ssi1ili"i%s + %/+n+-i/ *%2%l+$-%n". H+%2%r, r%s+)r/%s a2aila1ili"# is n+" a s)i/i%n" /+n*i"i+n +r )-an $r+0r%ss. / number of countries in Latin
/merica! /frica and /sia are favourably endowed with natural resources! yet their achievements in terms of economic progress are rather disappointing. 2any parts of the world which are presently underdeveloped are poor in terms of natural resources. %ases of /fghanistan and ibet are often cited to prove that lack of natural resources can turn out to be a ma"or obstacle to development. ut this point is not to be stretched too far! as man often succeeds in overcoming the problems arising from the scarcity of natural resources. &witerland! for example! has scarcely a single physical advantage for development! yet in wealth per capita it ranks as high as 4ermany! ritain and the #.&./. which are rich in the physical endowments. - 6!ob Vi%e7 8E!o%omi!& o2 De9e"o1me%t7 i% A+N+ A0;" %d S+P+ Si%0) (ed&+' E!o%omi!& o2 U%dede9e"o1me%t (Ne; Yo<7 -=.5' 11+ -.$-/
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Furthermore! the relative role of natural resources in economic development of a country tends to decline as an economy grows. heodore &chult has pointed out that the ratio of the natural resources to the complex of all resources used in poor countries is about 5A*5: percent as against : percent or even less in developed industrial countries.5
E%8)82I% F/%8(& In a country>s economic development role of economic factors is decisive. he stock of capital and the rate of capital accumulation in most cases settle the uestion whether at a given point of time a country will grow or not.
%apital formationB he strategic role of capital in raising the level of production has traditionally been acknowledged in economics. 3ith the development of growth economics in post 3orld 3ar*5period its role in economic progress has been increasingly emphasised. he Harod*Domar model of growth has treated capital as the crucial factor in economic growth. It is now universally admitted that a country which wants to accelerate the pace of growth has no choice but to save a high ratio of its income! with the ob"ective of raising the level of investment. 4reat reliance on foreign aid is highly risky and thus has to be avoided. Economists highly assert that lack of capital is the principle obstacle to growth and no developmental plan will succeed unless
adeuate supply of capital is forthcoming. 2arketable surplus of agricultureB Increase in agricultural production accompanied by a rise in productivity is important from the point of view development of a country. ut what is more important is that the marketable surplus of agriculture increases. he term =marketable surplus> refers to excess of output in the agricultural sector over and above what is reuired to allow the rural population to subsist. he importance of marketable surplus emanates from the fact that the urban industrial population subsists on it. 3ith the development of an economy! the ratio of the urban population increases and increasing demands are made on agriculture for food grains.
hese demands must be met adeuately otherwise the conseuent scarcity of food in urban areas
will arrest growth. %onditions in foreign tradeB he classical theory of trade has been used by economists for a long time to argue that trade between nations is always beneficial to them. In the existing context the theory suggests that the presently less developed countries should specialise in production of primary products as they have comparative cost advantage in their production. he developed countries on the contrary have a comparative cost advantage in manufacturers including machines and euipments and should accordingly specialise in them. In the past it was argued
that free trade based on this kind of specialisation was not beneficial to a developing economy. Economic systemB he economic system and the historical setting of a country also decide the development prospects to a great extent. here was a time when a country could have a laisse faire economy and yet face no difficulty in making economic progress. England>s economy was precisely the one in which there was minimal government intervention! and yet it steadily developed over a long period. In today>s entirely different world situation! a country would find it difficult to grow along the England>s path of development. he hird 3orld %ountries of the present times will have to make their own path of development. hey cannot hope to make much progress by adopting a laisse faire economy.
)8) E%8)82I% F/%8(& Human resourcesB Human resources are an important factor in economic development. Economists often see population as an obstacle to growth rather than a factor which will assist the developmental activity. )evertheless! man makes positive contribution to growth. 2an provides labour power for production and if in a country labour is efficient and skilled! its capacity to contribute to growth will decidedly be high. he productivity of illiterate! unskilled! disease ridden and superstitious people is generally low and they do not provide any hope to developmental work in a country. If a country can manage to use its manpower properly! it will prove to be an important factor in development. ut in case human resources remain either unutilised or the! manpower management remains defective! the same people who could have
made a positive contribution to growth activity prove to be a burden on the economy. echnical knowhow and general educationB It has never been doubted that the level of technical knowhow has a direct bearing on the pace of development. /s the scientific and technical knowledge advances! man discovers more and more sophisticated techniues of production which steadily raise the productivity levels. #nder assumptions of a linear homogenous 9 | P0e
production function and a neutral technical change which does not affect the rate of substitution between capital and labour! (obert 2. &olow has observed that the contribution of education to the increase in output per man hour in the #nited &tates between +@A@ and +@9@ was more than that of any other factor 7. .3. &chult! /.N. &en! and some others in the recent years have
emphasised the contribution of investment in man for economic development. ?olitical freedomB Looking to the world history of modern times one learns that he processes of development and underdevelopment are interlinked and it is wrong to view them in isolation. 3e all know that the underdevelopment of India! ?akistan. angladesh! &ri Lanka! 2alaysia! Nenya and a few other countries! which were in the past ritish colonies! was linked with the development of England. England recklessly exploited them and appropriated a large portion of their economic surplus. his made a significant contribution to ritain>s economic development. he colonies! however! were forced to remain backward in the process. Dadabhai )aoro"i has also candidly explained in his classic work =?overty and #n*ritish (ule in India> that the drain of wealth from India under the ritish was the ma"or cause of the increase in poverty in India during that period! which in turn arrested the economic development of the country. Hence!
political freedom is an essential condition for the economic development of the country. &ocial organiationB 2ass participation in development programmes is a pre*conditin for accelerating the growth process. However! people show interest in the development activity only when they feel that the fruits of growth will be fairly distributed. Experiences from a number of countries suggest that whenever the defective social organisation allows some elite groups to appropriate the benefits of growth! the general mass of people develop apathy towards state>s development programmes. #nder the circumstances! it is futile to hope that masses will
participate in the development pro"ects undertaken by the state. %orruptionB corruption is rampant in developing countries at various levels and it operates as a negative factor in their growth process. #ntil and unless these countries root out corruption in their administrative system! it is most natural that the capitalists! traders and other powerful economic classes will continue to exploit national resources for their personal interests. Furthermore a substantial portion of the outlay on development pro"ects is appropriated by the government officials and other functionaries by employing corrupt means. he regulatory system is also and licenses are not always granted on merit. he art of tax evasion has been perfected by 5 *obet M+ So"o;7 8Te!)%i!" C)%0e %d A00e0te Podu!tio% Fu%!tio% 7 *e9ie; o2 E!o%omi!& %d Stti&ti!&7 Vo" 5@7 %o+57 115-3$5347 Au0u&t -=/
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certain sections of developing countries and uite often tax is evade by them with the connivance of government officials. #nder conditions of rampant corruption it is futile to think that the pace of development will be fast. It is ! however! surprising that one finds hardly any reference to corruption as a growth arresting factor in the literature that has appeared on development and
underdevelopment in recent years. Desire to developB development activity is not a mechanical process. he pace of economic growth in any country depends to a great extent on people>s desire to develop. If in some country level of consciousness is low and the general mass of people has accepted poverty as its fate! then there will be little hope for development. (ichard . 4ill has candidly remarked! the point is that economic development is not a mechanical process it is not a simple adding up of assorted factors. #ltimately! it is a human enterprise. /nd like all human enterprises! its outcome will depend finally on the skill! uality and attitudes of the men who undertake.9
HUMAN DEVELOPMENT @ *i!)d T+ ?i""7 E!o%omi! De9e"o1me%t: P&t %d Pe&e%t (Ne; De")i7 -=.'7 1+ -=
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In the recent year the search for an alternative to 4)? as a measure of economic development has led to the computation of Human Development Index. he #nited )ations development programme introduced the HDI in the first Human Development (eport prepared under the able stewardship of 2ahbub ul ha! and published in +@@A. he measure has been enlarged O refined over the years O many related indices of Human Development like* gender related development index04DI1! gender empowerment measure04E21! human poverty index0H?I1have been developed in subseuent Human Development (eports published annually by #)D?. he first Human Development Report in +@@A opened with the simply stated premise that has guided all subseuent (eportsB ?eople are the real wealth of a nation.M y backing up this assertion with an abundance of empirical data and a new way of thinking about and measuring development! the Human Development Report has had a profound impact on policies around the world. "The basic purpose of development is to enlarge people's choices. In principle, these choices can be infinite and can change over time. eople often value achievements that do not show up at all, or not immediatel!, in income or growth figures greater access to #nowledge, better nutrition and health services, more secure livelihoods, securit! against crime and ph!sical violence, satisf!ing leisure hours, political and cultural freedoms and sense of participation in communit! activities. The objective of development is to create an enabling environment for people to enjo! long, health! and creative lives." Ma1)1 )l Ha3 0+@79*+@@J1
Founder of the Human Development (eport
THE HUMAN DEVELOPMENT INDE4& WORKING
he first Human Development (eport introduced a new way of measuring development by combining indicators of life expectancy! educational attainment and income into a composite human development index! the HDI. he breakthrough for the HDI was the creation of a single statistic which was to serve as a frame of reference for both social and economic development. 12 | P 0 e
he HDI sets a minimum and a maximum for each dimension! called goalposts! and then shows where each country stands in relation to these goalposts! expressed as a value between A and +.
he education component of the HDI is now measured by mean of years of schooling for adults aged 5: years and expected years of schooling for children of school entering age. 2ean years of schooling is estimated based on educational attainment data from censuses and surveys available in the #)E&%8 Institute for &tatistics database and arro and Lee 05A+A1 methodology1. Expected years of schooling estimates are based on enrolment by age at all levels of education and population of official school age for each level of education. Expected years of schooling are capped at +J years. he indicators are normalied using a minimum value of ero and maximum values are set to the actual observed maximum value of mean years of schooling from the countries in the time series! +@JA'5A+5! that is +7.7 years estimated for the #nited &tates in 5A+A. he education index is the geometric mean of two indices. he life expectancy at birth component of the HDI is calculated using a minimum value of 5A years and maximum value of J7.:- years. his is the observed maximum value of the indicators from the countries in the time series! +@JA'5A+5. hus! the longevity component for a country where life expectancy birth is :: years would be A.::+. For the wealth component! the goalpost for minimum income is +AA 0???1 and the maximum is J-!9-J 0???1! estimated for Patar in 5A+5. he decent standard of living component is measured by 4)I per capita 0???1 instead of 4D? per capita 0???1 he HDI uses the logarithm of income! to reflect the diminishing importance of income with increasing 4)I. he scores for the three HDI dimension indices are then 13 | P 0 e
aggregated into a composite index using geometric mean. he HDI facilitates instructive comparisons of the experiences within and between different countries. '+r-)la +r /al/)la"in0 HDI
O"d met)od (be2oe 34-4 *e1ot' he HDI combined three dimensions last used in its 5AA@ (eportB •
dome&ti! 1odu!t 1e !1it t 1u!)&i%0 1o;e 1it#+ his is the methodology used by the #)D? up until its 5A++ report. he formula defining the HDI is promulgated by the #nited )ations Development ?rogramme 0#)D?1 In general! to transform a raw variable! say
! into a unit*free index between A and +
0which allows different indices to be added together1! the following formula is usedB
•
where
and
are the lowest and highest values the variable
can attain!
respectively. he Human Development Index 0HDI1 then represents the uniformly weighted sum with Q contributed by each of the following factor indicesB
•
Li2e E1e!t%!# I%de
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•
Edu!tio% I%de
o
Adu"t Lite!# I%de (ALI'
o
?o&& E%o""me%t I%de (?EI'
•
?DP
New method (2010 Report onwards) [6] ?ublished on 9 )ovember 5A+A 0and updated on +A Kune 5A++1! starting with the 5A+A Human Development (eport the HDI combines three dimensionsB •
A de!e%t &t%dd o2 "i9i%0: ?NI 1e !1it (PPP US' In its 5A+A Human Development (eport! the #)D? began using a new method of calculating the HDI. he following three indices are usedB
+. Life Expectancy Index 0LEI1
5. Education Index 0EI1
3+- Me% Ye& o2 S!)oo"i%0 I%de (MYSI' 15 | P 0 e
/
3+3 E1e!ted Ye& o2 S!)oo"i%0 I%de (EYSI'
G
7. Income Index 0II1 Finally! the HDI is the geometric mean of the previous three normalied indicesB
LEB Life expectancy at birth 2;&B 2ean years of schooling 0;ears that a 5:*year*old person or older has spent in schools1 E;&B Expected years of schooling 0;ears that a :*year*old child will spend with his education in his whole life1 4)IpcB 4ross national income at purchasing power parit y per capita
LINKS BETWEEN ECONOMIC GROWTH AND HUMAN DEVELOPMENT
4enerally! economic growth and human development move together and are mutually reinforcing in the long*run. However! economic growth does not invariably and automatically translate into human development. %ountries differ in their human development efficienc!, or in how well they translate income into human development. Links between human development 16 | P 0 e
and economic growth can be mutually reinforcing. 3hen links are strong! they contribute to each other. 3hen weak! one can undermine the other. #nbalanced links are the result of rapid human development with little growth or of fast growth with slow human development. 3hile economic growth is generally found to positively impact several human development indicators! we cannot say that economic growth will invariably and automatically translate to human development if other important factors are not in place. he report makes several suggestions for strengthening links between growth and human development. Link between economic growth and human development not automatic! but can be strengthened through sensible policy actions. Human development reuires considerable investment in education! health! and nutrition. (esultB healthier! better educated population that is capable of being economically more productive.
• • •
4rowth also linked to other elements of human development such as political freedom cultural heritage environmental sustainability T% r%$+r" i*%n"ii%s "+ -ain s%"s + lin5s 1%"%%n %/+n+-i/ 0r+" an* )-an *%2%l+$-%n"& •
he effect of growth in household income and spending on human development
•
he effect of growth on government policies and expenditures.
Household activities (mostly unpaid and largely invisible to national accounts) contributing to human development:
3omen do most of these activities ' managing the household! raising children! caring for the sick and elderly! work in voluntary organiations that contribute to health! nutrition! and education. he value of this work was estimated in @: to be ++ trillion globally.
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$ducational attainment B Increases in income are associated with improvements for several
reasons. Families can spend more on school materials and are more likely to send children to school. /s incomes increase! families are in a better position to exert political pressure for better schools. 3ealthier families are able to create an environment more conducive to learning both at home and at school.
0%autions against "ust looking at improvements in school enrollment
because it may understate the benefits1.
HealthB Higher household income is associated with higher height*for*age ratios! survival rates!
life expectancy at birth! reduced illness among children. In several studies! income effects seem to be higher in urban than rural areas. he full benefits of increased income cannot be realied in rural areas because there are fewer healthcare facilities.
%ombining income with greater educationB ?er capita income and adult literacy are the most
important indicators of life expectancy. he choices that families make in spending their income depend on personal preferences! education! community knowledge! and customs. /lso! several studies suggest income is more li#el! to be spent on human development when women control the purse strings.
8ne reason may be that the increased income is less likely to be spent on
cigarettes and alcohol. In addition! increasing educational attainment of women also has strong effects on children>s health and nutritional status.
4overnment ?olicies and ExpendituresB here are several economic arguments for using government policies to improve human development. Lack of investment in human capital can be seen as a market failure! which government activity can help to correct.
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Examples of Market Failures in Investment in Human evelopment: •
%redit for human development is often lacking because lenders cannot stake a future claim
on human capital. %onseuently! people who might want to borrow for education and health often cannot do so! especially if they are poor. •
Failures in information flows often lead the poor to invest less in health and education than
they would prefer if they had full information. •
Human capital has externalities not reflected in the private returns of households and firms.
•
&everal benefits of human development have social benefits that are not directed
compensated for monetarily 0education can help contain infectious diseases1.
&overnments can improve human capital b! ma#ing loans for such activities available and
b! improving information flow.
In principle! growth should lead governments to give more support to human development. In reality! countries differ in the following waysB •
?ublic*expenditure ratioB averages about 5A*7AR for developing countries but ranges from
:R to ,AR. Depends largely upon ability and willingness of governments to collect taxes. axes in developing countries are only about +A*5AR! half that of industrialied countries. •
&ocial allocation ratioB percentage of public expenditure earmarked for social sectors 0health!
education! social security! water supply! sanitation1 ' averages about 5AR for ,+ countries studied. •
&ocial priority ratioB percentage of social expenditure devoted to basic social services 0basic
education! basic healthcare and nutrition! low*cost water supply and sanitation1. Depends upon governments> political ob"ectives and pressure of different interest groups. /veraged 59R in +@JAs for +5 countries studied! with a range from ++R to ::R. 4enerally! the more basic social services the government supports! the better off the poor.
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Even if these ratios remain the same when a country is growing! spending for basic social services can increase but only with increases in government expenditure. %ountries have been able to increase spending on human development during economic declines 0e.g.! )icaragua in the +@JAs1! but such expenditures are not sustainable without growth.
iversion of !overnment "pending •
2any countries suander large amounts on items that do nothing for human development
0e.g.! military expenditures1. •
Due to political pressures! governments often skew expenditures toward the rich. ExamplesB
subsidies to tertiary education made at the expense of primary education! spending toward high* tech hospitals for the affluent at the expense of basic healthcare in rural areas! corruption. •
Demands by international lenders for repayment of debt.
•
/id donors often show little interest in social services! particularly in basic hea lth services.
()() initiative is one solution. It reuires 5AR of aid flows and 5AR of developing country
budgets to be earmarked for basic social services.
Making Expenditure Effective •
DecentraliationB handing down responsibility of public services to local governments can
make them more efficient and give local people greater voice in their planning and operations. •
Efficient /llocation expenditure on basic services usually has greater impact on human
development than on tertiary education or curative medical services
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•
%omplementary Inputs education often needs to be combined with other services to make
them effective.
Educating girls also contributes to increases in child survival rates and
decreasing fertility rates.
"trengthening the #inks from !ro$th to Human evelopment
his section concludes by saying that for human development to improve! growth must be e*uitable and emplo!mentgenerating .
4overnments must give priorit! to social spending,
particularly for basic services. ?eople must have access to productive assets! such as land! credit! and physical infrastructure.
4overnments must also maintain good governance by
enabling people to share the benefits of growth and allowing them to participate extensively in public life. Finally! )48s and community groups can play a vital communit! action role by supplementing government and playing an advocacy role.
Lin5s r+- H)-an D%2%l+$-%n" "+ Gr+"
his section identifies ways in which human development improvements can lead to economic benefits. Healthy! well*educated people make an economy more productive.M &ome of the clearest economic benefits of human development arise from making workers! especially poorer workers! more productive by improving their nutrition! health! and education. Increases in access to education may also make income distribution more euitable. otal returns from education tend to be higher for women than for men.
•
echnologyB In agriculture! farmers with education are more likely to adopt modern
fertiliers and to learn from their own and others> experiences. In industr!! workers must be sufficiently educated to adapt to and disseminate new technology.
8n*the*"ob training by
employers is particularly important for this. /t higher levels of technology! educated personnel are necessary for research and development .
21 | P 0 e
•
radeB %ountries with higher*skilled workers can have comparative advantages in exporting
manufactures ' these skills are particularly important for countries with few natural resources so therefore need an alternative form of comparative advantage. •
&avings and InvestmentB 4overnment efforts to promote savings must be complemented with
education. 8ne problem of foreign investment coming from capital flows rather than official development assistance is that private flows tend to ignore countries with low human development. In several countries! a large portion of human development expenditures comes from official development assistance. "trong% &eak% and 'nbalanced #inks •
&trong LinksB %ountries have rapid advances in both economic growth and human
development. ?rogress in human development and economic growth mutually reinforce each other 0e.g.! Kapan! Hong Nong! 2alaysia! &outh Norea! &ingapore! &pain! ?ortugal! otswana1. •
3eak LinksB %ountries have both slow economic growth and human development progress!
with each undermining the other. 2ost of the least developed countries are in this category. •
#nbalanced LinksB (apid economic growth but slow human development progress 0e.g.!
Egypt! Lesotho! ?akistan1.
8r rapid human development but slow growth.
his is not
sustainable in the long*run 0e.g.! %osta (ica! Kamaica! ?eru! &ri Lanka! state of Nerala in India1. %ountries with unbalanced links are more unstable in the long*run than those with weak or strong links between growth and human development.
In the long*run! countries tend to
converge toward either strong or weak links. However! several countries have successfully switched from weak links to strong over the last three decades 0otswana! &ri Lanka! %hina! Indonesia1. olic! Recommendations for %ountries with +ea# in#s •
improve minimum literacy and primary education
•
improve income distribution by focusing on employment creation and poverty reduction
22 | P 0 e
•
restructure public and private resources to gear more resources to basic health! primary
education! nutrition! and family planning •
allocate budgetary subsidies to social programs that benefit the masses rather a few elites!
provide transparent breakdown of budgets to show who the real beneficiaries are
olic! Recommendations for %ountries with -trong in#s •
challenge is to give even more attention to human development including poverty reduction!
human rights! and environmental conservation and regeneration. •
target segments of the population that have not fully benefited from overall progress in
human development and growth! such as women •
advance higher levels of human development! such as tertiary education
olic! Recommendations for %ountries with nbalanced in#s
For %ountries with Fast 4rowth and &low Human DevelopmentB •
improve distribution of public and private resources by emphasiing "ob creation and
make more euitable the distribution of human capital by investing in education
•
reallocate public expenditures to ensure that basic needs are met! provide transparent
breakdown of budgets to show who real beneficiaries are For %ountries with &low 4rowth and Fast Human Development •
•
promote skill*intensive productive activities for exports strengthen link between science and technology institutions and needs of economy
23 | P 0 e
CONCLUSION Emphasis on human development and the construction of Human Development Index have shifted the focus from the =uantity of growth> to the =structure and uality of growth.> 3e now realie that success in economic growth must ultimately be "udged by what it does to our lives* the uality of life we can en"oy and the liberties we can exercise. In general! economic growth cannot be dissociated from the =end> of promoting human capabilities and of enhancing well*being and freedom.M 4overnments are now becoming increasingly aware that unless they take corrective actions! economic growth can become lopsided and flawed. his would lead to an economy that is "obless! ruthless! voiceless! rootless and futureless. /voiding these pitfalls reuires fostering of strong links between economic growth and human development. Economic 4rowth should lead to fuller choices for all people*rather than few choices for most people or many choices for a few. ut it is never enough to wait for economic growth automatically to trickle down to the poor. Instead! human development and poverty reduction must be moved to the top of the agenda for political and economic policy making. /nd even when links between economic growth and human development have been painstakingly established they must be protected against being blown apart by sudden shifts in political power or market forces.
ILI84(/?H; 88N& (EFE((ED I)DI/) E%8)82;! 2I&(/*?#(I I)DI/) E%8)82;! D# /)D &#)D/(/2 24 | P 0 e
