1.The essential features of a human development strategy
The essential features of a human development strategy
Human development is the ultimate objective of economic development.
It is also a means -- arguably the best means available -- for promoting
development.
Human development as an objective
Viewed as an end in itself rather than a means, human development is about enriching human lives. Material enrichment -- producing a larger volume of goods and services -- may contribute to this but it is not the same thing. Indeed it is by now widely understood that there is no one-to-one correspondence between material enrichment (measured, say, by gross national product per head) and the enrichment of human lives (measured, say, by the human development index). The human development approach thus implies the dethronement of national product as the primary indicator of the level of development.
The objective of development is not to produce more "stuff", more goods and services, but rather to increase the capabilities of people to lead full, productive, satisfying lives.2 A larger volume of output per head of the population may of course increase the capabilities of people, and thus should be warmly welcomed, but increased output should be seen for what it is, namely, an intermediate product that under appropriate circumstances can enhance human well being. Ultimately what is of concern is the ability of people to lead a long life (as measured perhaps by life expectancy at birth), to enjoy good health (as measured perhaps by morbidity rates), to have access to the stock of accumulated knowledge (as approximated by enrolment and literacy rates), to have sufficient income to buy food, clothing and shelter, to participate in the decisions that directly affect their lives and their community, and so on.
In formulating development policies, programmes and plans it is important to put people first, to specify objectives in terms of the enhancement of human capabilities. The more disaggregated are programme and policy objectives, the better. In addition to disaggregation by capabilities, at a minimum one should also disaggregate by occupational group and social class, gender and region and distinguish between rural and urban areas. In some countries it might also be useful to classify people into separate ethnic, religious or language groups. The appropriate categories for disaggregation will of course vary from one country to another depending on its culture and history and the extent of social stratification.
The human development approach does not replace one aggregate statistic
(GNP) by another (HDI) and then seek to maximize the numerical value of
the replacement. Rather it views the objective of development as inherently
multi-dimensional. There are numerous constituents of a person's (or a
society's) well being and in assessing progress towards development it
is necessary to assess the constituent elements. This approach puts new
and heavy demands on the statistical services -- new because most statistical
bureaux have concentrated their efforts on collecting production, expenditure
and income data for the conventional national accounting framework, and
heavy because the desired degree of disaggregation implied by the alternative
framework is high -- but the fact, where it is a fact, that human development
cannot at present be accurately measured need not prevent a country from
adopting human development as a strategy for development.
The economic benefits received by people -- whether in the form of money income, material goods and services received in kind, self-produced items of consumption or production, or capabilities such as a long life and good health which may be only partially mediated by relations of production and exchange -- can be understood as flows originating from the stock of capital. The stock of capital, in turn, can be divided into three components: (i) the stock of natural capital, (ii) the stock of man-made physical capital and (iii) the stock of human capital.3
The stock of natural capital consists of the natural resources of the globe, including the atmosphere and oceans, the flora and fauna, the soils and mineral deposits and sources of fresh water. The stock of natural capital can be consumed (as when species become extinct), degraded (as when ground water supplies are polluted by agricultural chemicals), maintained at a constant level of productivity (for example by soil conservation) or augmented (for example by tree planting programmes). The stock of natural capital can also be transformed into physical capital, as when raw materials are combined to produce intermediate goods such as steel and electricity and capital goods such as machine tools and factory buildings.
Much of environmental and resource economics is concerned with the use of the natural stock of capital, including instances (which unfortunately are numerous) when market forces fail to produce price signals which accurately reflect social costs and benefits. The literature on market failure, missing markets and the optimal discount rate addresses some of the most important issues in environmental economics, issues which have become prominent in policy debates in both developing and developed countries in recent years.
The stock of physical capital consists of the produced means of production, i.e., the plant and equipment used in the agricultural, industrial and service sectors, the physical infrastructure (roads, bridges, ports, pipelines, railways, airports, irrigation canals) and the stock of dwellings. Just as natural capital can be consumed, degraded, maintained, augmented or transformed into other forms of capital, so too can physical capital. Much of traditional development economics in fact was primarily concerned with increasing the stock of physical capital, e.g., by creating incentives for businessmen to invest, by raising the savings rate or by establishing state owned enterprises. Investment or the accumulation of capital -- by which was meant the accumulation of physical capital -- was for a long time regarded as the engine of growth and development.
The stock of human capital consists of the knowledge, skills, experience, energy and inventiveness of people. It is acquired in a variety of ways: through training and apprenticeship programmes, while on the job through learning by doing, in the formal education system, through informal contacts by word of mouth, through newspapers, radio and the information media generally, in institutions devoted to pure and applied research and through private study and reflection. The stock of human capital, like the stocks of physical and natural capital, will deteriorate if it is not maintained. Hence the importance of pre-natal and maternal care, school feeding and other nutrition programmes, the provision of safe drinking water, public health and disease control measures, guaranteed employment schemes and the like.
It is now recognized that human capital plays a central role in the development process and this has heightened interest in the economics of education, health economics, labour economics and related sub-disciplines. It is important to note, however, that human capital is just one component of the stock of total capital. Potential output and incomes rise when the stock of total capital increases, and in principle this could take place through net additions to the stocks of either natural, physical or human capital, or some combination of the three. It is important of course that the total stock of capital be utilized efficiently, given the state of technology, for technology, whether embodied in physical capital or in the knowledge possessed by human beings, is a powerful motor of growth in its own right. Ideally, expenditures should be allocated where returns are highest so that ultimately the returns on the margin are the same whether investment is in human, physical or natural capital. This will require constructing a calculus of benefits and costs and devising methods that will enable reasonably accurate estimates to be made of all costs and all benefits associated with expenditure projects. 4 Meanwhile, there is a strong presumption that under conventional development strategies the costs associated with investments in natural capital have been greatly underestimated (partly because air, water and noise pollution and other negative externalities have been ignored)5 while the benefits of investments in human capital have been underestimated. This has resulted in a pronounced bias against human capital expenditures in favour of investments in physical capital and exploitation of natural resources.
A distinctive feature of a human development strategy is the emphasis placed on human capital formation. This does not mean that additions to the stocks of natural and physical capital are ignored -- that would be a serious error -- but it does mean a major change in priorities in favour of human capital. The justification for this change in priorities is, first, that the returns on investing in people are in general as high as if not higher than the returns to other forms of investment, second, that investment in human capital in some cases economizes on the use of physical capital and the exploitation of natural resources and, third, the benefits of investing in people are in general more evenly spread than the benefits from other forms of investment. Thus a greater emphasis on human capital formation should result in as fast and perhaps even a faster pace of development, more sustainable development and a more equitable distribution of the benefits of development.
Of course what is true of countries in general is not necessarily true of every particular country. In the absence of relevant country-specific data policy makers may be forced to rely on comparative data from other countries, at least in the early stages of policy formulation, but it obviously would be better for each country to collect the information necessary to estimate the rates of return on various types of investment and to calculate the distributive implications of alternative investment patterns. Suffice it to say here that the evidence from around the world is that those countries that have given high priority to human capital formation have performed relatively well in terms of growth, employment, reduced inequality in the distribution of income and the alleviation of poverty. 6
A second distinctive feature of a human development strategy is the importance of complementarities among the various kinds of human capital expenditures.7 For example, expenditure on primary health care services should result in better health for the poor. This in turn should increase the efficiency with which the body transforms calories into improved nutrition, thereby increasing the benefits of maternal and child nutrition programmes, school lunch programmes and public food distribution schemes. Improved nutrition increases the ability of children to learn and is likely also to result in higher rates of attendance at school. There are thus strong complementarities among primary health care, nutrition and education expenditures.
Similarly, there are linkages between expenditures devoted to improving the health of women and the amount of education women receive, their fertility and their life expectancy. There are linkages between literacy programmes, formal education and the productivity of labour as well as between literacy and health. Whenever complementarities such as these occur, the components of expenditure programmes should not be viewed in isolation but rather as a single package. That is, whenever complementarities are present, the whole is greater than the sum of its parts.
There are also complementarities between investing in people and investing in physical capital. Human capital is of course a direct input into the productive process. For instance, frequent illness lowers the productivity of labour while on the job and reduces the number of days worked. Hence programmes which result in improved health not only are valuable in themselves (human development as an end), they also have a positive impact on output (human development as a means). Similarly, the more skilled is the labour force, the higher will be its productivity. Skilled labour not only can do things beyond the competence of unskilled labour, it is likely also to be able to work faster, with less supervision, with fewer errors and to produce goods and services of a higher quality.
The complementarity between human capital and physical capital arises from the nature of the production process. Machines require trained workers to operate them and trained mechanics to repair them. Modern, productive agriculture requires a literate agricultural labour force: workers who can read instructions on a fertilizer bag, absorb information contained in literature distributed by extension agents and understand the contents of a repair manual for agricultural equipment. Modern services (travel, finance, tourism) require numeracy: people who can make simple calculations quickly and accurately. A country that gives priority to physical capital while neglecting its human capital will soon discover that the returns to physical capital are lower than they need be. Finally, investment in people is necessary for technical change, which in combination with human capital is the driving force of economic growth. It is difficult to introduce improved methods of production, new ways of doing things and more complex and sophisticated products unless buyers, workers and consumers have sufficient training and education to enable them to understand the technology. Thus physical capital formation, the accumulation of human capital and technical change are closely interlinked.
In summary, a human development approach has numerous advantages. First,
it contributes directly to the well being of people. Second, it builds
from a foundation of equality of opportunity. Third, it helps to create
a more equal distribution of the benefits of development. Fourth, it enables
the linkages between the various types of investment in people to be fully
exploited and, fifth, it takes advantage of the complementarities between
human and physical capital.
These advantages, great as they are, do not materialise automatically. One institution, the state, must play a leading role in guiding the development process and intervening where necessary to ensure that the full benefits of human development are reaped. This does not imply that the state must be large in the sense of accounting for an unusually high proportion of total expenditure. Nor does this imply that the state should be relatively small, providing only minimal services and leaving the rest to the private sector. The size of the state is of secondary importance: what matters for human development is what functions the state performs, and how well it performs them, not how large it is.
Sri Lanka, for example, is widely known for giving high priority to human development expenditures whereas Brazil has had different priorities and consequently a lower level of achievement. Central government expenditure in Brazil, however, was much higher than in Sri Lanka, namely, 36 per cent of gross national product in 1990 as compared to 28.4 per cent, respectively. Similarly, while average incomes are broadly comparable in Tunisia and Costa Rica, central government expenditure differs markedly, being 37.2 per cent of GNP in Tunisia and 27.1 per cent in Costa Rica. Yet Costa Rica's performance in terms of human development is much superior to Tunisia's. A large public sector with the wrong spending priorities, as in Brazil and Tunisia, will do little to promote human development, whereas a smaller public sector with better priorities, as in Costa Rica and Sri Lanka, can have a large impact on human development.
A second issue of limited relevance is the extent of decentralisation within the public administration. Many developing countries have highly centralised governments, often inherited from the colonial period when the primary concern of the authorities was to maintain control over a subject population. After independence the administrative structure frequently was retained with only minor modifications, even in countries where the size of the public sector increased dramatically and its range of functions widened considerably. The consequence was a sharp deterioration in the efficiency of public administration and a growing recognition that, regardless of the development strategy pursued, a less centralised bureaucracy was likely to be more effective. Thus a strong case for decentralisation can be made in many countries whether or not the country chooses to give high priority to human development. One should not push this argument too far however. Indeed it is argued in Section 5 that decentralization is unlikely to be effective unless it includes devolution of power.
Admittedly the case for decentralisation gains added force when a human development strategy is adopted. The reason for this is that such a strategy tends to favour labour intensive rather than capital intensive projects, small and dispersed expenditures rather than large and geographically concentrated ones, and clusters of locally based programmes which are complementary to one another rather than homogeneous nation-wide programmes. Central administrations located in capital cities are not well placed either to design or to implement development programmes with these characteristics. Put another way, human development strategies tend to be intensive in the use of local knowledge and governments adopting such strategies are more likely to be successful when the public administration has strong ties to the grass roots.
This in turn implies the need to organize people around local institutions so that they can actively participate in formulating and implementing development programmes. Participation is of course an end in itself and the empowerment of people -- giving them the capability to act in furthering their own interests -- should be a central objective of human development. Indeed the centrality of grass roots participation is an essential feature of the strategy and one which distinguishes it from other approaches. This does not imply that democratic participation will happen automatically, since democratic decision making is a learned skill, but grass roots organizations do provide ideal vehicles for acquiring such skills. Human development ultimately rests upon a vigorous civil society -- a host of non-governmental organisations that give people a voice and instruments for action -- and in countries where civil society is weak, it should be a major purpose of public policy to invigorate it. The degree of decentralisation of the public administration, while important, is a secondary matter.
Quite apart from being an end in itself, participation has considerable instrumental value in a human development strategy. First, participation in representative grass roots organisations can make it easier to identify local opportunities for profitable expenditure and to specify priorities, identifying which projects are of primary importance and which can be postponed until additional resources become available. In other words, representative community-based institutions can help to define the content of development programmes at the local level and ensure that they accurately reflect local needs, aspirations and demands. Second, having helped to determine priorities and design development programmes, participation in functional organisations (irrigation societies, land reform committees, trade unions, women's groups, cooperatives) can then be helpful in generating support for national as well as local projects, programmes and policies. It is not sufficient for policy makers to be able to show that human development expenditures enjoy high returns, they must also show that there is sustained political support for such programmes from those who benefit from them.
Finally, participation is a valuable component of a development strategy
because it can help to reduce the cost of public services and investment
projects by shifting responsibility from central and local government (where
costs tend to be relatively high) to the grass roots organisations (where
costs tend to be relatively low). In some countries, as discussed below,
it may be possible to organise the beneficiaries of an investment project
and persuade them to contribute their labour voluntarily to help defray
some of the construction costs. This can occur, of course, only when the
labourers do indeed become the principal beneficiaries of the completed
project and this in turn may require that they become the owners of the
assets they construct. In other cases some of the public services with
a direct impact on human development (primary health care centres, nursery
schools, food distribution points) can be organised, staffed and managed
by local groups rather than by relatively highly paid civil servants brought
in from outside the community. If the benefits of a particular service
can be limited to an identifiable group -- a village, urban neighbourhood,
lactating mothers -- it may be possible to organize the group so that its
members bear at least part of the cost of supplying the service. In these
ways participation can be both an end and a means of human development.
Creating a coalition to support human development
Human development is partly about the empowerment of people. Interventions by government to change relative prices in favour of human development, elimination of discrimination against women, the creation of additional employment opportunities, the removal of barriers inhibiting the expansion of the informal sector, greater access of small business to formal credit institutions, a reallocation of public sector resources to support human capital formation, and structural reforms favouring greater equity, food security and a general reduction in insecurity: all these policy changes will alter the distribution of income, wealth and political power. Those who lose from these changes, relatively and absolutely, can be expected to resist them. Since the losers are likely to be those who have prospered under the status quo, they are unlikely to be the uneducated, the undernourished, the unemployed, the unprivileged and the poor. On the contrary, the losers are likely to consist largely of the educated, articulate, organised middle and upper classes. Their political influence almost certainly will be considerable and should not be underestimated; they have the capacity to block policies promoting human development or to transmute such policies into programmes which support their interests. Government allocations favouring higher education, middle class housing and urban hospitals are evidence of the ability of the powerful to control the public sector for their own ends.
The success of a human development strategy is thus likely to be contingent upon the political support of those who expect to gain from the change in strategy. The more numerous are the beneficiaries and the stronger are their organisations, the more likely it is that they will be able to overcome the resistance of those opposing change. It is not enough to design programmes which if implemented will increase the well being of the great majority of people, it is also necessary to create the political conditions which make it possible actually to implement human development policies. Thus policy makers intending to introduce a human development strategy cannot afford to neglect the need to create a supporting coalition.
This coalition may or may not be based partly on political parties,
but even if it is, support from other organised groups will be needed as
well. Indeed the points made above about the desirability of a vigorous
civil society apply here too. Grass roots participation plays three roles:
it is an end in itself, an instrument for increasing the productive potential
of an economy and a means for generating and sustaining political support
for human development. Locally based non-governmental organisations give
hitherto unorganised people a voice, an opportunity to articulate their
needs and preferences, their vision of a better society. Policy makers
should view them not as hostile to government or in conflict with its objectives
but as an essential feature of a human development strategy.
NOTES
2. See Amartya Sen, "Development as Capability Expansion," in Keith Griffin and John Knight, eds., Human Development and the International Development Strategy for the 1990s, London: Macmillan, 1990.
3. For a demonstration of how this approach can be used to analyze human development in a specific country see UNDP, Balanced Development: An Approach to Social Action in Pakistan, Islamabad, Pakistan, 1992.
4. The alternative to a benefit-cost approach is to specify specific targets (universal literacy, 75 per cent enrollment ratio in secondary education, reduction of the infant mortality rate by a quarter, etc.) and then to minimise the cost of attaining the targets. The advantages of specifying the targets in advance are, first, that the goals of the development strategy are clearly articulated and can be used to mobilise public support and, second, that the performance of the public administration can easily be monitored by comparing actual attainments with the specific targets. The disadvantages of target setting are that the targets often are arbitrary, the costs of attaining one objective are not compared with the costs of attaining other objectives, and consequently, the pattern of development expenditure may be inefficient and the overall rate of progress less than it otherwise would have been. See Appendix 2.
5. Methods for estimating environmental costs of economic activities are surveyed in Maureen L. Cropper and Wallace E. Oates, "Environmental Economics: A Survey," Journal of Economic Literature, Vol. XXX, No. 2, June 1992.
6. See Keith Griffin, Alternative Strategies for Economic Development, London: Macmillan, 1989.
7. Paul Isenman, "Basic Needs: The Case of Sri Lanka," World Development, Vol. 8, No. 3, March 1980.