The structure of incentives generates the signals that guide the allocation of resources and influence the division of investment among natural, physical and human capital. The structure of incentives cannot however determine the speed of response -- the elasticity of supply -- to economic opportunities. That depends on other things: initial conditions, institutional arrangements, the capabilities of people and government initiatives. The following section focuses on the role of government and in particular on the way government expenditure can contribute to human development.
A human development strategy does not necessarily imply that the state will control a larger share of the economy's resources than would occur under a more conventional strategy, but it does imply that the state will use its resources in a fundamentally different way. The strategy is not inherently more costly to the exchequer than conventional strategies, neither in the short nor in the long run. A government that chooses to emphasize human development will have to reallocate its expenditure in favour of human capital activities, but this need not lead to the swollen budgets and enlarged bureaucracies associated with some forms of the welfare state in developed economies. Human development is not a euphemism for the wide array of social policies one typically finds in western Europe; it is a growth and development strategy intended to improve the well being of people in as short a time as possible.
Implementation of the strategy will require a change in the composition of government spending. First, the percentage of the budget earmarked for activities which do not contribute to development should be reduced to a minimum. This includes spending on the military and internal security (which often have little to do with defending the state from external enemies), subsidies for some public enterprises (particularly those -- airlines, luxury hotels, breweries -- which cater primarily to upper income groups), excessively large bureaucracies in the public administration (which sometimes have been used to reduce unemployment among the urban educated youth) and external debt service. The revenues thus saved should be used to raise the proportion of expenditure devoted to human development, including greater spending on education and training, basic health and nutrition, fresh water supplies, etc.
Second, within the broad category of human development spending there should be a reallocation toward those activities which benefit the largest number of people. Spreading resources evenly over large groups rather than concentrating them on small groups is likely to yield a higher rate of return. It will also be more equitable and more consistent with democratic aspirations. In many developing countries this implies giving higher priority to programmes of particular benefit to women and to such things as child nutrition programmes, rural education, small medical clinics and paramedical personnel and to small scale irrigation projects and other locally based development schemes.
Third, the elaborate, expensive and comprehensive pension and social security systems as found in the West should be avoided, and where they already exist in embryo, their further development should be postponed until they can be extended to the entire population and particularly to those most in need. Most social security schemes in developing countries benefit the urban elite and cannot be justified within a human development strategy. This does not mean however that measures to increase economic security must be postponed indefinitely, but it does mean that policies adopted in the developed countries should not be imitated or replicated without careful consideration of costs and benefits and distributive equity. Some feasible programmes for developing countries, oriented towards the poor, are discussed in Section 4.
Finally, a human development strategy must walk a fine line between selectivity in public expenditure and the provision of universal services. The conventional wisdom today is that public expenditure should be carefully targeted on selected beneficiaries: leakages to non-beneficiaries should be avoided as much as possible on grounds of economy. Insofar as government spending can be accurately targeted on the rural and urban poor, there is something to be said for the conventional wisdom. There are however several problems with this approach. First, in many cases relevant to a human development strategy it is not possible to restrict the benefits of public expenditure to specific groups. A farm-to-market road, for example, can be used by anyone in the vicinity, rich and poor alike. A publicly supported secondary school must be accessible to all children in the community on similar terms; tuition charges for the children of the rich are not really feasible. Second, where selectivity is possible, it often is costly to enforce. Large and elaborate administrative structures may be necessary to exclude undesired beneficiaries or to discriminate positively in favour of intended beneficiaries. The benefits of selectivity may accrue in part to the bureaucrats who administer the programmes, surely not a target group. This is not to deny, for instance, that in some cases user fees for the non-poor and scholarships for the poor are possible, but one should not expect too much of discriminatory charges and subsidies. Third, it may be politically advantageous for tax supported human development programmes to be universal, open to everyone who wishes to take advantage of them. The gains in terms of national solidarity, full commitment and widespread participation in nationwide development programmes may outweigh the additional costs of organising universal, non-targeted services and projects. This will be especially true if the services are universal in terms of eligibility but are designed to be attractive primarily to certain groups only, so that the intended beneficiaries are largely self-selected. This is a topic revisited in Section 4.
The reallocation of public expenditure implied by a human development strategy does not entail a trade-off between efficiency and growth. On the contrary, provided an appropriate structure of incentives is put in place, public expenditures in support of human development should increase both allocative efficiency and the rate of growth of personal incomes properly measured. The social rates of return on human development expenditures, when all benefits and costs are taken into account, are quite high. The per capita costs of primary health care and, say, the first twelve years of education are much lower than the costs of university education and urban hospitals. Moreover, the social benefits of investment, when correctly calculated, are usually higher at the base of an expenditure pyramid (e.g. primary education) than at the peak (e.g. doctoral programmes at universities). Thus expenditure on human capital formation can be a very efficient way to promote development.
A healthy, literate, skilled labour force is the foundation of a country's long term growth. Sharp bursts of growth can be experienced by exploiting natural resources that happen to be in great demand, but unless the economic rents from natural resource extraction are transformed into human capital, such growth is unlikely to be sustainable. The experience of some oil exporting countries is testimony to this. As the world economy becomes increasingly integrated, the comparative advantage of developing countries, particularly the larger and more populous ones, is likely to rest on the skills, education and technical competence of their labour force. In addition, the existence of a highly skilled and educated labour force will affect the transfer of technology, making it easier to absorb technical knowledge produced in economically more advanced countries. Similarly, the presence in a developing country of a highly skilled and educated labour force will make it easier for the country to attract foreign capital. Thus in numerous ways a human development strategy is likely to increase the global opportunities open to developing countries. Ultimately, people are a country's principal asset. The benefits of investing in people however go beyond the increase in the productivity of labour and access to global opportunities: a healthy, well educated citizenry contributes to the social cohesion of a country and imparts a dynamism to all aspects of life and culture.
Human development became an attractive policy alternative in reaction to the heavy social costs incurred under orthodox stabilization and structural adjustment programmes. That is, human development was seen as a way to achieve "adjustment with a human face".22It can better be understood, however, as a long term strategy with important implications for short and medium term stabilization programmes.
Adjustment, stabilization, restructuring -- call them what you will, they mean much the same thing -- are tactical responses to external shocks and internal macroeconomic disequilibria. These tactical responses should not be allowed to undermine the foundations for long term development -- as occurred in Africa and Latin America during the "lost decade" of the 1980s -- by reducing the rate of human capital formation. If it is necessary in the short term to cut government expenditure, then those items which are of secondary importance should be eliminated and human development expenditures protected. Put another way, human development expenditures constitute the core of a government's development strategy. They are neither luxury items to be added on to conventional development strategies when resources permit, nor are they expendable items that can readily be discarded during periods of retrenchment. They are the heart and soul of government efforts to improve the well being of a nation's people.
A human development strategy however, like any development strategy, requires political support to sustain it. The reallocation of public expenditure that accompanies the introduction of a human development strategy will create both losers and gainers, and in designing the strategy the reaction of potential losers should be anticipated. There is an asymmetry during the transition period: those who gained from conventional development strategies and can be expected to lose relatively and perhaps absolutely from a change of strategy are likely to constitute an articulate, well organized and powerful opposition; the potential beneficiaries, in contrast, while numerically large, are likely to be less articulate, unorganized and politically less influential. Their support for change, moreover, is based merely on an expectation of gain, a gain that bitter experience may have told them is uncertain and possibly long delayed, whereas the opposition of the minority is based on a virtual certainty of loss, and a loss that will be felt immediately. Thus while there is potentially a broad base of support for policies of human development, these policies must be carefully selected and crafted to minimize opposition and avoid alienating those in the middle whose net gains or losses will be relatively small.
Political and economic considerations hence point in the same direction: government plans for human development should avoid long lists of desirable but vague objectives which provide little guidance to operational ministries as to how to achieve the objectives. Human development objectives are not moral imperatives. They should be carefully selected on the basis of (i) rigorous technical analysis which weighs benefits and costs, (ii) a political calculation of the number and strength of potential supporters and opponents, and (iii) an assessment of the feasibility and desirability of using some of the benefits to compensate the losers. Whenever a policy change results in a net improvement in the form of a rise in average incomes but is accompanied by a fall in the incomes of some groups, it is in principle possible for the losers to be compensated by the gainers while still leaving the latter better off. Whether compensation should in fact be paid depends, we suggest, on two things: whether the distribution of income after the policy change is preferable to the previous distribution and, if so, whether none the less, the losers must be "bribed" to acquiesce in the change and not use their political power to frustrate it.
Consider public expenditure on education as an example. It is often said, quite rightly, that human development accords highest priority to primary education, but this generalization is not a universally established truth and in considering a possible reallocation of public expenditure in favour of primary education, the contributions of secondary and tertiary education should not be overlooked. The social rate of return to different levels of education is something that must be determined, not assumed, and this must be done while taking into account the complementarities that exist among the different levels of education. One example of complementarities is the role of universities in producing well trained and highly motivated teachers for primary and secondary education. Apart from the interlinkages among the three tiers of the formal education system, there is a political reason for not neglecting university education, namely, the need to secure the cooperation of the educated classes upon whom much of the success of a human development strategy depends. Moreover, the educated middle classes should be natural allies of human development since the strategy gives high priority to education at all levels, to scientific research and development and to technical change as sources of growth and international competitiveness.
In choosing specific objectives for human development and the sequence of policy initiatives, it is important to take into consideration the degree to which human development programmes can be used to mobilize the participation of the intended beneficiaries. Human development is participatory development and the more people can become directly involved as agents of change, the more successful the overall strategy is likely to be. Campaigns to promote literacy, basic health care, primary education, immunization of children against epidemic diseases are ideal vehicles for active community participation. Local financial, material and labour resources can be mobilized in support of clearly defined goals and local communities can be organized on a permanent basis to monitor progress and ensure that the volume and quality of services are maintained once the campaigns are over.
All of this depends of course on selecting goals that are feasible,
i.e., capable of being achieved with the resources and administrative capabilities
at hand. Excessively ambitious targets should be avoided and careful attention
should be paid to the sequence of projects and programmes. One of the distinguishing
features of policies that promote human development is that they tend to
reinforce one another because of complementarities and positive externalities.
As a result, the social benefits of policies frequently exceed by a substantial
margin the private benefits, the margin sometimes depending on the order
in which projects are undertaken. That is, some policies deserve priority
because they facilitate the successful implementation of other policies.
Providing access to potable water, for example, is important in its own
right and also because it has "multiplier effects" on such things as the
ability to assimilate nutrients from the intake of food, a person's ability
to maintain good health and engage in productive activity, and the ability
of children to learn. In both the Pakistan and Bangladesh human development
reports the education of women was underlined as being critical in attaining
a number of other objectives -- improved child nutrition, decreased incidence
of disease, and lower growth of the population.23 The
presumption, in both these illustrations, is, first, that the whole is
greater than the sum of its parts and, second, that the sequence in which
the parts are assembled affects the benefits of the package as a whole.
The shape of the education pyramid
The education sector absorbs more public resources than any other human development activity in developing countries and the issues raised in allocating tax revenues to education are similar to those that arise in other sectors. Thus it should be possible to apply our analysis to other expenditure programmes with only minor modifications. Formal education, however, is only one way people acquire knowledge. Much knowledge and information are passed on to children, informally, by parents, other relatives and friends. Much is learned through experience, a process at the individual level of learning by doing, of trial and error, experimentation. In some countries skills may be acquired in apprenticeship programmes run by master craftsmen. In others there may be a number of formal training schemes, partially or wholly supported by government. And in still other countries, some of the larger companies may organize their own on-the-job training programmes. Because of the externalities associated with education, and the public goods feature of some forms of education, governments pursuing a human development strategy should always compare the benefits and costs of supporting apprenticeship programmes, public sector training schemes and private sector on-the-job training programmes with the benefits and costs of expenditure on the formal, conventional education system. In what follows below, however, we concentrate on formal education.
In many developing countries budgetary allocations for the formal education system have the shape of an inverted pyramid in which secondary and tertiary education receive more than four times as much public resources as primary education. 24 In many cases primary schools are starved of financing while universities receive heavy subsidies. The majority of the population, particularly the poor, may lack adequate educational facilities, or may find that the opportunity cost of attending school exceeds short run private benefits, while the children from middle and upper class backgrounds benefit from comparatively generously financed university education. 25
Not only is this inversion of the financial pyramid not equitable, it is also not efficient. Particularly in the poorest developing countries, where primary education has been most neglected, 26 the social rate of return on investing in basic education is high. 27 In addition to high returns, investing in primary education has the advantage of bringing government closer to the people it serves while simultaneously giving people greater control over their own lives and a basic institution of the communities in which they live. Primary schools are easier for local communities (villages, small towns, urban neighbourhoods) to control than secondary schools, colleges and universities. There is more opportunity for participatory development, for the active involvement of people in education and hence there is a greater likelihood that educational programmes will enjoy sustained support from the community.
Contrary to common belief, public expenditure on education in developing countries has not in general been an equalizing factor, providing equal opportunities to all social classes and groups. There are important exceptions, but more often than not, the educational system is no more egalitarian than the society of which it is a part. The inverted educational expenditure pyramid mirrors the stratification, privilege and discrimination against women and other groups which is characteristic of the society at large. This is hardly surprising, but it suggests that while it might be easy technically to design policies for reallocating resources from tertiary to primary and secondary education, it might be difficult politically to implement such policies. The commitment of the government evidently is crucial, but this in turn depends on securing popular support for human development.
In some circumstances it may be advisable to reallocate expenditure in stages, thereby minimizing opposition until a political coalition can be formed to support more wide ranging measures. In the initial phases of a human development strategy the demand for education by the poor may be low while the middle and upper classes may fully appreciate the advantages of secondary and higher education and press for additional funding. In such circumstances a massive reallocation of resources in favour of basic education should be delayed until the urban and rural poor can be organized to demand a change in priorities.
Even if primary education is free, the opportunity cost to poor families of sending their children to school can be high. In addition to the cost of books and supplies, transport and school uniforms, there is the loss of child labour and resulting decline in household income. At very low levels of income, discount rates may be high and households may be reluctant to give up current income for the sake of a higher income in future. One way of overcoming this problem while adding to human capital formation is to combine an expansion of basic education in poor areas with the introduction of school feeding and child nutrition programmes.
The demand for education by the poor may be depressed for a second reason, namely, a perception that for low income households the returns to education are low. There is in fact evidence that in both urban and rural areas there are positive connections among additional education, an increase in the productivity of labour and higher incomes. 28 These connections however may not be widely understood and it may be necessary as part of a human development strategy to supply the relevant information to the general public.
One aspect of social stratification in developing countries is that not all groups have equal access to formal education, and even in cases where there apparently is equal access, there are enormous variations in the quality of education offered. The rich have greater access than the poor. The urban population has greater access than the rural. There is thus a strong prima facie case for reducing the concentration of educational expenditure on high cost urban colleges and universities and instead distributing resources broadly among the entire population. This implies in particular a reallocation of expenditure toward primary and secondary schools, and particularly to schools located in rural areas, where most of the poor are located and where historically education has been severely neglected.
Discriminatory access to education by gender is highly evident throughout the developing world. Women are systematically under-represented at all levels of education. On average in the developing countries the literacy rate of women is only 69 per cent as high as the rate for men. Women receive only 54 per cent as many years of schooling as men. Their enrollment rate in primary school has risen sharply and is now 93 per cent of the men's, but in secondary and tertiary education women lag behind, their enrollment rates being 73 and 53 per cent, respectively, of the men's enrollment rates. 29 In Pakistan the situation is much worse than the average: three-quarters of the girls have dropped out of primary school before the final year. In the rural areas, among the poorest 20 per cent of the population, over 97 per cent of the women are illiterate, and even among the richest 20 per cent of the rural population, 87 per cent of the women are unable to read and write. The virtual absence of educational opportunities for women in Pakistan is responsible for the poor educational performance of the country as a whole. 30 Although Pakistan is an extreme case, the situation of women in other developing countries such as Bangladesh and Ghana is broadly similar. 31
Quite apart from educational biases against women, the poor, and rural areas, there is a bias in favour of spending on physical capital and against human capital -- teachers, lecturers, instructors, professors. It is sometimes said in the United States that the ideal education consists of Mark Hopkins on one end of a log and a student on the other. 32 The tutorial system at Oxford embodies the same ideal. In many developing countries, however, more emphasis is placed on the log and less on Mark Hopkins. The reason for this is an artificial division of public expenditure between capital and recurrent items combined with a belief that only capital expenditures contribute to development. The resulting bricks-and-mortar approach to education leads to a misallocation of resources, placing excessive emphasis on school construction (public investment) and insufficient emphasis on teachers and school supplies (spending on which is classified as public consumption). Governments switching to a human development strategy must be careful not to become victims of the way expenditures are classified. Conventional systems of classification make little sense, especially when priority is given to human capital formation.
Returning to the example of Pakistan, its situation suggests that in that country too many resources are devoted to physical capital and as a result insufficient resources are left to produce qualified teachers. Existing school buildings are not used efficiently and the teachers are poorly trained and motivated, unable to provide an education of high quality. Approximately a quarter of all teachers in Pakistan are untrained and the problem is particularly severe in the rural areas where low morale, low pay and few opportunities for advancement have resulted in widespread absenteeism by teachers. Before the students can be educated, something must be done about truancy among the teachers!
One indication of the low efficiency of the educational system in the developing countries as a whole is that in the mid-1980s it took on average nine years of schooling to get one person through grade five. High drop-out rates and high repeat rates represent a waste of resources. It is obvious that in many countries the efficiency of the educational system could be raised by placing less emphasis on building more schools and recruiting more untrained teachers and placing a great deal more emphasis on improving the average quality of primary and secondary education. This implies giving more attention to raising the quality of instruction, lowering the drop-out and repeat rates of students, allocating more money to teaching materials and in general raising the average educational achievements of the stock of human capital represented by students. In other words, in many cases the human and physical resources already allocated to education can be used more intensively and more efficiently.
Developing countries potentially have a comparative advantage in education because teaching is a labour intensive activity and labour is relatively abundant in developing countries. Of course education requires skilled labour and that is often in short supply, but this is a reason for altering the allocation of investment to enable developing countries to exploit their potential comparative advantage, not a reason for perpetuating the status quo. That is, compared to other "industries", education uses a factor of production, viz. educated labour, that potentially is rather cheap in developing countries, particularly in countries committed to a human development strategy. Thus education often is and certainly could be a low cost industry in developing countries. This is reflected in the rate of return on educational investment. Actual and potential future returns on expenditure on education are attractive in part because the benefits are high and in part because the costs are low.
Despite this, there has been underinvestment in education. In 1985, for instance, public expenditure on education was only $27 per inhabitant in the developing countries as compared to $515 in the developed countries, a ratio of 1:19. That is, relative to income, the developing countries spend far less on education than the developed countries. Within the education budget, the developing countries spend proportionately much less on teaching materials. In Japan, for example, 6.5 per cent of the education budget is allocated to teaching materials; in India, only 1.3 per cent. Finally, within the education budget, and relative to the distribution of students across primary, secondary and tertiary education, the developing countries spend proportionately much less than the developed countries on the first two tiers of the pyramid. In Japan, for example, 38.2 per cent of the education budget is allocated to primary education, where 50 per cent of the students are enrolled. Thus the expenditure/enrollment ratio is 0.8. The ratios in secondary and tertiary education in Japan are 0.9 and 1.1, respectively. In Nigeria, in contrast, the expenditure/enrollment ratio is 0.2 at the primary level, 2.0 at the secondary level and 21.7 at the tertiary level. 33 There is thus tremendous scope for improving the average quality of education in developing countries even within the existing inadequate budgetary allocations.
In the short term the most cost effective way of improving primary education may be to use existing facilities more intensively and provide additional training for existing teachers. Quality could be improved and student drop-out rates reduced if teachers were to become accountable to the communities they serve, and not solely to ministries of education in distant capital cities. A human development strategy should attempt to transform local primary and secondary schools into centres of community action, with parents and other members of the locality taking an active role in educational and other activities concerned with human development, such as literacy campaigns, the construction and maintenance of health clinics, the construction of sanitation facilities and the provision of potable water supplies.
There are also financial benefits of actively involving members of the community in local education. Under appropriate circumstances parents, friends and neighbours can help to reduce the costs to the exchequer of primary education, for example, by donating their labour and local materials for construction and school maintenance activities. The essential objective is to mobilize local talents, skills and energy to accelerate human capital formation in the locality for the benefit of everyone, children and adults alike. This will not happen spontaneously but will require the creation of an institutional mechanism which fosters cooperation between teachers and the rest of the community, which motivates and rewards good teachers and gives them stature in the community, and which encourages widespread participation by the community in educational and other development activities. Only in this way is it possible to ensure that investments in education meet the genuine needs of the people.
Even if more resources cannot be allocated to the education sector as a whole, the allocation of additional resources to primary education at the expense of the other two tiers of the pyramid need not inflict serious harm on secondary and university education. Costs per student-year in primary education typically are only a fraction of the cost per student-year in secondary and university education and consequently a marginal redistribution from the upper tiers to the lower could make a more than marginal improvement in primary education possible. This would be particularly true if, at the same time, repeat rates in primary education could be reduced. In Brazil, for example, the "unit cost" in tertiary education was 7.5 times that in primary education in 1985. Thus, if the number of student-years at university were reduced by 100 it would be possible to provide at the same cost 750 additional student-years of primary education. If at the same time the primary school repeat rate in Brazil could be reduced from 20 percent (in 1988) to, say, 2 per cent (the rate in the Philippines) an additional 135 children could be given a primary education. Thus the opportunity cost of 100 university places in this example is 885 primary school places.
It should be clear from the above illustration that the diversion of even modest sums from universities and colleges can have magnified effects on primary education. Moreover, since the beneficiaries of higher education often come from families able to pay for all or part of their education, it may be possible to recover some of the costs of tertiary education by imposing (or raising) tuition fees. In this way public expenditure on primary and secondary education could be increased without a corresponding reduction in public and private revenues available for university education. There is hence a strong case to be made for introducing an equitable system of fees and loans to replace the heavy subsidies now received by higher education.
The level of expenditure that can be justified for each of the three tiers of the education pyramid depends in part on considerations of equity and in part on the social rates of return on expenditure at each tier. The latter in turn depend on the balance of supply and demand for different types of human capital, a balance that will vary with the level of development. Every developing country obviously needs trained scientists, engineers, managers and teachers -- and other people with professional and technical skills. The issue, thus, is not whether resources should be devoted to tertiary education, but how large an allocation of limited public revenues should tertiary education receive.
Many highly educated people in developing countries lack opportunities
to apply their skills and talents. This suggests a relative excess of supply
and an inefficient use of the existing stock of human capital. Poor utilization
of highly educated people lowers both the private and social rates of return
on expenditure on tertiary education, compared to the return to primary
and secondary education. Many educated people either become unemployed
or emigrate to developed countries. This "human capital flight" or "brain
drain" constitutes a loss of resources to developing countries and a poor
investment of public funds. The correct response to this problem is to
change the composition of public expenditure toward areas where returns
are higher while also introducing measures to ensure that all available
human capital is productively employed. Policies which lead to an open
economy can be particularly helpful. Countries which exploit dynamic comparative
advantages based on the skill, technical sophistication and education of
its workers will be well placed to create remunerative employment for its
university graduates and other highly skilled people.
Access of all to primary health care
As with education, so too in health: there is an inverted expenditure pyramid in most developing countries. About three-quarters of all public expenditure on health is for expensive medical care that benefits a small minority of the population living in the urban areas. A high proportion of the budget for health, 80 to 90 per cent in some countries, is spent on hospitals, almost all of which are located in the cities. At the same time, only about 60 per cent of the people have access to primary health care. A high proportion of the poor, and of those living in rural areas, are not reached by the health care system and are forced to rely on home remedies and traditional medicine.
It is impossible to justify the pattern of expenditure one encounters in most developing countries. Viewed from the perspective of human development, the budgetary allocations are both inefficient and inequitable, and a major change in priorities clearly is desirable. What is needed are two things: a switch from hospitals to primary health care and a change of emphasis from curative to preventive medicine. Such a change in health strategy should make it possible to provide access of all to basic health at a cost the country can readily afford.
Indeed, by emphasizing primary health care it often will be possible to improve the average health of the population quite considerably while simultaneously reducing total expenditure on health programmes. It is possible to get more health for less money precisely because existing resources are used so blatantly inefficiently. There are a number of inexpensive preventive health programmes which if implemented on a nationwide basis can reduce the need for more expensive curative health care. Examples include mass immunization against communicable diseases, pre-natal care combined with post-natal maternity and child care programmes, and sanitation programmes designed to eliminate water-borne diseases. Introduction of such relatively simple public health measures could lead to a sharp reduction in the need for hospitals, doctors and medical technicians, expensive equipment and medicines and consequently to large savings of government revenue.
Beyond the immediate, direct effects of an expanded public health programme, there are longer term benefits in the form of fewer days lost from work because of illness, a higher productivity of labour and increased household incomes, a part of which can be saved and invested in growth promoting activities. The adverse consequences of poor health are sometimes irreversible, persisting over an entire lifetime and beyond. Unlike most educational deficiencies, which often can be corrected later, serious health problems early in life sometimes cannot be corrected in later years and their negative effects on productivity, incomes and general well being can last indefinitely. Indeed the effects of disease and malnutrition can be passed from one generation to the next. For example, the low birth weight and poor nutrition of an infant girl can cause her later as a mother to bear children with low birth weight or poorly developed mental capacities. The costs of preventing such things are low and represent an investment in human capital with a high pay-off. Not to spend the money would be inhuman.
Thus the argument for reallocating public expenditure from costly curative care (hospitals and doctors) to inexpensive preventive care (local health clinics staffed by paramedical personnel) is powerful. Indeed, because an expansion of preventive health measures reduces the need for expenditure on curative health measures, the case for a reallocation of resources in favour of primary health care may be even stronger than the case for reallocating resources in favour of primary and secondary education.
This reasoning cannot be pushed too far. The design of human development strategies puts a premium on lateral thinking, on breaking down old categories and on seeing connections that previously had been overlooked. The strong complementarities between expenditures on health and education are a case in point. Students who enjoy good health, for example, also benefit from an increased ability to learn. At the same time, people who enjoy a good education also are likely to know how best to maintain good health. Causality thus runs in both directions. Hence a reallocation of public expenditure to both primary health care and primary education can have a beneficial impact on each area of activity which is mutually reinforcing. Once again, the whole is likely to be greater than the sum of its parts.
There are considerable advantages therefore in concentrating on primary health care and the two lower tiers of the education pyramid in the early stages of a human development strategy. Spending on preventive health measures is particularly attractive because it represents a low cost way of combating many of the most common diseases found in developing countries. In Bangladesh, for instance, half of all deaths are among children under five years of age and two-thirds of these deaths, namely those caused by diarrhoea, measles and tetanus, could be prevented at negligible cost, by immunization or simple treatments. In fact a recent child immunization campaign in Bangladesh was remarkably successful and about 70 per cent of all infants were reached. The cost of this programme, which surely will save a great many lives, was only 0.3 per cent of total public revenue.
The basic components of a primary health care system are few in number, simple to implement and inexpensive. The six key elements are (i) immunization against the six most common communicable diseases, namely, measles, diphtheria, whooping cough, polio, tuberculosis and tetanus, (ii) nationwide availability of about 15 to 20 essential generic drugs, (iii) widespread availability and use of oral rehydration therapy, (iv) a family planning, midwifery and pregnancy management programme, (v) improved water supply and sanitation and (vi) health education. The immunization programme costs only about $1.20 per child; the per capita cost of the generic drugs programme is about half that amount; and a dose of the simple mixture used in oral rehydration costs only $0.10. Given the low costs and high effectiveness of these first three elements of a basic health programme, they obviously should be given very high priority in a human development strategy. Implementation does not require hospitals and large numbers of doctors; paramedical personnel will suffice; and diffusion can occur through mass grass roots campaigns.
To be fully successful, however, these initiatives should form part of a wider set of interventions which include the provision of clean water supplies, improved sanitation and infant nutrition programmes. Also important are family planning programmes which, by providing information, education and contraceptive supplies, can considerably improve the well being of families, and particularly women, by enabling them to choose the number of children they bring into the world. None of these need be expensive when compared to conventional health expenditure programmes in developing countries and the ratio of benefits to costs will be a great deal higher.
Clean water is essential for improved public health. Diarrhoeal disease, the single most important cause of infant and child deaths, cannot be effectively combatted without it. Moreover, inexpensive, technologically appropriate methods for supplying potable water to the urban and rural poor exist and can readily be introduced: public tube wells, rain water collectors, gravity fed water distribution systems and hand pumps. Hand pumps are a particularly attractive solution because they are low in cost while being simple to install, use and maintain. None of these technologies however is expensive and it has been estimated in Asia that it should be possible to provide potable water to everyone at an annual cost of about $2.00 per person.
Basic sanitation also is essential for good health. Particularly in the humid tropics where average temperature and humidity levels are high, and high population densities bring people into close proximity, disease is easily spread. Yet in many countries in the humid tropics basic sanitation is woefully inadequate. In Bangladesh, for example, only about 10 per cent of the population have sanitary ways to dispose of human excreta. There has been a small government programme since the 1950s to supply subsidized pit latrines, but even after four decades only about six per cent of households have them. Given the appalling sanitary conditions and the lack of success of past policies, the country clearly needs a "sanitation revolution" as recommended in a recent human development report. 34 Rather than rely on subsidized latrines supplied by the central government, it is recommended that the new approach centre on the active involvement of local communities, including non-governmental organizations and private enterprise.
The details of the technology and the delivery system will of course vary from one country to another. What is important to notice is that in the two cases of potable water and adequate sanitation, improvements in health are not directly related to increased public spending on conventional health programmes. In these two cases, indeed, the average health of the population would rise if fewer resources were allocated to the ministry of health (for spending on hospitals, etc.) and more were allocated, say, to ministries concerned with water supply and drainage.
A similar situation arises in the case of nutrition. Malnutrition is a major cause of poor health in developing countries and even in the United States 25 million people threatened by hunger receive "food stamps" under a national anti-poverty programme. In developing countries, as in developed ones, hunger and malnutrition have relatively little to do with the aggregate supply of food but instead reflect the way society is organized and particularly the distribution of wealth and income that flow from that organization. 35 People are hungry because either they lack the productive resources -- land, other fixed assets, water -- to grow enough food for themselves or the money to buy it. The fundamental solution to the problem of malnutrition thus has much more to do with creating productive employment and achieving a more even distribution of income and wealth than with increasing public expenditure on health. Nonetheless, short of the structural reforms discussed in Section 4, the problem can at least be ameliorated by school feeding programs and food subsidies directed to lactating mothers and infants.
The experience of Thailand is instructive. 36 In 1981 about 51 per cent of the country's pre-school children suffered from protein-energy malnutrition. The following year a series of reforms were introduced which changed priorities in favour of (i) preventive health measures, (ii) primary health care, with an emphasis on nutrition, clean water and sanitation, essential drugs and immunization, and (iii) community involvement in administration, financing and decision taking through village committees and village health communicators and volunteers. The results were spectacular. By 1989, protein-energy malnutrition had fallen to 21 per cent, the infant mortality rate had declined from 41 per 1000 in 1981 to 28 per 1000, access of households to clean water had risen from 32 per cent in 1982 to 78 per cent and 98 per cent of all villages were participating in the primary health care programme.
A human development strategy entails the construction of a basic health care system accessible to all and this, in turn, implies a reallocation of public expenditure away from expensive curative equipment, urban hospitals, the training of large numbers of doctors and the payment of their high salaries once they start to practise conventional medicine. Thailand shows it can be done. This will happen, however, only if the government is strongly committed to the strategy and understands that both the social rate of return and equity would be improved by a reorientation of policy. After all, expensive, curative oriented and inequitable health systems exist in developing countries because the political and economic elites demand it. What is needed is a countervailing demand from the beneficiaries of a human development strategy for a low cost, prevention oriented and more equitable public health system.
This does not imply that there is no role for private medicine in developing countries, but the thrust of the health care system must be preventive measures organized by the state. The private sector can then fill in the gaps and supply the more elaborate and expensive treatments to those who can afford them. At present, the poor spend proportionately more of their income on health services than the rich while suffering much worse health. In Bangladesh, for instance, the poorest families spend about five per cent of their income on private health whereas the richest families spend only about 1.8 per cent. This occurs despite the fact that public health facilities are virtually free in Bangladesh. The reasons are that most people do not have access to public facilities because the facilities are located in the cities and, moreover, those who do have access receive a low quality of care. As a result only one patient in four seeks treatment from them. That is, the government is spending its health care money on the wrong things, and doing them badly.
A government committed to human development obviously has to construct facilities in the rural regions of the country. Equally important, it must ensure that these facilities are adequately staffed with properly trained paramedical personnel, that a few basic medicines and other supplies are available and that there is an active outreach programme to inform the people of what is on offer and how the services can best be used.
As with expenditures on formal education, governments commonly regard construction of facilities as capital expenditure (and hence contributing to development) and spending on staff, medical supplies and health education as recurrent expenditure (and hence not contributing to development). While it would be wrong to reverse the assumptions, some recurrent expenditure should be regarded as contributing to human capital formation. In Pakistan, however, about three-quarters of recurrent health expenditure is allocated to hospitals and medical training -- despite the fact that the country has an excess supply of doctors (at prevailing salaries) and many secondary hospitals have low occupancy rates. This pattern of spending is neither equitable nor efficient.
A significant proportion of recurrent costs could be recovered by imposing discriminatory user fees and the funds thereby released could be channeled to primary health clinics for the benefit of, say, mothers and children, or the residents of rural areas or the poor in general. There should be little difficulty in principle in designing a structure of user fees so that they are progressive, with only a modest burden falling on the poor. The easiest way to do this is not to devise a structure of charges based on the ability of specific users to pay but instead to levy uniform charges on those services largely consumed by upper income groups. For example, in countries such as Pakistan, where there has been a relative over-investment in producing doctors, students wishing to acquire a medical education should be required to bear the full cost, perhaps assisted by a government funded loan. Similarly, charges for medical services at teaching hospitals could be higher than elsewhere, since such hospitals cater disproportionately to upper income urban residents. Lower charges would occur at secondary hospitals and services at basic health clinics could be free.
The structure of fees would thus provide a strong incentive to people
to use the health clinics rather than hospitals. Pecuniary incentives will
not suffice however; community involvement in basic health programmes also
is critical to success. Bangladesh, for example, is self-sufficient in
oral rehydration salts, but oral rehydration methods are used in only 15
to 20 per cent of the relevant cases. The problem in this instance is not
supply but effective demand. People need to become educated in basic health
issues and to become actively involved in primary health care. Grass roots
organizations and local government, not central government, are likely
to be most effective in ensuring that basic services actually reach those
most in need. In the area of health care, as in many other areas of human
development, a strategy based on development by the people, not just for
the people, is likely to be most successful in attaining its objectives.
Reducing low priority public expenditure
A human development strategy naturally tends to call attention to the potential benefits of reallocating public resources in favour of human capital, such as basic health services and primary education. Within the education and health budgets both equity and efficiency often can be increased by shifting priorities from services at the top of the pyramid (which usually favour upper income groups disproportionately) to those at the bottom (which favour lower income groups). These inter-sectoral and intra-sectoral reallocations pose the question of what areas of public expenditure should bear the burden of substantial reductions. This question cannot of course be answered in the abstract since the details of government spending obviously will vary from one country to another, but areas worth investigating include debt servicing, military expenditure, internal security and subsidies to the rich. In some countries it may also be possible to reduce public spending on state enterprises either by privatizing some of them or reducing their deficits, or by a combination of the two. (i) debt servicing
The external debt of developing countries more than doubled between 1980 and 1990. By 1989 repayment of interest and capital on the debt was $171 billion, of which interest alone was more than $64 billion, and the total would have been larger still had not many countries fallen into arrears. Because of these heavy debt service payments, during the second half of the 1980s there was a net transfer of resources from poor countries to rich of almost $200 billion, resources which in principle could have been used to promote human development.
In a number of countries, particularly in Sub-Saharan Africa and Latin America, debt servicing has become a major item of government expenditure. Indeed debt repayment often is even greater than military expenditure. More important, the burden of servicing the external debt has fallen disproportionately on the poor, the working class in general and on sections of the middle class. In order to make resources available for debt servicing governments have been forced to reduce their deficits and they have often done this by cutting expenditures on human development. As a result, the role of the state in actively promoting development has been curtailed. Overwhelmed by external debt and unable to raise taxes sufficiently, many governments have increased their domestic indebtedness to the banking system or resorted to inflationary finance through the central bank.
In order to amass the foreign exchange necessary to service the external debt, many countries have felt compelled to adopt a "neo-mercantilist" policy, maximizing exports and minimizing imports by restricting aggregate demand, imposing import restrictions and devaluing the exchange rate; in addition, some export incentives have been introduced. Since the neo-mercantilist policies have coincided with a period of recession in the developed countries (including the ex-socialist developed countries), the effect has been to worsen the commodity terms of trade of the developing countries, thereby aggravating their economic hardship. The developed countries, in turn, have responded by increasing their own protectionist barriers, thereby reducing the rate of growth of world trade.
Perhaps even more serious in the long run, some developing countries have used contractionary monetary and fiscal policies to lower real wage rates in an attempt to become more competitive in international markets. Competitiveness based on compressed real wages, however, is at best short lived. In the long term it weakens an economy's ability to shift resources into activities where higher productivity and higher incomes are possible. What is needed instead is an activist state committed to human development which gives highest priority to ensuring that the labour force is literate, skilled and well educated.
One reason why the governments of developing countries became so deeply embroiled in disputes over debt repayments is that they unwisely agreed to guarantee (and in some cases take over entirely) foreign loans extended to private domestic corporations and banks. A situation of "moral hazard" was created whereby neither the overseas lender nor the local borrower had an incentive to act prudently. By guaranteeing the liabilities of private enterprises, the governments of developing countries in effect granted enormous subsidies to the private sector and when the liabilities became payable the general public was expected to foot the bill. When the debt crisis erupted in Mexico in 1982, for example, the government nationalized the private banks, in part to relieve them of their debt repayment difficulties. Something similar occurred in Chile a year later. 37 These problems were not limited to the private sector however: in many countries the government also guaranteed the foreign debts of public and semi-public corporations.
In some cases external borrowing led directly to capital flight. That is, external debts were incurred in order to finance the accumulation of external assets by wealthy private citizens. In the Philippines, for instance, a revolving door seems to have operated: foreign loans were obtained in order to acquire foreign assets; these foreign assets were then used as collateral for more foreign loans to acquire more foreign assets. It has been estimated that in the Philippines capital flight was equivalent to about 70 per cent of the foreign debt, and the proportions are thought to be even higher in Argentina, Venezuela and Mexico. 38
The most seriously indebted developing countries would have to experience unprecedentedly rapid growth in the 1990s just to recover the ground lost in the 1980s and place themselves in a position to resume the trend rate of growth enjoyed in the fifteen years after 1965. The basis for accelerated growth during this decade, however, is lacking because investment in human and physical capital was neglected during the years of economic crisis. The much discussed structural adjustment policies, far from laying the foundation for future growth as their advocates claim, have actually weakened development prospects. 39
Given the situation facing the most heavily indebted countries, particularly the very low income economies in sub-Saharan Africa, the prospects for human development almost certainly will be meagre unless some relief is forthcoming. Three broad possibilities are conceivable. First, there could be a very substantial increase in foreign aid in the form of grants, so that the negative resource transfer becomes positive and large enough to permit adequate funding of a human development strategy. Alternatively, second, the foreign debt could be cancelled, in whole or in large part, and the loan in effect converted into a grant. Failing the above two remedies, some developing countries may have no alternative but to default. This is clearly a measure of last resort, although one with many historical precedents, and if forced to choose between paying foreign creditors and preventing further suffering of their own people, some governments may take debt relief into their own hands. This would be a pity, since the cost of solving the foreign debt problem of Sub-Saharan Africa and many of the other heavily indebted countries is relatively modest. (ii) expenditure on the military and internal security
In many developing countries expenditure on the military and internal security represent a massive diversion of public resources to socially wasteful purposes. Considering just military expenditure, and ignoring expenditure on internal security, there appears to be a rough inverse association between the level of human development and the percentage of total income absorbed by the military. For example, in 1989 the developing countries classified by UNDP as "high human development" allocated 3.1 per cent of their gross domestic product to military expenditure. The "medium human development" countries excluding China allocated 4.5 per cent and the "low human development" countries excluding India allocated 4.8 per cent. There is thus a prima facie case for enquiring in every country contemplating adopting a human development strategy whether it would be possible to reduce the resources allocated to the army, navy, air force, intelligence services and secret police, paramilitary units, local police, etc., in order to increase outlays on more productive activities.
Military expenditure and debt servicing account for a high proportion of total expenditure in many developing countries and the two items often are closely connected. In fact more than a third of the total external debt of developing countries was incurred to acquire military equipment. Moreover, recent research suggests that the availability of external loans actually increases the propensity of governments to spend on the military. 40 Foreign aid, in this case, makes no contribution to development, unless of course military expenditure is thought, rather implausibly, to contribute indirectly to human development. It is not uncommon for military expenditure and payments on the foreign debt to absorb 40-80 per cent of current government revenue. For example, in 1987 these two items accounted for 55 per cent of government revenue in Sri Lanka, 61 per cent in Pakistan, 64 per cent in the Philippines, 65 per cent in Colombia and 85 per cent in Jordan. 41
Between 1960 and 1988 military spending in developing countries increased five-fold in constant U.S. dollars and grew twice as fast as income per head. 42 In the late 1980s the rate of growth of spending on the military declined somewhat, but it could well increase again in the 1990s. Conflicts within states rather than conflicts between states are likely to increase as sub-nationalist movements challenge the legitimacy not only of specific governments but of the state itself. Indeed in 1988, of the 111 conflicts in the developing world, 90 per cent were intra-state struggles. 43
Rivalry between the two superpowers once provided the stimulus to militarization in developing countries, but since the collapse of the Soviet Union a new impulse has become important, namely the quest of arms manufacturers to seek out new or expanded markets in developing countries to compensate for the loss of markets in the developed countries. There is a danger that the end of the Cold War will foreshadow not an era of global peace but an explosion of sub-nationalist conflicts throughout the world. In the final years of the Cold War imports of military equipment and supplies accounted for seven per cent of total imports in developing countries44 and between 1978 and 1988 developing countries accounted for more than three-quarters of all arms traded internationally. 45 The risk today is that these percentages will increase.
Military expenditure already is a major obstacle to human development. Indeed military spending in developing countries is greater than spending on education and health combined. Despite an evident decline in external threats to national security, many governments continue to spend large sums on the armed forces and on internal security. Providing security to its citizens is one of the first responsibilities of a government and a lack of internal security can be a severe brake on development. Spending on internal security however often is intended not to enhance the security of the citizenry but to protect the government or the state from its own people, or to enable small minorities to suppress the majority and retain political power. In many countries spending on the armed forces serves no purpose other than keeping the armed forces in power at the expense (financially and politically) of the civilian population. The experience of Costa Rica, which has managed to do without a military establishment, is enlightening.
Accurate information on the amount of resources allocated to internal security is difficult to obtain. In countries racked by ethnic and religious conflicts -- Sri Lanka, Ethiopia, India, Somalia, Angola -- expenditures on internal policing and suppressing rebellion are substantial, often greater than central government expenditure on human development activities. Some of this is inescapable, and the difficulties of containing domestic conflict in pluralist states should not be minimized, but much domestic violence could be avoided by encouraging democratic political participation by all groups and, where the aspirations of sub-nationalist movements prove to be irreconcilable, by peacefully acceding to secessionist demands. The non-violent separation of Czechoslovakia into two states shows how it should be done.
Democracy and internal security often go hand-in-hand. That is, in many countries it will not be possible to reduce expenditure on internal security unless democratic practices are introduced throughout the political life of the country. This is recognized in the human development report on Colombia, where a distinction is made between "negotiable" and "non-negotiable" violence. 46
Since the eruption of "la violencia" in 1948 after the assassination of a political leader of the populist left, Colombia has attempted, unsuccessfully, to cope with widespread social violence by suppression. Recently, however, there has been a change of approach and "negotiable" violence has been reduced by extending a political amnesty to members of the various guerrilla movements and integrating the ex-combatants into the electoral process. So far at least, greater democracy in Colombia appears to have succeeded in reducing political violence. On the other hand, "non-negotiable" violence, i.e., violence that has its roots in such structural problems as poverty, unemployment and lack of human development, persists. Here the solution is neither suppression (internal security) nor democratization but a frontal assault on the structural causes.
In the case of non-negotiable violence, human development may be necessary to permit a reduction in expenditure on internal security. We thus have a possible virtuous circle: expenditure on human development weakens the structural causes of non-negotiable violence; this leads to reduced social conflict, which in turn allows a reduction in spending on internal security; less spending on internal security releases resources for human development, which further weakens the structural causes of non-negotiable violence. In the course of this virtuous circle the role and influence of the military and security forces can be progressively reduced as their raison d' être diminishes. (iii) public sector enterprises
In many developing countries the losses of public sector enterprises constitute a substantial drain on central government revenues and it is natural to consider whether the drain can be reduced and the resources thereby released used for other purposes. The sale of state enterprises to either domestic or foreign buyers is one possible option -- and a rather fashionable one at present -- but this is not the only option and the full range of possibilities should be considered before embarking on a particular course of action.
State enterprises in developing countries have a long history. They first became a conscious instrument of development in Turkey, spread to Latin America (Mexico, Brazil, Chile) in the 1930s and then became the dominant form of property ownership in the socialist countries (China, Cuba, Vietnam). The role they have played has varied enormously and it would be quite wrong to assume that whenever state enterprises operate at a loss, human development would best be served by disposal of these assets. Whenever a sale is contemplated one should first ask three questions: (i) Is it desirable to subsidize the enterprise and, if so, why? (ii) Which groups in society benefit from the subsidy? (iii) If a subsidy is desirable neither on grounds of economic efficiency nor of equity, would it be possible to eliminate the subsidy by lowering costs or raising revenues and, if so, would this be better than an outright sale?
The answers to these questions should be determined on a case by case basis. For example, a subsidy may be justified on efficiency grounds where there is a market failure. If a state enterprise organizes training programmes that benefit other employers too or a research programme which produces knowledge which is not entirely firm specific, benefits are produced for society as a whole which are not fully captured by the firm's revenue stream. In such cases a subsidy to cover the gap between social and private benefits would be appropriate. Note, however, that market failure can be used to justify a fixed level of subsidy only, not losses of indefinite magnitude.
Similarly, even if there is no market failure, a subsidy may be justified on income distribution grounds. Often, however, subsidies are in fact used to cover the losses of state enterprises that provide services mainly consumed by the middle and upper income groups. Examples include urban telephone services, luxury hotels and national airlines. Clearly improvements in the distribution of income cannot be used as valid reasons for subsidies in cases such as these. Moreover, even if the subsidies do benefit largely the poor, and hence diminished inequality can reasonably be adduced, one must still consider whether the distributional objectives could not be achieved at lower cost by some other means. Only if it is impossible for political or technical reasons to redistribute income through the tax and transfer systems would it be sensible to use the deficits of state enterprises to redistribute income to the poor.
Assuming that continued subsidy by the state cannot be justified, policy makers must decide whether to transfer state enterprises to the private sector or to reform the state enterprises while keeping them in the public sector. The possibility of reform should not be ruled out. If the losses are due to government imposed prices below a market clearing level, it might be possible to eliminate the subsidies by allowing state enterprises to set their own prices. If the losses are due to unnecessarily high costs, such as those caused by over-manning, then a possible solution is to terminate the subsidies and encourage state firms to cut their costs. It would be arbitrary to assume that under no circumstances are state enterprises able to cover their costs and earn a profit for their owners, the taxpayers.
Ultimately the decision between private and public ownership should depend
on the social rate of return. If the assets will earn a higher social rate of
return in the private sector, they should be sold; if not, they should be kept
in the public sector. In practice a human development strategy is likely to
entail some transfer of state enterprises to the private sector, namely, those
loss making enterprises which cater primarily to the rich. At the same time
there could well be an expansion of public sector enterprises providing services
that are essential for human development but that cannot be supplied efficiently
by the private sector. 47 Examples include the supply of
electric power to rural areas, an underground urban transport system, urban
water and sewage.
23. See UNDP, Balanced Development: An Approach to Social Action in Pakistan, loc. cit. and UNDP, Human Development in Bangladesh, Dhaka, Bangladesh, 1992.
24. The inverted pyramid applies not only to public expenditure on formal education but also to health, pensions, public food distribution, transportation (compare air travel with farm-to-market roads), irrigation (compare expenditures on large scale water management projects with small scale irrigation facilities), industrial support, etc. In each case expenditure per beneficiary increases as one climbs the pyramid while net social returns tend to fall. Thus the point made in the text about the composition of educational expenditure has wide applicability to other sectors.
25. For example in Indonesia in 1978 it is estimated that 83 per cent of state subsidies to higher education accrued to the upper income group, 10 per cent to the middle income group and only 7 per cent to the lower income group. Indonesia is perhaps an extreme case, but a similar pattern is evident in Chile, Colombia and Malaysia. See George Psacharopoulos, "Education and Development: A Review," World Bank Research Observer, Vol. 3, No. 1, January 1988, Table 5, p. 104.
26. Excluding China and India, which have good records, the primary school enrollment rate in the "other low-income economies" was 77 per cent in 1989. In the "middle-income economies" the enrollment rate was 101 per cent. See World Bank, World Development Report 1992, New York: Oxford University Press, 1992.
27. In Africa, for example, the rates of return on investments in education are estimated to be 26 per cent for primary education, 17 per cent for secondary education, and 13 per cent for higher education. These rates of return include public subsidies in total costs but make no attempt to include positive externalities in the benefits. Thus they understate the true social rates of return. See George Psacharopoulos, op. cit., Table 1, p. 101.
28. For a study of urban areas in east Africa see John Knight and Richard Sabot, "Educational Policy and Labour Productivity: An Output Accounting Exercise," Economic Journal, Vol. 97, No. 385, March 1987; and for a study of rural areas in Latin America see Daniel Cotlear, "The Effects of Education on Farm Productivity," in Keith Griffin and John Knight, eds., op. cit. Also see Marlaine E. Lockheed, Dean T. Jamison and Lawrence J. Lau, "Farmer Education and Farm Efficiency: A Survey," Economic Development and Cultural Change, October 1980.
29. UNDP, Human Development Report 1992, New York: Oxford University Press, 1992.
30. UNDP, Balanced Development: An Approach to Social Action in Pakistan, loc. cit.
31. See UNDP, Human Development in Bangladesh, loc. cit. and UNDP, Making People Matter: Introductory Comment on a Human Development Strategy for Ghana, Accra, Ghana, draft June 1992.
32. Mark Hopkins was a distinguished teacher at Williams College, Massachusetts in the 19th century.
33. All the data in this paragraph were obtained from John Oxenham with Jocelyn DeJong and Steven Treagust, "Improving the Quality of Education in Developing Countries," in Keith Griffin and John Knight, eds., op. cit.
34. UNDP, Human Development in Bangladesh, loc. cit.
35. See Amartya Sen, Poverty and Famines: An Essay on Entitlement and Deprivation, Oxford: Oxford University Press, 1981; and Jean Drèze and Amartya Sen, Hunger and Public Action, Oxford: Oxford University Press, 1989.
36. Thienchay Kiranandana and Kraisid Tontisirin, Eradicating Child Malnutrition: Thailand's Health, Nutrition and Poverty Alleviation Policy in the 1980s, UNICEF, International Child Development Centre, Innocenti Occasional Papers, Economic Policy Series, No. 23, January 1992.
37. Keith Griffin, op. cit., pp. 50-59.
38. James Boyce, "The Revolving Door? External Debt and Capital Flight: A Philippine Case Study," World Development, Vol. 20, No. 3, March 1992.
39. Hans Singer, "Beyond the Debt Crisis," Development (the journal of the Society for International Development), No. 1, 1992.
40. Daniel P. Hewett, "Military Expenditures in the Developing World," Finance and Development, Vol. 28, No. 3, September 1991.
41. Saadet Deger and Somnath Sen, Military Expenditure: The Political Economy of International Security, Stockholm International Peace Research Institute, New York: Oxford University Press, 1990.
42. Robert S. McNamara, "Reducing Military Expenditures in the Third World," Finance and Development, Vol. 28, No. 3, September 1991.
43. Saadat Deger and Somneth Sen, op. cit.
44. Daniel P. Hewett, op. cit.
45. Robert S. McNamara, op. cit.
46. Fundación para la Educación Superior y el Desarrollo, Un Plan de Desarrollo Humano de Largo Plazo para Colombia, Bogotá, Colombia, 1992.
47 . In some cases where outright
private ownership is not desirable, e.g. because of absence of competition,
it might be possible to combine private ownership with tight government
regulation of the enterprise. Whether this formula is preferable
to public ownership depends in part on the cost, often very high, of creating
and sustaining an efficient regulatory framework.