Many countries have made substantial progress over the past two decades: the rise of the South has been fairly broad-based. Nevertheless, several high achievers have not only boosted national income, but have also had better than average performance on social indicators such as health and education (figure 6).
How have so many countries in the South transformed their human development prospects? Across most of these countries, there have been three notable drivers of development: a proactive developmental state, tapping of global markets and determined social policy and innovation. These drivers are not derived from abstract conceptions of how development should work; rather, they are demonstrated by the transformational development experiences of many countries in the South. Indeed, they challenge preconceived and prescriptive approaches: on the one hand, they set aside a number of collectivist, centrally managed precepts; on the other hand, they diverge from the unfettered liberalization espoused by the Washington Consensus.
A strong, proactive and responsible state develops policies for both public and private sectors—based on a long-term vision and leadership, shared norms and values, and rules and institutions that build trust and cohesion. Achieving enduring transformation requires countries to chart a consistent and balanced approach to development. Countries that have succeeded in igniting sustained growth in income and human development have not, however, followed one simple recipe. Faced with different challenges, they have adopted varying on market regulation, export promotion, industrial development and technological adaptation and progress. Priorities need to be people-centred, promoting opportunities while protecting people against downside risks. Governments can nurture industries that would not otherwise emerge due to incomplete markets. Although this poses some political risks of rent seeking and cronyism, it has enabled several countries of the South to turn industries previously derided as inefficient into early drivers of export success once their economies became more open.
In large and complex societies, the outcome of any particular policy is inevitably uncertain. Developmental states need to be pragmatic and test a range of different approaches. Some features stand out: for instance, people-friendly developmental states have expanded basic social services. Investing in people’s capabilities— through health, education and other public services—is not an appendage of the growth process but an integral part of it. Rapid expansion of quality jobs is a critical feature of growth that promotes human development.
Global markets have played an important role in advancing progress. All newly industrializing countries have pursued a strategy of “importing what the rest of the world knows and exporting what it wants”. But even more important is the terms of engagement with these markets. Without investment in people, returns from global markets are likely to be limited. Success is more likely to be the result not of a sudden opening but of gradual and sequenced integration with the world economy, according to national circumstances, and accompanied by investment in people, institutions and infrastructure. Smaller economies have successfully focused on niche products, the choice of which is often the result of years of state support built on existing competencies or the creation of new ones.
Few countries have sustained rapid growth without impressive levels of public investment— not just in infrastructure, but also in health and education. The aim should be to create virtuous cycles in which growth and social policies reinforce each other. Growth has frequently been much more effective at reducing poverty in countries with low income inequality than in countries with high income inequality. Promoting equality, particularly among different religious, ethnic or racial groups, also helps reduce social conflict.
Education, health care, social protections, legal empowerment and social organization all enable poor people to participate in growth. Sectoral balance—especially paying attention to the rural sector—and the nature and pace of employment expansion are critical in determining how far growth spreads incomes. But even these basic policy instruments may not empower disenfranchised groups. Poor people on the fringes of society struggle to voice their concerns, and governments do not always evaluate whether services intended to reach everyone actually do. Social policy has to promote inclusion—ensuring nondiscrimination and equal treatment is critical for political and social stability—and provide basic social services, which can underpin long-term economic growth by supporting the emergence of a healthy, educated labour force. Not all such services need be provided publically. But the state should ensure that all citizens have secure access to the basic requirements of human development.
An agenda for development transformation that promotes human development is thus multifaceted. It expands people’s assets by universalizing access to basic services. It improves the functioning of state and social institutions to promote equitable growth where the benefits are widespread. It reduces bureaucratic and social constraints on economic action and social mobility. And it holds leadership accountable.