Development is much more than just economic growth

Investment in human capital imperative to achieve development

A girl reading in a school somewhere in Balochistan. PHOTO: REUTERS

LAHORE: Development is a much broader phenomenon than just economic or income growth. In fact, economic growth may be seen as one of the outcomes of a complex development process.

Contemporary scholars have established that development is a multidimensional field and thus encompasses additional spheres covering aspects of human and social development.

The 1980s and 1990s saw the rise of fresh approaches to development, building upon the narrowly defined approaches held around national income growth strategies.

Pakistan’s new development trajectory

Two leading scholars, Mahbubul Haq and Amartya Sen, are credited with reorienting the focus of development programmes to incorporate dimensions of social and human development.

Haq, an internationally renowned Pakistani economist, worked with Sen, an economic theorist, to advance a new approach of measuring development that amalgamated human and social improvements with economic growth.

Thus, development of the state is strongly linked with numerous factors other than income growth, such as health, education, nutrition, access to clean drinking water, access to energy, infrastructure and mobility among others.

Sen’s novel idea said that standard of living is not to be gauged by commodity possession or having money income alone, but in fact through the ease of availability of opportunities to individuals. For example, real development would make it easier for citizens to get better education, health care, sufficient nutrition, access to energy, infrastructure and safe environment with ease and translate these into enhancing their capabilities.

Subsequently, Haq advocated that investment in human capital is imperative to experience development.

The impact of their work was so profound that it came to be accepted as the official methodology by the United Nations Development Programme (UNDP) and became the guiding cornerstone of future development efforts across the globe.

However, this does not at all imply that economic growth should be left alone and it will come automatically. In fact, economic, social and human development are all contingent upon each other.

Just like markets, governments can either fail or succeed. To achieve successful development, a careful balance needs to be achieved between what the government can accomplish, the behaviour of the market system and what both institutions can achieve at best, working together.

Economic growth-induced development

Post-Haq and Sen, the other question that has invited debate amongst development practitioners and researchers is the causality between economic growth and social and human development.

Does economic growth cause better social and human outcomes or better social and human indicators translate into economic growth. The evidence backs both sides, for example, Punjab districts such as Jhelum and Gujrat rank extremely well on the Multi-Dimensional Development Index, primarily derived by the ability of citizens to purchase social services using high remittance inflows.

On the other hand, districts such as Hafizabad, Narowal and Kasur rank high based on government’s investments in ensuring better social sector coverage.

In addition, improvement of human capital would increase productivity of the labour force as greater social well-being leads to higher per capita output. Educated, healthy and nourished individuals would be increasingly productive, thus, stimulating economic growth. This proves that investment in human and social development would lead to economic growth.

Therefore, this establishes the existence of a cycle – economic growth generates human and social development and this, in turn, galvanises economic growth again.

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If one takes access to energy in Pakistan as an example, the shortage of power affects the productivity of companies by losing out on time and high wastage of material, but this is not the only impact.

Shortage of energy also means that workers when go back home are unable to rest and sleep well due to load-shedding. Thus, they generally feel tired and come to work with a general sense of deprivation.

Estimates show that simply improving access and availability of energy can add up to 2% per annum to growth.

Pakistan improves in HDI

As Pakistan’s second consecutive democratic government’s tenure draws to a close, it is important to acknowledge that the economy has made certain gains and stabilised the economic climate to a certain extent.

The annual GDP growth made a successful leap from 4.4% per annum in 2013 to 5.7% in 2016 – the highest growth achieved in the last decade.

On the UNDP’s Human Development Index (HDI), an indicator devised by Haq, which amalgamates standards of living and economic growth, in 2016 Pakistan ranked 147th with a value of 0.55.

The closer the value is to 1, the better the performance of the country. Since Pakistan’s position improved by two units between 2010 and 2015, the ranking puts it in the medium human development bracket.

This also includes countries such as India, Indonesia, Bangladesh, Bhutan, Kenya, Myanmar and South Africa. However, the journey to compare with the world’s top countries Norway (0.949), Australia (0.939) and Switzerland (0.939)) is still distant.

There is one more dimension to the debate of economic growth and social improvement namely equitable provision.

UNDP has launched district-level disparities in Pakistan based on the Multi-Dimensional Poverty Index. Results show that whereas some cities/districts such as Lahore and Karachi are doing extremely well on all development indicators, cities/districts such as Killa Abdullah, Kohistan and Tharparkar are extremely deprived.

This deprivation suggests an inequitable approach to development and thus lowers Pakistan’s performance. If Pakistan has to improve its development rankings and ensure better citizenry for all, the policy-makers will have to invest considerably more in these deprived regions. The choice is simple – spending a billion rupees in Killa Abdullah district of Balochistan will have much higher returns than spending the same billion in Karachi.

Economic growth in Punjab

The 18th Amendment to the Constitution has granted provinces considerable autonomy when it comes to development policies, especially in key social sectors such as health and education.

How the provincial governments benefit from this freedom depends entirely on their mandate, style of governance, the provincial demographic and economic situation. Prioritising the social sector for a better quality of life is what leads to development, which essentially reorganises and restructures entire economic and social systems, revolutionising institutional, administrative and social structures, along with transforming beliefs and popular attitudes.

Punjab’s Annual Development Plan 2017-18 has a budget of Rs635 billion, which gives highest priority to the development of social sector for which Rs201 billion (32%) has been allocated.

Major focus is on education (Rs82.61 billion), health (Rs51.80 billion) and clean drinking water (Rs52 billion). This is followed by infrastructure (Rs172.1 billion).

Fulfilling the infrastructure requirement for the economy to function efficiently, agriculture, education, health, water supply, governance and service delivery are the top priority in the development portfolio of Punjab.

Appropriate allocations have been made to these sectors that will stimulate economic activity and develop human resource.

Pakistan’s economic growth is set to improve through the China-Pakistan Economic Corridor (CPEC), which will serve as a driver of growth, trade, connectivity and infrastructure development in Pakistan as well as China.

This growth is likely to address the multi-dimensional inequity in Punjab and the country as a whole.

Dr M Amanullah is chief economist and Muhammad Usman Khan is an adviser in the Planning and Development Department, Punjab

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