World economy at a watershed

The question of equity has entered centre stage in designing development policy.


Dr Akmal Hussain July 18, 2013
The writer is Distinguished Professor of Economics at Forman Christian College University and Beaconhouse National University

Rapid economic growth in not only China and India but also in Brazil, Turkey and a number of African countries is resulting in a historic shift in the spatial distribution of global economic power. The 19th and 20th centuries saw the dominance of a metropolitan “North” with the countries of Asia, Africa and Latin America forming the peripheral “South”. The 21st century is witnessing the rise of the South. By 2050, Brazil, China and India are projected to account for 40 per cent of world output. This watershed moment in history is pregnant with possibilities of devising new concepts, institutions and policies for shaping a more humane future for the world.

The UNDP global Human Development Report 2013, under the able leadership of Dr Khalid Malik, has delved into these new trends and directions of development thinking. This report has the potential of influencing policy thinking and public action at the global, regional and national levels. Let us indicate some of the key empirical trends and conceptual issues that have been raised.

Significant improvements have taken place in life expectancy, education coverage and per capita incomes in the countries falling in the low and medium category in terms of the Human Development Index (HDI). Yet, wide HDI disparities remain within and between countries. More ominously, income inequalities within and between countries are increasing. This creates a basis for conflict in particular societies, as well as between countries. It also constrains poverty reduction and the attempt to seek cooperation for protection of the environment. Thus, the question of equity has entered centre stage in designing development policy. There is a major change in the orientation and origin of global production, whereby international trade in 2011 accounted for 60 per cent of global output. Developing countries have been an important driver of this change, with their share in merchandise trade increasing from 25 per cent to 47 per cent over the period 1980 to 2011. At the same time, South-South trade has increased from eight per cent of global merchandise in 1980 to 26 per cent in 2011. These facts highlight regional economic integration as an important element of development strategy.

The lessons that emerge from the success stories of the South challenge the orthodoxy in economics. For example, rather than evicting the state and letting the market conduct growth, there is a need to deepen the role of the state: for human development, social welfare and for nurturing industries with an innovation and export potential.

The measures of human development itself need to be broadened in the face of this new world. The UNDP report argues the need to shift focus from measuring individual capabilities to incorporating capacities of social groups.

My own work in development action and analysis shows how organised and empowered communities can become  forces for economic growth and development. Indeed, an organised village, by providing better access for individuals to markets and public services, becomes a form of social capital.

I would suggest that communities and the relationships between them must become categories of economic analysis. This is necessary insofar as order, community-based innovations and social change, are vital to economic development.

The UNDP report does well to recognise that social conditions and conflicting perceptions about progress can hinder development. A democracy that provides opportunities for discussion as a mode of resolving disputes is important. Social integration and institutions for consensus-building are essential to development. The report documents that the geographic distribution of economic power has shifted from the North to the South. But what the report ignores is the potential disorder that could arise out of the fact that the institutions of global governance, international finance and political power are still concentrated in the North. There is an incongruence between the distribution of economic and political power with respect to the South and the North. A change is required in the architecture of global finance and governance so as to give a greater voice to the South.

Published in The Express Tribune, July 19th, 2013.

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COMMENTS (7)

truthbetold | 7 years ago | Reply

"You note that Chinese statistics have become more reliable over the past 3 years. The data I quote, relates to last year."

First, thanks for the good discussion.

Please note that if the Chinese had artificially boosted their GDP numbers in the first two+ decades of their economic reforms, that means that the actual GDP numbers in the last three years were piggybacked/based on 2+ decades of boosted numbers. As you know, GDP growth number just adds to the previous year's GDP without any check of previous years numbers.

I agree with you that Indian numbers also may not be that accurate, but India has definitely been more transparent compared with China. Usually authoritarian states have an easier time in cooking their data. You may recall how Musharraf and Shaukat Aziz cooked the books and inflated the Pak GDP for many years.

While surely there are serious flaws in India's economic growth model, Indians have not tried to hide the rampant poverty and growing inequality. 'Tout au contraire', China still hides its dark side. Just the other day I was watching the program on CNBC "Trash Inc." that was able to take a sneak view of this dark side and stark poverty in China: http://video.cnbc.com/gallery/?video=1620084176 . China doesn't allow foreigners and journalists outside the shining new cities to document the contrastingly poverty-ridden lives of the rural Chinese.

Both China and India have a long way to go to even come close to the true per capita GDP of the prosperous western nations.

Alami Musafir | 7 years ago | Reply

@truthbetold IBRD data on China/India GDP is the most reliable available to an a economic researcher without access to internal Chinese/Indian government statistics. You note that Chinese statistics have become more reliable over the past 3 years. The data I quote, relates to last year. The USCC is hardly an impartial judge of Chinese statistics. Its bias may be assessed by looking at its mandate:

"The U.S.-China Economic and Security Review Commission was created by the United States Congress in October 2000 with the legislative mandate to monitor, investigate, and submit to Congress an annual report on the NATIONAL SECURITY implications of the bilateral trade and economic relationship between the United States and the People’s Republic of China, and to provide recommendations, where appropriate, to Congress for legislative and administrative action."

Indian economic data, particularly GDP, is hardly bulletproof either, as can be seen in these publications:

http://hindu.com/2004/10/04/stories/2004100403011200.htm

http://www.thehindu.com/business/Economy/official-statistics-need-to-bereliable/article2216561.ece

http://www.thehindu.com/business/Economy/official-statistics-need-to-be-reliable/article2216561.ece

http://articles.timesofindia.indiatimes.com/2011-07-06/india-business/297424481oil-import-bill-gdp-growth-data

But I agree with you that in the broad scheme of things, these matters are mere distinctions. The press makes a big deal about China's (and India's) unstoppable march to world dominance. But those at the top table (the West), will use their economic and military muscle to prevent this, just as it squashed the much lauded Asian Tigers. In the seventies and eighties, Japan was given a similar buildup in the press. Contrast that with its present situation.

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