World economy at a watershed

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 19^th and 20^th centuries saw the dominance of a metropolitan “North” with the countries of Asia, Africa and Latin America forming the peripheral “South”. The 21^st 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 19^th, 2013.

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