STWR - Share The World's Resources

The use of economic growth theory as a magic elixir towards 'development' fails to meet social goals such as the eradication of poverty and hunger. Two articles below argue that economic alternatives are both necessary, and possible.

Towards Sustainable Development - The Daily Mirror (Sri Lanka)

An Alternative Development Model - The Daily Mirror (Sri Lanka) 

12th February 08 ~ STWR

Towards Sustainable Development

17th December 08 - The Daily Mirror, Sri Lanka

What should be the goal of development?  Mainstream economists have maintained that economic growth is the stated goal of development.  But the experiences of Sri Lanka and most other developing countries clearly show that the current model of development with economic growth as its goal has failed because of three fundamental flaws.

First it treats economic growth as its primary objective rather than social objectives such as the eradication of poverty, the right to health and the  right to clean environment with climate change under control.

The case for rapid economic growth is supported by the need to provide more resources, which can then be allocated according to social needs.  However, this requires mechanisms to ensure that resources are indeed allocated according to social needs.  But do we have such mechanisms?  Such mechanisms are at best weak in rich industrialized countries and almost non- existent or dysfunctional (for eg Samurdhi in Sri Lanka) in developing countries.  Moreover it is important to note that the current capitalist model militates against such resource allocations, by arguing for low tax rates and the avoidance of explicit re-distributive measures, on the grounds that they impede economic growth.

The second flaw is the reliance on increasing exports as a source of economic growth.  This will depend on increased global consumption in order to absorb these extra exports.  There are two problems associated with increasing global consumption.  First, is that the environmental limits total global consumption.  It is now universally accepted that the world needs to reduce its consumption to prevent global warming.

Secondly, the extreme inequality of the global economy, where 20 percent of the population control 80 percent of the economy and resources, means that most of the additional consumption needed for our economic growth, is concentrated in  a small wealthy minority in the US and Western Europe, rather than among the poor majority, for whom increased consumption is absolutely essential.  It is also essential that the rich much get richer to take in more of our exports.  But the financial crisis in the US and Western Europe have seriously affected their economies.  Sri Lanka and other developing countries have lost their big markets.  Therefore their planners have to go back to the drawing board to formulate alternative  and sustainable development models.

One of the suggested alternatives to the current export oriented economic growth is the import – substituting industrialization model characteristic of much of Latin America till the 1970s.  This model is a micro version of the global export oriented growth and suffers from the same fundamental flaws.  It relies on the rich getting richer in order to make the poor less poor on a national scale.  Dependence on increasing consumption nationally to promote economic growth will be a non starter.  An entirely different people-centered development model with social objectives such as eradication of poverty, the right to health and clean environment.  Focus on increased per capita GDP should be put on hold.

An alternate sustainable development model should be based on the following underlying principles.

The first is that the alternate approach should be specifically designed to achieve society’s objectives in terms of poverty, health, education and environmental sustainability.  The first three objectives are enshrined in the economic and social rights contained in international human rights covenants.  Environmental sustainability safeguards the rights of unborn future generations.

The alternative  approach is designed to replace the current process in which national policies are driven largely by global economic conditions with a top down, one-size-fits-all framework determined primarily by global institutions including the WB, IMF and WTO.  The proposed policies and  programmes in the alternative  approach should be designed to achieve society’s four objectives at the local level with national policies designed to support, promote and facilitate them and global systems designed to foster and accommodate these national polices.

This “bottom-up” orientation is a reversal of the current process, in which national policies are driven largely by global economic conditions, within a top down, one-size-fits-all framework determined primarily by global institutions.The alternative  approach involves maximizing synergies between development, the environment, health and education, taking account of direct as well as indirect social and economic effects. 

This means addressing the social and environmental determinants of health and providing health related services, as inter related parts of a holistic framework that includes poverty reduction , food security, nutrition, social inclusion peace, personal security, safe living and working conditions, healthy life styles and diets, and access to health services, education, clean water and sanitation.

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An Alternative Development Model

24th December 08 - The Daily Mirror (Sri Lanka)  

Humanity faces three profound challenges: eradicating poverty, fulfilling the right of all people to good health and bringing climate change under control.  In the Editorial on December 17 it was shown that the current capitalist model of export oriented economic growth has failed to achieve the social objectives of eradicating poverty and right to health.  Instead the pro-growth model has resulted in a widening of the gap between the rich and poor within and among countries.  Developing countries need an alternative developmental model based on equity.

It was argued that one alternative model proposed namely import – substituting industrialization, a micro-model of the global export oriented capitalist model will not achieve the social objectives either. Humanity faces three profound challenges: eradicating poverty, fulfilling the right of all people to good health and bringing climate change under control.  In the Editorial on December 17 it was shown that the current capitalist model of export oriented economic growth has failed to achieve the social objectives of eradicating poverty and right to health.  Instead the pro-growth model has resulted in a widening of the gap between the rich and poor within and among countries.  Developing countries need an alternative developmental model based on equity.

Focusing directly on achieving social and environmental objectives requires abandoning the economic growth model of development with emphasis on increasing per capita GDP.  The alternative model based on equity designed to eradicate poverty should be designed and constructed to support the livelihoods of poor people.  These will, therefore, include: formulating and implementing policies on: microcredit, particularly for women and income generating schemes; labour intensive public service programmes to develop infrastructure designed to the needs and priorities of poor households, public sector procurement policies designed to maximize opportunities for farmers and medium, small and micro-enterprises avoiding the middlemen, agricultural extension programmes directed at small farmers, social safety nets and cash transfer programmes.

Where land ownership is concentrated, policies on reform and redistribution could provide a major boost to poverty eradication .These policies when fully implemented will provide equal opportunities to all including poor and obviate extreme deprivation.  It is relevant to note that the World Bank’s World Development Report 2006 defined equity in terms of the same two principles namely equality of opportunity and avoidance of  extreme deprivation. .

The 2006 Annual Bank Conference on Development Economics took place in St Petersburg, Russia. The   World Bank’s senior Vice-President and Chief Economist Francois Bourguiguon cited the World Development Report and urged the international community  not to block the institutional reforms needed to achieve greater equity, when these changes are against their interests.

The World Development Report 2006 refers to “inequality traps” which may be described as a situation where, “the poor are poor because the rich are rich”.  Inequality traps are similar to poverty traps in that they serve to keep people poor and destitute.  But they differ from poverty traps in that they refer to a reinforcing systems of economic, political and social structures. 

Social scientists call them “durable inequality” because the various dimensions of inequality in power, wealth and social status interact to protect the rich from downward mobility and prevent the poor from upward mobility.  For example, consider an agricultural labourer working for a rich landlord.  Being malnourished, illiterate and lacking in skills, he cannot get out of the poverty trap. 

Even if there were laws in place that would allow him to challenge his landlord, being poor, illiterate and helpless and from a remote area it will be impossible for him to go through the judicial processes needed to challenge the landlord and win his rights  in a far away city.   The present macroeconomic policies in Sri Lanka will never give any opportunity for millions of poor people like the labourer in Sri Lanka for any upward movement.

The only way is to take up the alternative  model described earlier.  It is based on equity and designed to eradicate poverty.  The institutional and policy reform necessary at the national level have been enumerated.  To repeat, they include microcredit particularly for women and income generating schemes; labour intensive public service programmes; public sector procurement policies designed to maximize opportunities for farmers and for medium, small and micro enterprises avoiding the middlemen and  agriculture extension programmes directed at small farmers.

These go certainly against the interests of the elite and the rich in Sri Lanka.  We wish to quote the World Bank’s Senior Vice President and urge the elite and the rich in Sri Lanka not to block these institutional and policy reforms but to incorporate them into the development agenda.

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