Thursday, February 19, 2009

Why "human development" is finally about ... well humans

Khadija Haq and Richard Ponzio (editors), Pioneering the Human Development Revolution, An Intellectual Biography of Mahbub ul Haq, Oxford University Press, Delhi, 2008, pp xvi + 266, Rs 595, ISBN 019569513-5.

V.V. Bhatt, Perspectives on Development, Memoirs of a Development Economist, Academic Foundation, New Delhi, pp 135, Rs 595, ISBN 13: 978-81-7188-683-8.

These are disparate books, united by the common feature that they incorporate in varying degrees, a series of reflections on aspects of the “development” process. One is told through the retrospective assessment of the life and work of a man acknowledged as a global leader of thought on the issue. The other is a first-person narration, anecdotal and loosely assembled, by an individual who over four decades, witnessed development policy in its formulation and implementation, from a vantage position within the financial sector.

“Development” became a global concern following World War II and the liberation of vast numbers of people from the fetters of colonialism. A quantitatively defined notion to begin with, development acquired in the following years, a distinct political facet. In between stood the human dimension. It is this conceptual evolution that is captured in the lifespan of Mahbub ul Haq, whose story is narrated by close associates in one of these volumes, published to coincide with the ten-year anniversary of his death.

What was the intellectual trajectory that brought an avid proponent of “growth” in its barest and most arid statistical form, to the realisation that living, laughing and most often, suffering humanity was the rightful focus and centre of all economic policy? How did Haq’s experiences mould his restless search for new conceptual avenues to explore in the struggle against poverty and all its degrading effects? And how did he fashion his relentless advocacy for a fundamental shift in the idiom of thought on economic policy? To answer these questions is to re-enact the voyage of discovery of one of the most important public intellectuals to have emerged from the South Asian region. And it is a voyage that is with great understanding and empathy, reconstructed in this volume edited by Khadija Haq – Mahbub ul Haq’s widow -- and Richard Ponzio, a long-time collaborator.

What is it about the aggregate measure of economic “growth” that makes it a very poor indicator of welfare? The answer today is obvious: that we need to worry not merely about the quantum of growth but also about how this increment in overall social product is distributed. This realisation dawned on Haq after he had crafted three five-year plans for the Pakistan government and seen them through with gratifyingly positive results. By the late-1960s, though, he began to realise that the years of achievement were beginning to “crumble”, not because “the pace of growth in the gross national product had been insufficient, but in spite of an enviable record of growth”.

This was the moment of awakening that led to Haq’s famous speech in April 1968, a moment in South Asian history that has justly become famous. In claiming that 22 families were reaping all the benefits from Pakistan’s economic growth, Haq was speaking out against the very government he was serving then in a senior economic policy position. The speech was also a serious auto-critique, since Haq had been responsible for most of the policies that had contributed to this undesirable outcome. We learn from the Haq-Ponzia volume, that the “22 families” speech was based on rigorous research and documentation, though one of the contributors suggests that it was perhaps methodologically a little flawed. The point nonetheless was made: that the seriously skewed distribution of gains from Pakistan’s economic growth, was threatening to undermine the whole process of planned development.

This was a conjuncture when, just around two decades since their shared independence from colonialism, both India and Pakistan were going through a phase of radicalisation in conceptual thinking. Major commercial banks in India were nationalised in 1969 and as we learn from Bhatt’s volume, this was followed by efforts to curb “what was called the concentration of economic power of large business houses”. As with Haq in Pakistan, the economist R.K. Hazari – like Bhatt a Deputy Governor of the Reserve Bank of India – provided the theoretical and empirical research for this policy orientation. And as with Haq in Pakistan, Hazari’s study was rigorous in many respects, though Bhatt found the policy conclusions it pointed to, “populist” and even rather disagreeable.

The chroniclers of Haq’s intellectual evolution do not pause to pronounce their own judgment, though they do record that the “22 families” speech became rather unfortunately, the precursor to a phase of ferocious political polemic without quite so serious an effort at institutional reform. Haq had -- perhaps unwittingly -- unleashed the kind of political forces that he could not be comfortable with. With the collapse of the Ayub Khan regime in 1970, Haq left Pakistan to take up an assignment with the World Bank as chief of the Policy Planning Department. He responded to a call from his homeland in the mid-1970s and briefly considered taking up a policy role again. But he was trapped in irreconcilable differences with the radical Finance Minister, Mubashir Hassan and chose to return to the World Bank, rather than take on Hassan’s intent to effect a total redistribution of wealth.

Back at the World Bank, Haq contributed significantly to the “poverty orientation” that the institution adopted during Robert McNamara’s tenure as president. Though the World Bank by this time had outgrown the traditional assumption that poverty reduction would be an axiomatic outcome of a high and rapid growth trajectory, there was an influential stream of thought within, which argued for a minimal departure from the orthodoxy. There were ways of tailoring the growth process to optimise the impact on poverty, this argument went. And growth strategies needed to be mindful of the need to maximise employment opportunities, enabling the poor to draw optimal benefit out of available jobs. A significant dent on poverty would follow this slight recalibration of economic strategies.

Haq and his collaborators thought that this approach still took too much for granted. The essence of poverty, they argued, was a dearth of human capital. And the basic characteristic of a poor economy was an absence of social infrastructure. Devoid of these essential underpinnings, the poor would risk being swept aside by any growth strategy, even one ostensibly tailored to their needs.

This debate conducted within the policy circles of the World Bank, as also in the wider academic terrain, presages the “capabilities” approach to development, which focuses on the enhancement of human skills, abilities, aptitudes, attitudes – capabilities in the broadest sense -- rather than merely increasing the production of “commodities”. Amartya Sen, India’s Nobel laureate economist and a close friend and ideological ally of Haq’s, was to lay down the basics of the approach in a series of lectures at the University of Amsterdam in 1982, published formally as a monograph under the title “Commodities and Capabilities” in 1985. In the following years, Sen and Haq began a phase of fruitful collaboration, in evolving the concept of “human development”.

By this time though, the World Bank was overtaken by tasks of seemingly greater urgency, which had less to do with “development” than with keeping the world financial system functioning. Developing countries had binged out on the easy availability of credit from the recycling of dollar surpluses earned by petroleum exporting countries through the 1970s. By the early-1980s, these countries had begun to choke on that legacy of riotous living. Interest rates, driven up sharply by the curious mix of fiscal voodoo and monetary orthodoxy inaugurated by the U.S. in 1981, had begun to bleed the export and repayment capacity of all these nations. Driven to the verge of panic by the prospect of a catastrophic collapse of the global economy, the World Bank shifted its attention from poverty reduction to “structural adjustment”.

Though “structural adjustment” as a policy approach defies easy summation, it is fair to characterise it as a strategy of weaning out of the economic process those deemed incapable of participation. “Getting the prices right” is considered the key component of structural adjustment, since any deviation from what would be the “natural” level of prices, would trigger a process of competitive bargaining, culminating in an inflationary spiral of prices.

Haq had thought of a process of empowering the poor and making them participants in the development process. He worked – ever since leaving the World Bank in 1980 to rejoin the Pakistan government in an honoured position – to make that a reality. He achieved significant positive results, as by consistently emphasising the merits of education and arguing that all options should be used in bringing every child within the educational system. In this pursuit, he argued the case for state funding of the mosque schools -- which today have acquired the terribly negative connotation of being the “madrassas” that breed terrorism – but in his time were regarded as the sensible way of bringing civil society and the state together in the common endeavour of education for the masses.

Haq was, according to this volume launched in his honour, always a supporter of “economic liberalisation”. Unfortunately, the volume does not quite draw the linkages between “economic liberalisation” and human development as a policy priority. Economic liberalisation undoubtedly, is an attractive philosophy. It has an etymological relationship with the notion of “liberty”. And it would be completely exceptionable as policy if it were not thoroughly inattentive, in its implementation, to the inequalities that make the breaking down of all barriers between countries and classes and regions, a losing bargain for the poor.

The revolution spoken of in Haq’s intellectual biography remains yet unfinished. Indeed, whatever progress has been made towards the goals of the revolution in policy thinking that he pioneered, stands in grave danger of being reversed by the prevalent circumstances in the world economy, conveniently encapsulated in the term “global meltdown”. This is a term which fails to convey a true image of the scale of human suffering that it has unleashed and could further unleash.

The headline news about the current economic meltdown is the number of jobs that are being lost. Each job loss is a diminution from the pool of human welfare, which damages the cause of human development that much more. And economic policy makers with all their tools of analysis, are yet to come up with a credible response. So what are the tools that are available for the analysis of human development and its correlation with overall growth rates?

Judging from Bhatt’s account, these tools are not very well developed, since he still seems rather dependent, to a debilitating degree, on concepts such as “capital” and “labour” – notions in economic theory that deny active human agency. Distilling out a central message from his experience in India’s financial institutions and senior policy positions, Bhatt suggests that the original sin of Indian development policy was the initiation of “certain negative processes, inimical to the vigorous functioning of private enterprise”. In other words, the supposed inauguration of the “licence-permit raj” as it is fashionably called, really is where the problem originates.

Bhatt indeed, believes that the “liberalisation” of the early-1990s has brought India closer to its true growth potential. That surely is a judgment that will not survive the current economic meltdown.

Poverty is not a numbers game, nor is it a statistical phenomenon. For millions, poverty is a numbing reality that kills hope and destroys human possibilities. Counting the poor has become a policy preoccupation in recent decades and most so since the World Bank took custody of the global anti-poverty campaign.
Even within those inclined to take a mechanical view of poverty, there has been an argument about broadening the definition of the term. There has yet been no credible effort within policy circles to humanise the term, to invest it with a sense of affect, to recognise that those who are targeted for benevolence by international aid agencies, also need to be recognised as individuals who are agents of their own destiny.

It needs to be asked if the processes of “development” conceived of here are about the poor regaining the rights and freedoms that have long been denied them, or of the enlightened few in the world community ascending to a state of grace by “lifting” people out of poverty – as the physical metaphor popularised by the World Bank would have it. Marginalisation is not just about physical deprivation, but of vast numbers of people being denied the right and the freedom to participate in the life of a community and a nation. The challenge of development is not merely about characterising the poor as the inert category of “labour” or about targeting them for specially benevolent attention. It is about recognising their humanity and defeating all social forces that deny them this basic entitlement.