When reading newspapers or books or watching the news, we often come across the word development. It is a term so often used to mean growth, loosely speaking, that when attached to any other word, it takes on new meanings. Urban development, rural development, industrial development, sustainable development, etc. Then, of course, we have the term developing economies, to refer to a group of low- and middle-income countries that are yet to reap the benefits of industrial growth.
In India, we had Modi’s Gujarat model of development, which was nothing but an industrial policy for the state of Gujarat, that was based on simplifying processes, cutting red tape, minimizing chances of corruption in the creation of infrastructure or new industries and businesses.
Then we have urban development, especially of metropolitan areas which has more to do with real estate and land use. This is the kind of city development that Britain excels in: consider the Canary Wharf redevelopment in London or more recently the Greater Manchester Development Project, which attracts large amounts of international financial investment, especially from China. China has its own real estate development on which the country is hugely dependent, leading to crises like the Evergrande, which I have written about before on my blog.
These are worlds away from what development means in the context of development economics or welfare economics as it is also referred to. Which is why, even if Gujarat has achieved a certain level of industrialization, the state still doesn’t pass muster as far human development indicators go. Those are the development metrics that development or welfare economists concern themselves with: life expectancy, literacy, healthcare, education. female and infant mortality, and the like.
Similarly, you might have the glitziest real estate project, whether residential or commercial or indeed both, and you might still have homelessness, poverty and people living in squalid, slum conditions right where the shiniest or tallest towers are being built.
In the field of economics – which I studied at Delhi University ages ago and continue to follow as an area of interest, though I don’t work in the field – development economics grew as a separate discipline decades ago, which Amartya Sen describes really well in his memoir, Home in The World. It grew because of a recognition that the poor and underprivileged need special policy interventions, if economies are to grow at a steady pace in the long-term. That governments need to invest in improving the lives of the poor, enabling them to rise above their circumstances. Something that I don’t think the poor in India are capable of, as yet.
Yet, development or welfare economics is not only about distributing freebies or sops to the poor to keep them content or in many countries, to keep them quiet. It is about investing in building capacity and capability and helping the poor stand on their own two feet. Through education, healthcare, skill development and job creation. According to the UN Human Development Index ranking for 2020, the top 10 countries are mostly from Europe, especially Northern Europe and Scandinavia. Hong Kong is the only Asian country to make it to the top 10 HDI ranking and has shown a huge improvement in recent years going to the fourth place. As you can see from the chart below for countries in South Asia and South-east Asia, the HDI ranking has improved as well, but India languishes near the bottom in the region. It is this qualitative aspect of economic growth and development that economists like Amartya Sen have been stressing on.
In recent years, there is also a growing realization that governments alone cannot manage this gargantuan task; businesses need to pitch in where they can. It is in this context that I have been wanting to read Amartya Sen’s Development as Freedom and I ordered a copy from Amazon India recently. However, as I have already posted on LinkedIn and Twitter, I don’t think what I bought is his original book; large parts of it don’t even read like his writing. This is an Anchor Books edition – a division of Alfred Knopf/Random House that I only heard about recently – the only one available on Amazon India. That’s the reason I decided not to write a book review kind of article because, as with my piece on Drucker’s book, I do not think it would be fair on Sen.
In Development as Freedom, Sen explores how development offers people, especially the poor and under-privileged, the ability to make life choices that help them improve their lives. This is what Sen sees as freedom: when people are not bogged down by where their next meal will come from, or how they might sow the next crop, but are liberated from those life-crushing circumstances and free to make their own decisions. For that to occur, people need to be provided education, healthcare, and income-generating capabilities and skills.
In his memoir, which I have reviewed on my blog, Amartya Sen writes about the essence of welfare economics. Influenced by the work of Kenneth Arrow in social choice theory, Sen writes of the different approaches to welfare, and of the problems associated with aggregation that is required to determine social choice of all those that make up a community or society.
“This field within economics directly assesses the well-being of individual members of a society as a whole. It was becoming clear to me that this was a subject in which I was particularly interested.
How do we determine how well a society is doing? Or to put it in the language of welfare, how can we assess social welfare?… Since a society contains many people, the welfare of a society must be related, in one way or another, to the welfare of the individuals that make up that society. Any attempts at making comparative judgements about social welfare must, therefore, involve aggregation over many individuals, and that must involve social choice theory in some form.”
There are several strands of welfare economics that Sen goes on to delineate for us, so we understand the finer points more clearly and fully. He explores the utilitarian theory of social welfare which highlights happiness or pleasure as the end goal of well-being. This school of thought has Jeremy Bentham, John Stuart Mill and others as its main proponents and the maximization of well-being is the ultimate end result being sought. However, this does require aggregation of some sort and it does not take into account the distribution of that well-being among the members of society.
Sen then explores the Rawlsian theory of well-being which arises from a sense of fairness, justice and liberty. The American philosopher, John Rawls, focused on the distribution of social welfare or well-being, along with civil liberties, individual rights, etc. And then, we also have the extreme example of welfare or well-being in that the individual’s happiness, rights and liberty are maximized through a libertarian interpretation of welfare.
As we can see, various approaches to the issue of social welfare yield different results. This is because they also make different connections between income, poverty and freedoms. Then again, social choices are made by individuals and the importance of what values they attach becomes significant. In the chapter, Markets, State and Social Opportunity, exploring the role of each in development, Sen says, there are many sides to the welfare problem and a multi-dimensional approach is needed in development economics.
“The case for taking a broad and many-sided approach to development has become clearer in recent years, partly as a result of the difficulties faced as well as successes achieved by different countries over the recent decades. These issues relate closely to the need for balancing the role of the government – and of other political and social institutions – with the functioning of markets.
They also suggest the relevance of a “comprehensive development framework” of the kind discussed by James Wolfensohn of the World Bank. This type of framework involves rejecting a compartmentalized view of the process of development (for example, going just for ‘liberalisation’ or some other single overarching process) … Instead, an integrated and multifaceted approach is needed, with the object of making simultaneous progress on different fronts, including different institutions, which reinforce each other.”
An important aspect of development or welfare economics in recent decades has been the government intervention of redistribution of income from the wealthier sections of society towards the poorer sections, through taxation and entitlements. Strangely, Sen does not discuss his views on this policy at all anywhere in the book. From what he has written elsewhere, I think he might be of the view that it’s not the redistribution of income per se, but how it is redistributed and how that helps the poor develop capabilities that matters. Indeed, Sen has always been of the view that primary education and healthcare are the responsibilities of the government and are not to be viewed as sops to the poor. In this context, he has always been critical of successive Congress governments since they have governed India for the longest period of time, for not doing enough in the areas of primary education and healthcare, though the Congress is a Centre-left political party. Even in Development as Freedom, he critiques his good friend Manmohan Singh’s liberalization policies of 1991.
“The powerful intellectual leadership of Manmohan Singh in bringing about the needed economic reforms in India was so concentrated on “liberalization” only, without a corresponding focus on the much-needed broadening of social opportunities. There is, however, quite a deep complementarity between reducing, on the one hand, overactivity of the state in running a “license Raj,” and on the other, removing the underactivity of the state in the continuing neglect of elementary education and other social opportunities (with close to half the adult Indians still illiterate and quite unable to participate in an increasingly globalized economy).”
That said, redistribution of income from the rich to the poor is the most common form of government policy intervention in helping the poor. In fact, it is so commonplace in most developed economies, especially those in UK, Europe and even Japan, that any kind of freebie or government assistance has come to be seen as “welfarism”. I must mention an article in The Financial Times by Martin Wolf, in which he termed Rishi Sunak’s large pandemic-related relief package to households as “nationalist welfarism”. I suppose his views were coloured by Brexit and the re-election of Boris Johnson and the Tories to power just prior to the Covid-19 pandemic. I am unable to find that article now which was shared on Twitter sometime in February or March 2020, where I happened to read it. Who knows, it might have been altered or deleted, after my reply where I said it might be populism but it’s not welfarism.
This in a country like the UK which invented the welfare state, before it spread to Europe and then took on newer forms as social democracy. In the US, anything remotely resembling welfare spending would be termed socialism, as indeed was the reaction to Obama’s Affordable Care Act. The US has its own entitlement programmes, but not all of them are fully funded by the state, so cannot be called social welfare programmes in the real sense of the word.
At any rate, would we call this type of social spending in the advanced countries development economics? Perhaps not, which begs the question if development economics is only relevant in poorer, developing countries.
As I see it (as an outsider), development economics concerns itself with helping the poor and underprivileged populations build capacity and capabilities, so they can catch up with the rest of society. Unfortunately, this happens to be the greatest need of poorer nations. As Gunnar Myrdal wrote in Asian Drama: An Inquiry into The Poverty of Nations in the 1960s, the endemic poverty experienced in South Asia and South-east Asian countries was not only a result of exploitation by colonial powers, it was due to a combination of factors such as illiteracy, lack of education and healthcare, social customs and governance.
I think that development economics, in that respect, is very specific to a country, region and people. Myrdal himself points out in his magisterial study, the nuances of the different kinds of poverty experienced in each country and the causes for those. This means that government policy intervention has to be specific and tailored to local conditions as well. Yet, one increasingly gets the feeling that politicians and governments consider doling out freebies and welfare schemes as development policy done, when it is nothing more than populism; consider the BJP’s pro-poor policies in recent years, which is only about throwing money at the problem, rather than developing good education and healthcare infrastructure in the country. No different than their Congress predecessors.
Addressing the needs of working women and helping them become economically and financially independent is also critical for economies to develop to their full potential. Sen does have a chapter titled Women’s Agency and Social Change, but I don’t think it deals with the subject in the same spirit as the rest of the book, which is about development as freedom. It is strange that he deals with “agency” as being the same as a “change agent”, which is very surprising. I suspect that this is not his view, but those of unprofessional PR agency bosses (Perfect Relations) who have been meddling in publishing for many years and seem to have meddled with this book as well. In fact, it appears that much of this might have come from guessing conversations – as the PR unprofessional idiot bosses are wont to do – between me and Ogilvy colleagues, including discussions in the ex-Ogilvy WhatsApp group, which I was a member of until three years ago.
In the very first chapter, The Perspective of Freedom, there is a reference to this particular sense of agency, which I suspect is not Amartya Sen’s.
“The use of the term “agency” calls for a little clarification. The expression “agent” is sometimes employed in the literature of economics and game theory to denote a person who is acting on someone else’s behalf (perhaps being led on by a “principal”) and whose achievements are to be assessed in the light of someone else’s (the principal’s) goals. I am using the term “agent” not in this sense, but in its older – and grander – sense as someone who acts and brings about change…”
There are some other aspects of development also not discussed in this book, which are to do with climate change and migrations, which are becoming more severe and widespread. The poor are often the worst affected and are hardly ever consulted on such matters, as Amitav Ghosh too points out in his book, Nutmeg’s Curse: Parables for a Planet in Crisis, which I reviewed recently on my blog. In connection with climate change and the UN’s SDGs (Sustainable Development Goals), there has also been a growth in impact investing in recent years, which can be a good way to raise funds for development projects.
And finally, I’d like to sign off this piece with brand development, an area in which I would like to focus the rest of my career, or whatever is left of it. Why brand development and not brand management as it was always referred to in the past? Because they are two different things. Brand development is a whole new way for companies to look at brands: from the single product brand which is itself a complex structure with its own architecture, to the combination of many such brands being part of a larger corporate brand and the ever-growing connections between all of them, as they develop. Brand development is also about vertical and lateral integrations, and it is always seen in entirety and in its full global sense.
Development in the economic sense, however, is always about ways of helping the poor improve their lives. About helping them find their freedom.