By Siraj Aziz, International Exco Alumni MYCorps

The early writings in development economics, especially after the Second World War concentrated greatly on ways to achieve economic growth and increase GNP and total employment (various authors cited in Sen, 1988). This narrative of ‘high growth’ as the central objective of development, in the midst of economic reconstructions particularly in Europe is not entirely flawed. Nevertheless, the emerging contemporary consensus (on the grounds of various political, socioeconomic and environmental catastrophes in later stages of 20th century) has been the clear concept of ‘welfare’ or ‘standard of living’ which is not defined in terms of commodities. Essentially, does economic growth mean more development? Is there any conflict between wealth and human liberty, for instance? Or are we asking the wrong questions here?

This essay argues that human well-beings (defined as ‘freedom’ later) must be the principal means and primary objective for an effective enhancement process of physical and living conditions. This invites the narrative of “human liberty”. Therefore, we attempt to challenge the conventional income-approach to development by using inter-country analysis within Amartya Sen’s capability-approach framework. Here, Sen’s thesis that “development stems from freedom” is scrutinized. We then analyse Malthusian Population Trap model alongside Banerjee and Duflo’s works on the lives of the poor to inform policy implications.
Firstly, we believe that relationship between GNP and life expectancy, a measure of well-being is far from simple. Based on figure 1 (adopted from Sen, 1999), Sri Lanka, Kerala and China had the highest life expectancy (70+ years) despite having the lowest GNP per head (way less than $1000) in the 7-country sample. In contrast, oil-producing Gabon had the highest GNP per capita but with the lowest life expectancy. Unfortunately, Gabon’s massive wealth resources per head is not converted into actual achievement; its citizens’ well-being. It is like having a bicycle as a resource for mobility but is non-beneficial for a disabled person. Therefore, could corruption (accumulation of massive wealth in the hands of the very few elites and leakages in the funding of government social policies) explain this phenomenon? Thus, we believe that life expectancy is a good proxy for life ‘achievement’ as every human life is “too precious to be too short-lived and non-fulfilling”. Hence, we support Sen’ argument that “development analysis must include length and nature of the life that people succeed in living in each period” (1988). GNP remains fundamentally inadequate for concept of development and does not tell the nature of people succeeding at the end of a development process. Therefore, more integral view of the people’s lives is needed to assess what kind of life they aspire in living (Sen, 1988).

If income and wealth do not promise well-being, what else do? Sen (1999) studied mortality reduction in twentieth-century Britain. Detailed nutritional studies in England and Wales confirmed that during the two World Wars, cases of undernourishment declined sharply and extreme undernourishment almost entirely disappeared despite significant fall in per capita food availability. Mortality rates also fell sharply (excluding war mortality). During two periods of World Wars, there were fast expansion of support-oriented policies at the back of much greater sharing of means of survival that led to effective distribution of food and healthcare. Jay Winter found out that these social attitudes of “sharing” and public policies to nurture “sharing” as well as supportive and shared social arrangements were blossoming in the First and Second World War respectively. In both World Wars, life expectancy rose outstandingly by nearly seven years! (See
figure 2) We can now claim that even without wealth possessions but strong social support system as “means” towards the objective to survive the wars, people can still achieve “high survival rates”.

Based on the above examples, we can agree that income does not guarantee well-being. In fact, Sen (1999) argued that we should not assess well-being and development within the domain of income based on how much commodities we possess or how much command we have over them – but rather in the space of functionings; what is it that we are able to do and become. Indeed, development is about expanding this set of functionings of “doings”, “beings” and “choosing” (also called ‘set of capabilities’). Expanding “ability to choose from functionings” or freedom, according to Sen (1999), manifests in five distinct components including political freedoms, economic facilities, social opportunities, transparency guarantees and protective security. These five “freedoms” complement each other and help to advance general capability of a person. Promoting these “freedoms” will assist public policies to foster human capabilities and substantive freedom in general. Freedom becomes the central to development for two important distinct reasons. Firstly, for evaluative reason; assessment based on whether freedoms that people have are enhanced. Secondly, for effectiveness reasons; achievement of development is thoroughly dependent on free agency of people (Sen, 1999). So, if expanding people’s set of capabilities that people have reasons to value is the ultimate objective of development, then any policies that violates their freedom cannot be the means of development.

Sen’s Capability Approach is not popular within policy circle probably because it gives way to discussion regarding moral evaluation of social arrangements beyond development context such as liberty and civil rights which state authorities are not comfortable with. But first, look at the following examples; open democratic elections in the UK and USA, social justice in functioning judiciary system, comprehensive social safety nets and pension schemes in Scandinavian countries, generously subsidized and comprehensive healthcare system in France and free tertiary education in Germany. By living in progressively democratic societies, citizens of these countries have substantive freedoms to choose from wider set of functionings in politics, social community, health and education for the kind of fulfilling life they have reason to value. Their high standard of living is reflected by their high life expectancy. This is in stark contrast to Sen’s personal experience of witnessing a knifed Muslim daily laborer, Kader Mia who had come for work for a tiny reward despite the area’s hostility caused by Muslim-Hindu communal riots (1999). With his family had nothing to eat, he got no choice but to work and suffered from economic “unfreedom”. Violation of freedom is a sad narrative of “under-development” in many least developing countries. Sen (1999) believes that freedom must be both the principal means and primary ends of development.

Sen’s thesis that development stems from freedom informs us that there is no one-size-fits-all policies in development. This implies that individual freedom is an important social commitment within country-context. Firstly, in explaining a phenomenon whereby large population growth hinders economic growth, Malthus (1788) controversially claimed that citizens are not reliable to solve larger social problems which require collective coordination; citizens lack moral constraint and lack of cognitive capacity to coordinate themselves. Figure 3 illustrates Malthusian Population Trap. As food supply increases at a constant rate and population grows exponentially, per capita income or food will start falling to low equilibrium level due to diminishing returns to fixed resources. The idea is to push towards point T after which income starts to grow more positively. China’s controversial one-child policy, which began in 1979 was planned top-down and centralised by the state authority to control social choice in China’s family size planning and consequently, population growth. This reduced the scope for agent-based development and gave rise to violation of freedom to achieve the kind of family life they have reason to value. After all, fertility is a micro-level choice. Household decides the number of children based on preference culturally and socially, or opportunity cost to child rearing or income considering substitutes for old-age related and other economic returns. Essentially, it is the households’ democratic right to have their own family planning. In fact, birth rate amongst the poor can fall given improvement in education and agency of women, reduction in infant mortality and development of old-age support schemes such as pensions and social support. Ironically, Chinese population growth rate did decline even before 1979 due to investment in primary education and public amenities.

This issue of “top-down policy making” impedes poverty eradication efforts. Institutional association of poverty with hunger for instance, such as in UN’s Millennium Development Goals persuaded a large part of governments’ efforts such as Egypt’s food subsidies and Indonesia’s Rakhsin programme to help the poor based on the idea that the poor desperately need food (Banerjee and Duflo, 2012). In describing poverty trap, the poor is implicitly assumed to eat as much as they can. However, Banerjee and Duflo (2012) found that even the very poor do not put every available penny into buying more calories when they get slightly richer. A 1% increase in overall expenditure translated into only 0.67% increase in the total food expenditure in Maharashtra, India in 1983. Besides, a food consumption pattern study by Jensen and Miller in two regions in China (Cited in Banerjee & Duflo, 2012) found that with staple food subsidy (on wheat noodles, rice), they buy less of both and instead opt for better-tasting meat and shrimp. With that subsidy, they “feel rich” and thus consume less of the staple food which is associated with being “poor”. The poor don’t seem to maximize expenditure on calories or micronutrients. For them, is there any more important thing than food? By defining poverty merely at income deprivation, we are at risk overlooking poverty as the deprivation of basic capabilities in society to achieve the kind of live they have reason to value.

Now we know that simply giving more money or subsidized food does little to persuade them to eat more. Indeed, the main issue is not calories (quantity), but shortage of micronutrients (quality). While conventional food policies impose such notion of “more cheap grains help reduce hunger” in strategizing policy execution, recognizing their actual and implicit needs instead is a much better proposition. In fact, the social returns of directly investing in nutrition for children and pregnant mother, two of the most socially vulnerable groups in society are tremendous (Banerjee & Duflo, 2012). In Colombia, micronutrient packets are sprinkled on kids’ meals in preschool. In Mexico, social welfare payments come with free nutritional supplements for the family. Within capability framework, we must recognise that the poor aspire to achieve more than just “enough food on table”. They want “positive freedom” to enjoy tasty, healthier food and to feel happy, pleasant and content about life, like the rich do. In food policy terms, mass subsidized cheap food is a misleading instrument (“means”) to tackle the problem of food hunger (“ends”) which itself is inaccurately perceived as be-all, end-all problem in eradicating extreme poverty (“process”).

But micronutrients supply in practice has its own challenges. In Indonesia, demand for ironfortified fish sauce by anemic workers is low despite its low prices. (Banerjee & Duflo, 2012) An Indonesian study concluded that because employers pay everyone the same wage irrespective of their effort, there would be no reason for those employees to eat more and eat nutritiously to get stronger. That flat wage structure unfortunately impedes contribution of higher productivity from food nutrients into higher earnings. It is obvious that significant increase in earnings is only among self-employed workers – if they get stronger, they can work harder on their small businesses by themselves and gain even higher earnings. Their effort is deservedly rewarded. These findings imply that wage structure in the labour market must be market-based to provide “capability” and “negative freedom”, without external intervention or pressure from job market regulations. Workers can then keep themselves motivated (“incentives”) and work more productively.

Banerjee et al (2007) comprehensively studied economic lives of the poor and the choice “unfreedom” they face in various life aspects. Their findings suggest that recognizing the poor as “agency” – “someone who acts and brings about change, and whose achievements can be judged in terms of her values and objectives irrespective of external criteria” (Sen, 1999) – produces more effective policy solutions. For instance, the poor have multiple jobs because they opt for riskspreading, to have fulfilling and productive spare time and they also cannot raise the capital they need to run a business that would occupy them fully. The existence of many petty entrepreneurs also suggests that they lack of access to financial markets for capital loan and financing. In this case, Financial Intermediaries must empower the poor as “agency” by providing affordable savings, investment and loan financing schemes, coupled with financial literary awareness and entrepreneurship mentoring to ensure sustained “financial freedom”. Besides, the poor don’t migrate for long-term despite its huge economic gains to which Munshi and Rosenzweig (2005) claim that it reflects their value of remaining close to one’s social network as the only available source of (informal) insurance for them. Making more money is not their huge priority. In education, parents in poor community do not react to low quality of schools either by sending children to better schools or pressuring government. They may often be illiterate themselves and consequently may have a hard time recognizing that their children are not learning much. Therefore, education policies in poor countries must empower participatory collaboration between parents and schools community to ensure effective teaching and learning process in class. Of course, there are critiques towards Sen’s Capability Approach (CA). Firstly, the theory’ approach is too individualistic (“freedom seeking”) whereby it ignores groups, communities, structures and institutions. However, CA does value groups, communities, structures and institutions as they are significant components to influence individuals’ substantive freedom. Besides, CA’s multidimensional nature reduces the focus on inequality between rich and poor, and on redistribution. CA actually sees income and wealth as means to an end but not ends in themselves. Both are crucial ‘means’ and relevant to analysis of society’s restricted capability across a wide range of domains. Lastly, is on CA being idealisitic and apologetic towards capitalism. Indeed, specifications of Capability list and thresholds do matter alongside analytical framework so that CA can be put to study a range of users.

To conclude, development policy requires a more complex understanding of social systems which combines economic, social, cultural and political institutions and their changing interactions over time (Adelman, 2001) and indeed “real freedom” is the be-all, end-all of development.

 

Capability Approach

Figure 1

Figure 2

Figure 3

 

Reference list

Adelman (2001), “Fallacies in Development Theory and Their Implications for Policy” in Frontier in Development Economics
Banerjee and Duflo (2012) Poor Economics
Banerjee, Abhijit V., and Esther Dfulo. 2007. “The Economic Lives of the Poor.” Journal of Economic Perspectives, 21(1):141-168
Sen, A. K. (1988) The Concept of Development
Sen, Amartya (1999). Development as Freedom. Oxford University Press
Tania Burchardt (2015) “Equality, Capability and Human Rights (LSE) Accessible via: https://www.youtube.com/watch?v=7zPQiRz3tHc&t=79s [Accessed 2 November 2017]

 

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