Part One
“IT is now evident that some of the recommendations of more traditional economics were not valid. Policy-makers cannot rely on simple policy guides, such as holding the fiscal balance in check, using monetary policy to control inflation, providing macroeconomic stability, and then leaving it to the market to do the rest.”
Thus, said the 13 distinguished economists, led by 2001 Nobel Laureate Joseph E. Stiglitz, “when they lay out, not a blueprint for policy, but a set of eight principles that we hope can help frame country-level policies and promote global discourse and the design of multilateral policies. These principles are increasingly needed in today’s rapidly changing and globalizing world.”
“Assuming that such an approach will promote growth that trickles down to the poor is not a tenable premise. Indeed, we owe some of our current predicament to too close an adherence to that dated advice,” they said.
Because of limited space, this column broke the eight principles into a three-part series, based on the original form of the Initiative for Policy Dialogue (IPD) at the Columbia University, founded in July 2000 by Stiglitz himself. A network of leading economists, political scientists and premier academic and policy centers in the global South and North, IPD brings the issues of developing countries to academics and the fruits of academic research to policy-makers.
Here’s Numbers 1 to 3, in its original format, of the eight principles:
- GDP growth is not an end in itself
We believe that, while policies to promote GDP growth are needed, that must not be an end in itself but a means to creating the resources needed to achieve a range of societal objectives, which include improved health, education, employment, security, as well as consumption.
Individual wellbeing is multidimensional and policy should aim for improvements in all of the dimensions valued by society, not just income. There is, for instance, a need to provide better nutrition to all pre-school children and to ensure that everybody has basic healthcare, and to recognize that these are well within the realm of the feasible.
If the right policies are not in place, GDP growth may come at the expense of these dimensions of well-being, including those related to local environmental and global climate degradation. It is also worth keeping in mind that GDP growth in itself may not lead to the eradication of oppressive norms and discriminatory practices against vulnerable groups. These usually require deliberate interventions.
We recognize the need to acknowledge that there will not be a single prescription deemed appropriate for all economies. Cultural and social contexts differ, as do histories. This leads to different aspirations in different societies and also plays a role in determining what will work and what will not.
In the past there was a propensity to prescribe a uniform policy code (developed in some rich country) for all nations. While there are broad policy principles we all need to pay heed to, there has to be space for diversity and context-specificity of policy.
- Development has to be inclusive
We believe that policy should help ensure that development is socially and economically inclusive, and not leave behind groups of the population whether identified by gender, ethnicity, or other social indicators.
There should be particular focus on extreme deprivation in the range of dimensions of wellbeing, and especially on individuals who suffer simultaneous deprivation on many dimensions. But a focus on the most deprived is not enough.
The gap between rich and poor, and across salient social groupings, is also important. The sharp rises in inequality of income and wealth witnessed in recent decades and the observed level of inequality of opportunities in access to basic services like health and education are ethically indefensible, undermine social cohesion, and fuel a spiral of policy capture by elites which further exacerbates inequality.
High inequality tends to rob the poor of voice and so results in a weakening of democracy. The empowerment of women and of historically discriminated groups is a priority in its own right, but it also provides a sound basis for economic efficiency.
When there is political turbulence and social conflict, development is not possible; and where development policies are not inclusive, they are likely to trigger social conflict. Overall, inclusive development is the only socially and economically sustainable form of development.
- Environmental sustainability is a requirement, not an option
Although it will be mediated and implemented differently in each country and regional context, we believe that development policymaking must take on environmental sustainability as a central objective.
This is related directly to local environmental degradation, where income growth in isolation can create a false indicator of wellbeing and progress. Further, competition over resources and environmentally related migration can lead to insecurity and conflicts, which undermine development.
At the global level, climate change is a long-term threat to the viability of the planet and, equally, a short to medium term threat to livelihoods, agriculture and habitat in many countries. Mitigation efforts must be pursued first and foremost at a global level, while adaptation policies require active intervention and support at national and local levels.
These are problems that cannot be left to the free market to solve. Regulatory interventions by the state and a certain amount of multi-country policy coordination are indispensable.
To be continued
To reach the writer, e-mail cecilio.arillo@gmail.com.