Economic and Social Policies for Human Development

ABSTRACTEconomic and social policies of governments could improve or worsen the wellbeing of people, so that their impact on human development could be positive or negative. This article discusses the role, as well as the scope, of public policies for human development in the contemporary developing and industrialised worlds, buffeted by frequent global and local economic crises, including a health pandemic of unprecedented proportions, where mainstream economic policies have often been detrimental, rather than conducive, to advancing human wellbeing. The paper revisits the human development framework and anchors it in an interpretation of the capability approach that helps in delineating economic and social policy pathways to desirable outcomes. It argues that this is essential for an effective operationalisation of the approach to human development. Building on that, it explores the nature of economic and social policies that might constitute an appropriate policy-mix for advancing human development. In doing so, it recognises that, while human development problems in poor and rich countries are similar, the choices, sequencing and prioritisation of policies will inevitably be determined by the country-context and government-objectives. Given the context, it suggests that the framework of SDGs at the national level could enable a focus on human development objectives in the policy design and strategic response of countries.KEYWORDS: Human developmentEconomic policiesSocial policiesMacroeconomic policiesInequalitiesWellbeingSocial opportunitiesSocial protectionHeterodox policesSustainable development goals Disclosure StatementNo potential conflict of interest was reported by the author(s).Notes1 On average, an individual from the top 10% of the global income distribution earns PPP USD 122,100 per year, whereas an individual from the poorest half of the global income distribution earns PPP USD 3,920 per year (World Inequality Report Citation2022).2 The gap between the average incomes of the richest 10% of countries and the average incomes of the poorest 50 percent of countries dropped from around 50x to a little less than 40x. At the same time, inequalities increased significantly within countries. The gap between the average incomes of the top 10% and the bottom 50% of individuals within countries has almost doubled, from 8.5x to 15x.3 On average, the poorest half of the population owns PPP USD 4, 100 and the top 10% USD 771,300.4 For a discussion on the coronavirus pandemic, and the response of governments, in global perspective, see Nayyar and Thakur (Citation2021). See also, Nayyar (Citation2020).5 A recent Oxfam report indicates that the richest 1% of the world accounted for nearly two-thirds of all new wealth worth US $42 trillion created since 2020. This is almost double the wealth of the bottom 99% of the world’s population. Just as striking, during the past decade, the richest 1% captured around half of all new wealth (Oxfam Citation2023).6 Of course, markets with their thrust on efficiency and innovation may well be important a means to sustain progress once people have attained essential human wellbeing standards, assuming that there are well-functioning markets which are also regulated wherever necessary.7 Martha Nussbaum (Citation1988, Citation1992, Citation1997, Citation2011) has also contributed to the development of the capability approach, although with some difference in emphasis of certain concepts and the objectives addressed.8 The criteria to select a few capabilities to anchor a wellbeing measure and set in motion a process to achieve those capabilities and the functionings that they potentially support is largely a political and a deliberative process for each society. However, certain normative considerations such as those emanating from human rights standards that reflect universal and civilisational values could inform the choices to be made both in respect of the constituent elements of the wellbeing measure and the policies to be pursued for advancing human wellbeing (Malhotra Citation2015, Citation2018).9 This characterisation of the relationship between macroeconomic policies and human development may differ significantly between developing countries and industrialised countries. For a detailed discussion, see Nayyar (Citation2012).10 For a detailed discussion on this set of issues, see Nayyar (Citation2012).11 Indeed, integration of economies into the world financial system has led to significant changes in the nature of, and space for, macro policies, not only in industrialised countries but also in the developing world. It has reduced degrees of freedom in the use of macroeconomic policies, constraining countries in using an autonomous management of demand to maintain levels of output and employment. Expansionary fiscal and monetary policies – large government deficits to stimulate aggregate demand or low interest rates to encourage domestic investment – can no longer be used because of an overwhelming fear that such measures could lead to speculative capital flight and a run on the national currency. In fact, the oversensitivity of international financial markets to inflation means that macroeconomic policies, everywhere, have been reduced to target inflation instead of employment levels or output stability (Nayyar Citation2011, Citation2012).12 To address income and wealth inequality, Atkinson (Citation2015), recommends rethinking policy in five areas: technology, employment, social security, the sharing of capital and taxation, which in light of recent global experience could contribute to human development and may therefore need to be anchored in a macroeconomic policy framework.13 India, among others, has established limited legal guarantees for work, education, information with public authorities, food, housing, certain social transfers (pensions) and health in the first decade of this millennium. Some of these have been expanded and refined in the last few years. India has also created a digital identity instrument Aadhaar for all citizens to bridge a critical gap in the effective delivery of vital public services and curbing leakages from public programmes.14 It is sometimes argued that policies based on creation of legal entitlements are resource intensive, which besides expanding bureaucracy, could undermine fiscal balance and overall macroeconomic environment. This need not be the case if legal entitlements are selectively established, economic incentives for production and improvement in factor productivity are not undermined and government’s financial liabilities expand only with its ability to raise resources. Also, policies that involve resource neutral legal entitlements may help expedite social change.15 For example, this is true of India, with its inherent reliance on vote-bank politics and limitations of the first-past-the-post criterion in multi-cornered electoral contests.16 For an extensive discussion on, and critical evaluation of, the MDGs, see Nayyar (Citation2013b).Additional informationNotes on contributorsDeepak NayyarDeepak Nayyar is Emeritus Professor of Economics at Jawaharlal Nehru University, New Delhi, and an Honorary Fellow of Balliol College, Oxford. He has served as Vice Chancellor, University of Delhi, and Distinguished University Professor of Economics at the New School for Social Research, New York. Earlier, he taught at the University of Oxford, the University of Sussex, and the Indian Institute of Management, Calcutta. He also served as Chief Economic Adviser to the Government of India and Secretary in the Ministry of Finance. He is Chairman of the Board of the Institute of Development Studies, Sussex. His books include the best-selling The Intelligent Person's Guide to Liberalization, Catch Up, and Resurgent Asia.Rajeev MalhotraRajeev Malhotra bridges the world of academics and policy making. As a development economist with over 35 years of experience, he has worked with the Government of India in various capacity and with the United Nations. He has consulted extensively for several international organisations, and national governments in South Asia, Africa and South Pacific Island Countries. Since 2012, he is Professor and Programme Director, Public Policy, at the Jindal School of Government and Public Policy, O.P. Jindal Global University, Sonipat, Delhi NCR, India. He has a PhD in Economics.