The Work of Amartya Sen on Economic Growth - Case Study Example

Are economic growth and development the same thing? Economic growth is measured by the rate of growth of the Gross Domestic Product ( GDP ) of a country. The Gross Domestic Product ( GDP ) is the sum of the value of all final goods and services produced by a country. Economic growth is one of the most important drivers of development, but it will not be appropriate to say that development and economic growth are the same thing. There are instances of nations and societies which have low development in spite of high economic growth. Noble laureate economist Amartya Sen (1999) argues in his book Development as Freedom that freedom is the most important tool and means to achieve development. “Freedoms”, Mr. Sen argues, “are not only the primary ends of development, they are also among its primary means.” The work of Amartya Sen on freedom and development was pivotal behind the concept of human development index (HDI). The human development index measures the level of “human development” of a country on the following parameters: i) Life expectancy. ii) Per capita real GDP. iii) School enrollment. iv) Adult literacy. According to development economists like Amartya Sen (1999) , the real indicator of the development of a society is its human development index. Empirical evidence suggests that there is a strong positive correlation between per capita GDP of the country and its Human Development Index. However, there are many exceptions to this positive correlation between Human Development Index and per capita GDP. Countries like Singapore, Algeria, Gabon , Qatar etc. repeatedly rank relatively low on the human development index in spite of their high economic growth and GDP per capita. On the other hand there are countries like Sri Lanka, Costa Rica and Canada that rank relatively higher on the Human Development Index in spite of their lower rates of economic growth. Amartya Sen(1999) places the well being of humans as the goal and the means for development. It should not be simply a spurious side effect. Development should be seen as a process of expanding freedoms. For achieving development, Amartya Sen argues that tyranny, poverty, lack of economic opportunities, social deprivation, neglect of pubic services and the machinery of repression should be eliminated. Economic growth alone cannot achieve these objectives which characterize development. Higher per capita income does not necessarily translate into higher life expectancy. Higher life expectancy is dependent on the access to public health services and the level of public health services provided in a nation. Another aspect of development that according to Amartya Sen (1982) cannot be addressed by economic growth alone is that of the role and freedom of women in society. A society cannot achieve the objectives of development if there is inadequate political economic and social participation and leadership of women. Societies where women have a second grade status in relation to men cannot be classified as developed societies even if they have high rates of economic growth. Women’s literacy and employment rates have a positive impact on child survival and reduction in population growth rates. The state of Kerala in India has been more successful in limiting population growth than China. China has coercive measures like one child policy in place. Kerala has no such coercive policies in place; it being part of the democratic and relatively liberal India. Kerala has limited population growth through the tools higher literacy rates of women and higher participation of women in the workforce. Lower population means higher GDP per capita. More than the economic growth ( rate of growth of GDP), it is GDP per capita that is the main driver and indicator of development. Development means more freedom and more freedom means more development. The unleashing of the human potential through more freedom is the very objective and raison d’etre of economic and social activities. The formation of social values and the evolution of social ethics are important aspects of the evolving process of development. A wide variety of social institutions contribute to the process of development. These include the market regulators, administrators, judiciary, media, non-government organizations, the political parties, legislatures etc. An integrated and holistic analysis of the respective roles of these social institutions in the process of development is needed. This integrated analysis will go a long way in making these institutions more effective in promoting the process of development. Economic needs and economic growth are considered by some to be more important than political freedom. According to Amartya Sen this opposition is illusory. It is political freedoms which drive the social responses to economic needs. Political freedoms are also central to the conceptualization of the economic needs. Economic growth has a positive impact on a larger portion of the population when there is political freedom and democratic and social institutions are in place and function independently and effectively. Take the case of many African nations. Economic growth in the form of GDP growth has been high on the back of their immense natural resources. But this economic growth is not translating into development for the major section of the population because of the lack of political freedoms. Dictatorial regimes in these countries, pocket the chunk of the national income for themselves, leaving little for the citizens. Freedom is the necessary condition for human development. Without effective democratic and social institutions economic growth cannot translate into development for the citizens. Amartya Sen (1990) in his work Development as Freedom places a large amount of empirical evidence to prove that the worst famines in the world have not been caused by food shortages. They occurred because of government apathy and lack of purchasing power and entitlements. In many instances countries, where large areas were struck with famines, were actually net exporters of food grains. There have also been no major instances of famines in democratic countries of the world (Sen, Amartya, 1982). A question that comes to mind here is that whether economic growth precedes human development or human development precedes economic growth. There are countries where economic growth is driven by the presence of natural resources like oil and gas. In such countries, the rate of growth in GDP may not be linked to human development. In these countries, economic growth has preceded human development. Sustainable economic growth in the long run, however, can only take place only if economic growth translates into human development. After a certain threshold, it is human development that drives economic growth. High economic growth rates are necessary for the development of a country, but they are often not enough (Sen, Amartya K., 1982 ). For development, economic growth has to be supplemented with political and social freedoms and well-functioning democratic and social institutions. Democratic and social institutions can work well only if there is a culture of ethics in the society. During the boom years of 2000-2007, even countries of sub-Saharan Africa averaged economic growth rates of more than 8%. This high economic growth was driven by the rise in the price of commodities due to the increased global demand. Economic growth and development are not the same things: the case of two nations, India and China. Over the past one decade, India’s GDP growth has been one of the highest in the world. It has averaged around 8%. In spite of its high economic growth India has continuously ranked at the bottom of the human development index (119th in 2010, with an HDI score of .519) . The main reasons for this have been: i) Low GDP per capita because of a very large population. ii) Life expectancy at around 64 years is lower than many other countries. iii) School enrollment rates have increased in the past, but are still low in comparison to many developed countries of the world. iv) The adult literacy rate according to the National Sample Survey ( NSS ) organization of India is at around 66%. This is relatively low in comparison to many other developed and developing economies. India has still not been classified as a developed country because it ranks low on the above development parameters. In terms of nominal GDP Indian economy is the eleventh largest economy in the world. In terms of purchasing power parity, Indian economy is actually the fourth in the world. This shows that economic growth (GDP size) and development are not the same thing. India is a democracy and the citizens enjoy substantial political freedoms. However the widespread corruption, large population and the failure of the state in providing many public goods have restricted the development of the country. China has been the miracle economy over the past three decades. Its economic growth rate has averaged 10%. It is currently the second largest economy in the world after United States of America. However, China is still classified as a developing economy. In the Human Development Rankings of 2010, China ranked 89th with an HDI score of .663. China allows very limited political freedom to its citizens. It has a one party rule under the Communist Party of China. The state of human rights is not good, to say the least. The miracle economic growth over the past three decades has been driven by this one party authoritarian structure in China. The economic growth has driven development and pulled millions out of poverty. However, the metamorphosis of China from a developing society into a developed one will not be completed until and unless it gives political freedoms to its citizens. Without a democratic structure in place, it will be interesting to see for how long China succeeds in sustaining its economic growth. China’s economic growth has been driven by low cost manufacturing. China enjoyed this low cost advantage because of large population of labors and extreme poverty and unemployment. Now this low cost advantage of China is slowly being eroded because of the rise in labor wages. The Chinese labor, with their improved economic conditions, is demanding higher wages and more benefits. China has succeeded in checking its population growth by having a coercive policy of one child per couple. Amartya Sen argues that China could have achieved better results (on the lines of Indian state of Kerala) without having these coercive measures. It could have achieved this through higher female literacy rates and higher employment in women. Conclusion: An analogy can be drawn from Abraham Maslow’s hierarchy theory of needs. The bottom two needs of this pyramid are physical needs (food, shelter etc.) and security needs. To fulfill these two needs economic growth is a must. The top needs of this pyramid are self-esteem and self–actualization needs. The process of development of a society cannot be complete until it offers its citizens the freedom to develop their capabilities so that they can achieve their potential . The economic growth is driven on the following four wheels: i) Human Resources. ii) Natural Resources. iii) Capital formation. iv) Technology. The ultimate objective of this economic growth is to enhance the development of the human beings by improving their general standards of living. Economic growth is a major driver of development but it is not the same thing as development. The process of development is much larger is its scope than economic growth. It includes economic growth within it, but has also other major components in it like political freedom, status of women, civil liberties, social and democratic institutions etc. The human development is central to this theme of development. This human development translates into human capital that sustains the long term economic growth. Therefore economic growth drives development and vice-versa also i.e. development drives economic growth. But while pursuing policies of economic growth one thing should be made clear. That economic growth is a means to achieve the objectives of development and not an end in itself. And development and freedom are inextricably linked. They cannot be separated. There cannot be development without freedom and freedom without development. References: Sen, Amartya, 1999, Development as Freedom, Oxford, Oxford University Press. Sen, Amartya, 1982, Poverty and Famines : An Essay on Entitlements and Deprivation, Oxford, Clarendon Press. Sen, Amartya K., 1982, Choice, Welfare and Measurement, Oxford, Basil Blackwell. Sen, Amartya, 1973, On Economic Inequality, New York, Norton. Sen, Amartya, 1986, Food Economics and Entitlements, Helsinki, Wider Working Paper 1. Sen, Amartya, 1987, On Ethics and Economics, Oxford, Basil Blackwell. Drèze, Jean and Sen, Amartya, 1989, Hunger and Public Action. Oxford: Clarendon Press. Sen, Amartya, 2002, Rationality and Freedom, Harvard, Harvard Belknap Press. Sen, Amartya,2005, The Argumentative Indian, London: Allen Lane. Sen, Amartya,2005, The Three R's of Reform, Economic and Political Weekly Allan Lane, 2009, The Idea of Justice Harvard University Press & London. 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