Human Development Report 2003: Flatters to deceive Sabyasachi Mitra

The recently published Human Development Report 2003 (HDR 2003) stresses the need for countries, both developed and developing, to play their roles in order to meet the Millennium Development Goals adopted at the UN Millennium Summit in September 2000 and in the process end poverty. In fact this report has more credence than the World Development Report, brought out by the World Bank. The HDR, an annual ritual of the UNDP, appears to have a focus oriented towards improving the condition of the world’s population, especially in developing countries. However, its adherence to the belief that globalization, the way it is spreading today, is the panacea of all miseries plaguing the people of poor countries nips in the bud the possibility of this report in departing radically from mainstream economic orthodoxy.

The HDR 2003, titled ‘Millennium Development Goals: A Compact among Nations to end Human Poverty’ therefore flatters only to deceive. The report still bases all hopes of alleviating miseries of poor countries on the largesse of the rich. The Millennium Development Goals on which the HDR 2003 hinges the progress of poor countries are listed below:

Eradicate extreme poverty and hunger

  • Reduce by half the proportion of people living on less than a dollar a day
  • Reduce by half the proportion of people who suffer from hunger

Achieve universal primary education

  • Ensure that all boys and girls complete a full course of primary schooling

Promote gender equality and empower women

  • Eliminate gender disparity in primary and secondary education preferably by 2005, and at all levels by 2015

Reduce child mortality

  • Reduce by two thirds the mortality rate among children under five

Improve maternal health

  • Reduce by three quarters the maternal mortality ratio

Combat HIV/AIDS, malaria and other diseases

  • Halt and begin to reverse the spread of HIV/AIDS
  • Halt and begin to reverse the incidence of malaria and other major diseases

Ensure environmental sustainability

  • Integrate the principles of sustainable development into country policies and programmes; reverse loss of environmental resources
  • Reduce by half the proportion of people without sustainable access to safe drinking water
  • Achieve significant improvement in lives of at least 100 million slum dwellers, by 2020

Develop a global partnership for development

  • Develop further an open trading and financial system that is rule-based, predictable and non-discriminatory. Includes a commitment to good governance, development and poverty reduction-nationally and internationally
  • Address the least developed countries’ special needs. This includes tariff- and quota-free access for their exports; enhanced debt relief for heavily indebted poor countries; cancellation of official bilateral debt; and more generous official development assistance for countries committed to poverty reduction
  • Address the special needs of landlocked and small island developing States
  • Deal comprehensively with developing countries’ debt problems through national and international measures to make debt sustainable in the long term
  • In cooperation with the developing countries, develop decent and productive work for youth
  • In cooperation with pharmaceutical companies, provide access to affordable essential drugs in developing countries
  • In cooperation with the private sector, make available the benefits of new technologies-especially information and communications technologies

What is disturbing in the goals mentioned above is that while almost all of the first seven targets, the onus of meeting which is on the countries in crisis, have specific periods within which they need to be met, the steps that the rich countries have to take in order to make the effort a success do not have any time frame. While the HDR makes a plea to the advanced countries and the private sector to set their own time frames, such pleas are bound to fall on deaf ears. The report itself mentions that the aid target of 0.7 per cent of the gross national income of developed countries had been set in 1970, and even today the aid flow is nowhere near the target. That thirty-three years later the same target has to be repeated, speaks volumes about the level of commitment in the North to fight for eradication of global poverty. Given this situation, it is useless to have the same set of goals for the developing world hoping that the aid necessary to meet these goals would suddenly start flowing.

The report, in many places, speaks of the need for greater resource generation from within the developing countries themselves. But the report hardly suggests ways as to how this can be accomplished. The only thing it suggests is good governance, implying that lack of governance is the prime cause for inadequate resource generation. While corruption seems to cause misery to the poor in the developing world, the scenario in developed countries is no better. Accounting malpractices have become the norm rather than the exception. However, while the donors have always looked at corruption in public offices and imposed governance related conditionalities on the borrowing governments, they have let the private sector go scot-free. The HDR 2003 too exhibits a similar tendency, under the implicit belief that private players would be free from corruption.

The report, in several places, contradicts its own statements. It focuses on increasing democratization of the economies and of the way in which governments function in these economies. However, the report seems to confuse between democratization (and decentralization) of government activities and reduction of state control. If anything, the withdrawal of the state, making way for the private players, will reduce the control that democratic processes have over policy decisions that are critical in shaping people’s social and material lives. People across the world will witness disempowerment with this process, aided and abetted by the forces of liberalization, deregulation and globalization.

The HDR 2003 also considers the Poverty Reduction Strategy Papers (PRSPs) as a framework that moves ‘poverty reduction closer to the centre of development strategies’. The only criticism the report has for PRSPs is that they ask the countries to prepare the papers keeping in mind the various constraints their economies are faced with. The HDR 2003 argues that this should not be the case particularly as far as the financial and market access constraints are concerned, and the developed world should give more aid and open their markets to products from developing countries.

While the increased donor assistance and market access would of course be welcomed by developing countries, lack of these are not the only deficiencies that the PRSPs suffer from. The PRSPs are supposed to be produced by the respective countries in consultation with their civil societies and ought to reflect the needs of the countries. However, in reality, the PRSPs look like documents written to satisfy the demands of donor agencies and countries, suggesting macroeconomic packages that are detrimental to the interest of the developing countries. While these packages are obsessed with bringing inflation down, for many of the Highly Indebted Poor Countries (HIPCs), most of them in Africa, inflation today is hardly a concern. The world today is rather in a deflationary stage. But because the donors believe that inflation is the worst thing that may happen, conservative monetary policy has to be pursued by African nations. Besides, PRSPs are also obsessed with the view that controlling public expenditure is the only route to fiscal discipline. The HDR 2003 does not mention these irrationalities that are widely prevalent in PRSPs.

The report has also repeatedly cited the International Conference on Financing for Development held at Monterrey in March 2002 as some sort of a milestone that ‘reaffirmed the world’s commitment to the Millennium Declaration and its development targets’. The HDR has said:

The conference advanced new terms for a global partnership based on mutual responsibilities between developing and rich countries. It also reaffirmed the primary responsibility of national governments for mobilizing domestic resources and improving governance-including sound economic policies and solid democratic institutions. And it reaffirmed commitments by rich countries to work towards a supportive international environment and increased financing for development. (p. 41)

However, the ‘Monterrey Consensus’ will hardly mitigate the miseries of those reeling under poverty. The Consensus expressed intentions to reduce poverty, but hardly included quantifiable goals or deadlines for the same. It focused more on the issue of how much aid rich countries should give to poor countries, that too only if the aid seekers exhibit ‘good governance’, solid economic policies and legal structures needed to encourage free trade, etc. Issues like debt relief, historically generated structural constraints on development and global policies in areas like health and education were hardly addressed. If this consensus is considered to be a landmark then the millennium goals cannot ever be achieved.

The HDR 2003 comments that globalization has bypassed several countries and regions and hence these regions and countries have remained poor or their economic conditions have deteriorated. Many small countries, despite opening up, have found out that no international firm has shown any interest to invest in production for small domestic markets. The report says, ‘But just as globalization has systematically benefited some of the world’s regions, it has bypassed others as well as many groups within countries’ (p 29). However, nothing can be further away from truth. More often than not, countries that are in crisis today would have been better off had globalization, in reality, bypassed them. Globalization has caused massive flights of capital and resources from one country to the other. As a result, countries that have benefited from the process of globalization have done so entirely at the expense of the economies of adversely affected countries.

The HDR 2003 has listed countries where hunger and child mortality have risen during the 1990s. The report mostly attributes such failure to economic stagnation and non-performance of the countries concerned. However, in many countries these increases have been caused to a great extent by the economic and other sanctions imposed by the UN (in Iraq), or the US (in Cuba). But such causation finds no mention in the report.

Overall the HDR 2003 turns out to be a huge disappointment. It fails to condemn the market forces for the miseries that they have thrust upon the masses in poor developing countries. Rather it states that the way these developing countries can benefit is through the spread of globalization in these countries as well. While agreeing that the causation is not automatic, the report argues that economic growth is essential for reducing poverty.

Seldom if ever is income poverty reduced in a stagnant economy, and the regions growing fastest economically are also the ones that have reduced income poverty most. That provides a clear message: economic growth is essential for reducing income poverty. (p 40)

However, things can easily work better the other way in economies that face a demand constraint. Redistribution-through taxing the rich and giving it to the poor-can in fact generate more demand for goods and services than if the money remained with the rich. This is a phenomenon accepted even by mainstream economists, as marginal propensity to consume is lower at higher levels of income. Also goods and services demanded by the poor are more likely to be locally produced than the ones demanded by the rich that mostly have a high, if not absolute, import content. Demand for locally producible goods and services does not stretch the need for foreign exchange, creates employment, and generates additional demand from those newly recruited. Thus more money in the hands of the poor has a greater multiplier effect on the domestic economy. But the HDR 2003 overlooks this fact. It states that almost no country has seen a reduction in poverty preceding a rise in growth rates. However, it is simply because the economic orthodoxy of the donors in today’s world does not leave any space for the receiving countries to go in for income redistribution.

What is regrettable is the fact that even the HDR 2003 fails to challenge this orthodoxy in economic thinking. Rather, this orthodoxy and the devotion to supply-side economics run through the report till the end. In the last paragraph the report states, ‘The global economic slowdown also threatens to undermine rich country action for development as their own economies come under pressure to reduce budget deficits and press home their own trading advantages’ (p. 162).

However, it is actually during slowdowns that economies need to boost spending and a reduction in budget deficit is not desirable at that point of time. And indeed the US, the preacher of these orthodox policies worldwide, itself seems not to practise what it preaches. It is another matter that the US, instead of increasing government expenditure, gives tax sops to the rich hoping that this will lead to an increase in demand. A better way of ensuring an economic reversal would have been to use the taxes to raise government expenditure in sectors that would have a greater multiplier effect in boosting demand and employment, and to ensure similar expansion outside the US through increased aid flows and imports.

As long as the economists involved in the preparation of the HDR do not give up their faith in neo-liberal policies, nothing substantial that might alleviate the miseries of the poor countries is going to come out of such reports. It might initially generate hopes for a better future in the developing world but such hopes are not going to last long. One can therefore say, as in previous years, this year too the HDR has flattered to deceive.