Mahbub Ul Haq: Man Who Wanted Development “Beyond GDP”

Developing beyond GDP Growth
Developing beyond GDP Growth | Source

Dr Mahbub Ul Haq is remembered for his pioneering and enduring contribution of shifting the focus of development discourse from GDP-centred economic growth to people and their well-being.

The Battle of Economic Growth

When Adam Smith laid the foundation of modern economics through his epic, An Inquiry into the Nature and Causes of the Wealth of Nations (1776), he would have never imagined that ‘economics’ would rule the future generations ‘colonizing’ all other disciplines of human inquiry. Today the whole Western world follows the ‘faith’ called economics and considers economic growth as the only measure of national progress, and the rest of the world drags along in the absence of alternatives. So, now we have a global culture where people religiously think that ‘economics is the only highway’ that takes people to the paradise of eternal happiness.

Gone are the days when talks of culture, art, history, morality, religion or spirituality signalled progress of societies and their people. Now per capita consumption decides how progressive you are. The more you consume the more developed you are supposed to be! So Americans are the biggest consumers we have today walking on the planet.

If along the way, nature feels tired of replenishing ever increasing demand for its resources or if communities and societies have been decaying with the arrival of ‘individualism’ that must be seen as an unavoidable ‘collateral damage’ of the battle of economic growth! These ugly issues should be left to the creatures called environmentalists and social scientists; after all it is their job!

Money can't measure human life.
Money can't measure human life.

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Mahbub Ul Haq’s Aversion towards GDP

Even during his Cambridge days as a student in the early 1950s, Mahbub Ul Haq had serious reservations about using the GDP as a metric of national progress and development. He often shared the issue of inadequacy of GDP with his Indian friend Amartya Sen also studying there. He never found it appealing that increasing per capita GDP should be the prime goal of nations.

Since its birth during the Great Depression in the 1930s, the Gross Domestic Product (GDP) has been widely adopted as an indicator of economic performance and progress around the world. After the WW2 which helped economic recovery in the US, people debated about how to transform the war economy to serve people in the peacetime. What came out was the idea of converting people into “relentless consumers” that we see today. The GDP served this purpose very well. Here is a piece of typical thought process that went into the debate.

“Our enormously productive economy…demands that we make consumption our way of life, that we convert the buying and use of goods into rituals, that we seek our spiritual satisfaction, our ego satisfaction, in consumption…we need things consumed, burned up, replaced and discarded at an ever-accelerating rate.” – Economist Victor Lebow in 1955 in his paper Price Competition

Leaders like Reagan and Thatcher should be noted for boosting forces that help economic growth – seen as the only panacea of all societal ills!

Dr Mahbub Ul Haq
Dr Mahbub Ul Haq

Mahbub Ul Haq – The Man

Mahbub ul Haq served as the World Bank’s Director of Policy Planning from 1970 to 1982 where he influenced Bank’s policies to focus on people’s well being. Then he served as the Finance Minister of Pakistan between 1982 and 1988. He was Special Advisor to the UNDP from 1989 to 1996.

In 1996 Haq left the UNDP to establish the Human Development Centre in Islamabad, Pakistan. After his death on 16 July 1998, the Human Development Centre at Islamabad was renamed as the Mahbub ul Haq Human Development Centre. The UNDP honoured him by instituting an Award for Outstanding Contribution to Human Development.

Haq Worried about Rising Inequality

During sixties, Haq noted that 22 industrial family groups had come to dominate the economic and financial life of Pakistan. Together they controlled about two-thirds of industrial assets, 80% of banking and 79% insurance. For almost a decade the economy was growing at around 6% and exports at about 8%. While the world was applauding Pakistan’s development Haq was worried about sustainability of such a growth pattern and rising inequality in the wealth distribution.

Haq noted that the disparity in per capita incomes of East and West Pakistan had more than doubled during this decade. The real wages of industrial workers concentrated in some key areas had decreased by about 33% due to rising inflation coupled with their weak bargaining power. From 1958 to 1968 Pakistan imported or domestically assembled private cars worth $300 million while spending only $20 million on buses. During the same period, about 80 – 90 percent of private construction could be described as luxury housing. It was clear that the growth had failed to touch lives of masses and remained limited to the privileged minority.

Haq also noted that the handful industrial houses wielded tremendous clout with the government and dictated its policymaking machinery. What Dr Haq observed half a century ago is still true today.

A recent Oxfam research report (Jan 2014) titled Working for the Few: Political Capture and Economic Inequality revealed that economic inequality is rapidly increasing in majority of countries. The global wealth is divided in two: almost half going to the richest 1% and the other half to the remaining 99 percent. Even the wealth of 99 percent is dominated by rest of the richest 20 percent.

The wealth of the one percent richest people in the world amounts to $110 trillion. That’s 65 times the total wealth of the bottom half. In 2014, 80 richest persons have as much wealth as the poorest 50 percent (about 3.5 billion people). In 2013 85 richest persons held that much, significantly down from 388 in 2010.

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Haq was Highly Critical of Military Expenditure

Dr Mahbub Ul Haq was highly critical of the rising military expenditure and the nuclear race. He was strongly in favour of shifting expenditure towards development programs and poverty eradication. He speculated that about $34 billion dollars per year would be enough to provide adequate education, healthcare and nutrition for all people. This amount was less than a quarter of the defence spending by the poor countries. Similarly, he estimated that the cost of a single military submarine was enough to provide safe drinking water to 600,000,000 people in the developing world, and the cost of a jet fighter could provide schooling to 3000,000 children in the developing world.

He also lamented the lack of development cooperation among South Asian nations and wanted to unite south Asian countries in a federation similar to the European Union.

The 20:20 Compact

On Dr Haq’s initiative, in March 1995 in the World Social Summit in Copenhagen, a global compact was reached that the developing nations will devote 20 per cent of their existing national budgets and the donors will earmark 20 per cent of their existing aid budgets to five human priority concerns:

1. Universal basic education, 2. Primary health care for all, 3. Safe drinking water for all, 4. Adequate nutrition for severely malnourished children, and 5. Family planning services for all willing couples.

This was the famous 20:20 compact. It required no new resources, only shifting of priorities in existing budgets. Had it been honestly implemented, the compact would have removed the worst forms of human deprivations by now.

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If Human Life is Multidimensional, Why not Development

If you are a multifaceted and thoughtful person you must be feeling uncomfortable with the too narrow concept of progress given by the economists. You must be wondering: if human life is multidimensional why not development? How can a simple economic number GDP describe the status of a complex thing like human well-being which depends upon so many factors?

Have things like family and community relations, cultural traditions, spiritual practices, moral values, living in nature, leisure time, good health, and freedom from stress become unimportant in people’s lives? Is development merely multiplication of wants or continual transformation of wants into needs?

Mahbub Ul Haq’s thought process must have been similar when he wanted to redefine development, going beyond GDP. In May 1970, at a conference Canada, Dr Haq declared: “It is time to stand development theory on its head, since a rising growth rate is no guarantee against worsening poverty”. He was convinced about the uselessness of using the GDP as an exclusive progress indicator and was looking for a development model that would directly address people’s well being.

GDP’s Imperfections are Well Known

After all the GDP is just an economic number – total market value of products and services bought and sold. Its imperfections are well known. It is blind to things that can’t be sold though they are very important for people and societies – like housework, volunteering, or raising children. Likewise, it can’t value social harmony, health, education, leisure or clean environment. It gets boosted by harmful things like natural disasters, polluting activities, diseases, and crimes and wars. Good things like community sharing put pressure on GDP. In fact, the more you spend, waste and destroy the more it grows. Therefore, rising GDP is no guarantee of better quality of life.

GDP Growth vs Well-Being Growth

The inherent problem with economic approach to progress is that it is blind towards things that can’t be measured in monetary terms; family atmosphere, leisure time, job security, crime free society, natural surroundings, emotional well being, self confidence and so on. Yet, these things are the primary factors of people’s well being. The moment we make improving people’s well-being target of development all such issues become important; because human well-being is a multidimensional subject.

This is actually a human development approach which focuses on people – and makes them the center of attention. It also puts the traditional wisdom – that income and wealth have limited value – they can’t be end in themselves – into practice. In other words, income and wealth are mere tools for adding value to people’s lives. This would seem quite strange to those who have learned to measure development only in monetary or consumption terms.

Human Development Reports (HDRs)

Dr Haq is considered the architect of the Human Development Reports which has significantly impacted the global developmental discourse since its launch in 1990. The paradigm of human development, as he conceived and developed along with Professor Amartya Sen, seeks to go beyond such issues as economic growth (measured in statistical terms) and the rise and fall of national incomes. The Reports’ basic aim was to look beyond economic growth and to put people back at the centre of the development process in terms of economic debate, policy and advocacy.

Amartya Sen has said:

“Human development as an approach is concerned with what I take to be the basic development idea: namely, advancing the richness of human life, rather than the richness of the economy in which human beings live, which is only a part of it”.

Dr Haq maintained that the real objective of development is to enlarge people’s choices in all fields—economic, political and cultural. He emphasized that people are both the means and the end of development. It revolves around building human capabilities. The most basic capabilities are to lead long and healthy lives, to have access to resources needed for a decent standard of living, and to be able to participate in the life of the community. The notion of human development is closely intertwined with issues of human freedom and human rights.

Things considered central to human development include greater access to knowledge, better nutrition and health services, reduction in inequalities, participation and freedom, human security and sustainability.

Since 1990, the Human Development Reports have provided insightful and innovative analysis of a wide range of issues and concerns, including gender, poverty, human mobility, climate change and globalization. They have successfully challenged the hegemony of the growth-centric paradigm in economics and democratic planning and policy making.

Impact of the HDRs

Since the first HD Report, other new composite indices for human development related to gender and poverty have been added; namely the Gender inequality Index and the Multidimensional Poverty Index (MPI).

Following the footprints of the Human Development Reports, over 600 regional and national human development reports at the country level have been published in more than 140 nations. Particular mention may be made of the series on Arab Human Development Reports, published in 2002, 2003, 2004, 2005 and 2009. The first Arab Human Development Report identified three major deficits in the Arab world: knowledge, freedom and women’s rights. The subsequent reports explored in greater depth the three deficits identified in the 2002 report. The Arab Human Development Report 2009 focused on human security in the context of the Arab world.

Well being is multidimensional
Well being is multidimensional

New Emerging Paradigms, Beyond Human Development

The HDRs have been catalysing the global developmental debate decisively. There is increasing acceptance of the concept of HD as a viable alternative to the economy centered model. New emerging paradigms repudiate the neo-classical quantitative model of development, vindicating Dr Haq’s conviction and vision. More and more people now are asserting that the discourse on development cannot be divorced from issues such as social justice, equality, cultural diversity, environmental safeguards, universal access to health care and consumer protection.

Nobel winner economist Joseph Stiglitz points out that development is meaningless in the long run unless it is sustainable, equitable and participatory. He emphasizes that it is not just income that matters but overall standards of living which means giving importance to economic as well as social, cultural and environmental dimensions.

Former chancellor of the University of Northern British Columbia, Alex Micholas says: The economists messed everything up. The main barrier to getting progress has been that statistical agencies around the world are run by economists and statisticians. And they are not people who are comfortable with human beings. The fundamental national measure they employ tell us a good deal about the economy but almost nothing about the specific things in our lives that really matter”.

In November 2007, an international conference on “Beyond GDP” was organized in Brussels under the auspices of the European Commission along with other partners. Over 650 participants discussed and debated alternate measures of progress and well-being and how they could be used for policy guidance.

With the availability of much better survey data which allow for new types of economic and social measurement, more and more experts are looking for well-being indicators to gauge progress. The issue of sustainability is gaining momentum as climate change worsens. For instance; Andrew Simms, director of the New Economic Foundation, says, “Growth has failed on its own terms. You cannot have infinite growth in a world of finite resources. Redistribution of the existing wealth is a far better way to go. It is now a case of paradigm shift or bust”.

Noting that the Human Development Index does not take sustainability into account, the Happy Planet Index was launched in 2006 by the New Economic Foundation. The Canadian Index of Well-Being seeks to measure well-being in Canada across a wide spectrum of domains including things like quality of environment and leisure time.

In 2008, the French government appointed an international commission on the Measurement of Economic Performance and Social Progress, under the chairmanship of economist Joseph E. Stiglitz. It included renowned economists, psychologists and academics including Amartya Sen. Among other things, the Commission reported that much of the contemporary economic disaster owes to the misguided assumption that policy makers had to simply focus on nurturing growth, trusting that this would maximise prosperity and well-being for all. The report offers guidelines for creating a broader set of indicators that more accurately capture people’s wellbeing as well as sustainability. It has also been taken up by the EU’s statistical office as well as by the Organisation for Economic Cooperation and Development (OECD).

Reflecting the fact that social support and stable and warm relationships offer healthy solace in the face of loneliness, stress and depression and have a positive bearing on health, Robert E. Lane of the Yale University says in his book The Loss of Happiness in Market Democracies that “overall evidence shows that companionship contributes more to well-being than does income”.

The Way Forward

Growth has become a catchy word spoken by leaders and a lot of people consider economic growth as the only yardstick of progress of people and societies. However, it is time that we stop to look around for its side effect. Given the trend of rising inequalities with economic growth, depletion pressure on natural resources and chaotic global climatic conditions it probably is the right time to adopt sustainable development strategies that enrich people’s lives without impairing societies, environment and nature’s free resources.

It is possible only if people are made the target of development and enhancement of their well-being becomes the goal of developmental processes. Since human well-being is affected by many things that don’t fit into economics the process of development should be also multidimensional. Human well-being is a complex thing and often subjective and not clearly quantifiable. But that doesn’t means that they should be ignored in search for perfect progress indicators.

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Comments 3 comments

Goodpal profile image

Goodpal 20 months ago Author

The US exists to money, happiness is too trivial a thing to bother about! Here money rules, not people who are just tools to grow the economy.

Only the tiny Himalayan country Bhutan has the audacity to pursue happiness, rather than GDP growth. This country's development is dictated by principles of gross national happiness (GNH) so that men live in harmony with nature enjoying their socio-cultural and spiritual activities.


watergeek profile image

watergeek 20 months ago

S0 . . . what was the result? How does the US fare in terms of say, the Happy Planet Index?


Ericdierker profile image

Ericdierker 20 months ago from Spring Valley, CA. U.S.A.

Very interesting indeed. Governing sure is complicated.

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