The history of measuring development is replete with models. The Standard Index, Gross Development Product (GDP) and its variant, Gross National Product (GNP)/Gross National Income (GNI) has been continuously questioned as a true measure of human development. GDP is defined as the sum of the economic activity that consists of the value of goods and services produced by the citizens inside the border of a country in a given year. GNP/GNI has the same definition but it also includes the economic activity of citizens who live outside the country’s border. The use of GDP is very popular because it is easy to track progress along a continuum. It is also politically preferable for showing achievements. Furthermore, it is assumed to be able to predict the overall progress of development. Many governments and development agencies such as the World Bank, and the IMF use GDP as a baseline to develop policies and projects.
The dissatisfaction with GDP as a measure of development led UNDP in 1990 to create the Human
Development Index (HDI). The intention was to emphasize that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth alone. The HDI was therefore created as an indication that national policy choices may explain how two countries with the same level of GNI per capita (GDP) can end up with different human development outcomes. As illustrated in the diagram, HDI is a summary measure of the average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and having a decent standard of living.
In support of the HDI, Amartya Sen, Nobel Laureate aptly describes development as creating freedom for people and removing obstacles to greater freedom. He argues that greater freedom enables people to choose their own destiny; and that obstacles to freedom, and hence to development, include poverty, lack of economic opportunities, corruption, poor governance, lack of education and lack of health. Subsequently, the UN promoted the 2015 Millennium Development Goals (MDGs), and the 2030 Sustainable Development Goals (SDGs) with a number of targets, largely responses to Sen’s vision. What all of these goals and targets contend is that economic development is a broader concept than economic growth and that development reflects social and economic progress and requires economic growth. While they all recognize that growth is a vital and necessary condition for development, they agree that it is not a sufficient condition as it cannot guarantee development.
More recently, the World Bank has initiated a Human Capital Development Project in an attempt to identify “the sufficient condition to guarantee development”. The project has established a Human Capital Index, the first version of which was released in October 2018. This metric is intended to measure the human capital of the next generation. Hence, the main concerns are with (a) the conditions that increase the survival rates of children under 5 years, (b) the expected years of learning-adjusted school, reflecting the quality and relevance of the learning environment; and (c) the overall health environment throughout the life cycle.
The focus on Human Capital is fascinating, especially in this era of the 2030 Sustainable Development Goals which will be explored more fully in another blog. But as shown in the diagram, the rates of return are maximized by investing in preschool programmes and sustained through quality of life long learning and job training. The major inputs to Human Capital Investments are improving skills, health, knowledge and resilience. And the major outcomes are productive, flexible and innovative citizens, communities, nations and regions.
The World Development Report 2019: The Changing Nature of Work supports this view by illustrating how investment in Human Capital becomes more important as the nature of work must respond to rapid changes in technology. More important is that markets in the future are projected to be demanding workers with higher levels of human capital especially advanced cognitive and socio behavioral skills with a pay difference of 25%-30% between those capable of performing analytic non-routine work and those without such skills.
The early takeaways from the exploratory studies within the Human Capital Development Project provide the basis for further dialogue on the value of focusing on Sustainable Human Development. They include:
Stiglitz Joseph, Amartya Sen, and Jean Paul Fitousi, The measurement of Economic Performance and Social Progress Revisited - OFCE - Centre de recherche en économie de Sciences, December, 2009
World Development Report 2018 Learning to realize Education’s Promise, World Bank, Washington DC 2018
Tim Evans, Without Health for All we will all end up in poverty by 2030, World Bank Blog December, 2017
Continuing the Dialogue on Climate Change: Scaling Climate Finance for Sustainable Landscapes Through Private-Public DialogueRead Now
This Blog is presented courtesy of ABT Associations News Update April 2019 www.abtassoiates.com It is a follow up the blogs carried by GOFAD on April 17 Celebrating International Civil Society Week and April 26 International Cooperation and Climate Chane in Small Island Development States The BIOS of the editors of this week's blog are listed below.
Many countries in Southeast Asia have set ambitious targets for transitioning to a low-carbon, climate-resilient future, including improved management of agriculture, forestry, and other land uses. However, the financing required to achieve these targets far exceeds existing public sector resources and international development assistance. As a result, greater private investment will be required to achieve these targets. Although private sector finance for renewable energy has been increasing rapidly, challenges remain in scaling up financing for sustainable landscapes.
On March 29, 2017, USAID/Asia, the United Nations Food and Agriculture Organization, and the Asia Low Emissions Development Strategies Partnership (Asia LEDS) hosted a regional workshop on “Convening Private Sector Investment in Climate-Smart Commodity Production in Southeast Asia” in Bangkok. The USAID-funded Climate Economic Analysis for Development, Investment and Resilience (CEADIR) Activity organized and implemented this workshop.
Approximately 90 private and public sector representatives participated, including multinational and domestic corporations, financial institutions, investment firms, small- and medium-sized enterprises (SMEs), commercial commodity certification platforms, and government agencies. Workshop participants discussed their experiences in promoting private, climate-smart investment in key agricultural and forestry product value chains and identified challenges that limit this investment. They recommended the following priority actions to help overcome these challenges:
● Access to financing: Improve SMEs and primary producers’ access to financing for climate-smart agriculture and forestry through aggregation, loan guarantees, and other de-risking mechanisms.
● Policies: Reduce barriers and increase incentives for climate-smart financing, and enhance private sector engagement in developing, implementing, monitoring, and evaluating policies, regulations, financing, and support.
● Communications: Facilitate regular dialogues among national and subnational policy makers, businesses, and small-scale producers.
● Data: Increase resources and capacity for measurement, reporting, and verification of greenhouse gas emission reductions to document progress toward national climate change commitments.
After the workshop, CEADIR identified country-specific needs for increasing private investment and public-private sector coordination for climate-smart agriculture and forestry in Cambodia, Indonesia, Philippines, and Vietnam. CEADIR also analyzed business models for private sector financing of sustainable rice and forest production in the region. Utilizing this analysis, CEADIR collaborated with FAO in convening a second regional workshop in Bangkok on October 10-12, 2017, engaging more than 60 private and public sector representatives, including representatives from Bangladesh, Cambodia, Indonesia, Laos, Burma, the Philippines, and Thailand. During the workshop, CEADIR highlighted private sector recommendations for accelerating climate-smart finance. It also supported governments in developing country-specific strategies with priority policy and program changes to increase private investment in low-emission, sustainable agriculture and forestry. In addition, CEADIR identified market needs and opportunities for donors and development partners to showcase more sustainable business models and to support public-private blended finance solutions. CEADIR analyses also demonstrated the potential for private sector climate-smart investments to help countries achieve their national climate change targets (i.e., Nationally Determined Contributions).
Mikell O’Mealy is a Senior Associate with Abt Associates’ International Development Division working on global climate change, natural resources management, and governance with countries, communities, and development partners in the Asia Pacific region and worldwide. She has 20 years of experience building capacity and cooperation at international, regional, and local levels. She has an M.S. in Marine Resources Management and a B.S. in Biology from Oregon State University.
Charlotte Mack-Heller, a Senior Associate with Abt Associates’ International Development Division, works on issues related to resilience, adaptation, and land use. She has worked closely with diverse stakeholders in 15 countries to build resilience and sustainability across a range of economically critical sectors, such as urban systems, infrastructure, agriculture, energy, water, and the coastal environment. She holds a M.P.P. and M.S. from the University of Michigan and a B.S. in Environmental Science from the University of Delaware.
Dr. Eric L. Hyman is an Economist in the Economic Policy Office of the USAID Economic Growth, Education, and Environment Bureau. He is the contracting officer's representative for the CEADIR Activity. He has 38 years of experience in natural resource economics, project design, monitoring and evaluation, cost-benefit analysis, environmental and social impact assessment, small- and micro-enterprise development and finance, and private and public sector capacity development. He holds a Ph.D. and M.R.P. in Environmental Planning from the University of North Carolina at Chapel Hill and a B.A. in Economics and Environmental Science from the University of Virginia at Charlottesville.