Sunday, September 07, 2014

A thought on economic development

Sustainable Development

I think the bases of economic development are

  1. solving problems and
  2. doing better the things you are now doing.
Sometimes you invent something completely new to solve a problem, improve efficiency or improve effectiveness, but sometimes you simply innovate -- do something already done elsewhere and apply it locally.

Who are the people who do these things? A country want's everyone to do these things, but I would suggest that in modern society it is often the middle class people who are responsible. I suspect that most patents are granted for the inventions of people in the middle class. Managers should play a key role in improving productivity, encouraging  "shop floor" innovations and improving the way things are done. Doctors help health services innovate. Small business owners, including farm owners, are important sources of innovation. Government employees -- teachers, engineers, geologists, etc. -- are also important in getting government to operate more effectively and efficiently.

The implication, I suspect, is that rapid economic growth is largely done by the middle class. I think a further implication is that "thou shalt not bind the mouth of the ox when it is treading out the grain". If the middle class is not allowed to profit from economic development, then the motor for economic development will not work well and will stall. I suspect that in societies in which power is widely shared, the middle class will effectively advocate their own interests, and help assure that economic growth is shared with the middle class.

There is great emphasis on pro-poor policies. I believe the arguments that the poor spend more of their income, so that increasing the income of the poor does a lot for increasing demand for goods and services, and that the demand for goods and services is like the supply important for economic growth. I also feel sure that an added dollar income for a poor person does more to improve that person's well being than does a dollar more for someone in the middle class or for a rich person. If the idea of "development" is to increase the average well being, then pro poor policies that assure the poor get a share of the benefits of progress makes sense.

I think you also must consider the longer time frame. You want social and economic mobility in a society. Children who have potential to contribute to society should be granted the opportunity to fully develop that potential; otherwise, in the long run the society probably will not develop as fast and well as it might. Surely the children of the poor have such potential, but their parents need the resources to assure that their children develop that potential. A pro-poor policy should help poor parents obtain more of the resources they need to develop that potential.

And of course, it is ethically better to see people in need better meet their needs, and it is only fair that people share in the benefits of development be widely shared -- that the rising tide does lift all boats.


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