Need to Redefine Concept, Strategy of Development

Published: 10th September 2015 06:00 AM  |   Last Updated: 09th September 2015 10:53 PM   |  A+A-

The recent socio-economic and caste census (SECC) 2011 data on deprivations is profoundly disquieting. At the global level too, the latest data on economic inequality is equally disconcerting. That 75 per cent of rural households in India earn less than Rs 5,000 per month or around Rs 33 per capita per day and that over 40 per cent are landless and work as manual casual labourers even after 68 years of Independence is something that every Indian has to reflect upon — the type of development and social choices that we, the world’s largest democracy, have made.

While the SECC data tells you who the poor are, where they live and how they struggle for food, water and a ‘habitation and a name,’ The Great Indian Poverty Debate  (2005), edited by Angus Deaton and Valerie Kozel, the outcome of a workshop jointly organised by the Planning Commission and the World Bank, exemplifies the Holy Grail to estimate the number of the poor. Although historically, India takes pride in having led the world in measurement of poverty, the ultimate results, despite the huge opportunity cost of resources, have turned out to be ‘much ado about nothing,’ except probably to mislead the public about the progress in poverty reduction.

Hopefully, when more caste-wise data on deprivation are made public by the SECC, the scholarly search for counting the number of the poor — identifying the poor is a different ball-game altogether — may disappear as a policy instrument.

As for a solution to the problem of poverty, there is near unanimity among most development pundits and practitioners that growth and more growth is the answer, notwithstanding the multi-dimensionality of its salience. However, the SECC data proclaim in unequivocal terms that growth and the process of enhancing it strongly excludes and that equality of opportunity has been the major casualty in Indian social life.

Evidently, inequality has been widening. Fairness and justice as democratic values have been blatantly suppressed. Is it not a fact that the so-called Left Wing extremist (LWE) districts are areas of alarming economic inequality?

It is time to rethink and redefine the concept of development, its goals, content and strategy, particularly, in the context of unfolding evidence on the widening economic inequality within nations and across nations, sending the strong message that growth is a poor instrument to contain poverty. A UNICEF working paper (2011) by Isabel Ortiz and Matthew Cummins points out that the richest 20 per cent population gets 83 per cent of global income with just a single percentage point for the poorest quintile and that it would take more than 800 years for the bottom billion to achieve 10 per cent of global income under the present exchange rate. That growth can only accentuate inequality is also well substantiated  in the Oxfam Report (2014) Even It Up.

“At the start of 2014, Oxfam calculated that the richest 85 people on the planet owned as much as the poorest half of humanity. Between March, 2013 and March, 2014, these 85 people grew $668m richer each day. If Bill Gates were to cash in all of his wealth, and spend $1m every single day, it would take him 218 years to spend it all. In reality though, he would never run out of money: even a modest return of just under two per cent would make him $4.2 million each day in interest alone,” points out the report.

It shows how millions of lives could have been saved if only a very small share of this was channeled for the benefit of the poor. Of course, under Pareto optimality, (a social state in which no one’s welfare can be raised without reducing the welfare of someone else), you cannot put out the fire in Rome because you do not want to disturb the welfare of the fiddling Nero.

The demand for equality, brought into public debate and policy thinking following the French Revolution, was strongly sidelined with the ascendancy of market fundamentalism and neo-classical economics is re-emerging in recent years, more emphatically during the last four or five years. The argument of neo-classical economists that there is no association between inequality and growth and that poverty can be mitigated if not eliminated through convergence — a strong argument advanced by the World Bank — has been proved completely wrong.

In particular, I would like to mention three works viz., Thomas Piketty’s Capital in the Twenty first Century (2014); Joseph Stiglitz’s The Price of Inequality (2012);  and Richard Wilkinson and Kate Pickett’s The Spirit level: Why Equality is Better for Everyone (2010); the latter being the work of two medical doctors who spent 50 years of combined research to prove that economic equality is better for any civilised and healthy life.

Piketty adduces incontrovertible evidence to show that in capitalist countries, for long periods of time, private rate of return on capital can be significantly higher than the rate of growth, resulting in increasing inequality that will endanger democratic societies unless immediate steps are taken to contain this. The work of Stiglitz, a former Chief Economist at the World Bank, demonstrates that generally, government policies and political institutions far from  countering inequality trends often enhance them unmindful of the impact on societies such as higher crime, health hazards, mental illness, lower educational achievements, poor social cohesion and the like.

As Wilkinson and Pickett put it: “The efficiency of the market economy seems to prove that greed and avarice are, as economic theory assumes, the overriding human motivations. Even the burden of crime appears to spring from the difficulty of stopping people breaking the rules to satisfy selfish desires. Signs of a caring, sharing human nature seem thin on the ground.”

It is a sad narrative on policy-making in the so-called democratic societies that development economics, avowedly created to fight backwardness and poverty, and the multitude of development centres that sprang up around the world, including India, in the post-colonialism era failed to address the issue of poverty and justice. To quote John Rawls: “Justice is the first virtue of social institutions, as truth is of systems of thought. A theory, however elegant and economical, must be rejected or revised if it is untrue; likewise, laws and institutions no matter how efficient and well-arranged must be reformed or abolished if they are unjust.”

It is important to note that the twin development policy institutions viz., World Bank and IMF have largely celebrated inequality rather than taking steps to contain it. Since 1978, the World Bank produced 37 development reports, of which nine deal directly with poverty and the majority of the others indirectly.

None of them relates inequality and poverty to the structural asymmetries in resource endowments, entitlement to participate in the markets and a growth process that excludes the disadvantaged and the voiceless. World Bank’s latest  world development report (2015) documents evidence to tell the world that poverty is largely a behavioural problem  and ventures to call it a ‘cognitive tax’.

In a democracy what is important is improving the lives that people live and making the world they live more beautiful, just and socially relevant. But that is what development is all about!



The writer is honorary professor, Centre for Development Studies (CDS), Thiruvananthapuram.


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