Benel Lagua l February 10, 2023 l The Manila Times
DEVELOPMENT as progress has conceptually grown from the previous narrow economic perspective to one which is broader and more comprehensive in scope. As economic growth, the traditional view of development focused on the capacity of a national economy whose initial economic condition has been more or less static for a long time to generate and sustain a rapid annual increase in GNP (gross national product) or GDP (gross domestic product) terms. It is the ability of a nation to expand its outputs at a rate faster than the growth of its population.
Economic growth is development in its most aggressive sense. It relies on the Adam Smith theory of the invisible hand. Its main assumption is rapid gains in overall and per capita GNP/GDP will “trickle down” to the masses in the form of jobs and other opportunities.
The more modern view has debunked this model. Redistribution of the benefits of growth cannot be left to chance or to the market. Development must aim for redistribution by way of actual initiatives to reduce inequality and unemployment. Development must create an environment in which people can develop their full potential and lead productive, creative lives in accordance with their needs and interests.
Development is now viewed as much more than economic growth, which is only a means, if a very important one, of enlarging people’s choices. Thus, the more modern view encourages policies and institutions to support greater inclusiveness and equity in access to services, resources and opportunities. The imperative is to empower the poor and marginalized groups to participate in social, economic and political life.
In its more sophisticated version, development is viewed as freedom as espoused by the economist Amartya Sen. He defines development as the process of expanding the freedoms that people can exercise. Wealth is merely an instrument for achieving the higher objective of attaining what we want: human flourishing and happiness. Sen takes a holistic view of poverty and characterized it as impending people’s ability to live the lives they want. Various freedoms (such as freedom for full political participation, from inequality, to acquire the necessities of life and of economic markets) are not only the ends of development but are enabling means to achieve development.
Most multilateral institutions have embraced the broader view of development as a broad and comprehensive term with economic, human, social and political considerations. The United Nations, World Bank and Asian Development Bank have all recognized the importance of empowering people by creating more inclusive, cohesive and accountable institutions.
The ideals have broadened, but what is the reality on the ground? In a report by The Economist on the Democracy Index as published by EIU (Economist Intelligence Unit), almost half (45.3 percent) of the world’s population live in a democracy of some sort, while more than a third (36.9 percent) live under authoritarian rule.
Pandemic-related restrictions in 2020 and 2021 suppressed individual liberties with the intention to protect people from Covid-19. The global Democracy Index has been on a decline for some time since 2016. With the EIU reporting several authoritarian regimes tightening their grip on their economies, development as broadly defined has suffered greatly. Creeping authoritarianism has led governments “to undermine democratic rights in the cause of public health.” The past year was supposed to mark some reversal, but the improvement is marginal.
China, home to one-fifth of the world, locked up millions of its citizens with its zero-Covid policy. It is now being reversed, but the government’s reactions to opposition to the policy have been repressive. Russia’s Ukraine adventure, media control and its crackdown on the anti-war protesters have further curtailed freedom. The United States is being affected by political polarization beginning with the Trump years. Coup attempts in Peru and in sub-Saharan African states have been observed. Afghanistan, North Korea, Turkey, Nepal, among others, continue to have low scores.
The Philippines has been classified as a “flawed democracy,” ranking 54 out of 167 countries. According to the EIU, characteristics of flawed democracies may include conducting free elections and respecting basic civil liberties despite problems including infringement on media freedom. Weaknesses include deficiencies in governance, underdeveloped political culture and low levels of political participation.
The NEDA (National Economic and Development Authority) has recently published the Philippine Development Plan (PDP) 2023-2028 which aims for the social economic transformation of the economy back on a high growth plan. The target GDP growth rate is 6 to 7 percent in 2023 and 6.5 percent to 8 percent in 2024-2028. Poverty rate is aimed to be reduced from 18.1 percent in 2021 to single-digit 9 percent in 2028. And the unemployment target is to bring it down to 4.0 percent in 2028.
For the sake of our people, we hope the PDP achieves its goals. But as modern development thinkers recommend, it should not be enough to achieve the metrics. We should aim for development that is substantive, shared, inclusive and with a positive impact on the Filipino person, on our society and on the planet. We need a functioning democracy with institutions that will help people make informed and evidence-based decisions, where access and opportunities are open to all. The preponderance of fake news must be addressed.
The development plan must not simply create productive opportunities but empower and enable our people to participate in these opportunities. We have good technocrats in government, but will the political patrons who control wealth and power readily allow social inclusion with political and economic freedom? Will we ever get out of the bounds of elite capture? We have a long way to go, but we need to be hopeful that we can achieve the future we deserve.
*** Benel de la Paz Lagua was previously executive vice president and chief development officer at the Development Bank of the Philippines. He is an active Finex member and an advocate of risk-based lending for SMEs. The views expressed herein are his own and does not necessarily reflect the opinion of his office as well as Finex.