National development—and particularly economic growth—is under severe challenge as an important and legitimate objective of action within the development industry

National Development Delivers: And How! And How? Lant Pritchett. April 26, 2021. https://lantpritchett.org/wp-content/uploads/2021/05/Development-Delivers_firstdraft.pdf

Abstract: Core dual ideas of early development, economics and practice, were that (a) national  development was a four-fold transformation of countries towards: (i) a more productive  economy, (ii) a more responsive state, (iii) more capable administration, and (iv) a shared  identity and equal treatment of citizens and that (b) this four-fold transformation of national  development would lead to higher levels of human wellbeing. The second is strikingly correct:  development delivers. National development is empirically necessary for high wellbeing (no  country with low levels of national development has high human wellbeing) and also empirically sufficient (no country with high national development has low levels of human wellbeing).  Three measures of national development: productive economy, capable administration, and  responsive state, explain (essentially) all of the observed variation in an omnibus indicator of  wellbeing based on over 58 distinct indicators, the Social Progress Index. How national  development delivers on wellbeing varies, in three ways. One, economic growth is much more  important for achieving wellbeing at low versus high levels of income. Two, economic growth  matters more for “basic needs” than for other dimensions of wellbeing (like social inclusiveness or environmental quality). Three, state capability matters more for wellbeing outcomes that  depend on public production than on private goods (and for some wellbeing indicators, like  physical safety, for which growth doesn’t matter at all). While these findings may seem too  common sense to be worth a paper, national development—and particularly economic growth—is, strangely, under severe challenge as an important and legitimate objective of action within the  development industry. 

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I argue that this de-emphasis on national development is wrong. National development (including economic growth) does powerfully deliver on human wellbeing for low-income countries—but much less so for richer countries. The development debate is largely a confusion of preference and priority and the powerful human tendency to project our immediate concerns onto others: to look in a mirror and describe what we see out a window. Suppose one ignores the “cold” economic numbers and takes the Social Progress Index (and its three major components Basic Human Needs, Foundations of Wellbeing, and Opportunity) as the “true” normative goal to be pursued. National development, measured by GDP per capita, State Capability, and Democracy is a strongly necessary and sufficient condition for achieving high levels of human wellbeing measured on these indicators. There are no countries with high levels of the SPI with low national development and there are no countries with high levels of national development with low levels of SPI.

In addition, a flexible examination of the connections between the different physical indicators of wellbeing and three components of national development (GDPPC, State Capability, and Democracy) reveals three interesting, and ultimately sensible, findings.

First, if one allows the impact of GDPPC on wellbeing indicators to vary flexibly across the level of GDPC the data shows that growth is tremendously more important for improving well being in developing than in developed economies.

Second, for developing countries GDPPC is much more important for elements the SPI regards as “Basic Needs” (like nutrition and basic health, access to water and sanitation, improved shelter) than it is for those classified as “Opportunity.”

Third, if one separates the components of national development into “economic” (GDPPC) and “governance” (state capability and democracy) the data suggests that growth has a larger impact on elements of wellbeing that are “private” goods (like nutrition) whereas “governance” is more important for “public” goods—like the environment.

The empirical data suggest that Prime Minister Arden and the OECD might be right, at their high levels of national development, to emphasize as their priorities direct measures of wellbeing over GDP (or national development). But developing country politicians—even with the exact same preferences—cannot reach the levels of human wellbeing enjoyed by those living New Zealand without much higher levels of GDP per capita and state capability.