Democratic Accountability and International Human Development

Regimes, institutions and resources

Kamran Afzal, Mark Considine

• Publisher: Routledge
• Year: 2014
• ISBN:
  9781317661320
• Edition: 1
• Topic: Volkswirtschaftslehre
• Subtopic: Nachhaltige Entwicklung

Scholars and policymakers have long known that there is a strong link between human development and spending on key areas such as education and health. However, many states still neglect these considerations in favour of competing priorities, such as expanding their armies. This book examines how states arrive at these decisions, analysing how democratic accountability influences public spending and impacts on human development.

The book shows how the broader paradigm of democratic accountability – extending beyond political democracy to also include bureaucratic and judicial institutions as well as taxation and other modes of resource mobilisation – can best explain how states allocate public resources for human development. Combining cross-country regression analysis with exemplary case studies from Pakistan, India, Botswana and Argentina, the book demonstrates that enhancing human capabilities requires not only effective party competition and fair elections, but also a particular nesting of public organisational structures that are tied to taxpaying citizens in an undisturbed chain of accountability. It draws out vital lessons for institutional design and our approach to the question of human development, particularly in the less developed states.

This book will be of great interest to postgraduate students and researchers in the fields of political economy, public policy, governance, and development. It also provides valuable insights for those working in the international relations field, including inside major aid and investment organisations.

1 The centrality of the human development approach

In his autobiography, The Singapore Story, Lee Kuan Yew delivers one of the most momentous lessons of modern development history:

I thought then that wealth depended mainly on the possession of territory and natural resources, whether fertile land with abundant rainfall for agriculture or forestry, or valuable minerals, or oil and gas … I was gradually forced to conclude that the decisive factors were the people, their natural abilities, education and training.

(1998: 105)

Indeed, it is hard to doubt the great wisdom in Lee Kuan Yew’s words, especially when Singapore is one of only a handful of Asian countries to have attained first world status despite its meagre natural resources. But even in countries with a rich natural resource inheritance, the centrality of human capital development to progress and prosperity is compelling. A large and constantly expanding body of scholarly research provides convincing evidence of the link between investment in human capital and economic growth, poverty alleviation, distributive justice and, at an even more important level, the expansion in human choices, enhancement of human capabilities and the broader welfare and wellbeing of individuals as human beings.

The latter perspective refers to what is now widely known as the human development approach. Scholarly works using this approach concentrate on the association between democracy and human choices, capabilities and welfare, but other than some occasional reference, they do not address the question of public spending on education and health or its outcomes. This book, therefore, expands the human development approach by focusing on public spending for human development and shows that an enhanced model of democratic accountability – or the accountability of the state and its institutions to citizens – can best explain how states allocate public resources for human development. In particular, we are interested in accountability relationships created by political regimes, bureaucratic and judicial institutions and modes of public resource mobilisation. In this sense, as our study shows, traditional recipes for institutional development based upon effective party competition and elections, are not enough. Rather, our accountability thesis requires the presence of responsive and answerable public organisational structures that are directly tied to taxpaying citizens in an undisturbed chain of responsibility and interdependence.

In explaining this approach the objectives of this chapter are fourfold: section 1 delineates the human development approach; section 2 explains the importance of public spending for human development; section 3 poses the core questions that the book seeks to answer; and section 4 presents a chapter-wise outline of our enquiry.

1. Human capital and the human development approach

In an encompassing sense, human capital can be viewed as a ‘stock of embodied and disembodied knowledge, comprising education, information, health, entrepreneurship, and productive and innovative skills, that is formed through investments in schooling, job training, and health, as well as through research and development projects, and informal knowledge transfers’ (Ehrlich and Murphy, 2007: 2). But at its core, human capital refers to attainments in education and health (Baldacci et al., 2008; Mushkin and Weisbrod, 1971; Weil, 2009), which are usually measured through indicators such as average level of educational attainment, school enrolments, literacy rates, life expectancy, mortality rates and survival rates.

The recognition of human capabilities as a form of capital and of their being a fundamental source of national prosperity is certainly not new and can be traced back to the classical works of William Petty and Adam Smith.¹ In the formal sense, however, it is works by Becker (1962, 1964), Denison (1962), Mushkin (1962), Schultz (1959, 1961), Walsh (1935) and Weisbrod (1962) that pioneered a theory of human capital development and led the way to the incorporation of human capital – alongside physical capital – as a basic tenet in the theories of economic growth. Ever since then, research on the effects of human capital accumulation on economic growth has grown rapidly, and the theories propounded to explain these effects have also graduated from fairly simple notions of increased productivity of labour through improved knowledge, skills or physical abilities to much more sophisticated modelling predicated, for instance, on: productivity enhancing externalities (Azariadis and Drazen, 1990; Lucas, 1988; Perotti, 1993; Romer, 1986); enhanced potential to innovate and absorb new technology (Benhabib and Spiegel, 1994; Nelson and Phelps, 1966; Romer, 1990); interrelations between human capital accumulation and the savings or population growth rates (Becker et al., 1990; Mankiw et al., 1992); enhanced ability to attract physical capital (Benhabib and Spiegel, 1994); and benefits accruing from international trade (Lucas, 1988; Romer, 1990).

The basic predictions of the newer models are consistent with those of the earlier works and, being validated by rich empirical evidence, they establish fairly unambiguously the centrality of human capital to economic growth. Many of these works augment neoclassical growth models with measures of human capital. The aforementioned study by Mankiw et al. (1992), for example, finds that incorporating a measure for human capital based on secondary school enrolments in Solow’s (1956) growth model greatly improves its power to explain cross-country variations in per capita income. Similarly, a pioneering work by Barro (1991) finds human capital, as measured by school enrolment rates, to have a positive effect on the growth rate of per capita income. These findings are further reinforced in Barro and Sala-i-Martin (1995) and Barro (1997, 2001). While controlling for several other potential determinants of economic growth, all three studies find male secondary and higher schooling to enhance the rate of economic growth. In another interesting work, Azariadis and Drazen (1990) present empirical evidence to show that a high ratio of human capital investment to per capita income is a precondition for accelerated economic growth.

Amongst the notable empirical works focusing on health capital are the two studies by Knowles and Owen (1995, 1997) that find the effect of human health, as represented by life expectancy, on economic growth to be even stronger than that of education. A more comprehensive study by Bloom et al. (2004), while controlling for work experience and schooling in addition to most other determinants of economic growth, also yields similar findings. In an equally elaborate study, Gyimah-Brempong and Wilson (2004), positing a relationship between health and the potential for technical innovation, augment the Solow (1956) growth model with health capital. They operationalise this, in sequence, with the child mortality rate, life expectancy and the infant mortality rate. In each case, they find health capital to enhance economic growth – both in sub-Saharan Africa and the countries in the Organisation for Economic Co-operation and Development (OECD). Interestingly, by simultaneously including an attainment-based measure for education in their models, they also find education to have a positive effect on the rate of economic growth. Ranis et al. (2000), operationalising human capital with measures based on life expectancy at birth and the adult literacy rate, find that human capital improves the rate of economic growth. Similarly, McDonald and Roberts (2002) not only find health capital to contribute significantly towards enhancing economic growth rates, but also find that omitting it from augmented Solow growth models generates misspecification biases. On the other hand, in his elaborate historical analyses, Fogel (1994, 2004) shows how sustained improvements in human health and ability since the early eighteenth century contributed to long-run economic growth. Arora’s (2001) study, which finds improvements in health to have enhanced the pace of economic growth in a sample of ten industrialised countries from around the late nineteenth to the late twentieth centuries, is in the same tradition.

The body of empirical evidence affirming the positive effects of education and health on economic growth is vast and constantly growing; and not all of it can be cited here. But what gives even greater credence to this relationship is that the evidence contradicting it is rather weak and scarce. And with the exception of a few studies such as Benhabib and Spiegel (1994) and Pritchett (2001), it is also based mostly on data from developed states (e.g. Bhargava et al., 2001; Hartwig, 2010), where tendencies towards convergence in the level and rates of economic growth, coupled with decreasing marginal productivity of any further improvements in the already high human development levels, tend to limit the effects of human capital on economic growth as well as the ability of statistical methods to isolate these effects.

However, there are more dimensions to the relationship between human capital and economic development than just higher rates of growth. Admittedly, the importance of accelerated economic growth should not be underestimated, but it must also be understood that economic growth does not necessarily lead to poverty alleviation or to an equitable distribution of the benefits of growth (Drèze and Sen, 1989, 2013; Haq, 1976; Sen, 1999; Todaro and Smith, 2009; United Nations Development Programme [UNDP], 1996). Rather, in the early stages, as Kuznets (1955) discovered, growth may even exacerbate inequalities in the distribution of income. The subsequent empirical evidence on the Kuznets hypothesis is mixed, which only serves to reaffirm that inequality may persist even during the more mature stages of growth rather than wane as the hypothesis predicts. However, a growth strategy based on human capital development can be expected to reduce poverty through its effect on the income-earning potential of individuals. The causal effect of education in raising incomes is well established (Becker, 1962, 1964; Psacharopoulos, 1972, 1994; Walsh, 1935; Welch, 1970) and hardly needs elaboration. Similarly, the improved health of individuals also means greater income-earning potential (Behrman, 1993; Chirikos and Nestel, 1985; Haveman and Wolfe, 2000; Schultz, 1999; Selowsky, 1981; Strauss and Thomas, 1998). Moreover, the reciprocal effects of improvements in health on educational attainment, and then of educational attainment on health levels, further reinforce the independent effects of education and health on the income-earning potential of individuals.

The income-enhancing benefits of education and health are all the more critical for the poor (Drèze and Sen, 1995; Schultz, 1993; Sen, 1999; Tanzi and Chu, 1998), and often mean their emancipation from the vicious cycle of poverty structured by low productivity, low income and low investments in human capital (Bloom and Canning, 2003; Ranis et al., 2000). Todaro and Smith succinctly contextualise these interrelationships within the overall question of economic growth:

That development requires a higher GNI [gross national income], and hence sustained growth, is obvious. The basic issue, however, is not only how to make GNI grow but also who would make it grow, the few or the many. If it were the rich, it would most likely be appropriated by them … But if it were generated by the many, they would be its principal beneficiaries, and the fruits of economic growth would be shared more evenly.

(2009: 208)

Clearly, for the society as a whole, broad-based education and health provision that lead to more equitable educational attainments and health levels across socioeconomic groups can also mean greater equity in the distribution of income (Drèze and Sen, 1995; Schultz, 1993; Sen, 1999; Tanzi and Chu, 1998; Weil, 2009). But again, the significance of education and health is not confined to their economic and material advantages, as the UNDP’s first Human Development Report notes:

The basic objective of development is to create an enabling environment for people to enjoy long, healthy and creative lives. This may appear to be a simple truth. But it is often forgotten in the immediate concern with the accumulation of commodities and financial wealth.

(UNDP, 1990: 9)

Echoing the social and economic insights of scholars such as Haq (1976, 1995) and Sen (1973, 1977, 1981, 1984, 1985, 1999), this notion of development – or the human development approach – takes a human-centric view of economic growth in which the human part of human capital development is at least as important as the capital part. In this perspective, human health and education are intrinsically valuable, and not just because they are instruments of economic growth. Similarly, poverty is not a simple reference to the deprivation of material sustenance, but acquires a much larger meaning focused on deficiencies in basic human attainment and the lack of choice that is caused by the lack of basic education and health, which then become critical obstacles both to the realisation of the income-earning potential of individuals and to their enjoyment of life (Drèze and Sen, 2002; Haq, 1995; Sen, 1999). Consonant with this conceptualisation, the meaning of economic growth also expands into a much more encompassing notion of socioeconomic enrichment.

In this paradigm, social and economic development, as a process, is driven by a fuller and more inclusive utilisation of human capabilities; and, as an ideal, it aims not just at expanding the economic entitlements of individuals, including the question of an equitable distribution, but also at enabling them ‘to avoid such deprivations as starvation, undernourishment, escapable morbidity and premature mortality, as well as … [to acquire the capabilities] associated with being literate and numerate’ (Sen, 1999: 36). In this framework of development, achieving higher levels of education and health becomes not just a means to an end, but an end in itself (Anand and Ravallion, 1993; Todaro and Smith, 2009). The UNDP’s Millennium Development Goals defined in 2000 clearly reflect this approach to development; and more recently the UNDP has also introduced the non-income Human Development Index (HDI) to emphasise the centrality of human capabilities in the overall development paradigm (UNDP, 2010).

In accordance with this new approach to development, many scholars (e.g. Anand and Ravallion, 1993; Ranis et al., 2000) and most international agencies associated with development now prefer to use the term human development rather than human capital development. We also adopt this term since it appears to us to encompass, without bias, both the material and human aspects of investing in the education and health of human beings. The term human capital development, on the other hand, tends to convey a meaning tilted towards the material dimension and, in a sense, may seem to commodify human existence (Drèze and Sen, 2002). Our usage, nevertheless, is not inspired by any underestimation of the economic imperatives of human life, for meagre incomes and agonised survival along the lower peripheries of subsistence are the fate of countless millions, and poverty-compelled suicides, sometimes even preceded by the killing of dependent children, are but one stark reminder of the misery found in the less developed world.

2. Public spending on human development

So we must take as given the centrality of education and health to the material and non-material prosperity and wellbeing of nations, and to the quality of life, happiness and satisfaction of the individuals who constitute them. This awareness, coupled with the fact that a laissez-faire market mechanism will almost invariably lead to a provision of education and healthcare skewed in favour of the upper socioeconomic classes (Drèze and Sen, 2002; Sen, 1999; Todaro and Smith, 2009), explains the significance of public spending on human development.

Even though some scholars (e.g. Filmer and Pritchett, 1999; Filmer et al., 2000, 2002; Flug et al., 1998) have failed to find any relationship between government spending on education or health and human development outcomes and therefore might disagree with our assertion, it is an approach that receives empirical support from many other comprehensive works; for instance, Anand and Ravallion (1993), Baldacci et al. (2003, 2008), Bidani and Ravallion (1997), Bokhari et al. (2007), Gupta et al. (2002b, 2003) and Przeworski et al. (2000). Each of these studies finds strong empirical evidence suggesting that public spending on education and health certainly improves human development outcomes.

Indeed, public spending on education and health has a critical role in improving human development outcomes, particularly in developing states, and even more particularly for their poor, who usually have very limited access to education and health facilities other than those provided by the public sector (Tanzi and Chu, 1998; World Bank, 1991, 2003a, 2006). This means that without public provision not only will the poor most likely remain deprived, but also the state cannot hope to fully utilise the potential of its human resources for economic growth or to address the problems of poverty and distributive inequalities, with all their far-reaching social, political and global implications.

It should be clear from the previous overview that public spending on education and health is likely to improve the social and economic life of individuals in at least three ways:

• fostering economic growth and increasing the overall size of the pie to be distributed;

• alleviating relative and absolute poverty of incomes by improving the earning potential of the poor; and

• increasing human capabilities, expanding individuals’ choices and thus enhancing societal freedoms.

These outcomes appear all the more important when we consider that a market-determined distribution of education and healthcare is most likely to further entrench the vicious cycle of socioeconomic inequity by allowing the rich disproportionately greater – and the poor disproportionately lower – access to education and healthcare, generation after generation. But this is not all: the human aspect of public intervention must also be considered. In the human dimension, disease, illness and mortality are not merely cold statistics: they are figures alive with human suffering. The loss of a child is not one person less; it is agony, pain, and lifelong emotional trauma for an entire family. Similarly, illness and the loss of a few days’ work for the poor may translate into hunger and psychological anguish for an entire household; and even worse, the death of a breadwinner may plunge dependents into a lifetime of absolute poverty, with ramifications spread over more than one generation. Indeed, the many stories of human helplessness, exploitation, suffering and misery arising from poverty, il...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of tables
• List of abbreviations
• Preface
• 1 The centrality of the human development approach
• 2 Traversing the known: potential determinants of public spending and performance
• 3 Democratic accountability and public spending on human development: a theoretical construction
• 4 What really drives human development spending and outcomes? Regression analysis: methods and data
• 5 Why governments differ in spending on human development
• 6 From increased democratic accountability to better human development outcomes
• 7 Pakistan and India: of military ballads and popular ballots
• 8 Botswana: a miracle of institutions
• 9 Argentina: a tale told by taxation
• 10 Conclusion: ending a story to begin another
• Appendix I. Subsets of states: Phase-I and Phase-II analysis
• Appendix II. Subsets of states: Phase-III analysis
• Appendix III. Subset of states: life expectancy analysis
• References
• Index