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states have to be conscious that the nature of growth (and the intensity of labour use in sectors that drive growth) evolves as the economy transforms, and to respond with matching investments in people’s skills over two decades, one study finds that during the first decade (1982–1990), 80% of annual economic growth was accounted for by new employment and capital accumulation. 31 Unemployment dropped from 20% to below 3%, with the number of jobs growing 5.2% a year. Economic growth in the next decade (1991–1999), however, was driven less by accumulation of capital and more by the productivity growth of workers, a result of investment in human capabilities. 32 • Bangladesh. The more rapid decline in poverty in the 1990s compared with the 1980s 33 was attributed to both the expansion of labour- intensive exports (such as garments and fisheries) and the increase in employment in the rural nonfarm sector (comprising small and cottage industries, construction and other nontradable services). The stimulus, however, came less from productivity improvements within this sector than from rising demand facilitated by an increase in crop production, an inflow of remittances and growing exports. 34 • Rwanda. Expansion in jobs does not always have to come from export-oriented manufacturing. In Rwanda, jobs in tourism services have increased over the past decade. The sector now sees export earnings that exceed those from coffee and tea and employs nearly 75,000 people. 35 • Uganda. Like Rwanda’s, Uganda’s high growth during the 1990s was poverty alleviating because of income growth in agriculture through large scale absorption of labour, especially in the cash crops sector that was buoyed by world prices and improvement in agriculture’s terms of trade. 36 • Thailand. Developing countries endowed with arable land can continue to create stable jobs in agriculture, even though its share in total output typically declines over time. This is the case in Thailand, whose employment pattern of the 1960s is comparable to that of many Sub-Saharan African countries today. While Thailand has since become a manufacturing powerhouse, millions of stable jobs continue to be created in nonmanufacturing sectors such as retail, hospitality and construction, as well as in commercial farming: the number of stable jobs in agriculture increased from 519,000 in 1960 to nearly 3 million in 2008. Overall, in the 1990s alone, Thailand increased its share of stable jobs by 11 percentage points (as Brazil did between 1970 and 1988). 37 • Indonesia. Indonesia before the 1997 Asian financial crisis stood out for pursuing growth that had a high labour intensity. Real wages increased at an average annual rate of 5% for two decades preceding the crisis. Between 1990 and 1996 alone, formal nonagricultural employment increased from 28.1% of the workforce to 37.9% and the share of workforce in agriculture declined from 55.1% to 43.5%. 38 Post-crisis, when some of the development gains were reversed, the proportionate increase in poverty was lowest for agricultural workers. 39 As these examples suggest, patterns of growth are rarely consistently pro-poor over consecutive decades. This is because developmental transformation is synonymous with the change in the structure of production and sectors differ in their capacities to create jobs. Skilled and unskilled jobs, for example, require a different mix of complementary inputs, such as formal education and industry-specific training. The larger point is that human development–oriented policies require both growth and an equitable expansion of opportunities. Developmental states, therefore, have to be conscious that the nature of growth (and the intensity of labour use in sectors that drive growth) evolves as the economy transforms, and they need then to respond with matching investments in people’s skills. Fostering state–market complementarities Both markets and governments can fail, but there are synergies when they work together. Development progress cannot be left to markets alone. Some markets not only fail to function, but may not exist at all at early stages of development. Most successful developmental states have introduced industrial and related policies that enhance the private sector’s potential to contribute to human development, especially by creating jobs in new sectors. 72 | HUMAN DevELOPMENT REPORT 2013
• Turkey. The state created favourable economic conditions that encouraged construction and the manufacture of furniture, textiles, food and automobiles—all industries with a high capacity to absorb labour. Turkey’s export basket has since moved towards products that involve more processing, higher technology content and the use of skilled labour. 40 • Tunisia. Since the early 1970s, Tunisia has relied on financial and fiscal incentives to attract foreign and domestic capital to export-oriented industries, particularly for garment production. 41 Various forms of business– government relations have enhanced industrial upgrading and promoted industry clusters. Today, Tunisia is among the top five exporters of apparel to the European Union. 42 It also has the potential to export health services by providing treatment to visitors from neighbouring countries, to a value equivalent to a quarter of Tunisia’s private health sector output. 43 • Chile. After returning to democracy in the 1990s, Chile encouraged investment and technological upgrading in sectors where the country had an intrinsic comparative advantage. It subsidized the formation and operation of innovation-based consortia between private firms and universities and engaged in other innovation-promoting activities. 44 Committing to long-term development and reform Achieving enduring transformation is a longterm process that requires countries to chart a consistent and balanced approach to development. Some technical or managerial solutions may appear to be attractive quick fixes, but they are generally inadequate. • China. Since market-oriented reforms in the late 1970s, China has experienced a “complex and interlocking set of changes: from a command to a market economy; from rural to urban; from agriculture to manufacturing and services; from informal to formal economic activities; from a fragmented set of fairly self-sufficient provincial economies to a more integrated economy; and from an economy that was fairly shut off from the world to a powerhouse of international trade”. 45 The scale of these changes required a committed state pursuing a long-term vision to build the necessary institutions and capacities. The leadership deliberately replaced the old guard, who might have been expected to resist change, with a younger, more open and better educated government bureaucracy. By 1988, a remarkable 90% of officials above the county level had been appointed since 1982. 46 Capacity upgrading is still a priority, and the education levels of officials have risen continuously. The Chinese bureaucracy has been designed with a strong results orientation, linking career development to the achievement of central objectives of modernization and economic progress. 47 People-friendly developmental states need strong political leadership committed to equity and sustainability. Effective leadership aligns the long-term goals of policymakers and enables constituencies to appreciate the state’s work in fostering individual capabilities and social integration for human development. This requires a balanced approach to development and an ability to convert crises into opportunities for introducing broad-based economic reforms. • Brazil. By the time the Brazilian transformation to a developmental state began (around 1994), the government had implemented macroeconomic reforms to control hyperinflation through the Real Plan and concluded the trade liberalization that had begun in 1988 with tariff reductions and the removal of other restrictions. 48 Trade openness and prudent monetary and fiscal policy followed, as did innovative social programmes that reduced poverty and income inequality. In large and complex societies, the outcome of any particular policy is inevitably uncertain. Developmental states need to be pragmatic and test a range of different approaches. • China. China’s reform and opening resulted from an explicit choice in the late 1970s to relax constraints on people’s participation in economic decisions. But the institutional innovations that went on to underpin China’s transformation resembled Deng Xiaoping’s approach to “crossing the river People-friendly developmental states need strong political leadership committed to equity and sustainability Chapter 3 Drivers of development transformation | 73
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W N S E Human Development Report 20
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Human Development Report 2013 The R
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Human Development Report 2013 Team
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Finally, the Report also calls for
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Musa, Thangaval Palanivel, Anuradha
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3.6 India’s Supreme Court issues
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Overview One of the most heartening
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Human Development Report also stres
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sudden opening but of gradual and s
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two scenarios for 2010-2050: a base
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messages and demands challenge gove
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Introduction When developed economi
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leading economies—Brazil, China a
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comparable access to information, e
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mobile phones: cellular banking is
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“The political problem of mankind
Page 34 and 35: Box 1.1 Fairness, macroeconomics an
Page 36 and 37: Box 1.3 Amartya Sen, Nobel Laureate
Page 38 and 39: Figure 1.1 Income per capita is ris
Page 40 and 41: Box 1.4 Subjective indicators of we
Page 42 and 43: Figure 1.4 There is notable variati
Page 44 and 45: Figure 1.6 Most regions show declin
Page 46 and 47: Progress in human development achie
Page 48 and 49: Box 1.7 Social competencies: human
Page 50 and 51: Table 1.3 Inequality and satisfacti
Page 52 and 53: Not all countries have the precondi
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Page 56 and 57: Box 2.1 The South’s integration w
Page 58 and 59: Figure 2.1 As a share of world merc
Page 60 and 61: Box 2.2 Acquisitions by the South o
Page 62 and 63: Figure 2.3 Between 2000 and 2010, I
Page 64 and 65: Figure 2.4 Export earnings per capi
Page 66 and 67: Box 2.6 Final assembly is about mor
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Page 70 and 71: Figure 2.6 Emerging market economie
Page 72 and 73: developing countries trade more amo
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Page 76 and 77: Table 3.1 Selected developing count
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Page 82 and 83: Box 3.5 Eastern Europe and Central
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Page 88 and 89: Having weathered the Asian financia
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Page 92 and 93: Advancing health requires more than
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Page 104 and 105: Figure 4.1 Under the fast track sce
Page 106 and 107: Around the world people are calling
Page 108 and 109: Figure 4.4 Different environmental
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Page 112 and 113: Box 4.2 China and Ghana: who benefi
Page 114 and 115: Figure 4.8 countries thus converge
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Page 120 and 121: Addressing climate change requires
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Page 124 and 125: Box 5.2 Jo Leinen, Member of the Eu
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Page 130 and 131: Figure 5.1 Under the accelerated pr
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a fair and less unequal world requi
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Notes Overview 1 Atsmon and others
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25 Blinder 2006. 26 UNIDO 2009. 27
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which is 61.7 deaths per 1,000 live
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References Abdurazakov, A., A. Mins
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urban_world_cities_and_the_rise_of_
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Kamau, P., D. McCormick, and N. Pin
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Labor Administration. Geneva: Inter
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Statistical acknowledgements The Re
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Key to HDI countries and ranks, 201
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Statistical references ADB (Asian D
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Core features of the model pertinen
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Countries and HDI ranks in 2012 and
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