Economic Growth and Basic Human Needs

Abstract

An enduring debate in the political economy of development turns upon the question of whether trade-offs exist between economic growth and the equitable provision of basic human needs (such as adequate nutrition, shelter, and education) in poor areas. Much of the empirical work on this growth-welfaredebate has supported the argument that improvements in basic welfare and enhanced economic performance are mutually reinforcing processes. But if the relationships between improved welfare and factors of growth have been fruitfully examined, the effects of growth and growth-oriented policies upon subsequent levels of poverty and inequality are less clear. In a past issue of this journal, political scientists Bruce E. Moon and William J. Dixon argue that higher rates of economic growth do not improve a nation's ability to meet the basic needs of its population. However, two problems undermine Moon and Dixon's analysis and cast doubt upon the accuracy of their conclusions. I address this concern, constructing and estimating a dynamic model of the impact of growth upon basic welfare that tries to account for these problems. The findings confirm Moon and Dixon's general conclusion, but suggest that the impact of growth-related factors upon basic needs outcomes may be less enduring than they had supposed, with beneficial consequences of either positive externalities or effective government intervention (or both) soon outweighing any detrimental effects of sustained growth. Do trade-offs exist between economic growth and the equitable provision of basic human needs in poor areas? Basic human needs are material and social requirements of human functioning, such as minimum levels of nutrition, shelter, and education. Although these requirements may differ across regions and cultures,1 similar conditions tend to prevail in areas where these needs-whatever they may be-are poorly met: life expectancy is generally low, infant mortality rates are high, and the scope of human activity is limited for most people to meeting the bare necessities of day-to-day survival. Such widespread destitution will have adverse effects on labor productivity, and will preclude the possibility of private savings and investment for much of the population. These conditions can trap a nation or region within a vicious circle of increasing demands upon resources and institutions and a diminishing capacity of the material and institutional environments to meet these demands.