Macroeconomics and Human Development

Abstract

Macroeconomics and Human DevelopmentDeepak NayyarMicroeconomics and Human Development pursue to tackle both negative and positive effects of macroeconomics on human development and vice-versa through a series of external and internal factors. From the very beginning, the author, Deepak Nayyar, professor of Economics at Jawaharlal Nehru University, New Delhi, India and Distinguished University Professor of Economics at the New School for Social Research, New York, USA, aroused the reader's interest by promising to present an unexplored but very important domain.The book consists in a series of articles published in a prestigious publication: Journal of Human Development and Capabilities. The authors have a perennial echo in the economic field. For example, Joseph E. Stiglitz is the winner of the 2001 Nobel Memorial Prize in Economics and Jose Antonio Ocampo received in 2008 Leontief Prize for Advancing the Frontiers of Economic Thought.The authors' writing style, scientific, coherent and easy to follow, transforms the paper into a compelling and must-read writing. The book is structured in 7 independent chapters. The first one draws attention to the relation between macroeconomics and human development. The next 3 chapters include various factors in the analysis of macroeconomics in human development such as economic fluctuations, inequalities and distribution. The 5th chapter presents a global and actual problem: the effects of the economic crisis on the poor. The 6th chapter illustrates a particular case: an analysis of the issue in Latin America. Finally, the book ends with a financial perspective on human development.In the first part of the book, Deepak Nayyar highlights the relevance of studying together both macro and human development, identifying them as dichotomized world (p. 2). The most relevant ingredients in the sphere of macroeconomics on which the well-being of people reckon are: employment levels, social protection and public entitlements. The author expresses his own opinion regarding the macroeconomic goal setting, stressing on that what is efficient for a household at a micro is not necessarily efficient for the government at a macro level (p. 14). The chains of negative causation between human development and macroeconomics are presented in parallel: jobless growth, unsustainable growth and the aging of industrial societies.In Stiglitz's perspective, inequality generates a great impact on volatility and the creation of crises. In turn, financialization is a decisive phenomenon for economic instability. Moreover, downward fluctuations in government spending, inadequate monetary policies and asymmetric trade agreements9 lead to higher volatility, less efficiency and more inequality (the poor are the least able to protect themselves). As a solution to overcome crisis, the author states that: it is costly (...) to increase resource transfers from the private to the public sector (e.g. taxes) (p. 41). The economic strings in a national economy are presented as an intriguing vicious cycle: weak investment in human capital and human development (e.g. public transportation, education, R&D etc.) increase volatility and inequality and weaken growth, while, weaker growth, greater volatility and inequality lead to weaker investment in human capital and human development.Moreover, Stephanie Seguino brings into discussion the role of distribution of income. She asserts that the intention to correct the distribution of income can, under some conditions, bring negative effects: reduce both aggregate demand and employment. The author proved, through mathematical calculus, that human development can be encouraged through higher real wages and public physical and social infrastructure investment. Additionally, the government plays a role in promoting win-win outcome through macroeconomic regulations on trade, investment, finances etc. Macroeconomic strategies should be orientated toward the creation of demand: trade and investment policies that rebalance worker's bargaining power and incentive for firms to share increases in profits with workers. …