Economic Growth and Basic Human Needs

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-welfare"debate 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.