Having signed an agreement with the IMF for short run balance of payments support there is a tendency for a single minded focus on “stabilization” while ignoring issues of economic growth and human welfare. In this article I will draw upon new research to suggest that not only is the universal provision of basic services necessary for achieving social justice and hence social cohesion, but could also be a key factor in sustained economic growth. Indeed historical evidence shows that a policy of universal provisioning of education, health and social protection was a crucial precursor to the economic “take off” in a number of countries that got onto a high growth trajectory. Even more important, when most citizens in these countries had access to these services they could develop their capabilities and thereby not only enable higher economic growth but improve the quality of life.
Recent research by the UNDP shows that there were three common factors amongst countries that undertook universal provisioning of basic services (e.g. Scandinavian countries, Germany, Japan, Costa Rica and China): First, in most cases a policy of universal provisioning was adopted before their economic take off and before they had achieved high per capita income levels. Second, the initial measures for universal provision of education, health and social protection were taken under a wide range of political structures ranging from authoritarianism to democracy. Third, social justice was achieved not at the cost of economic growth but in fact became the basis of long term growth.
Almost complete literacy was achieved in Germany by the late eighteenth century, while policies for universal compulsory public education were introduced in Denmark, Sweden and Norway in the first half of the nineteenth century. Policies for social protection such as social insurance, medical insurance and old age pension laws were introduced in Germany under Bismarck and in some of the Scandinavian countries in the late nineteenth century. Such measures were taken before these countries became industrialized. Under very different social and political conditions, Chile introduced social protection programmes in the early twentieth century while Costa Rica adopted reforms for education, public health and social protection in the mid twentieth century.
The orthodox view holds that developing countries cannot afford universal provisioning of basic services and they have to adopt a targeted approach. Historical evidence indicates to the contrary that many of the countries undertook universal provisioning of basic services when their per capita incomes were lower than that of Pakistan today. For example when schooling was made compulsory for all children in Sweden in 1842, its per capita GDP was only GK $876 which is less than half the per capita GDP of Pakistan today at GK$ 2,239.
It can be argued that that the provision of basic services can become a key factor in economic growth and is not just a palliative to the inequalities generated by a market based growth process. In the contemporary knowledge based economy an educated, skilled, healthy and socially secure labour force is critical to the process of innovation that drives economic growth. In this perspective, as research by the UNDP suggests, the provision of basic services can be seen as a “social investment”.
The provision of basic services also helps in achieving social cohesion and winning legitimacy for the state. Recent research by Easterly and earlier by Rodrik shows that cohesive societies achieve higher economic growth than fragmented societies.
Pakistan is undergoing a major demographic shift which adds a new dimension to the issue of basic services. The labour force in the age group 15 to 49 which was estimated to be 96 million in 2010 is projected to increase to 181 million by 2050. An estimated 3.1 million persons of whom 2.1 million are young are entering the labour force annually. If we provide education, skills, health care, social protection and livelihoods to the rapidly growing and increasingly young labour force, their creative energy can bring about a cultural, social and economic transformation in Pakistan. If not, the millions of deprived youngsters, ignorant, hungry and angry can spell disaster for the country.