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UN scholar lays thrust on investment in human capital, physical infrastructure

Published in The Financial Express on Thursday, 16 February 2017

INTERVIEW

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Professor Sakiko Fukuda-Parr — FE Photo

Professor Sakiko Fukuda-Parr is currently teaching International Affairs at The New School in New York and is serving as the Vice-Chair of the UN Committee for Development Policy (CDP). Her works cover poverty, inequality, development, globalisation, human rights, MDGs and SDGs. She talked to The Financial Express (FE) on Sunday during her visit to Dhaka at the invitation of the Centre for Policy Dialogue (CPD). The excerpts are as follows:

 

Financial Express (FE): What do you think about the future of the Agenda-2030 or Sustainable Development Goals (SDGs) when the world is going through a turbulent time?

Sakiko Fukuda-Parr:  The Agenda-2030 or SDGs are a politically negotiated agenda which calls for leaving no one behind. One of the functions of the United Nations is to promote consensus on ideas, values and principles. In a turbulent time, I think the most important is to keep the consensus on key values, ideas and principles. Because they can easily be forgotten as a lot of these values and principles are under attack in this rise of current political trends we are seeing all over the world.

SDGs are actually a reaffirmation of many important values and principles. These are not only targets. SDGs give us tools to go trough the turbulent times and a clear sense of direction to go ahead.

SDGs are also expected to challenge the developed countries, not just developing countries. These countries are asked to what they are committing to their own national programme. I have been in Japan recently and asking what Japan has been doing on SDGs – not in terms of development aid but in terms of its own. Japanese prime minister actually created a superb office for implementation of SDGs in Japan.

 

FE: How the Brexit and the US President Donald Trump’s move have threatened the future of the world? Is the course of globalisation going to be reversed?

Fukuda-Parr: The anger against globalisation is legitimate as a lot of people lost out due to the process. Now the struggle is over how to compensate the losers and how to analyse the problems. It is wrong to say that immigrants have taken all the jobs, immigration letting in the terrorists. Both of these analyses are faulty and not founded on good facts and logical arguments.

It is more to do with the fact that social safety net eroded, distribution of income worsened, because the economy works in a way that has created the terrible distribution of income. It is the part of the policy that works to create incentives for investments that do not create jobs, the incentive for innovation that drives up prices of medicine and causes poverty in the United States. There should be incentive for such investment that creates jobs. But stopping free trade or stopping free flow of people is not going to be the solution. The solution is better management of the process of economic activities and better incentive for investment that provides better social outcome and contributes to social value.

 

FE: Do you think that developing countries like Bangladesh will be successful to reduce the growing income and social inequalities?

Fukuda-Parr: I can’t comment on the situation in Bangladesh.  But there is a particular reason why inequality is increasing in developing countries. One of the problem in general is return to labour has not increased. Famous economist Piketty has mentioned this in his work.  In the US, though labour productivity has increased, wages have been very stagnant. It is not very hard to look the countries in past generation, how one could achieve economic growth and how the growth could benefit the broader section of population. It is undisputed that investment in human capital is as critical as it is in physical infrastructure that benefits households and individuals. Mahbubul Haq said 25 years ago that people are the real wealth of a nation. I think, it is still true. But, somehow the economic model today is putting so much priority to attracting investment at the cost of labour and social investments. For example, corporate tax avoidance means that you just don’t have public funds to invest in people and road infrastructure. Those are some of the contradictions of economic models we have.

Look at the experiences of the East Asian countries in 1970s and ’80s. It has been quite straightforward – having investment in broad-based human capital. Look at South Korea what they have done. Within a generation they brought their education from a situation where not all even have primary education to a world class quality level, amongst the top in the world. Another example is Singapore. These are your neighbouring countries, the North within the South.

 

FE: Neo-liberalism is driving most of the developing countries along the development path. But how sustainable is such growth-obsessed development strategy? 

Fukuda-Parr: Market works when you have strong government institutions, when you have strong investment in human capital that includes both the government and household investing in children’s education. So, market fundamentalism that should be avoided.

Investing in human capital and physical infrastructure – you have to do the both. Look at the data, for example. Compare what Bangladesh is spending on education in proportion to the GDP now that Korea had done in ’90s. Also compare the proportion of investments in infrastructure in the two countries in two periods of time. You will then find whether Bangladesh is doing under-investment or not.

Again, it is a matter of policy of making the human life secure. There are many countries that transformed very rapidly from a poor base by investing in both physical and human capital.  The idea of trade-off, investing more in one in exchange for less in an other, is a mistake and false trade-off.

 

FE: In your works you also stress empowerment of women. How important is it for the development?

Fukuda-Parr: I think women’s empowerment has a very important role in the development process. I admire Bangladesh for the role women are playing in this country. Along with this structural transformation of the economy, you also need social transformation. The burden of unpaid works undertaken by the women is a constraint to the paid economy to get contribution from women. If men do some household work, women will get some time for paid work and also some more quality time to take care of a sick child or sick elderly family member. One of our research showed that the factor that explains good performance of an economy was not democracy, was not laws or human rights, was not government expenditure – but it was gender equality. It is the Social and Economic Rights Fulfilment (SERF) index.

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