Development or economic growth?

What should society be aiming for? This is a question with an easy answer but a big difference between rhetoric and reality.

Development is what we should be targeting. This is a richer concept than economic growth. It allows us to enfold social objectives, sustainability and environmental features - even ethics or philosophical positions (see Sen's Development as Freedom).

Economic growth is a sterile measure in comparison - growth of GDP. Targeting economic growth is inadequate on many levels. GDP - what does it measure? Not very much (see John Kay's excellent piece in the FT today) - certainly not well-being of society in any meaningful sense. I've always enjoyed Herman Daly's stance on this issue - well worth a read for anyone that is frustrated by GDP going up when crime rises (well, we have to buy security alarm systems, have more police and prisons don't we?). The creation of the word illth may be a stretch too far for the English language (the opposite of wealth) but it gets the point across.

Then you have the implicit acceptance of the concept of wealth trickle down - it doesn't matter where the wealth in society is created as it will ultimately trickle down to the poor. I have more sympathy with this concept - certainly, reducing GDP shows a clear correlation with declining fortunes for a society as a whole - for most societies an absolute increase in the size of the economy is a necessary if not sufficient condition for development. Not sufficient because it might not work or might not work quickly enough build a stable, secure and cohesive society. Underclasses are increasingly being seen in developed countries as well as developing nations. From these dislocated underclasses may come the security problems of the future.

Wealth can't be understood in terms of averages or medians - policy focus must be given to those in greatest need. This is familiar rhetoric and no development discussion would take place without this concept being at the heart of the debate. However, when it comes to actions the development institutions remain trapped in a top down institution building, growth enhancing model that leaves the softer goals of development, particularly for the poorest to too much to chance.

Next time: more on this topic - leaning on Bill Easterley's great book The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics.