TATA INSTITUTE OF SOCIAL SCIENCES, TULJAPUR

Course: Concept, History and Theories of Development

M.S.W.R.D

Assignment
Topic: Essays on Human Development and Classical Growth Theory

Submitted by Submitted to
Ashish Kumar Dey M.Kunhaman Sir
Roll no. :- t2018rd003
 Human Development
Developmental debates prior to 1990 were by and large focussed on economic
performances of nations. Economic performances and of nations both the expression
used here are worthy of attention. It implies that approach to assessment of
development was not only economy centred where individuals were not given much
importance also it was ignorant and apathetic in terms of measures used.
Human beings are philosophical entity and are not limited to the mere
fulfillment of their livelihoods. Apart from the basic needs of food, clothes, shelter and
security there are a lot more of requirements which a human being may consider
important in order to attain his/her course of development.Institutions not only the
government (central or local) but also global institutions and civil society must step into
act as an agent in the improvement of human condition by improving their well-being
through interactions with each other. With that rationale in consciousness UNDP
brought a new perspective of development and transformed the whole theory which
directed the international attention, now humans were the focal point of
developmental story. Two of the economists of Indian subcontinent Mahbub-ul-Haq
from Pakistan (Architect of H.D.I) and Amartya Sen from India were the pioneer in
this project.They defined human development as process of enlarging peoples’
freedom and opportunities. Amartya Sen brought the concept of capability and
functioning approach, for him capability expansion is necessary for freedom of choice
between different options, basically they looked at human beings as end not means of
development. With the advent of H.D.I humans became centre of development and
focus shifted from economy to people. Welfare took place of growth and ended the era
where economic development and human values were presented in dichotomy. World
witnessed a huge transformation in development theory, now development could not
be divorced from the real freedom of people that they can lead and enjoy.
Development got its distinct meaning from growth which can assess the overall
prosperousness of citizens in terms of employment, health and education not just the
expansion of nation’s income and wealth. H.D.I include Indicators namely per capita
income, longevity, education and measured in the range of 0-1. This way it can create
a considerable and strong political appeal. It applies to countries of different levels and

!1
people though indicators are different. As there were nothing much to distinguish
among highly developed countries Dr. Sen suggested basic H.D.I for low developed
countries, one supplementary indicator for medium developed countries in each of
three variables and further supplementary indicators in each of three variables of high
developed countries. Also H.D.I talks about equity and sustainability that ones’
legitimate choice should not be overpowered by the enlargement of others’ choice nor
at present neither of future generations. Some controversial choices are there as well
like divorce and suicide which can’t be acceptable by many under the influence of
conventional dogmas but as it is indicating more options hence contemplated as
positive achievement by few.
Despite the fact H.D.I as an index is a concept which is much wider
and richer than any other indices but human development is a concept that any of
indices can’t caught completely. Undoubtedly H.D.I conceals inadequacy of other
indices such as GNP but there are solid criticisms of H.D.I as an index to reflect
human development as whole. There are incongruity in the measures of three
indicators where health and education indicators are incompatible with average per
capita income, besides that it itself (per capita income) ignores greater inequalities
within it. It also ignores some qualitative aspects like gender equality, impacts of war,
regional and ethnical harmony, power relations between different groups due to
inequality and their desire to oppress.
There had been several attempts to cure this kind of obstacles in assessing peoples’
developmental trajectory. But in my opinion regardless of it’s fallacies H.D.I is the best
possible alternative of all other indices which civil society, scholars and other
beneficiaries eagerly wait for in order to understand human progress and
development. So, it’s our only possible means till some other more progressive method
comes into being.

!2
 Classical Growth Theory

Classical economists of 18th and 19th century had their independent and distinct
understanding about the concept of growth. Classical growth theory is not the idea of
any single economist but by and large product of the synthesis of particularly these
two economists Adam Smith and David Ricardo (both gave their theories in different
times). Though their approach towards the question of economic growth were not
always same but when viewed in terms of conclusion there were well established
similarities in their model.
Adam Smith’s contribution was not much in developing this model. He did
not give any systematic theory in classical growth theory. It was the work of later
economists and precisely Ricardo’s who worked on it in a systematic manner. Smith
emphasised on individual which was supported by later economists of classical legacy
as well. In their perspective individuals are fully capable in income generation and
maximising their welfare. They are simply best caretakers of themselves and no state
intervention is needed for their well-being rather free trade, natural liberty and
independent environment will contribute in their prosperity. Smith’s division of labour
is an important string in order to understand the crux of classical growth theory. He
gave the concept of division of labour for the increased productivity in an economy
but this was restricted by capital accumulation and size of market. Thereby, smith
advocated free trade so that increased production could find it’s own market, as well as
capital accumulation is important because without that excessive production would
not be possible. That’s why all the classical economists had given much importance to
saving and re-investment. Capital accumulation is key to economic growth of a nation
as without capital neither technological progress nor more profit generation is possible.
Ricardo identified three factors namely capital, labour and land as well as their owners

!1
respectively capitalist, labours and landlords instrumental behind the process of
growth. In their opinion each and every individual’s objective is to maximise their
accumulation of capital which accordingly maximise the accumulation of national
capital. This increased national capital accumulation implies increased productive
capacity. Hence, increase in national income which is economic growth because in
classical view economic growth refers to generation of income which is natural
outcome of free play of economic forces, because every individual has the natural
instinct of raising personal welfare and therefore economic growth is inevitable
outcome of this natural instinct. Smith also talked about invisible hand which suggests
that excessive profit earned by individuals will be redistributed among those who are
not that well off. This theory was given by classical economists based on some
assumptions which are prerequisite for the applicability and relevance of their theory
like laissez faire economy, there are two sectors agriculture and industry in which
agriculture is subject to law of diminishing returns, flexible prices, perfect competition
in the economy and many more. Some of these are irrelevant, some are over-
emphasised and some are practically impossible in present day situation.
In this theory they also mentioned about the process of economic
growth one being progressive and the other one as stationary state. In the progressive
state rate of growth tends to rise, it’s a state where there is more profit hence more
saving and investment. However they commented that this growth is not an infinite
process, a situation would come when profit is zero thus no saving and inducement for
investment. In the words of Adam Smith it is when stationary state emerges. There are
lot of criticisms of classical growth theory as well that it over emphasised on law of
diminishing returns and gave less importance to technological progress, ignored
government interference, included and taken some laws and theories as base which
doesn’t apply. For them, capitalists were the only saver which is not true in today’s
world. Presently where development and growth has distinct meaning, state
intervention is necessary to cure certain circumstances, service sector is the most
crucial and important in nation’s wealth and even low developed countries at a larger
extent overcome the problem of population growth, Classical growth theory has little
relevance in our economic world.

!2