Reflections on Global Trends and Sustainable Development

By Piya Mahtaney

Summary

Piya Mahtaney opens this Forum of Free Enterprise booklet by characterising current global trends as “chaotic, contradictory, perplexing and disappointing” and asks whether the avowed objective of sustainable development can be achieved within a decade or two. Her central move is to refuse both purist positions on offer: she rejects the simplistic equation of higher inequality with higher growth, and she equally rejects the assumption that privatisation and deregulation will, on their own, deliver equity. Empirical evidence linking growth to poverty reduction, she notes, is mixed; redistributive tools have disincentive effects; and growth gains eroded by skewed income distribution are no real gains at all.

The middle of the essay marshals the Eastern bloc and former Soviet Union experience as evidence against market-fundamentalist optimism. For the period 1990–99 the GDP index for 25 transition countries and the FSU stood at 65 per cent and 54 per cent of pre-transition output respectively; Mahtaney attributes this contraction to weak states, the lack of well-defined central–local relations, an underdeveloped civil society, and the absence of accountability mechanisms. She concludes that a market reinstatement uncoupled from institution-building produces “either anarchy or stagnancy,” and that a capitalist orientation was made attractive partly by the failures of socialist institutional design rather than by intrinsic market virtue.

The second half turns to structural adjustment and cost–benefit analysis (CBA). Mahtaney argues that adjustments are routinely captured by vested interests, that the real divide between developed and underdeveloped worlds is the bargaining power of the lower-income majority, and that CBA — the neoclassical workhorse for project appraisal — systematically discounts social, cultural and anthropological costs by reducing them to monetary equivalents. The Sardar Sarovar Dam in Gujarat is offered as the showcase failure: the CBA framework trivialised the displacement of tribals and villagers (a resistance “headed by a prominent social worker, Medha Patkar”), and roughly ten million people are displaced annually by such infrastructure projects. Her solution is not to discard CBA but to make it more inclusive and demote it to one guideline among many. A closing table from the Human Development Report 2005 anchors the argument in regional poverty trends from 1981 to 2001.

Key points

• The empirical correlation between growth and poverty reduction is mixed, and the prevailing assumption that higher income inequality fuels higher growth was a simplistic policymaker conceit that ignored the disincentive effects of redistributive tools.

• Privatisation and deregulation, taken as ends in themselves, do not automatically reform institutions; even granting their effect on efficiency and competitiveness, they do not necessarily reduce poverty or inequality.

• The transition of formerly socialist economies failed to deliver the expected growth surge — for 1990–99 the GDP index stood at 65% of pre-transition output for the 25 transition countries and 54% for the FSU.

• Institutional weaknesses (poor enforcement of law, captured tax collection, lobby pressure, weak central–local relations, underdeveloped civil society) are the binding constraint on transition success, not the formal market/state choice.

• Structural adjustment programmes have produced rising unemployment, poverty and cuts to social expenditure, and are routinely manipulated by vested-interest groups to maximise their share of the gains.

• Development should be understood as eradicating dehumanising deprivation and securing tolerable levels of inequity rather than as a utopian quest for complete equity.

• Cost–benefit analysis, exemplified by the Sardar Sarovar Dam case, monetises non-monetary impacts in ways that erase displacement, environmental loss and the trauma of dispossession — it must be widened in scope and used as one guideline among many, not the sole basis for decision.

• Global poverty data (Human Development Report 2005) show the share of people on under $1/day fell from 40.4% (1981) to 20.7% (2001) globally, but Sub-Saharan Africa rose from 41.6% to 46.4% and South Asia remained around 32%.

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