Economic development and public welfare

Michael Roberts
Compare two countries to examine key factors for promoting or impeding a harmonious relationship between economic development and public welfare

Historical and cultural traditions often come to shape crucial aspects of contemporary policy. With this in mind, this essay will focus on models of economic development, social policies, political ideologies and socio-culturalfactors that encourage or limit a harmonious relationship between economic development and public welfare. A wide definition of public welfare is employed, encompassing such factors as good health, adult literacy and basic education in addition to poverty elimination goals. Improvement in social development indicators is equated with better public welfare. It will be shown that the way a state utilisessocial policy to channel growth can have more or less desirable outcomes. Most examples taken from Costa Rica illustrate the former, while the South African experience demonstrates how countries can become trapped in not so ideal circumstances.

In South Africa the model of economic development emerged from a mining economy. The discovery of diamonds and gold in the latter half of the 19thcentury initiated a set of economic and social relations with continuing repercussions today (Lloyd-Sherlock 2007). Dramatic emigration of economically active males from rural areas stemmed from high labour demand in the mines. More concern was evident about the quantity of workers than their quality and the social conditions they enjoyed (Beinart 1994). Workers were housed in single sex compounds withno freedom of movement. In the early 20th century the dominant view in policy circles held that black workers, forming the vast majority, had a limited desire for consumer goods. This justified poor pay. Patterns of discrimination and social exclusion were also deeply etched into South African economic policy. White workers were given more technical jobs, though this may have been little morethan an excuse for granting them 12 times the wages of their black counterparts (Beinart 1994). Such values and initial policies fed into what became Apartheid.

Costa Rican history has produced a very different set of economic relations. There emerged a strong notion that high wages increase productivity of workers and contribute to a stable economy. Such was the view of Jose Figueres, a dominantpolitical figure in the mid 20th century and main architect of Costa Rica’s 1949 constitution (Mehrotra and Jolly 1997). The alternate concepts of worker productivity in the two countries are ideologically bound. There were no clearly identifiable conclusions policy makers in South Africa or Costa Rica could draw from different country experiences. This is evidence that the commonly held valueswithin countries are fundamental to whether the conditions for a harmonious relationship between economic development and public policy are produced. In Costa Rica an alliance emerged between workers and the state to pay comparatively high wages (Rourk 1979). In South Africa the alliance between mine owners and political rulers aimed to affect the opposite.

Some countries are better able to adaptto changing economic environments in ways that benefit public welfare. The experience of import substitution industrialisation (ISI) in Costa Rica did not involve the enormous bureaucracies and over-staffing characteristic of much of the region. An effective state apparatus with clear separation between the executive, judiciary and legislature was crucial to the country’s performance under ISI(Lloyd-Sherlock 2007). A prospering rural economy with rising wage levels led to less push for emigration than in other countries. This meant that a similar model to that adopted elsewhere resulted in more desirable outcomes in the Costa Rican context. The economy was also able to develop an ingenious and unorthodox structural adjustment strategy that enabled it to avoid most of the politically...