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Finance & Development, December 1979
Article

Country experience in providing for basic needs: Studies of country policies geared toward meeting the basic needs of the poorest provide a basis for identifying key macroeconomic elements of such policies

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
December 1979
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Frances Stewart

The ultimate goal of economic development is the improvement of the conditions of life in developing countries. In the years after World War II, when many countries acquired independence, economic development became a major objective, and the main aim of development policy was then to raise the growth of gross national product (GNP). But it has become apparent that economic growth alone is, in many cases, not sufficient to improve substantially the conditions of life of the poor. The real incomes of the poorest 40 per cent of many populations have remained abysmally low; while the values of social indicators—such as life expectancy at birth, morbidity, and literacy—lag well behind those of the population of developed countries. The basic needs approach to development is a response to these shortcomings of policies concentrated on economic growth: it focuses directly on improving the conditions of life of poor people—in particular on their need for essential goods and services. (See “From growth to basic needs,” by Paul Streeten, Finance & Development, September 1979.)

It is not possible to reach complete agreement on exactly what the basic needs of poor people are. The composition of the basic goods and services required in each country varies, of course. Moreover, some people would include nonmaterial needs such as employment, participation in the means of production, and political rights. But some needs are common to the poor in most countries—these include food and nutrition, health services, education, water, sanitation, and shelter. These are basic human needs in large part because they contribute to two fundamental aspects of human life—health and education. In this article, improvements in health and education are taken as the primary objectives of a basic needs approach.

In order to provide a basis for identifying the key macroeconomic elements for policy-makers attempting to meet the basic needs of their populations, the World Bank recently conducted in-depth analyses of the performance of seven countries in the area of basic needs—Brazil, Egypt, The Gambia, Indonesia, Mali, Somalia, and Sri Lanka. This analysis from the country studies can be set alongside more general information from other developing countries to form a picture of how countries are meeting basic needs.

Varying performances

The performance of developing countries in meeting the basic needs of their populations varies enormously. Figures for life expectancy at birth and rates of literacy provide rough measures of achievement. For example, among countries with populations of over half a million people, life expectancy at birth in 1977 was estimated to be less than 45 years in 12 countries—Afghanistan, Angola, Bhutan, Chad, Ethiopia, Guinea, the Lao People’s Democratic Republic, Mali, Mauritania, Niger, Senegal, and Somalia. It was 70 years or over in 10 countries—Argentina, Costa Rica, Cuba, Hong Kong, Jamaica, Panama, Singapore, the Republic of China, Trinidad and Tobago, and Uruguay. Similar variation occurs in rates of literacy: in 12 countries less than 20 per cent of the adults were literate in 1975, while 16 countries had adult literacy rates of over 80 per cent. The quality and extent of basic goods and services provided in the less developed countries also varies widely. For example, in the 5 best-served countries, there is one nurse for every 432 people; in the 5 worst-served countries, each nurse serves over 36,000 people (see table).

However, between 1960 and 1977, all developing countries improved their provision of basic goods and services, although the improvement was by no means uniform over all the countries. On average, life expectancy in low-income developing countries had risen from 40 years in 1960 to 50 by 1977; in middle-income developing countries it increased from 53 years on average in 1960 to 60 in 1977; in the industrialized countries it went from 69 years to 74; and in the centrally planned economies it rose from 58 years to 66. Similar improvements occurred in literacy rates; for example, among low-income countries the adult literacy rate rose from 29 per cent in 1960 to 36 per cent in 1977, while middle-income countries moved from 51 per cent in 1960 to 69 per cent in 1977.

Two factors are of major significance in explaining these large variations. One is countries’ past performance in the provision of basic needs goods and services: countries that did relatively well in 1960 also did relatively well in 1977, and conversely. Thus, of the 16 developing countries where life expectancy was over 60 years in 1960, in 14 life expectancy was over 70 in 1977. By contrast, in no country where life expectancy was less than 60 in 1960 was it over 70 in 1977. There was quite a substantial variation in the rate of improvement among countries between 1960 and 1977, but the strong correlation between present and past performance over the 17-year period indicates not only the importance of history but also the limits to major progress in the medium term.

Provision for basic needs in developing countries
EducationHealth servicesWaterNutrition
1976197619751974
Enrollment in primary educationPopulation per:Population with access to safe waterAverage per day
(As per cent of age group)DoctorNurse(In per cent)(In calories)As per cent of requirements1
MaleFemale
Average of lowest five countries24956,71036,76471,77376
Average of highest five countries2135127846432893,137125
Source: World Bank, World Development Indicators, 1979.

Requirements are defined by the UN Food and Agriculture Organization.

Among all less developed countries, excluding Greece, Israel, Portugal, and Spain.

Source: World Bank, World Development Indicators, 1979.

Requirements are defined by the UN Food and Agriculture Organization.

Among all less developed countries, excluding Greece, Israel, Portugal, and Spain.

The second major explanation of the varying performance of countries is the level of per capita income. Since this level determines the availability of resources, it helps determine national expenditures on goods and services that affect life expectancy and literacy. For a group of 86 developing countries in 1975, 52 per cent of the variance in life expectancy is related to differences in income per capita.

However, a large number of countries do much better (or much worse) than would be predicted by per capita income alone. The relationship between changes in income per capita and changes in performance on life expectancy and basic needs is much weaker—the change in per capita income providing virtually no explanation of the change in life expectancy between 1960 and 1970. (In fact, it was precisely the failure of growth of GNP to eliminate poverty which led to the new emphasis on basic needs.)

One reason why a country’s performance in meeting basic needs is not fully explained by per capita incomes is that the distribution of income among the population varies between countries and changes over time. One would expect the income of the poorest 40 percent of the population, rather than average per capita income, to be critical in determining basic needs performance. While data are inadequate for a full testing of the significance of income distribution, it is clear that those countries in which life expectancy is much higher than their per capita incomes might indicate also tend to have more egalitarian income distribution. And countries that do worse than might be predicted tend to have marked inequality in income distribution. Thus, two groups of countries—the socialist countries, which have fairly equal income distribution, such as the People’s Republic of China, Cuba, and North Korea, and the rather egalitarian market-oriented and mixed economies, such as Jamaica, the Republic of Korea, Sri Lanka, and the Republic of China, all provide better for basic needs than predicted. The countries with relatively unequal income distribution, on the other hand, such as the oil producing countries, do not perform as well as might be predicted on the basis of per capita income. But some countries with very inequitable distribution of income appear to be average performers in meeting basic needs.

Paradigms of success

The evidence from the Bank’s studies, together with more general evidence from other developing countries, enables us to classify countries according to their success, and tentatively suggests certain paradigms of performance. Life expectancy is the single most significant indicator of performance on basic needs. Comparing achievements in life expectancy with what might have been predicted on the basis of a country’s level of income per capita provides a way of classifying countries’ performance.

The countries whose achievements on life expectancy have been significantly above their expected level form a rather mixed bag. They include Burma, the People’s Republic of China, Costa Rica, Cuba, Hong Kong, Jamaica, North Korea, the Republic of Korea, Panama, Paraguay, Sri Lanka, the Republic of China, Thailand, and Uruguay.

In general, we may tentatively distinguish three types of economies which turn out to be notably successful.

The rapidly growing, market-oriented economies: Successful examples include the Republic of Korea and the Republic of China. They both combined relatively equal land and income distribution with rapid economic growth; the economic growth has been generally labor-intensive and employment-generating with considerable emphasis on human capital. For these countries, the prime impetus for success in meeting basic needs has been rising incomes among all sections of the community. These higher incomes have permitted increased expenditure by poor families for basic needs. The public sector has played a supportive role in providing near-universal primary education and health services, although public consumption as a proportion of national income has been below average. These economies show that a market-oriented strategy may succeed in meeting basic needs, given fairly equal initial distribution of incomes and land, and rapid economic growth which is not accompanied by a serious increase in inequality in income distribution.

The centrally planned economies: The People’s Republic of China and Cuba are examples of socialist countries which have been relatively successfuly in providing for basic needs. Their achievements are based on a combination of equitable income distribution and planning, with priority given to social investment. We know too little at this stage about the People’s Republic of China to say much in detail about its experience.

The Cuban achievements—average life expectancy of 72 years and almost universal literacy—reflect the high priority placed on education, health, and nutrition by the socialist government. Cuba has spent about twice as much of its national income on health and education as other developing countries with a similar income level. A system of subsidies and rationing has guaranteed a minimum balanced supply of food, clothing, and shelter to all the people, while expenditure on nonbasic private consumption has been curtailed. While precise figures are not available, it is believed that substantial asset redistribution combined with full employment has brought about an egalitarian distribution of income. However, the high priority given to social investment may have been partly at the expense of productive investment.

The “mixed” economy with welfare intervention: Sri Lanka’s programs provide a prime example. With income per capita at less than $200 a year, life expectancy in Sri Lanka is 69 years and 75 percent of the population is literate. The high level of achievement in Sri Lanka was the result of effective government intervention—on supply, through universal health and education programs, and on incomes, through food subsidies—which reinforced a fairly egalitarian income distribution.

The food ration accounted for about 20 per cent of the caloric intake of families with a household income below 400 rupees a month; in 1973 the subsidies amounted to about 14 percent of the income of families at that income level. The effect of the subsidies on health and nutrition was noticeable in 1974, when a cutback in the ration was associated with a marked increase in the death rate. Until recently, the programs were universal, not aimed at particularly needy groups. The distribution of income apparently became more equitable between 1953 and 1973, with the income share of the bottom 20 per cent rising from 5.2 per cent to 7.2 per cent. The distribution of taxes, government services, and subsidies was egalitarian, reducing overall inequality by one fifth according to one measure (that is, the Gini coefficient).

None of these three “successful” paradigms is easy to duplicate as a general model; each arises from special historical and political circumstances. Nonetheless, their stories suggest some of the essential elements of success: the fact that quite a large number of countries have been fairly successful (10 countries with life expectancies of over 70) shows that improved performance is feasible in varying circumstances and country situations.

Less successful cases

In contrast to the paradigms of success, the analysis also shows patterns of development that are associated with poor or moderate achievement in providing for basic needs. Such patterns are evident in three categories of developing countries.

Very poor economies: A number of small African countries are examples of this pattern. They lack almost all the elements needed to meet basic needs effectively. They have low incomes (around $100 a head) and low productivity; infrastructure and administration facilities are deficient; and there is very low expenditure on the main basic needs sectors. The sectors are closely linked, which means that advance on any single sector is likely to be ineffective if pursued alone. Curative health services, for example, tend to be rendered almost totally ineffective by low levels of nutrition, poor health and hygiene practices, low standards of sanitation, and unclean water. Similarly, the provision of clean water and sanitation services has little effect on health because of deficiencies in other services—particularly poor education that may prevent users from making proper use of the services. Yet simultaneous progress on all fronts is prevented by the lack of all the necessary resources—such as finance, administration, and skills.

The net effects of major deficiencies in all the basic needs sectors in these countries are very high levels of infant and child mortality—as many as 50 per cent of the children die before they are five in some areas. Most governments in such areas are now committed to a basic needs approach and recognize the deficiencies of past programs. Yet new programs are rendered rather ineffective by administrative deficiencies and by political pressures, at both national and local levels, which tend to deprive the underprivileged of access to basic services and produce urban and class bias in the distribution of services. The very low level of aggregate resources also severely limits the magnitude of any set of programs to meet basic needs.

Rapid growth without substantial poverty reduction: These are the economies where the “trickle down” of the benefits of growth has failed most notably; economic growth is combined with worsening income distribution. Not only do the incomes of the poor fail to keep up with the average; in some cases they actually fall in real terms, mainly because the growth process is rather capital intensive and favors the modern manufacturing sector at the expense of the rest of the economy. In many cases, the level of public services is low and the distribution of public services is rather inegalitarian, favoring the urban areas and the middle classes. Aspects of the performance of some of the larger countries in East Asia and Latin America illustrate this pattern.

Moderate growth, moderate poverty impact: This is a fairly typical development pattern. Here growth has been fairly capital intensive; as a result, additional incomes have tended to accrue to those in the modern sector rather than to the rural areas and the urban poor. In many of these countries up to a third of the population fall below an absolute poverty line, with poverty and malnutrition concentrated in the rural areas. Although public expenditure on basic services has tended to be quite high, performance in the field of education sometimes has been poor. The tax system has done almost nothing to offset maldistribution; the fairly high public expenditure benefits the middle classes disproportionately, and thus fails to contribute effectively to providing for the basic needs of the poor.

In contrast to the very poor countries, a noticeable feature of the last two categories is that a much improved performance could be achieved by redistribution of resources to those who are without access to them. For the most part, these countries have a sufficient margin of resources, at present devoted to luxury or semiluxury consumption in both private and public sectors, to make this feasible without a substantial reduction in investment. But one could expect very severe political obstacles to such redistribution. There would be strong resistance to cutting down on private consumption to build up public services. Moreover, the distribution of public services is quite strongly inegalitarian, so a buildup of the public sector might not have any major impact on basic needs among the poor. Political constraints arising from entrenched vested interests provide the major obstacle to substantial improvements in providing for basic needs.

The analysis of country performance suggests that there are two major determinants of achievements in meeting basic needs: first, the pattern of growth and the consequent distribution of incomes. An egalitarian, labor-intensive pattern of growth provides the poor with the purchasing power to ensure adequate nutrition and other essentials. The second determinant is the nature of government interventions in relation to basic needs—both in terms of the level of services and subsidies provided and their distribution. While in theory government interventions can offset initial inequalities caused by the process of development, political limits on intervention are normally such that in fact the most essential element for successfully meeting basic needs is to increase the incomes of the poor.

In general, there seems to be no systematic relationship between a country’s economic growth and its performance in meeting basic needs in the medium term. Some countries, such as the Republic of Korea and the Republic of China, have had rapid growth and improved performance while others, like Cuba and Sri Lanka, have done well on providing for basic needs but are below average on growth rates. Among the best performers in the area of basic needs, some have had above-average investment ratios for middle-income countries (the Republic of Korea, Paraguay, the Philippines, and the Republic of China) while others have had below-average ratios (Colombia, Cuba, Jamaica, Paraguay, and Sri Lanka). Because improving performance on basic needs increases the productivity of the labor force, it might be expected, in the medium to long term, to increase the overall rate of growth. A higher rate of growth, in turn, may be expected to improve performance on basic needs through its effects on per capita income. But much depends on the essential characteristics of the growth process.

Macroeconomic framework

The country studies and paradigms provide insights into the macroeconomic requirements for different types of countries to implement a successful program to meet basic needs. There is a need for a macro-economic framework to provide coherent and comprehensive guidelines for planning and for policy intervention in three areas of the economy: production, organization, and income. Developments in all three areas affect basic needs. (1) The production approach shows how the allocation of productive resources in the economy (for example, between the basic needs sectors, nonbasic needs consumption, and investment) has certain effects on basic needs. (2) These productive activities are carried out in different forms of organizations—the market sector, the public sector, and the household sector. The household, particularly, plays a critical role both in producing basic needs “goods” (food, health, and so on) and in using these goods. This use of basic needs goods by households largely determines their effectiveness in improving conditions of life. The public sector is also of particular importance in basic needs sectors, since it normally provides most health and education services and also intervenes actively in other sectors. The areas of production and organization deal with the supply of basic needs goods. (3) Planning for basic needs must also include an analysis of the way incomes are generated and distributed throughout society, since the level of income determines families’ purchasing power and, therefore, their demand for basic goods and services.

The three approaches must be consistent; in any particular country, successful planning for basic needs requires guidelines and action in each of them, while deficiencies in any one of the approaches may detract from the effectiveness of the overall strategy. Applying the three approaches to country performance described in this article, it is seen that organizational deficiencies were particularly notable in some countries. Poor household practices with respect to health and hygiene were a major factor in the persistence of unacceptable living conditions in the three African countries and in Indonesia; deficiencies in the provision of services by the public sector were evident in these countries and in Egypt. The failure to generate sufficient incomes among the poor was evident among all the weak performers, particularly in Brazil and Indonesia.

The “success” stories, on the other hand, showed all three aspects of the framework as effectively developed and coordinated; but the leading factor contributing to the success differed between countries. In the Republic of Korea and the Republic of China, the critical factor was a rapid and widely distributed growth in incomes; in Cuba, it was planned production; and in Sri Lanka, it was the combined effect of appropriate and efficient organization—the households were notably good at health/hygiene, and the public sector structure was successful in health and education—and in maintaining adequate real incomes for most of the population.

A major finding of the review of country experience is the very great variety of experience that is consistent with successful performance in meeting the basic needs of the population. Political and economic systems among successful countries vary widely. The macroeconomic framework provides a coherent way of classifying country performance and analyzing differences, although further development of such an approach and detailed application to particular countries are required. A major lacuna in our knowledge concerns aspects of political economy. We know that political factors are critical. But we are ignorant about the conditions that lead to an effective and determined basic needs approach to development. The paradigms provided by the country studies used in this analysis could serve as a guide in that direction.

Related reading

    J.FeiG.Ranis and F.Stewart“Basic Needs: A Framework for Analysis”World BankApril1979.

    International Labor OfficeEmployment Growth and Basic Needs—A One World ProblemGeneva1976.

    N.Hicks“A Note on the Linkages Between Basic Needs and Growth” World Development (forthcoming issue).

    N.Hicks“Sector Priorities in Meeting Basic Needs: Some Statistical Evidence”World BankApril1979.

    G.Sheehan and M.Hopkins“Meeting Basic Needs: An Examination of the World Situation in 1970,”International Labour ReviewSeptember-October1978.

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