Please Share the below Post
Rate this post

Measurement of Economic Development with Good Governance and Humane Governance Index (HGI):

Definition and Explanation:

The economists have presented an approach to measure economic development which is known as Humane Governance Index (HGI) as a measure of economic growth.

In the present day’s development economics ‘Good Governance’ has assumed a reasonable importance. The good governance is also known as Humane Governance. Thus these terms are used as alternatives. The concept of humane governance is the summation of good economic governance, good political governance and good civic governance. The experts agree that good governance is not imposed by the elites, rather it is framed by the people of a country. As a result of good governance the weakest persons of the society will be protected and they will be saved from molestation in their daily life. As a result of good governance, the govt. will be answerable. All the forces of administration, judiciary, bureaucracy, parliament, law and order and other employees of public services will have to be the servants along with civil.

In South Asian countries the political democracy is yet to have its roots and there exists a big gap in the rulers and the subjects. The persons having official powers are not ready to become civil-servants. This state of affairs can be attributed to low level of education, the discriminatory behavior regarding women and minorities, the imperialism, feudalism, superstitions and weak institutional set-up. Such all results in Bad-Governance or Mis-Governance. Thus, in the early years of 1990 the economists started associating economic development with good governance. In other words, economic development can possibly be attained if the developing countries change their existing social, political and economic system. Such all change is called good governance or humane governance.

Before we present good governance and its components the definition of Governance is presented, as given by UNDP:

Governance is such a system of economic, political and administrative authority which makes possible to understand and control the issues at each level of economy. The governance comprises the mechanism, methodology and institutions which help the citizens and groups to protect their interests. The persons, as a result of such governance, attain their legal rights, minimize their differences and perform their obligations along with the attainment of their rights”.

Types of Good Governance:

The good governance has three types:

(1) Good political governance, (2) Good civic governance and (3) Good economic governance.

They are discussed below:

(1) Good Political Governance:

In case of UDCs the social setup is of such a type that their political economies are surrounded by the lobbyists, vested interest groups and the politicians. These groups are aimed at pursuing those political policies which result in rapid holding of elections. While, on the contrary, the voters in these countries are always found hectic regarding tax-reductions, increasing the personal benefits and enhancing the opportunities of “Free-Riding”.

Moreover, in these countries the administration is always desirous to extend its net-work. They are hardly interested in serving the people. The voters believe in slogans, while the politicians, bureaucracy and vested interest groups protect their own interests. They lay-voters hardly attain any benefit from the prevailing political set-up. Thus the good political governance requires that:

(i) There should be a free judiciary in the country. (ii) There should be the free and fair elections in the country where so many parties could participate. (iii) There should be such a constitution where prompt amendments could not be made. (iv) There should be a decentralized system of powers in the country where the masses could participate in decision making. (v) There should be a transparent political system whereby the accountability of decision-makers and project operators could be made. (vi) Not only every person should have an access to the law, but all should be equal in the eyes of law. (vii) There should be the existence of such a political system in the country that the discrimination on the basis of sex and religion is abolished. (viii) Such a political set-up be evolved in the country that the opportunities of harmony between different states and within states could increase.

(2) Good Civic Governance:

The urban life of developing countries is furnished with a lot of problems. Here, people fail to get the basic requirements of life like water-supply and water-sanitation. They do not have any access to the public offices and their bosses. They have to be prey of a lot of official formalities and red-tapism. Because of official formalities the incentives of individual suffer leading to sabotage the. process of development. Here the individualism overshadows the collectivism. Everybody protects his own interests. In short, in UDCs there is a severe shortage of good civic governance. The provision of good civic governance may lead to economic growth. They good civic governance is possible if:

(i) the institutions providing civic facilities are decentralized. A proper system of accountability of administration of these institutions is made possible. If the machinery is decentralized and the participation of the masses is made the decisions regarding the local projects will be made in time. The masses will be able to get the civic amenities like education, health, medical-care water sanitation and water supply. All such would lead to uplift their health standard. Consequently, the human resource development will take place. (ii) The human rights be protected. The basic facilities to the farmers be provided particularly, the deprived segments of the society be provided with basic needs regarding I fooding, clothing and housing (iii) The people be provided with information regarding I different issues at a larger level. (iv) The steps be taken to promote collectivism in the! country.

(3) Good Economic Governance:

Regarding good economic governance the role of state regarding market is evaluated. The neo-classical economists have always been suspicious about the role of govt. in market. They highly believed in market economy. They were of the view that Smith’s invisible hand would lead to allocate the scarce resources optimally in different uses. The neo-classical further say that if the role of state in the economy is increased:

(i) The competitive forces will get weaker. The price distortions will rise leading to increase rent-seeking opportunities. (ii) The activities of wealth getting and wealth earning will be affected, particularly when the people have to face unexpected taxes Because of such fact the concept of ‘Minimalist State’ became popular in the world. The purpose of this state is to (a) maintain macro-economic stability with the help of an autonomous central bank. Such stability is possible due to balanced budget, low inflation rate and a stable exchange rate, (b) This minimalist state will provide protection to the property owners. Again, this state will provide legal framework and rule of the law.

During 1930s Great Depression and with the evolution of Keynesian Economics the free market economy have had a set-back. After, 1945, when II world war came to an end the role of state in each country went on to increase. The proportion of govt. expenditures which was 10% of GDP in 1913 in OECD countries went to 50% of GDP in 1995. While during the period of 1960 to 1985 such expenditures increased from 15% of GDP to 30% of GDP in case of UDCs. But in recent days so many other incidents took place, as:

(i) The central planned economies of Russia and Eastern European countries collapsed. (ii) The welfare states suffered from financial crisis. (iii) The govts. of UDCs failed to provide directly productive activities. The same was also true in case of social services.

In such state of affairs the need for definition of good economic governance was realized which could establish a link between economic development and social justice. With this, it was realized that the activities of the state should be in accordance with its efficiency. This means that state should pay more attention in the provision of social services. This will result in a better civil society where the private sector could be able to work efficiently and fairly. The greater intervention on the part of govt. in state would result in weakening of competitive forces.

The price distortions will rise and incentives will come to an end. The unproductive expenditures will grow and the resources will be used un-optimally. Thus, there exists a consensus amongst economists that free market economy will be more helpful for the long run growth, as here the prices of factors of production reflect the scarcity of such factors. But the market should not be allowed to work in such a way that the less privileged sects of the society could suffer. The state has not shown a very remarkable performance regarding provision of social services in so many UDCe. Thus, the good economic governance requires that:

(i) There should be stability at macro-economic level, i.e., rate of inflation should be lower one, no greater fluctuations in exchange rate and reduction in budget deficits. (ii) People should be having protection regarding their properties, i.e., the govts. will not take-over the privately owned resources. This will promote market economy where people will be having incentives leading to boost income and outputs, (iii) Such activities be discouraged which promote rent earning chances. In other words, the hoarding and speculation like activities be discouraged. (iv) Greater funds be allocated for the provision of basic education, health, clean water, adequate nutrition and family planning services and micro credit for the poor in the budget. (v) The progressive system of taxation be launched so that the greater part of income and wealth could be shifted over to govt. With such amounts the welfare expenditures could be met along with provision of subsidies to the poor. (vi) Each person should have an access to acquire laud and loans. In certain countries the discriminatory practice is followed regarding women to get loans and properties. Thus, the good economic governance requires that any discrimination in market regarding women, children, old-aged and disabled should be discarded. (vii) The good economic governance demands for the existence of a strong institutional set-up. The institutions represent the laws.

Accordingly, not only the productive activities will expand but the wealth of the country will also go up. As if in a country, the regulatory and legal set-up exists in its effective form, the saving and investment will be encouraged. The position of govt. policies could be ascertained and property rights could be protected. It is. said that if people have access to the courts, there are laws against bankruptcy, corruption and they are strictly followed, all such would provide grease to the wheels of market economy. This will encourage inventions and innovations in the market economy and economic changes will occur. This means that the institutions create efficiency in the market economy. Thus, the good economic governance requires a system based upon effective judicial system, legal, social, political and economic institutions. If such like situation is not created, the economic activities will not only lead to create inefficiency but the inequalities in the system will also grow. Thus, due to good economic governance when the institutional inefficiencies come to an end, not only economic development is accelerated, but the degrees, intensities and incidence of poverty also declines.

Thus, if any country gets rid of existing orthodox system, abolishes feudalism, linguistic, religious and ethnic prejudices, changes social and economic set-up, the flow of expenditures towards the privileged sections of the society is diverted from the traditional budgeting procedure is abolished and it is redesigned in the light of modern trends, the taxation system is improved, particularly the tax-rebates for the rich are put to an end, the local govt. system is improved, the powers are decentralized, the participation of common man in political and economic affairs is increased, an effective system of acceptability is established which is implemented at each level, the illegal capital outflow is checked, the tax evasion is stopped, the corruption at official level is removed, the leakages in the revenues are removed, the social and economic injustices are put to an end and the human and natural resources are optimally utilized, all such would reflect Good Governance or Humane Governance (HGI).