Human Development Report

1. OVERVIEW
Changing today's consumption patterns
-for tomorrow's human development
World consumption has expanded at an spicuous display to meeting basic needs-
unprecedented pace over the 20th century, today's problems of consumption and Trend is not
with private and public consumption human development will worsen.
destiny-change is
expenditures reaching $24 trillion in 1998, But trend is not destiny, and none of
twice the level of 1975 and six times that of these outcomes is inevitable. Change is possible
1950. In 1900 real consumption expendi- needed-and change is possible.
ture was barely $1.5 trillion. In short, consumption must be shared,
The benefits of this consumption have strengthening, socially responsible and
spread far and wide. More people are better sustainable.
fed and housed than ever before. Living • Shared. Ensuring basic needs for all.
standards have risen to enable hundreds of • Strengthening. Building human capabili-
millions to enjoy housing with hot water and ties.
cold, warmth and electricity, transport to and • Socially responsible. So the consumption
from work-with time for leisure and sports, of some does not compromise the well-
vacations and other activities beyond any- being of others.
thing imagined at the start of this century. • Sustainable. Without mortgaging the
How do these achievements relate to choices of future generations.
human development? Consumption is Human life is ultimately nourished and
clearly an essential means, but the links are sustained by consumption. Abundance of
not automatic. Consumption clearly con- consumption is no crime. It has, in fact,
tributes to human development when it been the life blood of much human
enlarges the capabilities and enriches the advance. The real issue is not consumption
lives of people without adversely affecting itself but its patterns and effects.
the well-being of others. It clearly con- Consumption patterns today must be
tributes when it is as fair to future genera- changed to advance human development
tions as it is to the present ones. And it clearly tomorrow. Consumer choices must be
contributes when it encourages lively, cre- turned into a reality for all. Human devel-
ative individuals and communities. opment paradigms, which aim at enlarging
But the links are often broken, and when all human choices, must aim at extending
they are, consumption patterns and trends and improving consumer choices too, but in
are inimical to human development. Today's ways that promote human life. This is the
consumption is undermining the environ- theme of this report.
mental resource base. It is exacerbating
inequalities. And the dynamics of the con-
sumption-poverty-inequality-environment The 20th century's growth in
nexus are accelerating. If the trends continue consumption, unprecedented in its
without change-not redistributing from scale and diversity, has been badly
high-income to low-income consumers, not distributed, leaving a backlog of
shifting from polluting to cleaner goods and shortfalls and gaping inequalities.
production technologies, not promoting
goods that empower poor producers, not Consumption per capita has increased
shifting priority from consumption for con- steadily in industrial countries (about 2.3%
OVEI{VIEW

2. annually) over the past 25 years, spectacu- poverty in industrial countries-a multi-
larly in East Asia (6.1 %) and at a rising rate dimensional measure of human deprivation,
in South Asia (2.0%). Yet these developing on the same lines as the human poverty
regions are far from catching up to levels of index presented in Human Development
industrial countries, and consumption Report 1997 for developing countries but
growth has been slow or stagnant in others. more appropriate to the social and economic
The average African household today con- conditions of the industrial countries.
sumes 20% less than it did 25 years ago. The new human poverty index (HPI-2)
The poorest 20% of the world's people shows that some 7-17% of the population in
and more have been left out of the con- industrial countries is poor. These levels of
sumption explosion. Well over a billion peo- deprivation have little to do with the average
ple are deprived of basic consumption income of the country. Sweden has the least
The new human needs. Of the 4.4 billion people in develop- poverty (7%), though ranked only thirteenth
ing countries, nearly three-fifths lack basic in average income. The United States, with
poverty index sanitation. Almost a third have no access to the highest average income of the countries
(HPI-2) shows that clean water. A quarter do not have adequate ranked, has the highest population share
some 7-17 % of the housing. A fifth have no access to modern experiencing human poverty. And countries
health services. A fifth of children do not with similar per capita incomes have very dif-
population in attend school to grade 5. About a fifth do ferent levels of human poverty. The
industrial countries not have enough dietary energy and pro- Netherlands and the United Kingdom, for
is poor tein. Micronutrient deficiencies are even example, have HPI-2 values of 8% and 15%,
more widespread. Worldwide, 2 billion peo- despite similar income levels.
ple are anaemic, including 55 million in HPI-2 shows conclusively that under-
industrial countries. In developing coun- consumption and human deprivation are
tries only a privileged minority has motor- not just the lot of poor people in the devel-
ized transport, telecommunications and oping world. More than 100 million people
modern energy. in rich nations suffer a similar fate. Nearly
Inequalities in consumption are stark. 200 million people are not expected to sur-
Globally, the 20% of the world's people in vive to age 60. More than 100 million are
the highest-income countries account for homeless. And at least 37 million are with-
86% of total private consumption expendi- out jobs, often experiencing a state of social
tures-the poorest 20% a minuscule 1.3%. exclusion. Many conclusions about depri-
More specifically, the richest fifth: vation apply to them with equal force.
• Consume 45% of all meat and fish, the
poorest fifth 5%.
• Consume 58% of total energy, the poor- Ever-expanding consumption puts
est fifth less than 4%. strains on the environment-emissions
• Have 74% of all telephone lines, the and wastes that pollute the earth and
poorest fifth 1.5%. destroy ecosystems, and growing
• Consume 84% of all paper, the poorest depletion and degradation of renewable
fifth 1.1%. resources that undermines livelihoods.
• Own 87% of the world's vehicle fleet,
the poorest fifth less than 1%. Runaway growth in consumption in the past
How rewarding is today's pattern of 50 years is putting strains on the environ-
consumption in terms of human satisfac- ment never before seen.
tion? The percentage of Americans calling • The burning of fossil fuels has almost
themselves happy peaked in 1957-even quintupled since 1950.
though consumption has more than dou- • The consumption of fresh water has
bled in the meantime. almost doubled since 1960.
Despite high consumption, poverty and • The marine catch has increased fourfold.
deprivation are found in all industrial coun- • Wood consumption, both for industry
tries and in some they are growing. This and for household fuel, is now 40% higher
year's Report presents a new index of than it was 25 years ago.
2 I IUlV1AN DEVELOPMENT REPORT J998

3. Rapid consumption growth for some, stagnation for others, inequality for all-with mounting
environmental costs
Consumption is distributed inequitably
Shares of world consumption, 1995 Relative growth-
income, population
t and consumption
20%
share Percentage Increase, 1975-95
+
..
I
tt Cars in East Asia
,. .
- I',
•
60%
share
Telephones in Arab States
.. ~
I
T
20%
share
t
Electricity in South Asia
McDonald's restaurants
in Arab States (1991-96)
Televisions in Latin America
C
erea/s Radios in Africa
,I Cable TV in China
Source: World Bank 1997d; ITU 1997b; UN 1996c and 1997b; (1990-95)
FAO 1997a and 1998; UNESCO 1997d.
World GDP
World population
Food in Africa
1975
22.7
Per capita CO 2 emissions, 1995
Metric tons yearly
USA
Canada
Industrial countries
Germany 10.3
Japan .,
South Africa
I.
Mexico
China East Asia
5.7
Brazil
South Asia
Latin America & Caribbean
Arab States
Source: CDIAC 1996; UN 1996c and 1997b; UNESCO 1997d; World Bank 1997c 1950 60 70 80 90
=
95
South-East ASia & Pacific
Sub-Saharan Africa
OVERVIEW 3

4. Yet growth in the use of material • The world's forests-which bind soil
resources has slowed considerably in recent and prevent erosion, regulate water sup-
years, and much-publicized fears that the plies and help govern the climate-are
world would run out of such non-renewable shrinking. Since 1970 the wooded area per
resources as oil and minerals have proved 1,000 inhabitants has fallen from 11.4
false. New reserves have been discovered. square kilometres to 7.3.
The growth of demand has slowed. • Fish stocks are declining, with about a
Consumption has shifted in favour of less quarter currently depleted or in danger of
material-intensive products and services. depletion and another 44% being fished at
Energy efficiency has improved. And tech- their biological limit.
nological advance and recycling of raw • Wild species are becoming extinct
materials have boosted efficiency in mater- 50-100 times faster than they would natu-
Poor people and ial use, now growing more slowly than rally, threatening to tear great holes in the
economies. Call this dematerialization. The web of life.
poor countries per capita use of basic materials such as
bear many costs steel, timber and copper has stabilized in
of unequal most GECD countries-and even declined The world's dominant consumers are
in some countries for some products. overwhelmingly concentrated among
consumption So, non-renewables are not the urgent the weU-off-but the environmental
problem. It is two other crises that are damage from the world's consumption
nudging humanity towards the "outer lim- falls most severely on the poor.
its" of what earth can stand.
First are the pollution and waste that The better-off benefit from the cornucopia
exceed the planet's sink capacities to absorb of consumption. But poor people and poor
and convert them. Reserves of fossil fuels are countries bear many of its costs. The sever-
not running out, but use of these fuels is est human deprivations arising from envi-
emitting gases that change the ecosystem- ronmental damage are concentrated in the
annual carbon dioxide (C0 2 ) emissions poorest regions and affect the poorest peo-
quadrupled over the past 50 years. Global ple, unable to protect themselves.
warming is a serious problem, threatening to • A child born in the industrial world adds
play havoc with harvests, permanently flood more to consumption and pollution over his
large areas, increase the frequency of storms or her lifetime than do 30-50 children born
and droughts, accelerate the extinction of in developing countries.
some species, spread infectious diseases- • Since 1950 industrial countries,
and possibly cause sudden and savage flips because of their high incomes and con-
in the world's climates. And although mate- sumption levels, have accounted for well
rial resources may not be running out, waste over half the increase in resource use.
is mounting, both toxic and non-toxic. In • The fifth of the world's people in the
industrial countries per capita waste genera- highest-income countries account for 53%
tion has increased almost threefold in the of carbon dioxide emissions, the poorest
past 20 years. fifth for 3%. Brazil, China, India, Indonesia
Second is the growing deterioration of and Mexico are among the developing
renewables-water, soil, forests, fish, bio- countries with the highest emissions. But
diversity. with huge populations, their per capita
• Twenty countries already suffer from emissions are still tiny-3.9 metric tons a
water stress, having less than 1,000 cubic year in Mexico and 2.7 in China, compared
metres per capita a year, and water's global with 20.5 metric tons in the United States
availability has dropped from 17,000 cubic and 10.2 in Germany. The human conse-
metres per capita in 1950 to 7,000 today. quences of the global warming from carbon
• A sixth of the world's land area-nearly dioxide will be devastating for many poor
2 billion hectares-is now degraded as a countries-with a rise in sea levels,
result of overgrazing and poor farming Bangladesh could see its land area shrink by
practices. 17%.
4 I IUil-iAN DEVELOPMENT REPORT 1990

5. • Almost a billion people in 40 developing for or restore the agricultural resource base,
countries risk losing access to their primary to find alternatives to deforestation, to pre-
source of protein, as overfishing driven by vent desertification, to control erosion and
export demand for animal feed and oils to replenish soil nutrients. Poor people are
puts pressure on fish stocks. forced to deplete resources to survive; this
• The 132 million people in water- degradation of the environment further
stressed areas are predominantly in Mrica impoverishes them.
and parts of the Arab states-and if present When this reinforcing downward spiral
trends continue, their numbers could rise to becomes extreme, poor people are either
1-2.5 billion by 2050. forced to move in increasing numbers to
• Deforestation is concentrated in devel- ecologically fragile lands. Almost half the
oping countries. Over the last two decades, world's poorest people-more than 500
Latin America and the Caribbean lost 7 mil- million-live on marginal lands. Competitive
lion hectares of tropical forest, Asia and The poverty-environmental damage
Sub-Saharan Mrica 4 million hectares each. nexus in developing countries must be seen
spending and
Most of it has taken place to meet the in the context of population growth. In the conspicuous
demand for wood and paper, which has developing world pressures on the environ- consumption turn
doubled and quintupled respectively since ment intensify every day as the population
1950. But over half the wood and nearly grows. The global population is projected to
the affluence of
three-quarters of the paper is used in indus- be 9.5 billion in 2050, with more than 8 bil- some into the
trial countries. lion in developing countries. To feed this social exclusion of
The poor are most exposed to fumes population adequately will require three
and polluted rivers and least able to protect times the basic calories consumed today,
many
themselves. Of the estimated 2.7 million the equivalent of about 10 billion tons of
deaths each year from air pollution, 2.2 mil- grain a year. Population growth will also
lion are from indoor pollution, and 80% of contribute to overgrazing, overcutting and
the victims are rural poor in developing overfarming.
countries. Smoke from fuelwood and dung How people interact with their environ-
is more dangerous to health than tobacco ment is complex. It is by no means simply a
smoke, but every day women have to spend matter of whether they are poor or rich.
hours cooking over smoky fires. Ownership of natural resources, access to
Leaded petrol, used more in developing common properties, the strength of com-
and transition economies than in industrial munities and local institutions, the issue of
countries, is crippling human health, per- entitlements and rights, risk and uncer-
manently impairing the development of tainty are important determinants of peo-
children's brains. In Bangkok up to 70,000 ple's environmental behaviour. Gender
children are reported to be at risk of losing inequalities, government policies and
four or more IQ points because of high lead incentive systems are also crucial factors.
emissions. In Latin America around 15 mil- In recent times environmental aware-
lion children under two years of age are at ness has been increasing in both rich and
similar risk. poor countries. The rich countries, with
These environmental challenges stem greater resources, have been spending
not only from affluence but also from grow- more on environmental protection and
ing poverty. As a result of increasing impov- clean-up. The developing countries, though
erishment and the absence of other they have fewer resources, have also been
alternatives, a swelling number of poor and adopting cleaner technologies and reducing
landless people are putting unprecedented pollution, as in China.
pressures on the natural resource base as The world community has also been
they struggle to survive. active on environmental problems that
Poverty and the environment are caught directly affect poor people. Such areas
in a downward spiral. Past resource degra- include desertification, biodiversity loss and
dation deepens today's poverty, while exports of hazardous waste. For example,
today's poverty makes it very hard to care the Convention on Biological Diversity has
OVER1EX· 5

6. near-universal signature, with over 170 human lives. Do they further deepen
parties. The Convention to Combat poverty as households compete to meet ris-
Desertification has been ratified by more ing consumption standards-crowding out
than 100 countries. But the deterioration of spending on food, education and health?
arid lands, a major threat to the livelihoods Do these patterns motivate people to spend
of poor people, continues unabated. more hours working-leaving less time for
And there are other immediate environ- family, friends and community?
mental concerns for poor people, such as And is globalization accelerating these
water contamination and indoor pollution, trends in competitive spending and rising
that have yet to receive serious international standards?
attention. Global forums discuss global
warming. But the 2.2 million deaths yearly
Globalization is from indoor air pollution are scarcely Globalization is integrating consumer
mentioned. markets around the world and opening
creating new opportunities. But it is also creating
inequalities and new inequalities and new challenges for
new challenges for Rising pressures for conspicuous protecting consumer rights.
consumption can turn destructive,
protecting reinforcing exclusion, poverty and Globalization is integrating not just trade,
consumer rights inequality. investment and financial markets. It is also
integrating consumer markets. This has two
Pressures of competitive spending and con- effects-economic and social. Economic
spicuous consumption turn the affluence of integration has accelerated the opening of
some into the social exclusion of many. consumer markets with a constant flow of
When there is heavy social pressure to new products. There is fierce competition
maintain high consumption standards and to sell to consumers worldwide, with
society encourages competitive spending increasingly aggressive advertising.
for conspicuous displays of wealth, inequal- On the social side local and national
ities in consumption deepen poverty and boundaries are breaking down in the setting
social exclusion. of social standards and aspirations in con-
Some disturbing trends: sumption. Market research identifies"global
• Studies of US households found that elites" and "global middle classes" who fol-
the income needed to fulfil consumption low the same consumption styles, showing
aspirations doubled between 1986 and preferences for "global brands". There are
1994. the "global teens"-some 270 million 15- to
• The definition of what constitutes a 18-year-olds in 40 countries-inhabiting a
"necessity" is changing, and the distinctions "global space", a single pop-culture world,
between luxuries and necessities are blur- soaking up the same videos and music and
ring. In the 1980s Brazil, Chile, Malaysia, providing a huge market for designer run-
Mexico and South Mrica had two to three ning shoes, t-shirts and jeans.
times as many cars as Austria, France and What are the consequences? First, a
Germany did when they were at the same host of consumption options have been
income level 30 years earlier. opened for many consumers-but many
• Household debt, especially consumer are left out in the cold through lack of
credit, is growing and household savings are income. And pressures for competitive
falling in many industrial and developing spending mount. "Keeping up with the
countries. In the United States households Joneses" has shifted from striving to match
save only 3.5% of their incomes, half as the consumption of a next-door neighbour
much as 15 years ago. In Brazil consumer to pursuing the life styles of the rich and
debt, concentrated among lower-income famous depicted in movies and television
households, now exceeds $6 billion. shows.
Many voice concerns about the impact Second, protecting consumer rights to
of these trends on society's values-and on product safety and product information has
6 HUMAN DEVELOPMENT REPORT 1998

7. become complex. Increasingly, new prod- dalously deep and extensive deprivation for
ucts with higher chemical content, such as future generations.
foods and medicines, are coming on the Developing countries today face a
market. When information is not adequate, strategic choice. They can repeat the indus-
or safety standards are not strictly enforced, trialization and growth processes of the past
consumers can suffer-from pesticides that half century, and go through a development
are poisonous, from milk powder that is phase that is inequitable, and creates an
contaminated. enormous legacy of environmental pollu-
At the same time the consumer receives tion. Or they can leapfrog to growth pat-
a flood of information through commercial terns that are:
advertising. An average American, it is • Pro-environment, preserving natural
estimated, sees 150,000 advertisements on resources and creating less pollution and
television in his or her lifetime. And waste. Developing
advertising is increasing worldwide, faster • Pro-poor, creating jobs for poor people
than population or incomes. Global and households and expanding their access
countries today can
advertising spending, by the most conserva- to basic social services. leapfrog to growth
tive reckoning, is now $435 billion. Its growth If poor countries can leapfrog in both patterns that are
has been particularly rapid in developing consumption patterns and production tech-
countries-in the Republic of Korea it nologies, they can accelerate consumption
pro-environment
increased nearly threefold in 1986-96, in the growth and human development without and pro-poor
Philippines by 39% a year in 1987-92. In the huge costs of environmental damage.
1986 there were only three developing coun- They can incorporate many of the available
tries among the 20 biggest spenders in adver- technologies that are not only less environ-
tising. A decade later there were nine. And in mentally damaging but clean-solar energy,
spending relative to income, Colombia ranks less energy-intensive crop production,
first with $1.4 billion, 2.6% of its GDP cleaner paper production technologies.
Leapfrogging technologies will enhance
the prospects for development by saving
Poor countries need to accelerate their the huge costs of environmental clean-up
consumption growth-but they need that many countries are now incurring. The
not follow the path taken by the rich cost savings will go beyond the direct costs
and high-growth economies over the of cleaning up old toxic sites, scrubbing coal
past half century. power plants and so on. Health care costs
linked to environmental damage can also be
Not only have consumption levels been too saved. And leapfrogging will bypass the
low to meet basic needs for more than a bil- lock-in that can result from inappropriate
lion people, their growth has often been slow infrastructure development.
and interrupted by setbacks. In 70 countries Some argue that the scope for cheap,
with nearly a billion people consumption effective and politically less contentious
today is lowerthan it was 25 years ago. It can- antipollution policies is very limited in poor
not be raised without accelerating economic countries. This is a myth. Many actions have
growth-but growth has been failing many already been taken. And further options
poor people and poor countries. Despite the exist:
spectacular growth of incomes for many • Higher yields can be achieved through
people in Asia, only 21 developing countries more intensive agricultural methods rather
worldwide achieved growth in GDP per than more fertilizers and pesticides.
capita of at least 3% each year between 1995 • Phasing out lead in petrol costs only 1-2
and 1997-the rate needed to set a frame cents per litre for the refinery, as Mexico
for reducing poverty. and Thailand have shown.
Some suggest that developing countries • Solar power and compact fluorescent
should restrain their consumption in order lightbulbs can increase efficiency fourfold
to limit environmental damage. But this and reduce the need for rural electricity
would mean prolonging the already scan- grids.
OVERVIEW 7

8. • Clean four-stroke engines can be made the incentives and options to move towards
compulsory for motorcycles and three- consumption patterns that are less environ-
wheelers, as Thailand has done. mentally damaging and less socially harm-
These show what is possible. But to real- ful. People care about the impact of
ize the potential, more needs to be done to consumption on their own health and
develop and apply innovations. safety-and the broader impact on the
Affluent societies in industrial countries environment and society. But they are
also face strategic choices. They can con- caught up in a system of limited choices and
tinue the trends in consumption of the past opportunities and perverse incentives.
decade. Or they can shift to consumption Here's a seven-point agenda for action.
that is pro-people and pro-environment.
Continuing past trends would increase
Consumption levels industrial countries' consumption by four- 1. Ensure minimum consumption
to fivefold over the next half century. Some requirements for all-as an explicit
of over a billion argue that growth must be slowed and con- policy objective in all countries.
poor people must sumption downsized. But the real issue is
be raised not growth of consumption but its impacts "Everyone has the right to a standard ofliv-
on people, the environment and society. If ing adequate for the health and well-being
societies adopt technologies that diminish of himself and his family, including food,
the environmental impact of consumption, clothing, housing and medical care and nec-
if patterns shift from consuming material essary social services ... Everyone has the
goods to consuming services, growth can right to education" (Universal Declaration
help, not hinder, moves to sustainability. of Human Rights). These principles of uni-
The strategic choices of rich countries as the versalism and human rights acknowledge
world's dominant consumers, will be criti- the equal rights of everyone-women, men
cal in determining the future. and children-without discrimination.
They demand governance that ensures that
AGENDA FOR ACTION all have enough to eat, that no child goes
without education, that no human being is
Five goals are central: denied access to health care, safe water and
• Raise the consumption levels of more basic sanitation and that all people can
than a billion poor people-more than a develop their potential capabilities to the
quarter of humanity-who have been left full extent.
out of the global expansion of consumption Strong public action is needed to meet
and are unable to meet their basic needs. these goals. This means a mix of public pro-
• Move to more sustainable consumption visioning in basic social services and an
patterns that reduce environmental dam- enabling environment and incentive system
age, improve efficiency in resource use and for private and voluntary action. It means:
regenerate renewable resources-such as • Strong public policies to promote food
water, wood, soils and fish. security-ranging from conducive mone-
• Protect and promote the rights of con- tary, fiscal, commercial and pricing policies
sumers to information, product safety and to institutions and incentives to promote
access to products that they need. local production and distribution.
• Discourage patterns of consumption • Priority public expenditures for basic
that have a negative impact on society and social services-education, health, safe
that reinforce inequalities and poverty. water, basic sanitation. Not only should ser-
• Achieve more equitable international vices be expanded, but access should be
burden-sharing in reducing and preventing made more equitable. Studies in many
global environmental damage and in reduc- countries show that access favours the
ing global poverty. better-off rather than the poor, and urban
The key is to create an enabling envi- rather than rural populations.
ronment for sustainable consumption- • Infrastructure for transport and energy
where both consumers and producers have to provide affordable and efficient services
8 Hurv1AN DEVELOPMENT REPORT 199~

9. for people, not just economic growth. TIlls and governments to support more techno-
means, for example, public transport, paths logical development and application.
for bicycles and pedestrians and energy Rather than attempting to pick and pro-
from renewable sources in rural areas. mote winning technologies, governments
• Incentives to develop "poor people's can help create a dynamic marketplace to
goods"-low-cost housing materials, perform that task more effectively. The
energy-saving equipment and food storage state can require all energy providers-
systems. public and private-to supply a fixed mini-
• Institutions and legal frameworks that mum share of energy from renewable
secure people's rights to housing, to com- sources-either by generating it themselves
mon property, to credit. or by purchasing it from other providers.
John Kenneth Galbraith wrote 40 years TIlls approach both ensures the introduc-
ago about private affluence amid public tion of renewable energy sources in the A second green
squalor. Far from narrowing, the contrasts market and stimulates innovation of more
have grown, and to them are added private efficient and lower-cost technologies.
revolution is
and environmental squalor. The benefits of cleaner technologies have needed-primarily
been well demonstrated, as with the reduc- to benefit the
tion of material use in GEeD countries.
2. Develop and apply technologies and Many technological solutions already exist
world's poorest
methods that are environmentally for environmentally friendly goods, but cur-
sustainable for both poor and affluent rent pricing structures undervalue environ-
consumers. mental costs and benefits-and thus reduce
market incentives. Increased public support
Human development can be sustained with for further research and development could
purposeful action. The challenge is not to accelerate the pace of technological progress.
stop growth. It is to change the patterns of There is a particular need for technolo-
consumption and production, using new gies to meet the requirements of the poor.
technologies to achieve greater efficiency About 2 billion people in developing coun-
and to reduce waste and pollution. Many tries lack access to electricity. Meeting this
such technologies are already in production need through clean, renewable sources of
or on the drawing board. energy can reduce poverty and indoor air
Sustainable growth of consumption and pollution. The sun and wind are available at
production depends on major advances in no cost to villages that have little hope of
cleaner, material-saving, resource-saving being connected to electricity grids.
and low-cost technologies. Also needed are W1l1dpower, now the world's fastest-
consumption options that are environmen- growing source of energy, meets only 1% of
tally friendly and low cost and affordable global demand. India aims by 2012 to pro-
for the poor. But many do not yet exist- vide 10% of its electricity from renewables,
these need to be invented. And those that which could provide half the world's energy
exist need to be better marketed-goods by the middle of the next century.
that use less energy and fewer renewables Perhaps most important among tech-
(water and wood), that create less waste nologies for the poor are those for agricul-
and pollution and that are low in cost. Such tural production in ecologically marginal
options may be available in some coun- environments. Improvements in food pro-
tries-the zero-emission car, for example- duction in much of Asia and Latin America
but not worldwide, or they may be only at would not have been possible without the
the experimental stage. Public expenditure green revolution-the scientific break-
on research and development in energy has throughs that provided high-yielding vari-
declined by a third in real terms since the eties of rice, wheat and maize. The world
early 1980s. Moreover, less than 10% goes average yield of these crops has more than
to energy efficiency improvements. The rest doubled over the past 20 years. But this did
goes largely to fossil fuel and nuclear energy not happen in areas of lower rainfall and in
development. The case is strong for firms the more fragile ecological zones, where
O1cR'lEX' 9

10. people subsist on millet and sorghum-and Environmental taxes-<:harging for pol-
on cattle, sheep and goats. The world aver- lution, congestion and depletion-have
age yield of millet and sorghum increased proved higWy effective in both industrial
by only 15% over the past two decades. and developing countries. They have been
A second green revolution is needed for widely used in Western Europe and are the
these people, among the world's poorest. well-accepted core of green tax reforms-
But this should not just repeat the first rev- the Swedish air pollution tax and the Dutch
olution-it needs to aim both at increasing water pollution tax, for example. But not
yields and incomes and at preserving and just in Europe. Malaysia's effluent charges
developing the environmental base. and Singapore's automobile taxes are well
The private sector has a critical role established and effective.
too-not just to meet the challenges of In Europe the social costs of environ-
Removing perverse social responsibility but to produce environ- mental damage, unaccounted and unpaid,
mentally friendly, poverty-reducing goods. are estimated to average more than 4% of
subsidies and The market for environmental goods alone GDP Estimates for the United States range
imposing is estimated at $500 billion. But for the pri- from 2% to 12%. Users are encouraged to
environmental vate sector to act, it needs the right signals make excessive and wasteful use of road
from prices and incentives in the market. transport, with private cars most under-
taxes can promote priced and most environmentally damaging.
equitable growth Removing perverse subsidies that
3. Remove perverse subsidies and encourage environmental damage, lower
restructure taxes to shift incentives economic efficiency and benefit the
from consumption that damages the wealthy-and imposing environmental
environment to consumption that taxes instead-<:an be a catalyst for reduc-
promotes human development. ing inequalities and poverty and improving
the prospects for equitable growth.
Many developing countries use subsidies- Environmental taxes raise revenues that
on staple foods and basic energy supplies, for can be used to spend on environmental pro-
example-to help poor people survive and tection, to reduce taxes on labour, capital
reduce poverty. Yet at the same time, most and savings or to improve access to social
countries tax employment and subsidize pol- services for poor people.
lution and environmental damage directly The policy instruments described above
and indirectly. Such "perverse" subsidies are present a win-win opportunity for changing
particularly common in the sectors of energy, consumption patterns to reverse environ-
water, road transport and agriculture. Total mental damage and increase the consump-
subsidies worldwide in these four sectors are tion of the poor. Removing water subsidies,
estimated at $700-900 billion a year. They for example, would reduce water use by
are also often distributionally regressive, ben- 20-30%-and in parts of Asia by as much
efiting mostly the wealthy-often political as 50%. That would make it possible, with-
interest groups-while draining the public out large, environmentally destructive
budget. water development projects, to supply safe
The absolute amount of subsidies is drinking water to most of the 1.3 billion
about twice as large in the OECD countries people now lacking it.
as in the rest of the world. In the OECD Another example: congestion charges
countries agriculture is most heavily subsi- can finance improvements in public trans-
dized (more than $330 billion), followed by port and expand transport options. They can
road transport ($85-200 billion). In devel- ease congestion, save time, lower the costs
oping and transition economies the largest of public transport and, usually, improve the
subsidies go to energy ($150-200 billion) distribution of income. Road transport sub-
and water ($42-47 billion). In the words of sidies in developing countries amount to $15
the Earth Council, "the world is spending billion. The increased involvement of the
hundreds of billions of dollars annually to private sector in financing, building and
subsidize its own destruction." operating public transport systems in the
10 HUMAN DEVELOPMENT REPORT 1998

11. 1990s is creating pressure to reduce road Sweden bans television advertising directed
subsidies and increase user fees. Argentina at children under 12.
cut subsidies to suburban rail systems by $25 Where price incentives are inadequate,
million between 1993 and 1995 when it pri- environmental laws and regulations are
vatized the operation of urban transport. needed. Skilfully devised, controls can be
The benefits of a shift from taxing enabling for the consumer, not restricting.
employment to taxing pollution and other But implementation is as important as leg-
environmental damage could be consider- islation. Strong institutions, free from cor-
able. An GECD study on Norway suggests ruption, are needed to enforce regulations
that a revenue-neutral shift would reduce in such areas as rights to land, security of
unemployment while encouraging recycling tenure in housing and accurate information
and reducing environmental damage. on consumer goods to protect the interests
More and more countries are realizing of poor people. Consumer rights
that old policies and subsidies have adverse Regulation and market interventions
consequences. Thus energy subsidies in can be mutually reinforcing. Sometimes
must be protected
developing countries have fallen from more regulation is needed to initiate action that from unbalanced
than $300 billion in the early 1990s to about can later be taken further with price incen- information flows
$150-200 billion today. Environmental tives. At other times price incentives can be
taxes are multiplying. But perverse subsi- used to make a start-with regulation later
dies are still huge, and environmental taxes to ensure wider compliance, especially after
have reached nowhere near their potential. fostering social acceptance.
Even in the Nordic countries, where some A new approach that has gained consid-
of the most interesting experiments are erable interest and momentum in recent
being carried out, pollution taxes and con- years is self-regulation through publicizing
gestion charges raise only about 7% of gov- information on industrial polluters. This
ernment revenues. encourages the production of information
about pollution generation, both as a source
of incentive for behavioural change and as
4. Strengthen public action for a benchmark for subsequent regulation. A
consumer education and information well-known example is the US Toxic
and environmental protection. Release Inventory, which requires busi-
nesses to report the amounts of toxic mate-
The expansion of consumer choice has lit- rials that they put into the environment.
tle significance if choices are based on Many companies respond by reducing pol-
wrong or misleading information. Strong lution to preserve their reputations.
public action to protect consumer rights is
needed to offset vastly unbalanced infor-
mation flows dominated by commercial 5. Strengthen international mechanisms
advertisements. to manage consumption's global
Consumer rights must be defended impacts.
through:
• Strict standards for consumer health Environmental damage crosses borders. So
and safety. do shifts in consumption patterns and
• Product labelling about the content and habits. Poverty and inequality are issues of
proper use of products and their environ- global magnitude and thus cannot be tack-
mental and social impact. led by nations singly. They require interna-
• Information and awareness campaigns tional action.
about potential health hazards, such as International responsibilities for ensur-
smoking tobacco and the improper use of ing the sustainability of natural resource use
feeding formula for infants. have been debated in numerous forums.
Advertising can serve positive purposes, The Kuala Lumpur Meeting of the Parties
but controls are needed, especially on tele- to the Basel Convention on the Ban on
vision advertising targeting young children. Hazardous Waste agreed to ban the export
OVERVIEW 11

12. of such waste to poor countries. Both the sumers are willing to pay price premiums of
Convention on Biological Diversity and the 5-10% for products that are more environ-
Convention on International Trade in mentally sound (in production, operation
Endangered Species of Wild Flora and and disposal).
Fauna have been quite successful. Businesses are responding to consumer
Although some of these agreements demand for cleaner, safer products.
sometimes fall short of expectations and Evidence from Eastern Europe shows that
ideals, they are steps in the right direction. firms exporting to the European Union tend
The recent Kyoto Meeting on the United to have cleaner production processes than
Nations Framework Convention on Climate firms that produce for the domestic markets,
Change has set industrial country targets for which are less environmentally demanding.
emissions of carbon dioxide and proposed a Conventional wisdom assumes that
Strong civil society Clean Development Mechanism to assist environmental damage is a necessary con-
developing countries. Both the financirlg sequence of economic growth. This is
alliances should be and the institutional arrangement for this wrong. Environmental damage is a drain on
built to protect mechanism must be dealt with by the global economic growth, and it is possible to pur-
consumer rights community. Another problem that needs to sue a path to growth that does not damage
be addressed: the continuing decline of offi- the environment.
cial development assistance and the mount- Poverty eradication, environmental sus-
ing unsustainable debt of poor countries. tainability, consumer rights protection-all
Many global instruments to tackle envi- these build on one another. Eradicating
ronmental and poverty issues are under- poverty does not require growth that ignores
developed-such as environmental trading consumer rights or destroys the environ-
permits, debt swaps and fair trade schemes. ment. Quite the opposite. Protecting con-
These instruments tend to be double-edged sumer rights and protecting the environment
swords, however, and need to be carefully are necessary for eradicating poverty and
negotiated so that they do not penalize poor reducing inequalities.
nations and make them even poorer. There is great potential for building
Tradirlg environmental permits should not closer alliances among the environmental
mean permanently giving away the rights of movement, the women's movement, the
developing countries. A coordirlating global movement for children, consumer groups
institution in the form of the proposed and pressure groups against poverty. Already
international bank for environmental set- their central concerns show great conver-
tlements is needed to develop and manage gence. Stronger alliances are needed-and
these instruments equitably. possible-if each movement emphasizes the
common need for human development.
United and mobilized together, these groups
6. Build stronger alliances among the can achieve much more.
movements for consumer rights,
environmental protection, poverty
eradication, gender equality and 7. Think globally, act locally. Build on
children's rights. the burgeoning initiatives of people in
communities everywhere and foster
Consumer groups have been a powerful synergies in the actions of civil society,
force for protecting consumer rights world- the private sector and government.
wide. They have helped remove unsafe
products from the market and promote The growing number and strength of con-
proper labelling and the supply of safe and sumer and environmental movements
low-cost goods. around the world-includirlg the 2,000
Now consumers increasingly are using town and city Agenda 21s that have been
the power of their purses to push the inter- prepared-reflect the commitment of peo-
ests of communities even halfway around ple to takirlg collective action. Many opin-
the globe. Studies in Europe show that con- ion surveys show that people place a higher
12 HUMAN DEVELOPMENT REPORT 1998

13. value on community and family life than on Increases in consumption should be
acquiring material possessions. And many planned and encouraged-but with atten-
people are asking how they can give more tion to nurturing the links, to making sure
emphasis to human concerns. that the increases contribute to human
Some 100 countries have prepared development and to avoiding extremes of
national human development reports, inequality. FOlward-looking perspectives
assessing their present situations and draw- are also needed-to avoid infrastructure
ing conclusions on actions to achieve more and institutions that may lock a country into
human patterns of development. Most of unsustainable or socially dysfunctional
these plans have analysed needs in the crit- consumption.
ical areas of education, health and employ- In the better-off countries-most of the
ment, often linking them with opportunities industrial countries and some of the richer
for generating resources from reduced mil- developing countries-the challenge is dif- Increases in
itary spending. ferent. The priority to eradicate poverty and
These initiatives in many cases are the ensure the basic needs of all remains.
consumption
outcomes of successful alliances of the gov- Indeed, the failure of the richest countries must also nurture
ernment, institutions of civil society and to do that is a scandal. But as general living links to human
international organizations. standards rise and the proportion in poverty
Progress has also been made in the area falls, the balance of attention in economic
development
of sustainable consumption and a cleaner and social policy needs to shift. Increasingly,
environment as a result of civil pressure, the policy focus needs to move towards
public action and private sector responses. enlarging the options for patterns of con-
The instruments: eco-taxes and subsidy sumption in which human creativity can be
removal, stiff environmental regulations lived out and carried forward with diversity
backed by penalties, community efforts for and fulfilment, with most of the population
better management of common resources at comfortable levels of consumption, well
(erosion control, reforestation) and more above the margins of subsistence. These
equitable provisioning of public infrastruc- policies need to be combined with those of
ture and services. the environment and human development.
This shows what is possible. It also shows Recent experiences give considerable
that support exists for a cleaner environment, hope, with more evidence showing that
a more equitable society and the eradication changes in consumption patterns towards
of poverty. Individuals, households, civil soci- sustainable poverty reduction are possible.
ety groups, governments and private busi- Hope brings challenge. The high levels
nesses-all have a role, and together their of consumption and production in the
complementary efforts can build even more world today, the power and potential of
energy and synergy for action. technology and information, present great
opportunities. After a century of vast mate-
• • • rial expansion, will leaders and people have
the vision to seek and achieve more equi-
In the poorer countries many priorities in table and more human advance in the 21 st
consumption still need to be addressed. century?
OVERVIEW 13

14. WHAT IS HUMAN DEVELOPMENT?
Human development is a process of enlarging development requires strong social cohesion and
people's choices. Enlarging people's choices is equitable distribution of the benefits of progress
achieved by expanding human capabilities and to avoid tension between the two. And the
functionings. At all levels of development the power of collective action is an essential driving
three essential capabilities for human develop- force in the pursuit of human development.
ment are for people to lead long and healthy • Equity. Concerns for equity take centre stage
lives, to be knowledgeable and to have access to in the human development perspective. The
the resources needed for a decent standard of notion of equity is most often applied to wealth
living. If these basic capabilities are not or income. But human development emphasizes
achieved, many choices are simply not available equity in basic capabilities and opportunities for
and many opportunities remain inaccessible. all-equity in access to education, in health, in
But the realm of human development goes fur- political rights.
ther: essential areas of choice, highly valued by • Sustainability. Sustainability means meeting
people, range from political, economic and the needs of present generations without com-
social opportunities for being creative and pro- promising the abilities and opportunities of
ductive to enjoying self-respect, empowerment future generations. It thus implies both intra-
and a sense of belonging to a community. generational and intergenerational equity.
Income is certainly one of the main means of Sustainability is an important dimension of
expanding choices and well-being. But it is not human development. Human development is a
the sum total of people's lives. process of enlarging people's choices. But such
enhancement must be for both present and
Current global concerns and human future generations without sacrificing one for
development the other.
Here is how human development relates to cur- In the 1990s there have been major global
rent global concerns: debates on sustainable development (United
• Human rights. Human development leads to Nations Conference on Environment and
the realization of human rights-economic, Development in Rio, 1992) and for people-cen-
social, cultural, civil and political. The human tred sustainable development (World Summit for
development perspective takes an integrated Social Development in Copenhagen, 1995).
view of all human rights-not the narrow and These have a common core, not to be missed,
exclusive focus on civil and political rights. It pro- with human development. Human development
vides a framework in which advancing human is not a concept separate from sustainable devel-
development is commensurate with realizing opment-but it can help to rescue "sustainable
human rights. development" from the misconception that it
The 1948 Universal Declaration of Human involves only the environmental dimension of
Rights affirms that "everyone has the right to a development.
standard of living adequate for the health and All these approaches have emphasized the
well-being of himself and his family, including need for people-centred development, with
food, clothing, housing and medical care and concerns for human empowerment, participa-
necessary social services ... Everyone has the tion, gender equality, equitable growth, poverty
right ... to education ... to work ... [and] to reduction and long-term sustainability.
social security." Subsequent international
human rights instruments reaffirmed people- Measuring human development-human
centred development as a universal right-iden- development index
tifying as additional dimensions the right to Human Development Reports, since the first in
security, participation, freedom of association, 1990, have published the human development
freedom from discrimination and exclusion from index (HDJ) as a measure of human develop-
development. ment. Recognize, however, that the concept of
• Collective well-being. Individual rights, human development is much broader than the
choices and opportunities cannot, however, be HDI. It is impossible to come up with a compre-
unlimited. One person's freedom can constrain hensive measure-or even a comprehensive set
or violate the freedom of many others. As the of indicators-because many vital dimensions of
reaction to the excessive individualism of the free human development are non-quantifiable. But
market shows, there is a need for socially respon- a simple composite measure of human develop-
sible forms of development. Individual and col- ment can draw attention to the issues quite
lective well-being are intertwined, and human effectively. The HDI is not a substitute for the
14 HUMAN DEVELOPMENT REPORT 1998

15. fuller treatment of the richness of the concerns this separate index has been devised for indus-
of the human development perspective. trial countries, drawing on the greater availabil-
The HDI measures the overall achievements ity of data. It focuses on deprivation in the same
in a country in three basic dimensions of human three dimensions as HPI-1 and one additional
development-longevity, knowledge and a one, social exclusion. The variables are the per-
decent standard of living. It is measured by life centage of people likely to die before age 60, the
expectancy, educational attainment (adult liter- percentage of people whose ability to read and
acy and combined primary, secondary and ter- write is far from adequate, the proportion of
tiary enrolment) and adjusted income. people with disposable incomes of less than
50% of the median and the proportion of long-
Human poverty index term unemployed (12 months or more).
While the HDI measures overall progress in a
country in achieving human development, the Gender-related development index
human poverty index (HPI) reflects the distribu- The gender-related development index (GDI)
tion of progress and measures the backlog of measures achievements in the same dimensions
deprivations that still exists. The HPI measures and variables as the HDI, but captures inequali-
deprivation in the same dimensions of basic ties in achievement between women and men.
human development as the HDI. It is simply the HDI adjusted downward for gen-
der inequality. The greater the gender disparity
HPI-1 in basic human development, the lower a coun-
The HPI-1 measures poverty in developing coun- try's GDI compared with its HDI.
tries. The variables used are the percentage of
people expected to die before age 40, the per- Gender empowerment measure
centage of adults who are illiterate and depriva- The gender empowerment measure (GEM)
tion in overall economic provisioning-public reveals whether women can take active part in
and private-reflected by the percentage of economic and political life. It focuses on partic-
people without access to health services and ipation, measuring gender inequality in key
safe water and the percentage of underweight areas of economic and political participation
children under five. and decision-making. It tracks the percentages
of women in parliament, among administrators
HPI-2 and managers and among professional and
Introduced in this year's Report, the HPI-2 mea- technical workers-and women's earned
sures human poverty in industrial countries. income share as a percentage of men's.
Because human deprivation varies with the Differing from the GDI, it exposes inequality in
social and economic conditions of a community, opportunities in selected areas.
HOI, GOI, HPI-1, HPI-2-Same components, different measurements
Longevity Knowledge Decent standard of living Participation or exclusion
HDI Life expectancy at birth 1. Adult literacy rate Adjusted per capita income in PPP$
2. Combined enrolment ratio
GDI Female and male life 1. Female and male adult Female and male earned
expectancy at birth literacy rate income share
2. Female and male combined
enrolment ratio
HPI-1 Percentage of people not Illiteracy rate Deprivation in economic
expected to survive to age 40 provisioning, measured by:
1. Percentage of people without
access to water and health services
2. Percentage of undervveight
children under five
HPI-2 Percentage of people not Functional illiteracy rate' Percentage of people living Long-term unemployment
expected to survive to age 60 below the income poverty line rate (12 months or more)
(50% of median disposable income)
a. Based on level 1 prose literacy according to the results of the OEeD International Adult Literacy Survey.
OVERVIEW 15