Saturday, 4 July 2015

Human Development as Positive Freedom: Latin America in Historical Perspective

This blog post was written by
Leandro Prados de la Escosura,
professor in Economic history at
Unidersidad Carlos
III de Madrid 
How much has well-being improved in Latin America over time? How does Latin America compare to the advanced nations? Have their differences widened? Why? 

Trends in well-being have been drawn on the basis of GDP per head. However, as development is increasingly perceived as a multidimensional process, a more comprehensive approach to living standards has been put forward. Leandro Prados de la Escosura provides new answers to these questions with the help of a new historical index of human development (HIHD) that covers from 1870, when large-scale improvements in health, helped by the diffusion of the germ theory of disease, and in primary education were initiated, to 2007, the eve of the Great Recession.
The HIHD shows substantial gains in Latin American human development since 1870 –and especially over 1900-1980-, with HIHD in 2007 nine-fold the level in 1870.

Trends in the HIHD do not match those observed for real GDP per head (Figure 1). Human development (excluding its income dimension) grew faster than real GDP per head over 1870-2007, but it is during the globalization backlash of the 1930s and 1940s when clearer discrepancies emerged. Thus, while real GDP per head slowed down as world commodity and factor markets disintegrated, better health and education practices became widespread resulting in a major advance in human development. Since 1970, the pace of advancement in human development has not matched that of economic growth, with a dramatic contrast in the 1980s when the collapse in per capita incomes paralleled moderate gains in well-being.

Figure 1 Real GDP per Head and Human Development (excluding income) Growth (%)

Social dimensions have driven human development gains in Latin America over the long run (Figure 2). Longevity accounts for the larger share during the first half of the twentieth century. Access to knowledge had, instead, a leading role in the late nineteenth century and during the second half of the twentieth century.

Figure 2 Drivers of HIHD Growth in Latin America, 1870-2007 (%)

The epidemiological or first health transition –that is, the phase in which persistent gains in lower mortality and higher survival were achieved as infectious disease gave way to chronic disease- was experienced in Latin America during the first half of the 20th century and, especially, over 1938-1950. 

Major gains in longevity up to mid-twentieth century were associated to advances in medical science and technology, such as the diffusion of the germ theory of disease (1880s), new vaccines (1890s), and sulpha drugs to cure infectious diseases (late 1930s) and antibiotics (1950s). Economic growth also contributed to expanding longevity through nutrition improvements -that strengthened the immune system and reduced morbidity- and public provision of health. In Latin America, however, such an advance often did not result of widespread treatment of infectious diseases with sulpha drugs and antibiotics, largely inaccessible to its low-income population, but was achieved through low-cost public health measures and the diffusion of hygienic practices, often during periods of economic stagnation.

Since mid-20th century, longevity gains slowed down in Latin America as the early-life, first health transition was exhausted. In comparison with advanced economies (OECD countries, for short) an incomplete catching up took place in Latin America between 1900 and 1980, as part of a wider process that embraced all developing regions (Figure 3). Life expectancy only made a substantial contribution to catching up during 1938-1950. Education has been the leading dimension in catching-up, especially, during the second half of the twentieth century (but for the 1980s).

Figure 3 Latin America’s HIHD Catching-up with OECD, 1870-2007 (%)
At the turn of twentieth century a second health transition has started in the advanced countries, with mortality falling among the elderly -as respiratory and cardiovascular diseases were fought more efficiently and their health and nutrition in childhood had been better. Latin America’s absence from this second health transition helps to explain why the region has fallen behind in terms of human development.

Latin America’s position relative to the OECD differs significantly in terms of human development (excluding its income dimension) and GDP per head. While sustained catching-up took place over the 20th century, in which Latin America achieved almost two-thirds of OECD level, in terms of GDP per head, after a long phase of stability, Latin America’s declined since 1950, representing only one-fourth of OECD level at the beginning of the 21st century. A comprehensive depiction of human development needs to incorporate the opportunities individuals have in the choice of life, which includes exercising their political capabilities and influencing public decisions. 

The case of Cuba provides an extreme contrast between the success in achieving ‘basic needs’ in health and education and the failure to enlarging people’s choices –the core of human development- as agency and freedom are curtailed by the political regime. The same caveat applies to fascism and other totalitarian regimes under capitalism that suppressed freedom and agency across Latin America. Nonetheless, it is reassuring that, since 1950, human development and democratization are correlated in Latin America and their association grows stronger as their levels get higher.

A development puzzle emerges from the previous discussion and raises key questions. 
Why are trends in GDP per capita and human development uncorrelated over long periods of time when increases in per capita income would surely contribute to better nutrition, health and education? Does the explanation lie more with public policy (e.g. public schooling, public health, the rise of the welfare state), or with the fact that medical technology is a public good? 

Why did life expectancy stop being the driving force of world human development as the first health transition was concluded? Why Latin America has been so far left behind in the second health transition? Is it due to a lack of public policies, or to an inequalising effect of new medical technologies? To what extent did restricted access to health and education, as a result of income inequality, play a role? These questions deserve further investigation, as the answers are likely to have far-reaching policy ramifications.

By: Leandro Prados de la Escosura (Universidad Carlos III and CEPR)

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