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Economic growth does not connote higher human development
Ana Sirbu, 20 September 2004
After a two-year pause, a fresh Human Development Report of Moldova was finally launched in the end of July. Its theme was Good Governance for Human Development. It has been determined that there is a strong direct correlation between the level of good governance and that of human development (HD) in a country. The topic elected has proved to be a very audacious one, as characterizing, analyzing and proposing potential measures for a country's governance is not an easy task.
HD is the fundamental goal of the humanity. It is the process of enriching the spectrum of human opportunities for the people all around the world. It permits and facilitates the accomplishment of beautiful, long, healthy lives. Although the human development index (HDI) does not provide us with an exact, irrefutable measure of the HD level of a certain country, it certainly gives us a good picture of where we stand among the other countries of the world in terms of income, health and education. Moldova is placed on the 113th position among 177 countries rated in the yearly Global Human Development Report, pertaining to the category of the Medium HD countries. Although Moldova was in the first half of the 90's one of the most progressive post-soviet republics in terms of reforms, it has not managed to even slightly maintain the position it had in 1990 when it was ranked on the 64th place according to its HDI. Since then, the human development level of Moldova fell drastically. Now, 14 years later, the republic's position is almost twice lower among the countries of the international community.
Our attention is caught by the fact that even after four years of steady economic growth: 2000-2003, although our GDP continues to rise, the HD level of the country does not ascend.
The HDI evaluates the general accomplishments in a country in terms of three basic aspects: longevity (life expectancy at birth), knowledge (adult literacy rate and combined enrolment ratio), and a decent standard of living (adjusted per capita income in Purchasing Power Parity-PPP$). This year's global report determined that, in 2002, Moldova was on the 113th place, with an HDI of 0.681 on a 0 to 1 scale.
There are three groups of countries according to their HD level: high HD: HDI>0.8; medium HD: 0.5
Now, more than 60% of the world's countries have a higher human development. Moldova is one of the Medium HD countries. But unfortunately, in the transition period, Moldova has had almost the lowest rhythm of economic growth (besides Tadjikistan) amongst all the ex-soviet republics
Although the country's GDP has grown by a total cumulative of 24.1% for the period 2000-2003, when economic growth was finally renewed, its HD position is that same 113th position as it was in 1995, after the sudden transition shock, when the country just started implementing market reforms. Comparing the data used to determine the HDI in both 1995 and 2002, we can analyze the structural changes this index experienced. Considering the components of the HDI in both those years, we are able to see in which areas the Republic of Moldova became stronger and which ones we regressed in. We can observe that life expectancy at birth increased by one year (from 67.8 in 1995 to 68.8 years of age in 2002), despite the high level of poverty and the low level of accession to healthcare by the financially vulnerable segment of the population.
In the education domain though, the situation worsened considerably. The adult literacy rate dropped by 8.9 points (98.9% in 1995 and 90.0 in 2002), and the combined first-, second-, and third-level gross enrolment ratio decreased by 5 points (from 67% in 1995 to 62% in 2002). Why is now almost 9% more of our population illiterate? A large number of people cannot afford education, not even first- and second- level education that is public and free. A large number of children are obliged to work within their households and later, instead of attending the University a lot of them chose to work, within the country or abroad. Although the total number of learning institutions in Moldova is now higher (1674 institutions in 1995 and 1778 in 2002), the total number of students pursuing their studies within these institutions has decreased: 766.5 thou in 1995 and 738.1 thou in 2002. Besides this, our population is steadily decreasing (4.34 mil. in 1995 and 4.23 mil. in 2003) and instead of the elderly people who had received an education, appears the new generation that is not too much aware of the importance of learning. A number of qualified workers, teachers, doctors, etc. leave the country and the schools remain without the employees it once had. Sending their remittances home, all these people contribute to a higher GDP of their country, but a higher GDP does not mean a higher human development level.
In Moldova, the GDP per capita grew indeed between 1995 and 2002, a change confirmed by the increasing GDP index: from 0.23 in 1995 to 0.45 in 2005 and the increasing real GDP per capita (PPP$) rank minus HDI rank index: from 23 in 1995 to 36 in 2002. Since the remittances sent home continue to increase, these numbers will most probably augment as well. However, we remain on the 113th place. According to the Department of Statistics and Sociology, Moldova is among the countries with a low level of income ($543 for the year 2003). Thus, if not for the remittances sent home by the people employed abroad, it would be a paradox that, with such low incomes, consumption is so pervasive and accounts for more than 100% of the country's GDP. The per capita income in Moldova also speaks about our current poverty situation: circa 40% of the population is below the poverty line. The income insufficiency and the income unequal distribution (the Gini coefficient was 0.421 in 2002) trigger a lower level of healthcare and a worse attitude toward education. Therefore, in order to reach a higher level of human development, the best has to be done in order to eradicate poverty.
We still have a long way to go. In the high human development countries, the average life expectancy at birth is circa 10 years higher than that in Moldova. Education dropped in Moldova, and enrolment in education institutions decreased (this percentage being of only 62%, compared to the high 80's and low 90's percentile of the highly developed countries). Therefore a higher attention has to be given to both healthcare and education.
Although we still are among the countries with medium Human Development, Moldova's position on the HDI ladder has significantly dropped since 1990. Poor education and healthcare are fully recognized signs of poverty, thus the best has to be done in order to eradicate poverty. Also, not only Moldova degraded since 1990, but the other CIS countries proved to be capable of a much sharper and effective progress. The HDI offers us information not only to know how developed we are in comparison with the other countries of the world, but also enables us to deduce a number of conclusions regarding the development dynamics of Moldova relative to other countries and the fields in which a number of measures need to be taken in order to improve our level of HD. It shows us the countries that progressed, that could give us an example of reforms the implementation of which was proved to be effective. Economic growth certainly helps, but it does not necessarily connote a higher HD level.