International economists today know that good policies alone will not ensure economic development; effective social and civil institutions are required—indeed, they provide the most fruitful context for sustainable development. Functioning social institutions such as the family, the local community, the rule of law, the domestic security infrastructure, and public institutions, are absolutely essential in order for development programs to achieve their objectives. In practice, however, these institutions are often inadequate to meet the demands of development. Successful development initiatives, then, must identify the institutions relevant to the development effort, determine the improvements needed within those institutions, and then strengthen those institutions so they are able to perform the tasks required for development.
At the same time, international organizations and nongovernmental organizations (NGOs) now realize the importance of implementing systems that not only ensure more effective management of development but also measure the impact of their projects in the broader macroeconomic context as well as on the immediate recipients. Concerns have been raised with regard to traditional measures of development. One of the reasons for such concerns has been the metrics typically used to measure and analyze the progress made in advancing the development agenda. For example, an organization that implements a job training program will typically measure the participants’ improvement in specific skills or in income. In addition, however, the organization should also measure the resulting impact on the participants’ families, communities, and cultures as well as on a more complete definition of quality of life.
Similarly, in measuring the impact of development efforts, it is not only actual income but the use of that income that matters in terms of fundamental human development.
Responding to new international interests for sustainable development
The European Commission (EC) has recently embarked on the “GDP and Beyond Initiative” based on a successful series of conferences aimed at improving measures of progress, wealth, and well-being. Last year the EC published a roadmap and is expected to report on the implementation and outcomes of the key actions put forward by 2012 at the latest. The initiative’s intention is to complement GDP with environmental and social indicators relevant to the challenges of today. The Organization for Economic Cooperation and Development (OECD) is also developing a Global Project trying to assess society’s progress. Its goals were approved in 2007 in the Istanbul Declaration, which urges “statistical offices, public and private organizations, and academic experts to work alongside representatives of their communities to produce high-quality, facts-based information that can be used by all of society to form a shared view of societal well-being and its evolution over time”.
In macroeconomics, institutions such as the family and the community are referred to as human and/or social capital. They are essential components of the economic growth process. Development professionals working “on the ground” must understand the critical role that institutional effectiveness plays in economic development. Furthermore, they need the managerial proficiency to make those institutions more effective and the appropriate skills to undertake quantitative evaluation of programs.
“Integral economic development” is an approach to development that seeks to strengthen the civil and social institutions required for sustainable development; it takes an integrated view of the person in society as a social being, not as a selfish individual.