The Family and Economic Development: Socioeconomic Relevance and Policy Design

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1 The Family and Economic Development: Socioeconomic Relevance and Policy Design Dr. Maria Sophia Aguirre Department of Business and Economics The Catholic University of America Institut Catolique de Madagascar Antananarivo, Madagascar June 14, 2007

2 Is the Family Relevant for Economic Development? Some would argue that the family is key because: Ø The earth is limited Ø The family is a hostile place for women and children Ø Large families threaten countries stability Others argue that the family is key because: Ø Healthy families are needed for the economy to fulfill its purpose. Therefore it is a reference point for policy Ø Growth of the population does not equal poverty Ø The aging population trap threatens sustainable economic growth and development

3 I Would Like to Argue The focus on family and population is not necessarily incorrect, but both the population control policies used and the approach of some international organizations and countries to the family are mistaken. This is because: Ø Healthy families are essential for a country as they have a direct impact on human, moral, and social capital, and therefore, on resource use, economic activity, and economic structures. Ø Resources are used inefficiently when directed towards policies that weaken families in stead of policies that strengthen them. This, in turn, hampers the sustainability of real economic growth and perpetuates poverty.

4 On this point, I have good company Nobel Laureate, 1992 No discussion of human capital can omit the influence of families on the knowledge, skills, values, and habits of their children and therefore on their present and future productivity. Becker (1991) Nobel Laureate, 1998 The human development approach must tale full note of the robust role of the human capital, while at the same time retaining clarity about what the ends and means respectively are. What needs to be avoided is to see human beings as merely means of production and material prosperity. Sen (1994)

5 How Does the Family Fit in the Economy? Basic Activities Means Used Role of the Family Purpose Production Resources Human Capital Basic Needs Exchange Market Human, Moral, Social Capital Profit Consumption Optimization and Distribution Appropriate distribution Wellbeing (welfare)

6 Socioeconomic Relevance Children develop best within a family that is functional, i.e., with their biological parents in a stable marriage The academic and social performance of a child is very closely related to the structure of the family in which he lives and this is important for the quality of human and social capital The psychological stability and health of a child is closely related to healthy families and this is important for worker productivity and government finances

7 Ø The breakdown of the family is a symptom of a sick and weak society ü Abuse of women is 25 times more likely to occur in an irregular family. ü Men who have witnessed domestic violence are three times more likely to abuse their own wives and children. ü Substance abuse and teen-age pregnancy is higher in broken families. ü Women and children of broken families have a higher probability of living in poverty. ü Increase of the social welfare expenditures burden.

8 Percentage of Families that are in Poverty by Family Structure and Ethnicity, Married Single Married Single Married Single Married Single White Asian and Pacific Black Hispanic Source: Annual Demographic Survey, Poverty in the U.S.: US Census Bureau, March 2005, Table POVO2.

9 Percentage of Women who are in Poverty by Family Structure and Ethnicity, Married Single Married Single Married Single White Black Hispanic Source: Annual Demographic Survey, Poverty in the U.S.: US Census Bureau, March 2005, Table POVO2.

10 Percentage of Children who are in Poverty by Family Structure and Ethnicity, Married Single Married Single Married Single White Black Hispanic Source: Annual Demographic Survey, Poverty in the U.S.: US Census Bureau, March 2005, Table POV13.

11 Developed Countries Welfare Expenditures vs. Developing Countries Debt in 2003 Nigeria Mexico Brazil UK WE FD France 561 Germany 867 US Million of Dollars Source: CIA World Handbook, 2005.

13 Wealth in Canada 160, , ,000 Canadian Dollars 100,000 80,000 60,000 40,000 Wealth 20,000 Housing Marital Status 3 Housing Wealth Wealth Distribution

14 Net Wealth in Canada 160, , , ,000 Canadian Dollars 80,000 60,000 40,000 20,000 0 Less HS HS Terciary College 1 2 Marital Status Level of Education

16 Players and Perspectives in the Debate Ø The Population Control Perspectives Ø The Women's Rights Perspective Ø The Children's Rights Perspectives Ø Sexual and Reproductive Rights Perspective Ø The Gender Perspective

17 1. The Population Control Argument First: rapid growth in population means the spread of poverty and aggravates conditions such as as poor health, malnutrition, illiteracy, and unemployment (Bucharest, 1974) Second: population threatens government stability in developing countries, and encourages confrontation between developed and developing countries (Memorandum 200) Third: it pushes future generations to scarcity, and an unsustainable environment carrying capacity (Rio, 1992) Fourth: it sees population growth to be symptomatic of the larger problem of women's oppression the more children a woman has, the less opportunity she has for her own self-actualization and development (Cairo, 1994 and Beijing, 1995)

18 2. The Women's Rights Perspectives Family is seen as a factor that oppresses and subordinates women socially because children curtails the mother s development. Access to 'reproductive information and services' frees women from this situation, since ignorance makes women have more children than they desire. Women have the right to be women, whether they work in the home or outside of it. Motherhood and the family do not oppress women, but rather offer women fuller expression. Women become a policy tool, by reducing them to their reproductive and sexual traits or capacities, they fail to recognize the fullest dimensions of women

19 3. The Children's Rights Perspectives Normal perspective: holds children as the recipients of parental protection and guidance. Parents held their rights in their stead until they grew out of minority status. Recent perspective: wishes to endow children with greater autonomy, regardless of age, and argues that these autonomous children hold certain rights over and against their parents. Both views are present in the 1989 Convention on the Rights of the Child. The Recent perspective: n seriously challenges the parental rights recognized by the Universal Declaration of Human Rights n drives a wedge in the parent-child relationship by setting parent and child on equal footing n neglects any understanding of an organic relationship of parents and children.

20 4. Arguments for Sexual and Reproductive Rights Reproductive Health Ø An individual Good Population Stabilization Ø A Common Good

21 A. Reproductive Health: An Individual Good It is an end in its own right and a foundation stone to achieve women s empowerment, education and health. Thus education and its promotion is for the individual good. Reproductive health and universal access to contraception are integral to achieve equality between men and women Therefore, it is the responsibility of the government to ensure the universal exercise of this human right

22 B. Reproductive Health: A Common Good It is a foundation stone of prosperity and better quality of life for all people. They are essential to achieve sustainable development. The global and national needs are sustainable development and environmental preservation, and people are the most important threat. Accordingly, global and national needs coincide with personal rights and interests (UNFPA 98) The assumption underlying this argument is the Malthusian Theory of population and resources.

23 Therefore, the sexual and reproductive rights perspective Ties together the population control perspective and the women's rights perspective, and increasingly, also children's rights. Argues that if information is made available, women will use these services and will have fewer children. This, in turn, will free women from home and enable their personal development. It will also curbs population growth. Is supported by the UN Conferences of the past twenty-five years, Is based, on the false premises that all women want fewer children, motherhood is an oppressive institution, and population growth is a negative occurrence. It also ignores the problems of an aging population.

24 5. The Gender Perspective They argue that the traditional binary understanding of gender as male and female restricts personal sexual expression. The gay-lesbian lobby, radical women's rights groups, and population control groups such as the International Planned Parenthood Federation (IPPF), are the main supporters of an understanding of gender that allows for bisexual, transsexual, homosexual, etc. The population control perspective is supportive of alternative gender language insofar as non-heterosexual couples imply fewer children, while the gay-lesbian lobby and radical women s groups want greater sexual freedom of expression.

25 Economic Theories Classical Economic Growth: Malthusian Theory picked up by Coals and Hoover (1958) Neo-Classical Theory: Solow (1956) Human Capital Theory: Gary Becker Neo-Malthusian Theory: Ehrlich (1968) and Hardin (1968)

26 The inverse relationship between population and growth The consumption effect The production effect on private and public goods Age Distribution effect Dilution of Capital

27 Neo-Classical Theory Investment plays a key role in the economic process. ü The adjustments in growth take place due to the behavior of investment in physical capital. ü It determines the growth adjustment process ü Country characteristics determine the relative level of income. ü Shocks may only play a minor role in determining economic growth. ü ü These models have explained the experience of developed countries, they have failed to explain worldwide experience. Human Capital has also been incorporated.

28 Neo-Malthusian Theory Two main sub-categories The Limited Resource Perspective: takes the classic Malthusian argument and applies it to all natural resources The Socio-Biological Perspective: almost acting as a sub-set of the former, treats the environment as a limited resource and regards people as a threat to the biodiversity and ecological balance of that resource.

29 hundreds of millions of people will die of starvation by the 1970s, 65 million Americans will starve, the population of the U.S. will decline by 22.6 million persons, and England will cease to exist by (Ehrlic, 1968) The population connection must be made in the public mind. Action to end the population explosion humanely and start a gradual population decline must become a top item on the human agenda: the human birthrate must be lowered to slightly below the human death rate as soon as possible. There still may be time to limit the scope of impending catastrophe, but not much time. More frequent droughts, more damaged crops and famines, more dying forests, more smog, more international conflicts, more epidemics, more gridlock, more crime, more sewage swimming, and other extreme unpleasantness will mark our course. (Ehrlich and Ehrlich, 1990)

30 People face serious health and poverty problems, especially in the developing world Lack of income and assets to attain basic needs: ü Human assets ü Natural assets ü Physical assets ü Financial assets ü Social assets ü Aging security Vulnerability to adverse shocks are linked to an inability to cope with them

Wastewater treated 29 / 97 Solid waste disposal: landfill or incinerated 31 / 78 Solid waste disposal: other

31 Environmental Health, Welfare and Living Conditions in Low Income Countries Indicator % access House Connection: water 48 / 99 House Connection: sewerage 46 / 99 House Connection: electricity 62 / 100 Water consumption (liter per person) 30 / 600 Wastewater treated 29 / 97 Solid waste disposal: landfill or incinerated 31 / 78 Solid waste disposal: other (dump,recycled,etc.) 66 / 22 Paved Road 19 / 94 Literacy 49 / 100 Under-five mortality (per 1000) 107 / 6 Public Expenditures on Health (%GDP) 1.3 / 6.2

32 Causes of Death in Women and Men Deaths Per Year (In Millions) Injuries Cancer Cardiovascular Diseases 5 million new cases per year Respiratory infections HIV/AIDS Respiratory diseases 8 million new cases per year Perinatal conditions Diarrhoeal Diseases Tuberculosis million new cases per year Malaria Maternal condition WHO, World Health Report, 2004, Annex Table 3.

33 Low Cost Effective Interventions Cost of Treatment and (annual cost per capita) US Dollars Treatment Costs Effectiveness Chemotherapy for TB (6 months ) $20.00 ($0.60) 95% Contraceptives (HIV) $14.00 ($1.90) 99% (85%-95%) Hydration salts for Diarrhea $0.33 ($1.60) 95% Pneumonia Antibiotics (5 days antibiotics) $0.27 High Measles (1 dose of vaccine) Malaria Pills / Nets Sources: CDS, WHO $0.26 ($0.50) $1 / $0.5 ($0.05/$4.5) 98% 100%

34 Cost of malaria to African countries is 1.3% of GDP per year, productivity of the worker is reduced by 60%. Direct and indirect costs of malaria in sub-saharan Africa in term of overall GDP is equivalent to a loss of $100 billion annually. 75% of TB infections and deaths occur in the year age group (the most productive group). 20%-30% of Income is lost due to TB. AIDS places seventh among the leading causes of death. The main mode of transmission are homosexual and heterosexual promiscuity and injected-drug-use (IDU) (all high risk behavior). Majority of maternal deaths are due to poor access to health care (1.9% of female death) Sources: Scaling Up the Response to infectious Diseases, 2002 and RBM 38, WHO, 2005

35 One-Year-Olds Fully Immunized 22% Decrease Tuberculosis Immunizations 35% Decrease Measles Immunizations Source: Human Development Report, 2005, Table 8

36 Infant Mortality Rates 92% Decrease Source: Human Development Report, 2005; Table 10

37 Undernourished Population Source: Human Development Report, 2005, Table 7

38 Life Expectancy at Birth 32.8 Years Source: Human Development Report, 2005, Table 1

39 Population living on less than $1 a day Population in Millions East Asia & Pacific South Asia Sub- Saharan Africa Latin America & Caribbean Europe & Central Asia Middle East & North Africa Source: World Development Report, 2005, Table 2.5

40 We know from economic analysis that in economic development Ø There is a positive correlation between ü human capital, infrastructure and economic growth ü healthy institutions and economic development ü health and income per capita Ø These positive correlations reflect an essential causal link running from human capital to ü healthy institutions (social capital) ü infrastructure and technology Ø Life expectancy is a significant predictor of economic growth

41 Solutions often Proposed Ø Outlined in the 8 UN Millennium Development Goals. Ø Population control ü Aging population trap Ø Safe sex and antiretroviral drugs. ü Although condoms give the best protection against HIV for men, the risk reduction for women is not as high (Davis and Weller,1999) ü Use of condoms increases the risk of contracting AIDS (UNAIDS 1996, NACHHD 1999, Green 2005) ü Not a solution for IUD and Heterosexual transmission ü Access to family planning increases sexual promiscuity (Kaiser 2000, Paton 2002, USAID 2002)

42 The message is clear, the only way to avoid acquiring HIV through sexual contact is abstinence from sexual involvement or restricting sexual activity to a mutually f a i t h f u l, m o n o g a m o u s, l i f e - l o n g relationship with a similarly uninfected heterosexual partner. In most cultures and for all recorded history, this relationship is known as marriage

43 Aging Trap Ø Social security system funding: the family cannot support the elderly Ø Competition between the younger and older people Ø Early retirement Ø To provide for the economic needs of the elderly, there is a reduction of funding allocated to training new generations Ø The transmission of cultural, scientific, technical, artistic, moral, and religious goods is endangered: "moroseness results. Add to this immigration. Ø Saving rates are affected by a society's age structure, mirroring the change in an individual's saving rate over the life cycle.

44 Speed of Population Aging Number of years for % of population aged 65 and over to rise from 7% to 14% Colombia Brazil Thailand Tunisia Sri Lanka Jamaica Chile Singapore China Azerbaijan Japan Spain United Poland Hungary Canada United Australia Sweden France Source: US Census Bureau, 2000

45 Allocation of Funds World Bank budgeted for $500 to combat malaria and for tuberculosis amounted to $560 million. The WHO funds totaled $309 million in for malaria and tuberculosis. For HIV/AIDS, the World Bank allocated $1.8 billion in grants, loans, and credits to fight HIV/AIDS Cost of Antiretroviral regimen has decreased significantly ($12,000 per year to $100) Annual population assistance levels reached $2 billion a year. The misuse of funds does not only affect health but also other fundamental elements of economic growth

46 Expenditure on Grant-Financed Development Activities of the United Nations System by Sector (Percentage of Total)

47 Expenditures on Grant-Financed Development Activities of the United Nations System by Sector 25 Percentage of Total Year Population Education Source: Compiled from Comprehensive Statistical Data on Operational Activities for Development, years

48 How Government Policies Can Help: Some Examples Ø Legislation that supports families vis a vis other types of living styles Ø Programs that support and promote healthy marriages and stable families Ø Changes in family subsidies/penalties for children Ø Parental leaves Ø Promotion and protection of the family as a means to eradicate poverty, especially the feminization of poverty Ø Programs directed towards fostering functional societies and markets, where corruption is not a fundamental part of governmental operations.

49 Education Transfer all government aid throughout voucher system Differentiate voucher, targeting more resources to the most needed (with higher cost of education) Spread out info about the key role of family within society and effect on educational outcomes Enhance parents owes and rights to educate their children (e.g areas such as sexual education) Allow parents (and or teachers) to get engage in municipal school management

50 Competitive Funds Prevent domestic violence and enhance health family relationships Sexual education programs designed and chosen at school level by parents and teachers Pre-marriage orientation Support programs for couple in crisis Programs aim to prevent alcoholism and drug abuse

51 Conclusion Ø The family is a necessary good for economic development: it should be promoted and protected if poverty reduction wants to be achieved. ü Children develop in the best way within a family that is functional, i.e., with his biological parents in a stable marriage. ü The breakdown of the family: damages the economy and the society since human, moral, and social capital is reduced and social costs increased.

52 The Neo-Malthusian approach is seriously flawed on many levels and policy actions based on such assumptions are inefficient and damage real sustainable development. They lead to: Aging trap: one child policy Weakening of the family Health problems Financial burden for government Family structure is relevant for wealth. This happens to be the case after other characteristics are controlled by. The impact of children on family wealth is best within marriage. Evidence seems to hold across countries. In socialized market economies the negative impacts seem to be mitigated but not eliminated. Healthy family structures support private property. Some of the recent reevaluations of family policies in developed countries seem to point in the right direction.

The Family and Economic Development

The Family and Economic Development Dr. Maria Sophia Aguirre Department of Business and Economics The Catholic University of America Family as Foundation for Social and Economic Development Focus on the