Japan's postwar recovery combined record and sustained economic growth with leaps forward in human development. In 1955-70 real GDP per capita was rising at around 10% a year. At the same time there was a big reduction in poverty and a narrowing of income gaps. Between the early 1960s and the mid-1980s the share of the national income received by the wealthiest 20% of households fell from 50% to around 45%, while that of the poorest 20% rose from 5% to 10%. One crucial reason for this double success in growth and human development was a commitment to equity in opportunities.

The base for this egalitarian development was built in the postwar period, when radical reforms were introduced to ensure that fascism did not resurge and to transform Japan into a more democratic society. Reforms included the abolition of the aristocracy, a new constitution based on democratic government, land reform, a wealth tax and equal rights for women.

The postwar government based its macroeconomic policy on low interest rates, mild inflation and a disciplined policy of budget surpluses, along with protective tariffs and preferential credit for selected industries. It also aimed at low unemployment, promoting vigorous job creation and by fostering countless small enterprises. Throughout the period of very rapid growth, at least 50% of non-agricultural workers belonged to enterprises with fewer than 100 employees. And wage levels rose steadily with productivity.

Through a virtuous cycle, progress in human development has both been stimulated by economic growth and contributed to it. In many respects human development was already high. Beginning with the Meiji reform in 1868, primary school enrollment was raised from 28% of school-age children in 1873 to to 96% in 1905, providing a solid foundation for rapid modernization.

After the Second World War the government continued to invest in the social sectors, helped by keeping defense spending to a minimum (below 1% of GDP). This produced dividends in education and health. Between 1960 and 1990 the percentage of he working-age population completing secondary or higher education doubled. Since the late 1950s infant mortality has fallen almost tenfold, from about 40 per thousand live births to about 4.3, one of the lowest rates in the world. Life expectancy increased from less than 70 in 1958 to 80 years in 1993. And today, those who need social safety nets tend to be disabled rather than poor.

In 1990 Japan's public expenditure on education and health was among the highest on a per capita basis - about $2,208, while the world average was only $336. The emphasis on education extends to a strong emphasis on research and development and on training workers in industry.

Japan's record is not perfect, however, and challenges lie ahead. Growth has slowed and unemployment is now rising above 3%. Inequality is also on the rise - with a growing number of elderly poor. Japan lags behind in gender equality, and women's participation in decision-making outside the home remains low. Environmental concerns also challenge policy-makers, though more progressive measures are now being pursued. And the Japanese people may choose more leisure rather than long hours of work.

Source:
Human Development Report 1996, UNDP, Box 2.3.

Ishikawa, Tsuneo, 1995, "Country Study on Japan."

In the century following 1870 Sweden's successes in economic growth and human development were spectacular and sustained. Its per capita income growth rate was second only to Japan's - and its progress in human development even more notable.

In the early stages export industries - timber, iron ore, paper and steel - were the country's engine of growth. Most export revenues were invested domestically to strengthen the economy and promote human development. Economic growth was remarkably stable, averaging more than 3% a year from 1890 to 1930.

This success depended on laying a solid foundation of basic human development during the late 19th century. The number of primary school students more than doubled betweemn1850 and 1870, and universal literacy was achieved by 1875. Technical education also expanded rapidly during this period.

The Great Depression of the 1930s and its aftermath marked a dramatic change in the Swedish model of development. In 1932 the Social Democratic Party swept to victory, ushering in a new era of equitable growth, low unemployment and expanded social protection (pensions, child allowances, rent controls and health insurance). The state intervened in the labor market and to help workers find jobs. As a result unemployment remained below 3% until the 1990s.

From 1930 through the early 1970s Sweden experienced a golden era of development characterized by both rapid growth and increasing equity through substantial redistribution of income. Sweden's Gini coefficient fell from 0.31 in 1967 to a historic low of 0.2 in 1982.

The government actively intervened in the economy to keep downturns infrequent and moderate. It maintained a liberal trade regime, strong incentives for business investment and an activist industrial policy, channelling credit into priority sectors.

But in the 1970s warning signals began to appear that such development could not be sustained. Public spending, already high at 43% of GDP in 1970, ballooned to 67% by 1982. Transfer payments such as family allowances and housing subsidies, grew rapidly.

Slow economic growth could not support continued increases in government deficits. While Sweden's rate of per capita income growth was 3.4% from 1961 to 1974, it slipped to only 0.6% in 1974-93. By the early 1990s Sweden was plunged into an unprecedented socio-economic crisis. Growth turned negative and unemployment leapt from 1.7% in 1990 to 8.2% in 1993.

Despite the slowdown in growth and an overhaul of the welfare state, human development remains high in Sweden. In the past 30 years advances in human development have outpaced increases in income. The country ranks among the top ten in the human development index. It has one of the most impressive records of equitable development, especially in gender equality. It ranks number one in the gender-related development index and number two in the gender empowerment measure.

Source:
Human Development Report 1996, Box 2.4, UNDP.

de Vylder, Stefan. 1995b. "Sustainable Human Development and Macroeconomics: Strategic Links and Implications." UNDP Discussion Paper. New York.

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