Why development matters: Economic growth vs. development

A view of Ulan Bator, the capital of Mongolia. Does economic growth automatically translate to development? Mongolia’s story says no. Photo by: Francisco Anzola / CC BY

The recent Annual Democracy Forum 2014 co-hosted by Botswana and International IDEA has been another fresh look at the old debate on the link between democracy and development.

One could claim from time to time that there is a weak connection or even disconnect between the two which tend to hold reasonable in the short run. However, the overwhelming majority face some undeniable empirical evidence of strong connection between development and democracy in particular in the long run. The question these days is not so much the link between the two, but rather the nature and kind of interrelation between the two.

The debates in Gaborone also revealed that the state and the quality of democracy that impact development — and vice versa — also matter and should be the subject of further investigation.

To these general premises, I wish to add my own personal observations in the case of my own country, Mongolia, which witnessed a rapid economic growth for last few years reaching 17 percent in 2011. Was Mongolia successful in translating its rapid economic growth, mainly fueled by mining, into a development success story? The predominant answer is “no,” leading to an obvious conclusion that economic growth does not automatically translate into development, the latter being understood in its broader definition, including human development and growth. When one talks about economic growth and development, a distinction should be made between the two or the two terms should be narrowly defined.

So what went wrong and what went missing in case of Mongolia? Was it the lack of good governance or a clear-cut national development policy? Corruption? Populism? Civil society participation? Lack of transparency? Policymakers and those in power were well familiar with these notions. They tried to have good governance in place.

In order to look for answers to these questions, one should revisit the state of Mongolian politics for the last few years. The first predominant answer is weak implementation or insufficient enforcement of rules for successful development or in short, lack of political will by the authorities. The political failure to build a strong framework for translation of economic growth into successful development was caused by widespread populist sentiments among the voters that no political parties and politicians could ignore.

As more discoveries of mineral wealth and abundance were made, voters grew nationalistic, with increasing demand for the wealth to directly benefit them. During the 2008 parliamentary elections, the two major political parties both promised the voters cash distributions if they were elected. From 2008 to 2012, Mongolia experienced the period of double-digit economic growth fueled by foreign and domestic investment into mining of copper, gold, coal and iron ore. To keep its election promise, the coalition government made cash distributions to voters — billions of dollars that otherwise could have been wisely and effectively invested in infrastructure, education, public health, urban development and in fighting urban pollution.

With the mining boom, a resource nationalism grew as well as a notion that investors were pilfering the country’s wealth at the expense of the local population became widespread. In early 2012, just a few months before the next parliamentary elections, Mongolia adopted a law restricting foreign government-controlled direct investment. Another law restricting mining fed by populism rather than environmental concerns had been adopted earlier. All these developments, combined with the falling demand in coal, drove investors out.

What are the lessons for the development community? Economic growth by itself does not lead to development. Even development stakeholders with knowledge and tools for successful development can’t guarantee success. Political will and sound implementation are needed for development to happen.

#DemocracyMatters is a three-week series exploring the intersection of democracy, development and natural resources management in partnership with International IDEA, the Institute for Democracy and Electoral Assistance.

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About the author

  • Luvsantseren Orgil

    Luvsantseren Orgil is Mongolia's permanent representative to the United Nations in Geneva and ambassador to Switzerland. A career diplomat, he was a former foreign policy adviser to the Mongolian president as a specialist in international relations. Orgil has also worked for the U.N. office in Tajikistan and has experience in the private sector.

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