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A society's development status at any time is multi-dimensional a nd defined only by a combination of many appropriately weighted factors. There is no single ideal indicator that is flawless for all purposes. A widely used indicator for the development status is per capita national income. Provided the measured national income accurately reflects real purchasing power, inter-country differences in per capita national income converted to units of an appropriate common currency indicate how the average individual's command over resources differs from country to country. The degree of sensitivity with which the measured income reflects real purchasing power, however, is not very high. One can be reasonably confident about real differences only when there are large differences in the measured income.1 Rising per capita income is a concomitant of socio-economic evolution in which the rules of the capitalist sector emerge triumphant. In this process, more people are engulfed in risks and uncertainties socio-economic hazards - of a dynamic market economy.
The same evolutionary process also means that the traditional sector suffers from a decline in its capability to maintain itself as an autonomous haven for economic security even for its denizens, let alone those who have left it for the capitalist sector. In the course of this evolution, the economic aspects of life (production and consumption) in the traditional sector increasingly take on the characteristics of market economy and come under the influence of the same economic forces that govern the capitalist sector. In short, the rise in society's average income is obtained in association with the rising insecurity of life. Socio- economic hazards are thus built into the very process of resource mobility and allocation that encourages individual initiative and adventure for taking advantage of risky or uncertain opportunities. In some of today's economically most developed countries, the above socio-economic evolution took place largely independently of the State's purposeful efforts to promote it. Therefore the State took no credit for the success of the economy: nor did it assume responsibility for the social cost of its failure.
Rising income as well as the attendant socio-economic hazards owed to the leading sector, but the dynamism of the leading sector itself emerged from the aggregate of innovative activities of many private entrepreneurs within the market mechanism. In today's developing countries, in contrast, the State is much more directly involved in the economic process. The State is often an important constituent of the leading sector. The more it succeeds in stimulating economic development, the greater its responsibility must be for the concommitant socio- economic hazards. The decision to promote economic development must therefore imply the willingness to take the blame for its social cost. Thus, as pointed out by A.O Hirschman, when the State takes the leadership of economic development, it cannot avoid "internalising" in its development plans necessary measures to counter welfare problems inherent in the development process. Unfortunately, Hirschman advances this eminently convincing argument only to show that because of its responsibility for the repair of welfare damages in the course of development, the state leadership cannot be more effective in stimulating economic development than classical private entrepreneurs who took the profits but passed the social cost of development to workers and the general public. Hirschman implies that the State as an entrepreneur might just as well behave like the classical entrepreneur and raise the cost- effectiveness of development by not bothering about the care of its social cost. A hawkish argument of this kind which puts a premium on impatience for economic development will be proved wrong not in the economic process as such but in the political aspect of life by inciting riots. An equilibrium within the economy is no more respectable than an equilibrium between economy and policy in the totality of circumstances in which economic development proceeds.
"Compensatory justice" can be invoked in this connection. It suggests a fair exchange relationship by holding the State responsible for the consequences of what it does. Even when state participation in economic development is only by "moral" encouragement, it shares the responsibility for socio-economic hazards that attend the development process, with private entrepreneurs who are encouraged by the State. In the final analysis, whatever it does or does not do, the State cannot but be a "change agent". And in So far as a change introduced, encouraged or merely tolerated by the State makes someone worse off, the principle of "compensatory justice" à la welfare economics must be squarely faced.
1 For this point and related measurement issues, see E. E. Hagen, The Economics of Development (Homewood, Illinois: Richard Irwin, 1968), Chapter 1.
2 A.0. Hirschman, The Strategy of Economic Development University Press, 1958), Chapter 1.
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