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3.1 Assets for development

In Section 1, we identified economic goals relating to aggregate income and consumption, broader goals associated with human/social development indicators, and the environmental goals associated with sustainable development. In Section 2, we conceptualised livelihood outcomes in terms of variables that have much in common with these goals. The importance of income in livelihoods is self-evident, although it is not just about magnitude of income, but about its stability and reliability too. The human development indicators relating to health and education that we looked at in Section 1 are not explicitly mentioned as variables in the livelihoods framework, however, health and education are dimensions of human capital and therefore things that livelihood strategies frequently seek to enhance along with other assets. Building assets is key to development and prosperity from both the perspective of the individual and from the perspective of national and international development strategies,

Pillars of development

National development goals and those of individuals and households are obviously related insofar as national aggregates are in effect the sum of individual livelihoods. Let us now consider this issue by looking once again at capitals or assets, which you'll remember, are a key part of the livelihoods framework. These are depicted in the diagram in 3.1.1.

3.1.1 Pillars of development

Source: adapted from Dorward (2009) p. 137.

Achieving the goals of development (such as increasing incomes and consumption or providing universal access to health and education) requires assets, which we can classify into social, human, natural, physical, and financial capital. These are the pillars of development, the base upon which an economy stands. They are depicted by the five columns in the diagram above. Economic growth and development is achieved by expanding the asset base, although the precise composition of assets required for sustainable development is a contentious issue.

Mutual growth linkages

Growth in one type of capital can affect other assets in both positive and negative ways. The existence of these relationships is depicted by the horizontal arrows in the diagram in 3.1.1.

Can you think of examples of how changes in one type of capital might bring about changes in another?

An obvious example is where growth in human and financial capital allows further investment in physical capital and vice versa. On the other hand the expansion of physical capital may lead to a deterioration in natural capital. If this harmful effect is not kept within limits, development may be unsustainable. Universal education and health care strengthens human capital, but requires growth in other forms of capital (financial, social, and human capital) before they can be provided. These are just a few examples - you can probably think of many more.