The relationship between these two instruments — growth and inequality reduction and/or
redistribution — has been the subject of a long debate in economics. In the 20th century this
was carried forward through the work of Simon Kuznets who argued for a positive
relationship between growth and inequality, at least in the early stages of development
(Kuznets (1966)). If this is so, then there could be a trade off between these two critical
instruments; this could lead to trade offs at the level of the objectives mentioned.5
Indirect trade-offs in outcomes because of competition for resources between instruments
are present in the MDGs. The MDG targets reflect the expansion of policy from the narrow
macroeconomic stability objectives of the 1980s into interventions designed to directly
affect social outcomes in health, education, the environment and gender relations, all now
common ingredients of PRSs. A range of instruments are used to improve results in these
areas. Many of these are not directly contradictory, but nearly all call for considerable funds.
This implies outcome trade offs in countries carrying out PRS-driven expenditures: these
countries often have small resource bases, high fiscal deficits and external debt burdens, and
necessarily finite inflows of concessionary finance. Here, difficult choices may need to be
made between, for example, technology investments to improve environmental
sustainability and hygiene programmes for mothers to bring about the targeted reduction in
child mortality (Goal 4).
Complementarities— On the other hand, it is now recognised that many of the instruments
and objectives contained in the MDGs are complementary. In the objectives, female
education (part of Goal 3) reduces child mortality through better nutritional and caring
practices by mothers as a result of enhanced literacy and skills. Improved maternal health
(Goal 5) is also likely to help reduce child mortality. Clearly, reversing the spread of
epidemics such as malaria and HIV/AIDS will cut mortality. In turn, better outcomes in
education and gender equality should help to halt the spread of these diseases, particularly
HIV/AIDS. Finally, better educational and health outcomes should reduce poverty, directly,
by enhancing poor people’s entitlements to essential services and indirectly, through
poverty-reducing growth as emphasised in “new” growth theories.
Sequencing— This analysis suggests that the problem of sequencing will complicate
achievement of the MDGs. In particular, the kinds of complementarities described may
unfold over time as part of a complex cycle of socio-economic transition. For example, low
inequality is now considered an important aspect of East Asia’s spectacular socio-economic
performance. One view of developmental success in East Asia sees both low inequality and
good educational outcomes as the essential initial conditions for subsequent high growth
and poverty reduction (see McMahon (1998 on education; Birdsall et. al. (1995 on inequality
and education). Using our division of variables into MDG targets and policy levers, certain
values of instruments (distribution patterns) and objectives (education) may have been pre-
5 More recently, a literature has emerged claiming a positive relationship between equality and growth, some
of this based on analysis of the East Asian experience (Birdsall et. al. (1995); Alesina and Perotti (1994)). This
has led to a new consensus which emphasises the growth-dampening effects of inequality. Nevertheless, the
linkages between distribution and growth are complex and still little understood. Indeed, some have
questioned the East Asian evidence purporting to show a positive relationship between equality and growth,
arguing that many studies make cavalier use of inequality data (Moll (1992)).