approach 1: invest more in social infrastructure(social welfare) to boost the productivity of its people and thereby raise growth
approach 2: focus only on growth and when you have generated enough resources then go for the development and investment of social infrastructure.
The first approach is by Nobel Laureate Amartya Sen and the second one is by an equally renowned economist Jagdish Bhagwati.
A single sentence on both cannot do proper justice to their ideas but it pretty much summarizes their policy prescriptions. So which side are you on?
Don't know the two folks. Typically those who support approach 2 already are doing well. They are just looking to make their piece of the pie bigger. And looking for excuse to prevent lifting all boats.
as i said, single sentences do not do justice to the whole agenda. the two choices are not as trivial as they sound. both approaches have their pros and cons and the final aim of both is social welfare. the 2nd choice will be much for the society once we have enough resources, but until then it isn't that fair. while the 1st choice looks good from above, the government may never be able to have enough resources because it is continuously spending whatever it earns. the 2st approach promises rapid growth(but at what cost?) whereas the 1st one cannot make any such promises, economic growth can be extremely slow.
As far as third world countries are concerned i'll go for the first approach but for economies which are considerably developed, approach 2 seems viable to me.
do you know Joseph Stiglitz? Amartya Sen works with him.
The government should stick to protecting life, liberty and property and let the market function. The way to productivity is through voluntary exchange. It is savings that leads to capital that leads to production which leads to wealth. High taxes, regulations and devaluation of the currency makes the country less productive. Yes, we can have increased productivity from infrastructure spending but this is over the long run. One needs to have the money in the first place and not simply steal purchasing power from the people by expanding the money supply, borrowing at the rate one cannot afford to pay back or raise high taxes even higher. The money being used for infrastructure cannot be used for something else. If there is a real problem like getting from point A to point B and there is a dire need for it then it might be justifiable while simply making the roads prettier is not. The problem in the U.S. is that the debt, government spending, regulations and taxes are too high and there is not enough savings, capital, investments nor production. The federal reserve and the government encourage this with cheap money and government loans and guarantees. The main problem in Pakistan is that the government is not protecting life, liberty or property well. There is a corruption to the core problem. This stops others from wanting to invest in Pakistan. Pakistan also has some of the same problems as the U.S.