So, what is sustainable human development?

We define human development as expanding the choices for all people in society. This means that men and women - particularly the poor and vulnerable - are at the centre of the development process. It also means "protection of the life opportunities of future generations...and...the natural systems on which all life depends" (UNDP, Human Development Report 1996). This makes the central purpose of development the creation of an enabling environment in which all can enjoy long, healthy and creative lives.

Economic growth is a means to sustainable human development - not an end in itself. Human Development Report 1996 showed that economic growth does not automatically lead to sustainable human development and the elimination of poverty. For example, countries that do well when ranked by per capita income often slip down the ladder when ranked by the human development index. There are, moreover, marked disparities within countries - rich and poor alike - and these become striking when human development among indigenous peoples and ethnic minorities is evaluated separately.

There are five aspects to sustainable human development - all affecting the lives of the poor and vulnerable:

• Empowerment - The expansion of men and women's capabilities and choices increases their ability to exercise those choices free of hunger, want and deprivation. It also increases their opportunity to participate in, or endorse, decision-making affecting their lives.
  

• Co-operation - With a sense of belonging important for personal fulfillment, well-being and a sense of purpose and meaning, human development is concerned with the ways in which people work together and interact.
  

• Equity - The expansion of capabilities and opportunities means more than income - it also means equity, such as an educational system to which everybody should have access.
  

• Sustainability - The needs of this generation must be met without compromising the right of future generations to be free of poverty and deprivation and to exercise their basic capabilities.
  

• Security - Particularly the security of livelihood. People need to be freed from threats, such as disease or repression and from sudden harmful disruptions in their lives.
  

UNDP focuses on four critical elements of sustainable human development: eliminating poverty, creating jobs and sustaining livelihoods, protecting and regenerating the environment, and promoting the advancement of women. Developing the capacities for good governance underpins all these objectives.

What, then, is governance? And what is good governance?

The challenge for all societies is to create a system of governance that promotes, supports and sustains human development - especially for the poorest and most marginal. But the search for a clearly articulated concept of governance has just begun.

Governance can be seen as the exercise of economic, political and administrative authority to manage a country's affairs at all levels. It comprises the mechanisms, processes and institutions through which citizens and groups articulate their interests, exercise their legal rights, meet their obligations and mediate their differences.

Good governance is, among other things, participatory, transparent and accountable. It is also effective and equitable. And it promotes the rule of law. Good governance ensures that political, social and economic priorities are based on broad consensus in society and that the voices of the poorest and the most vulnerable are heard in decision-making over the allocation of development resources.

Governance has three legs: economic, political and administrative. Economic governance includes decision-making processes that affect a country's economic activities and its relationships with other economies. It clearly has major implications for equity, poverty and quality of life. Political governance is the process of decision-making to formulate policy. Administrative governance is the system of policy implementation. Encompassing all three, good governance defines the processes and structures that guide political and socio-economic relationships.

Governance encompasses the state, but it transcends the state by including the private sector and civil society organisations. What constitutes the state is widely debated. Here, the state is defined to include political and public sector institutions. UNDP's primary interest lies in how effectively the state serves the needs of its people. The private sector covers private enterprises (manufacturing, trade, banking, cooperatives and so on) and the informal sector in the marketplace. Some say that the private sector is part of civil society. But the private sector is separate to the extent that private sector players influence social, economic and political policies in ways that create a more conducive environment for the marketplace and enterprises.

Civil society, lying between the individual and the state, comprises individuals and groups (organised or unorganised) interacting socially, politically and economically - regulated by formal and informal rules and laws.

Civil society organisations are the host of associations around which society voluntarily organises. They include trade unions; non-governmental organisations; gender, language, cultural and religious groups; charities; business associations; social and sports clubs; cooperatives and community development organisations; environmental groups; professional associations; academic and policy institutions; and media outlets. Political parties are also included, although they straddle civil society and the state if they are represented in parliament.

The institutions of governance in the three domains (state, civil society and the private sector) must be designed to contribute to sustainable human development by establishing the political, legal, economic and social circumstances for poverty reduction, job creation, environmental protection and the advancement of women.

Much has been written about the characteristics of efficient government, successful businesses and effective civil society organisations, but the characteristics of good governance defined in societal terms remain elusive. The characteristics?

• Participation - All men and women should have a voice in decision-making, either directly or through legitimate intermediate institutions that represent their interests. Such broad participation is built on freedom of association and speech, as well as capacities to participate constructively.
  

• Rule of law - Legal frameworks should be fair and enforced impartially, particularly the laws on human rights.
  

• Transparency - Transparency is built on the free flow of information. Processes, institutions and information are directly accessible to those concerned with them, and enough information is provided to understand and monitor them.
  

• Responsiveness - Institutions and processes try to serve all stakeholders.
  

• Consensus orientation - Good governance mediates differing interests to reach a broad consensus on what is in the best interests of the group and, where possible, on policies and procedures.
  

• Equity - All men and women have opportunities to improve or maintain their well-being.
  

• Effectiveness and efficiency - Processes and institutions produce results that meet needs while making the best use of resources.
  

• Accountability - Decision-makers in government, the private sector and civil society organisations are accountable to the public, as well as to institutional stakeholders. This accountability differs depending on the organisation and whether the decision is internal or external to an organisation.
  

• Strategic vision - Leaders and the public have a broad and long-term perspective on good governance and human development, along with a sense of what is needed for such development. There is also an understanding of the historical, cultural and social complexities in which that perspective is grounded.
  

Interrelated, these core characteristics are mutually reinforcing and cannot stand alone. For example, accessible information means more transparency, broader participation and more effective decision-making. Broad participation contributes both to the exchange of information needed for effective decision-making and for the legitimacy of those decisions. Legitimacy, in turn, means effective implementation and encourages further participation. And responsive institutions must be transparent and function according to the rule of law if they are to be equitable.

These core characteristics represent the ideal - and no society has them all. Even so, UNDP believes that societies should aim, through broad-based consensus-building, to define which of the core features are most important to them, what the best balance is between the state and the market, how each socio-cultural and economic setting can move from here to there.

UNDP is faced increasingly with post-crisis situations and disintegrating societies. For them, the issue is not developing good governance - it is building the basic institutions of governance. The first step is towards reconciliation - building society's ability to carry on a dialogue on the meaning of governance and the needs of all citizens.

Relationships between governance and human development

Each domain of governance - the state, the private sector and civil society - has a unique role in promoting sustainable human development (see box overleaf).

The state

In countries where electoral processes exist, the state is composed of an elected government and an executive branch. The state's functions are manifold - among them, being the focus of the social contract that defines citizenship, being the authority that is mandated to control and exert force, having responsibility for public services and creating an enabling environment for sustainable human development. The latter means establishing and maintaining stable, effective and fair legal-regulatory frameworks for public and private activity. It means ensuring stability and equity in the marketplace. It means mediating interests for the public good. And it means providing effective and accountable public services. In all four roles, the state faces a challenge - ensuring that good governance addresses the concerns and needs of the poorest by increasing the opportunities for people to seek, achieve and sustain the kind of life they aspire to.

The state, of course, can do much in such areas as upholding the rights of the vulnerable, protecting the environment, maintaining stable macroeconomic conditions, maintaining standards of public health and safety for all at an affordable cost, mobilising resources to provide essential public services and infrastructure and maintaining order, security and social harmony.

State institutions can also empower the people they are meant to serve - providing equal opportunities and ensuring social, economic and political inclusion and access to resources. But people can be empowered only if their legislatures, electoral processes and legal and judicial systems work properly. Parliaments of freely and fairly elected members representing different parties are crucial to popular participation and government accountability. Effective legal and judicial systems protect the rule of law and the rights of all. Open elections mean public confidence and trust - and so political legitimacy. States should also decentralise political and economic systems to be more responsive to citizens' demands and to changing economic conditions.

In developed and developing countries alike, the state is being compelled to redefine its role in social and economic activity - to reduce it, reorient it, reconfigure it. The pressures for change stem from three sources:

• The private sector wants a more conducive market environment and a better balance between state and market.

• Citizens want increased accountability and responsiveness from government, as well as greater decentralisation.

• Global pressures from supranationals and worldwide social and economic trends are challenging the identity and nature of the state.

The private sector

The state is a big force for development - but it is not the only one. Sustainable human development depends in part on creating jobs that provide enough income to improve living standards. Most states now recognise that the private sector is the primary source of opportunities for productive employment. Economic globalisation is fundamentally changing the ways in which industries and enterprises operate. In many developing countries, private enterprise must be encouraged and supported to be more transparent and competitive in the international marketplace.

Equitable growth, gender balance, environmental preservation, expansion of the private sector and responsible and effective participation in international commerce cannot be achieved by the market alone, however. States can foster private sector development that is sustainable by:

• Creating a stable macroeconomic environment.

• Maintaining competitive markets.

• Ensuring that the poor (especially women) have easy access to credit.

• Nurturing enterprises that generate the most jobs and opportunities.

• Attracting investment and helping to transfer knowledge and technologies, particularly to the poor.

• Enforcing the rule of law.

• Providing incentives for human resource development.

• Protecting the environment and natural resources.

Civil society

Civil society also has to protect the rights of all citizens. As the state and the private sector are being reshaped and their relationships redefined, civil society is changing in important ways. Unresponsive government and unrelenting economic and social pressure have undermined some traditional civil society organisations and strengthened others - and in many cases forced people to organise in new ways. Civil society is thus more than just society. It is the part of society that connects individuals with the public realm and the state - it is the political face of society.

Civil society organisations channel people's participation in economic and social activities and organise them into more powerful groups to influence public policies and gain access to public resources, especially for the poor. They can provide checks and balances on government power and monitor social abuses. They also offer opportunities for people to develop their capacities and improve their standards of living - by monitoring the environment, assisting the disadvantaged, developing human resources, helping communication among business people.

More fundamentally, civic networks ease the dilemmas of collective action by institutionalising social interaction, reducing opportunism, fostering trust and making political and economic transactions easier. Well-developed civic networks also amplify flows of information - the basis for reliable political, economic and social collaboration and public participation of civil society members. These relationships and social norms make up a nation's social capital.

Civil society organisations do not always pursue the qualities of good governance. Nor are they always the most effective development agents. That is why states, while recognising and protecting the democratic rights of civil society organisations, must also ensure that the rules of law and values that reflect societal norms are adhered to. Democratic institutions, particularly local ones, can be important in ensuring that all in society have a voice, as well as ensuring that there are transparent and fair ways to reach consensus.

Like private enterprises, civil society organisations need adequate capacities to fulfill their potential. They also need an enabling environment, including a legislative and regulatory framework that guarantees the right of association, incentives to facilitate support and ways for civil society organisations to be involved in public policy-making and implementation.

Strengthening the enabling environment for sustainable human development thus depends not only on a state that governs well and a private sector that provides jobs that generate income. It also depends on civil society organisations that make political and social interaction easier and that mobilise society to participate in economic, social and political activities.

The global context

The transformation from command to market-oriented economies, the emergence of democratic political regimes in the former Soviet Union, the rapid development and global proliferation of new technologies, the pervasive spread of telecommunications systems, the growing importance of knowledge-based industries and skills and the continuing integration of the world economy through trade and investment - all these have created the foundation for a new age of sustainable human development. But all carry risks as well. Is it to be a breakthrough or a breakdown?

Changes in the world's economic, political and social systems have indeed brought unprecedented improvements in human living conditions in both developed and developing countries. Consider the profound breakthroughs in communications, transport, agriculture, medicine, genetic engineering, computerisation, environmentally friendly energy systems, political structures, peace settlements. The list goes on.

But these changes also bring new uncertainties and challenges as the world steps into the 21st century. Signs of breakdown are everywhere: disintegration of families; destruction of indigenous societies; degradation and annihilation of plant and animal life; pollution of rivers, oceans and the atmosphere; crime, alienation and substance abuse; higher unemployment; and a widening gap in incomes and capabilities. Not a pretty picture.

The trend towards globalisation deserves special attention. It is manifest in the growth of regional blocs that cooperate in such areas as trade and legal frameworks, in the power of intergovernmental bodies such as the World Trade Organization and in the spread of transnational corporations. Globalisation has profound implications for governance the final impact of which we cannot yet determine. First is the increasing marginalisation of certain population groups. Those who do not have access to the technological/information revolution are in danger of becoming part of a structural underclass. Second is the erosion of state sovereignty as transnational bodies increasingly mediate national concerns and press for universal laws. Third is the increased globalisation of social and economic problems, such as crime, narcotics, infectious diseases and the migration of labour. Finally, international capital and trade are decreasingly accountable to sovereign states.

Governance can no longer be considered a closed system. The state's task is to find a balance between taking advantage of globalisation and providing a secure and stable social and economic domestic environment, particularly for the most vulnerable. Globalisation is also placing governments under greater scrutiny, leading to improved state conduct and more responsible economic policies.

Because each domain of governance - state, private sector, civil society - has strengths and weaknesses, the pursuit of good governance requires greater interaction among the three to define the right balance among them for sustainable people-centred development. Given that change is continuous, the ability for the three domains to continuously interact and adjust must be built-in, thus allowing for long-term stability. UNDP's Initiatives for Change recognises that the relationships among government, civil society and the private sector:

are key determinants in whether a nation is able to create and sustain equitable opportunities for all of its people. If a government does not function efficiently and effectively, scarce resources will be wasted. If it does not have legitimacy in the eyes of the people, it will not be able to achieve its goals or theirs. If it is unable to build national consensus around these objectives, no external assistance can help bring them about. If it is unable to foster a strong social fabric, the society risks disintegration and chaos. Equally important, if people are not empowered to take responsibility for their own development within an enabling framework provided by government, development will not be sustainable.

Developing countries must ensure that everyone can participate in economic and social development and take advantage of globalisation. They must build a political system that encourages government, political, business and civic leaders to articulate and pursue objectives that are centred around people and a system that promotes public consensus on these objectives.

What role can UNDP play in this?

We are already doing much. As of 1995 a third of our resources were allocated for governance. Ongoing development cooperation in management development and governance, including cost-sharing, amounts to about $1.3 billion. Management development and governance allocations vary significantly across regions. In Africa, the Arab States and Eastern Europe and the CIS, the largest total contribution (UNDP and cost-sharing) is allocated to aid management and coordination. Within the Asia and the Pacific region, however, the largest allocation is for economic and financial management, while the Latin America and the Caribbean region tends to emphasize planning and support for policy formulation. Within global and interregional programmes, the largest allocations are those dealing with planning and support for policy formulation, decentralisation and strengthening civil society.

UNDP policy for governance programming is driven by three major forces:

1. Our mandate We support the implementation of declarations and agreements reached at global UN conferences, many of which have specific references to governance. The most recent mandate for governance is Executive Board decision 96/29 in which the Board endorses the mission statement.

1. Our mission To promote sustainable human development.

1. Our comparative advantage We have institutional strengths that, together, set us apart from other external partners concerned with governance issues:

• Impartiality - We can work as an agent for change with all actors.

• Customer orientation - We pursue our mandate within national priorities.

• Long time frame - We view development from a long-term perspective and seek to maintain a presence in programme countries.

• Experience - We have 50 years of experience in capacity development.

• Trust - UNDP has won the trust of governments and other partners in programme countries.

• Universality - Field presence in 137 countries ensures ongoing dialogue, learning and cooperation.