The World Bank had a critical opinion towards the nature of welfare measures taken up by developing countries for a long time. The World Bank opined that the attempts to guide resource allocation during the past thirty years have generally failed to improve economic performance. The Bank came to this conclusion by simply dismissing these interventions are not market friendly, and it was done more harm than good to the economy. These measures in the Third World affected the long term institutional basis for growth performances of these economies.
The above claims were made by the World Bank on the basis of the rankings allocated to the East Asian nations in Human Development Reports published by the United Nations Development Programme. These rankings were allocated on the criteria of improvements in some development indices like primary education, basic health, life expectancy and child mortality rate. But there is a clear difference between the economic growth and human development schools over the criteria for development. As said by Mahabub-Ul-Haq, who chiefly involved in preparing HDRs, the first (economic growth school) focussed exclusively on the expansion of only one choice–income, while the second embraces the enlargement of all human choices–whether economic, social, cultural or political. It might well be argued that expansion of income could enlarge all other choices as well. But that is not necessarily so.
Another important dimension involved in the arguments for improvement of institutional capabilities through the development of human resources was the sources of these claims. Under the political conditions prevailing in South East Asian nations at the time of their growth records and the programmes such as land reforms, emphasis on primary education and basic health were not taken up on the grounds of the social justice. These are brought on the grounds of efficiency in terms of higher labour inputs and generally for changes in abilities and attitudes that are favorable to rising productivity, which can further strengthen the capitalist mode of production. Therefore, it is not surprising that in most of the developing countries have made some efforts at land reform.
The World Bank itself expressed that the reforms brought up by the South East Asian nations are directed towards rise in productivity. The World Bank viewed the improvement of human resources as a part of requirements for private domestic and foreign investments. This is evident in the terms of World Bank, which said, private domestic investment and rapidly growing human capital were the principle engines of growth. Agriculture while declining in relative importance, experience rapid growth and improvement in productivity. And some of these economies (East Asian) also got a head start because they had an better – educated labour force and a more effective system of public administration. Education policies that focused on primary and secondary schools generated rapid increase in labour force skills.