Introducing Economic Development

A Global Perspective

Todaro and Smith, Chapter: 1

Source: Philippine Daily Inquirer
The Study of Economic Development
Raises some of the World’s Most Fundamental Questions
• For example: Why do living conditions differ so drastically for people across different
countries and regions, with some so poor and others so rich?
• Why huge disparities also in health, nutrition, education, freedom of choice, women’s
autonomy, environmental quality, market access, security, voice?
• Why is output per worker many times higher in some countries than others?
• Why do workers in some countries have fairly secure, formal jobs with regular, predictable
pay, while in others most work with fluctuating and insecure earnings?
• Why are populations growing rapidly in some countries, on verge of shrinking in others?
• Why are public services insufficient, corrupt in some countries; effective in others?
• Why have some formerly poor countries made so much progress and others so little?
• How have child illness and death rates fallen so much in the world, and what can be done
in places where they remain far higher than average?
• How can we measure impacts of government policies and NGO programs make in
improving the wellbeing of the poor and vulnerable; what lessons have we learned?
• How did great divergences across countries come about? How does history matter?
 Box: The Experience of Poverty –
Voices of the Poor
• When one is poor, she has no say in public, she feels inferior. She has no
food, so there is famine in her house; no clothing, and no progress in
her family. - A poor woman from Uganda
• For a poor person everything is terrible—illness, humiliation, shame. We
are cripples; we are afraid of everything; we depend on everyone. No
one needs us. We are like garbage that everyone wants to get rid of. - A
blind woman from Tiraspol, Moldova
• Life in the area is so precarious that the youth and every able person
have to migrate to the towns or join the army at the war front in order
to escape the hazards of hunger escalating over here - Participant in a
discussion group in rural Ethiopia
• When food was in abundance, relatives used to share it. These days of
hunger, however not even relatives would help you by giving you some
food. - Young man in Nichimishi, Zambia
 Box: The Experience of Poverty –
Voices of the Poor (Continued)
• We have to line up for hours before it is our turn to draw water.
—Mangochi, Malawi
• [Poverty is] . . . low salaries and lack of jobs. And it’s also not having
medicine, food, and clothes. - Discussion group, Brazil
• Don’t ask me what poverty is because you have met it outside my house.
Look at the house and count the number of holes. Look at the utensils
and the clothes I am wearing. Look at everything and write what you see.
What you see is poverty. - Poor man in Kenya
• A universal theme reflected in these seven quotes alone is that
poverty is more than lack of income – it is inherently
multidimensional, as is economic development
 What Do We Mean By Development

•development may mean different things to

different people so it is important that we have
some working definition or meaning.

•Without that we would be unable to determine

which country was actually developing and
which was not.
Traditional Economic Measures

FEATURES :
▪ Traditionally development was generally seen as an economic phenomenon.

• Development meant achieving sustained rates of growth in per capita income.

• Traditional approach used to measure overall economic well-being of a

population.

• rapid industrialization and availability of goods and services to the average

citizen for consumption and investment was its prime concerns.

• It implies the planned change of the structure of production and employment

so that agriculture’ share of both declines and that of the manufacturing and
service industries increases.
Traditional Economic Measures

LIMITATION
• The experience of the 1950s to early 1970s signaled that something was
wrong with this narrow approach of development
• For example many developing countries reached their economic
growth targets but the levels of living of the masses remained
unchanged.
• Under this approach, poverty, discrimination, unemployment and
income distribution which are major challenge before developing
countries, could not be addressed.
The New Economic View of Development

•FEATURE

• During the 1970s, economic development

redefined in terms of the reduction or elimination
of poverty, inequality, and unemployment within
the context of a growing economy.

• “Redistribution from growth” was its common

slogan.
The New Economic View of Development

Development must therefore be understood

as a multidimensional process-

involving major changes in social structures,

popular attitudes, and national institutions, as
well as the acceleration of economic growth,
the reduction of inequality, and the
eradication of poverty.
The New Economic View of Development

•Development represent the whole range of

change by which an entire social system tuned
to the diverse basic needs and aspirations of
individuals and social groups within that
system, moves away from a condition of life
widely.
Amartya Sen’s “Capability” Approach

• Amartya Sen, the 1998 Nobel laureate in economics,

argues that the “capability to function” is what really
matters for status as a poor or non poor person.
• Sen argues that poverty cannot be properly measured
by income or even by utility as conventionally
understood;
• what matters fundamentally is not the things a person
has—or the feelings these provide—but what a person
is, or can be, and does, or can do.
• What matters for well-being is not just the
characteristics of commodities consumed, as in the
utility approach, but what use the consumer can and
does make of commodities.
 Some Important “Beings” and “Doings” in
Capability to Function:
• Being able to live long
• Being well-nourished
• Being healthy
• Being literate
• Being well-clothed
• Being mobile
• Being physically secure
• Being able to take part in the life of the community
• Being happy – as a state of being - may be valued as a
functioning
• What other examples would you suggest are important?
Amartya Sen’s “Capability” Approach
• In the Capability Approach 'poverty' is understood as
deprivation in the capability to live a good life and
'development' is understood as expansion of
capability.

▪The Capability Approach focuses directly on the

quality of life that individuals are actually able to
achieve.

• This quality of life is analyzed in terms of the concepts

of 'functioning's' and 'capability'.
• Functionings –what people do or can do with the
commodities of given characteristics that they
come to possess or control.
• Sen goes on to note that functioning depends also
on
(1) “social conventions in force in the society in
which the person lives,
(2) the position of the person in the family and in the
society,
(3) the presence or absence of festivities such as
marriages, seasonal festivals and other occasions
such as funerals,
(4) the physical distance.
• In other words Functionings are set of beings and
doings.
• examples of beings-being educated, illiterate, being
happy, being depressed, being active in politics ,
being part of a social work, being part of a criminal
work, being well behaved, being well nourished,
being under nourished .
• Examples of doing-Examples of doings -Travelling,
Caring for a child, Voting in a election, Taking part in
a debate, Taking drugs, Killing animals, Eating
animals, Donating Money to charity
• Capabilities are a person's real freedoms or
opportunities to achieve functioning's. Thus, while
travelling is a functioning, the real opportunity to
travel is the corresponding capability.
• Amartya Sen has argued that measuring the achieved
combination of functioning's of an individual is not
always enough to assess well-being.
• Well-being should include an individual’s “freedom to
achieve.” This freedom is represented by an
individual’s capability.
• Freedom of choice, or control of one’s own life, is
itself a central aspect of most understandings of well-
being. A functioning is a valued “being or doing.
•The need for capability in the assessment
of an individual’s well-being is based on
the importance of choice and opportunity.
• An individual’s well-being can be
improved by having more choices.
•For example, someone who can choose
between multiple careers is better off
than someone who is limited to one
career only, even if both individuals prefer
the same career.
Development and Happiness
•happiness is part of human well-being, and
greater happiness may in itself expand an
individual’s capability to function.

•In recent years, economists have explored the

empirical relationship between
satisfaction/happiness and income. One of the
findings is that the average level of happiness
or satisfaction increases with a country’s
average income.
Richard Layard identifies 07 factors that surveys
show affect average national happiness
1. family relationships,
2.financial situation
3. work,
4.community and friends
5. health
6. personal freedom, and
7.personal values
Describe each of the following:

•Self – esteem
•Sustainability
• Freedom

How MDG’s differ with SDG?

 Three Core Values of Development

•to define what we mean when we talk about

development as the sustained up gradation of an
entire society and social system toward a
“better” or “more humane” life at least three
basic components or core values serve as a
conceptual basis and practical guideline for
understanding the inner meaning of
development. These core values—sustenance,
self-esteem, and freedom—represent common
goals sought by all individuals and societies.
• Sustenance : The Ability to Meet Basic Needs. All
people have certain basic needs without which life
would be impossible. These life-sustaining basic
human needs include food, shelter, health, and
protection. When any of these is absent or in
critically short supply, a condition of “absolute
under development” exists.
• Self-Esteem: To Be a Person A second universal
component of the good life is self-esteem—a
sense of worth and self-respect, of not being used
as a tool by others for their own ends.
▪
• Freedom from Servitude: To Be Able to Choose
Freedom here is to be understood in the sense of
emancipation from social servitude to nature, other
people, misery, oppressive institutions, and dogmatic
beliefs, especially that poverty is predestination.
• Freedom involves an expanded range of choices for
societies and their members .
• Amartya Sen writes of “development as freedom,
• . The concept of human freedom also encompasses
various components of political freedom, including
personal security, the rule of law, freedom of
expression, political participation, and equality of
opportunity
•The Central Role of Women: development
scholars generally view women as playing the
central role in the development drama.
Globally, women tend to be poorer than men.
•Children need better health and education, and
studies from around the developing world
confirm that mothers tend to spend a
significantly higher fraction of income under
their control for the benefit of their children
than fathers do.
•To make the biggest impact on development,
then, a society must empower and invest in its
women
The Three Objectives of Development

• We may conclude that development is both a

physical reality and a state of mind in which society
has, through social, economic, institutional
processes, secured the means for obtaining a better
life. Whatever the specific components of this
better life, development in all societies must have at
least the following three objectives:
• 1. To increase the availability and widen the
distribution of basic life-sustaining goods such as
food, shelter, health, and protection,
• 2.To raise levels of living, including, in addition to
higher incomes, the provision of more jobs, better
education, and greater attention to cultural and
human values, all of which will serve not only to
enhance material wellbeing but also to generate
greater individual and national self-esteem,
• 3. To expand the range of economic and social
choices available to individuals and nations by
freeing them from servitude and dependence, not
only in relation to other people and nation-states, but
also to the forces of ignorance and human misery
•Coclusion -Thus it is clear that
Development is the process of
improving the quality of all human
lives and capabilities by raising
people’s levels of living, self-esteem
and freedom.
Millennium Development Goals
• Millennium Development Goals (MDGs) A set of eight
goals adopted by the United Nations in 2000 .The goals are
assigned specific targets to be achieved by 2015.

• to eradicate extreme poverty and hunger;

• achieve universal primary education;
• promote gender equality and empower women;
• reduce child mortality;
• improve maternal health;
• combat HIV/AIDS, malaria, and other diseases;
• ensure environmental sustainability; and
• develop a global partnership for development.
•Committing themselves to making
substantial progress toward the eradication
of poverty and achieving other human
development goals by 2015.
•The MDGs are the strongest statement yet of
the international commitment to ending
global poverty.
•They acknowledge the multidimensional
nature of development and poverty
alleviation;
•an end to poverty requires more than just
increasing incomes of the poor
•Appropriately, the first MDG addresses
the problem of extreme poverty and
hunger. The two targets for this goal are
more modest:
•to reduce by half the proportion of
people living on less than $1 a day and
• to reduce by half the proportion of
people who suffer from hunger.
•“Halving poverty” has come to serve as
a touchstone for the MDGs as a whole.
• In addition, key international agencies, including
the United Nations, the World Bank, the
International Monetary Fund (IMF), the
Organization for Economic Cooperation and
Development (OECD), and the World Trade
Organization (WTO), all helped develop the
Millennium Declaration and so have a collective
policy commitment to attacking poverty directly.
The MDGs assign
• specific responsibilities to rich countries,
including increased aid, removal of trade and
investment barriers, and eliminating
unsustainable debts of the poorest nations.
CRITICISM OF MDG

•some observers believe that the MDG

targets were not ambitious enough,
•going little beyond projecting past rates of
improvement 15 years into the Future,
•Moreover, the goals were not prioritized;
for example, reducing hunger may leverage
the achievement of many of the other
health and education targets.
• although the interrelatedness of development
objective was implicit in the MDGs’ formulation, goals
are presented and treat in reports as stand-alone
objectives; in reality, the goals are not substitutes for
the setting of 2015 as an end date for the targets
could discourage rather than encourage further
development assistance if it were not met.
• the MDGs measure poverty as the fraction of the
population below the $1-a-day line, this is arbitrary
and fails to account for the intensity of poverty—that
a given amount of extra income to a family with a per
capita income of, say, 70 cents a day makes a bigger
impact on poverty than to a family earning 90 cents
per day (see Chapter 5).
Sustainable Development Goals
With the imminent expiration of the MDGs,
the UN coordinated global efforts to launch its
successor, Sustainable Development Goals
(SDGs)
it is “a universal agenda” for all countries,
developed as well as developing and without
exceptions, “to be driven by five big,
transformative shifts.” These universal shifts
are:
1. Leave no one behind—to move “from
reducing to ending extreme
1. Leave no one behind—to move “from reducing to ending
extreme poverty, in all its forms;” in particular, to “design
goals that focus on reaching excluded groups.”
2. Put sustainable development at the core, “to integrate the
social, economic, and environmental dimensions of
sustainability.”
3. Transform economies for jobs and inclusive growth, while
moving to sustainable patterns of work and life.
4. Build peace and effective, open, and accountable institutions
for all, which “encourage the rule of law, property rights,
freedom of speech and the media, open political choice,
access to justice, and accountable government and public
institutions.”
5. Forge a new global partnership so that each priority should
involve governments and also others, including people living
in poverty, civil society and indigenous and local
communities, multilateral institutions, business, academia,
and philanthropy.
Next Chapter….
Quiz