Chapter 1

Introducing
Economic
Development:
A Global
Perspective

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1.1 How the Other Half Live

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

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1.1 How the Other Half Live
• 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
• We have to line up for hours before it is our turn to draw water.
—Mbwadzulu Village (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 is that
poverty is more than lack of income – it is inherently
multidimensional, as is economic development.

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Terminologies
• Traditional economics – concerned
primarily with the efficient, least-cost
allocation of scarce productive resources
and with the optimal growth of these
resources over time so as to produce an
ever-expanding range of goods and
services. = neoclassical economics – it
assumes economic rationality and a purely
materialistic, individualistic, self-interested
orientation toward economic decision-
making.

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Political economy

• Goes beyond traditional economics to

study, among other things, the social and
institutional processes through which
certain groups of economic and political
elites influence the allocation of scarce
productive resources now and in the future,
either for their own benefit exclusively or
for that of the larger population as well.

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The Nature of Development
Economics
• Greater scope than traditional neoclassical economics
and political economy.
• Development economics focuses primarily on the
economic, social, and institutional mechanisms
needed to bring about rapid and large-scale
improvements in standards of living for the masses of
poor people in developing nations.
• Development economics must be concerned with the
formulation of appropriate public policies designed to
effect major economic, institutional, and social
transformations for entire societies in a very short
time. It is for this reason that the public sector has
assumed a much broader and more determining role
in development economics than it has in traditional
neoclassical economic analysis.

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The Nature of Development
Economics
• As a social science, economics is concerned with
people and how best to provide them with the
material means to help them realize their full human
potential.
• But what constitutes the good life is a perrenial
question, and hence economics necessarily involves
values and value judgments.
• Our very concern with promoting development
represents an implicit value judgments about good
(development) and evil (underdevelopment).

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Why Study Development
Economics?
• The ultimate purpose of any course in economics
including development economics is to help
students think systematically about economic
problems and issues and formulate judgements
and conclusions on the basis of relevant
analytical principles and reliable statistical
information.

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The Important Role of Values in
Development Economics
• Economics is a social science.
• It is necessary to recognize from the onset
that ethical or normative value premises
about what is or is not desirable are central
features of the economic discipline in general
and of development economics in particular.
• It follows that value premises, however
carefully disguised, are an inherent
component of both economic analysis and
economic policy.

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Country Categories:
• A high-income economy is defined by the World Bank as
a country with a gross national income per capita
US$12,056 or more in 2017, calculated using the Atlas
method. While the term "high-income" is often used
interchangeably with "First World" and "developed country",
the technical definitions of these terms differ.
• High income OECD countries: United Kingdom, United
States, Japan, Germany, France, Italy, South Korea, Spain,
Poland, Canada, Australia, Chile, Netherlands, Portugal,
Greece, Belgium, Czech Republic, Sweden, Austria,
Switzerland, Israel, Denmark, Slovakia, Finland, Ireland,
Norway, New Zealand, Slovenia, Estonia, Luxembourg,
Iceland

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• Central and Eastern European Countries
(CEECs) is an OECD term for the group of
countries comprising Albania, Bulgaria,
Croatia, the Czech Republic, Hungary,
Poland, Romania, the Slovak Republic,
Slovenia, and the three Baltic States:
Estonia, Latvia and Lithuania.

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East Asia and the Pacific

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South Asian Countries

• Afghanistan
• Bangladesh
• Bhutan
• India
• Maldives
• Nepal
• Pakistan
• Sri Lanka

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Latin America and the Carribean

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Sub-Saharan Africa
Angola, Benin, Botswana, Burikina Faso, Burundi,
Cabo Verde, Cameron, Central African Republic,
Chad, Comoros, Congo, Dem. Rep., Congo Rep.,
Cote D’Ivoire, Equatorial Guinea, Eritrea, Eswatini,
Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-
Bissau, Kenya, Lesotho, Liberia, Madagascar,
Malawi, Mali, Maritania, Mauritius, Mozambique,
Namibia, Niger, Nigeria, Rwanda, Sao Tome and
Principe, Senegal, Seychelles, Sierra Leone,
Somalia, South Africa, South Sudan, Tanzania,
Togo, Uganda, Zambia, Zimbabwe

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Figure 1.1 World Income Distribution

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Development and Happiness

• Economists have explored the empirical

relationship across countries and over time
between subjectively reported satisfaction
and happiness and factors such as income.
• One of the findings is that the average
level of happiness or satisfaction increases
with a country’s average income.

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Factors that affect average national
happiness

• Family relationships
• Financial situation
• Work
• Community and friends
• Health
• Personal freedom
• Personal values

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Factors that affect average national
happiness

• In particular, aside from not being poor,

the evidence says that people are happier
when they are not unemployed, not
divorced or separated, have high trust of
others in society, enjoy high government
quality with democratic freedoms and have
religious faith.
Social capital – traditional strengths such
as moral values and trust in others.

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1.2 Economics and Development Studies

• Economies as Social Systems: The Need to

Go Beyond Simple Economics
• Social Systems
– Interdependent relationships between economic and non-
economic factors
• Success or failure of development policy
– Importance of taking account of institutional and structural
variables along with more traditional economic variables

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1.3 What Do We Mean by Development?

• Traditional Economic Measures

– Gross National Income (GNI)
– Income per capita
– Utility of that income?
• The New Economic View of Development
– Leads to improvement in wellbeing, more broadly understood
• Amartya Sen’s “Capability” Approach
– Functionings as an achievement
– Capabilities as freedoms enjoyed in terms of functionings
– Development and happiness
– Well being in terms of being well and having freedoms of choice
– “Beings and Doings”:

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Some Key “Capabilities”

• 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 able to take part in the life of the community
– Being happy – as a state of being - may be valued as a
functioning

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1.3 What Do We Mean by Development?
(cont’d)

• Three Core Values of Development

– Sustenance: The Ability to Meet Basic
Needs (food, shelter, health, protection)
When any of these is absent or in
critically short supply, a condition of
“absolute underdevelopment” exists.
– Self-Esteem: To Be a Person
– Freedom from Servitude: To Be Able to
Choose

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Three Core Values of Development

– Self-Esteem: To Be a Person – a sense of

worth and self-respect, of not being used
as a tool by others for their own ends. It
may be called authenticity, identity,
dignity, respect, honor or recognition.
The nature and form of self-esteem may
vary from society to society and from
culture to culture. This is the second
universal component of the good life.

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Three Core Values of Development

– Freedom from Servitude: To Be Able to

Choose. A third and final universal value
is the concept of human freedom.
– Freedom here is to be understood in the
sense of emancipation from alienating
material conditions of life and from social
servitude to nature, other people,
misery, oppressive institutions and
dogmatic beliefs especially that poverty
is predestination.
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Three Core Values of Development

• Freedom from Servitude:

– The concept of human freedom should also
encompass various components of political
freedom, including, but not limited to, personal
security, the rule of law, freedom of expression,
political participation, and equality of
opportunity.

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Figure 1.2 Income and Happiness: Comparing
Countries

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1.3 What Do We Mean by Development?
(cont’d)
• The Central Role of Women
– To make the biggest impact on development,
societies must empower and invest in women
– Women have the primary responsibility for
child rearing and the resources that they are
able to bring to this task will determine
whether the cycle of transmission of poverty
from generation to generation will be broken.

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The Central Role of Women
• 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.
• Women also transmit values to the next
generation.
• To make the biggest impact on development,
then, a society must empower and invest in its
women.

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The Three Objectives of
Development
– Increase availability of life-sustaining goods such
as food, shelter, health and protection
– 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 well-being but also to
generate greater individual and national self-
esteem.
– Expand range of economic and social choices by
freeing men from servitude, dependence, and
also to the forces of ignorance and human
misery.
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1.4 The Millennium Development Goals

• Millennium Development goals (MDGs)

– Eight goals adopted by the United Nations in
2000
• 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
• Develop a global partnership for development

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Table 1.1 Millennium Development Goals and
Targets for 2015

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Table 1.1 Millennium Development Goals and
Targets for 2015 (cont’d)

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