The document discusses definitions of development and economic growth. It defines development as involving both economic growth and qualitative social changes. Economic growth is defined as a sustained increase in a country's output. The document also outlines objectives, criteria and determinants of development as well as advantages and disadvantages of economic growth.
The document discusses definitions of development and economic growth. It defines development as involving both economic growth and qualitative social changes. Economic growth is defined as a sustained increase in a country's output. The document also outlines objectives, criteria and determinants of development as well as advantages and disadvantages of economic growth.
The document discusses definitions of development and economic growth. It defines development as involving both economic growth and qualitative social changes. Economic growth is defined as a sustained increase in a country's output. The document also outlines objectives, criteria and determinants of development as well as advantages and disadvantages of economic growth.
The document discusses definitions of development and economic growth. It defines development as involving both economic growth and qualitative social changes. Economic growth is defined as a sustained increase in a country's output. The document also outlines objectives, criteria and determinants of development as well as advantages and disadvantages of economic growth.
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CHAPTER ONE
Session one; The Notion of Development
Definitions of Development Development is an elusive term. The concept has been understood differently in different time/ periods and by different persons. Its meaning has evolved progressively to have the present meaning. In the 1950s and 1960s, for example, development was considered as synonymous to economic growth. Accordingly, in this period, it has been defined as the capacity of the economy to generate and sustain fast growth rate of GDP (per capital income Jhingan (2007) defines development as economic growth plus change. The author sees development as being related to qualitative changes in economic wants, goods, incentives, institutions, productivity and knowledge or upward movement of the entire social system. According to Kindleberger (1965), economic development implies both more output and changes in the technical and institutional arrangement by which it is produced and distributed. In same vein, Friedman and Hansen (1972) define economic development as an innovative process leading to the structural transformation of social system. Innovation and transformation of social system are the key points in this definition. The definitions above imply that development is about growth and change. • Okun and Richardson (1962) also defined economic development along the growth perspective as “a sustained, secular improvement in material well-being, which we may consider to be reflected in an increasing flow of goods and services.
• In same vein, Rodney (2009) sees economic development as
a situation where members of a society jointly increase their capacity for dealing with the environment. • Todaro succinctly puts the definition of development as follows: development is “conceived as a multi dimensional 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 unemployment), and the eradication of absolute poverty”. Core values of development Denis Goulet distinguishes three basic components or core values of development Life-sustenance: life-sustenance is concerned with the provision of basic needs. No country can be regarded as fully developed if it cannot provide its entire people with such basic needs as housing, clothing, food and minimum education. A major objective of development must be to raise people out of primary poverty and to provide basic needs simultaneously without which there is absolute under development Self-Esteem: self-esteem is concerned with the feeling of self-respect and independence. It means to be a person, a sense of worth and self-respect, of not being used as a tool by others for their own ends. Every society or individual strives towards self-esteem. Without development the pride of the peoples of the developing countries on their cultural identity and dignity are being eroded. Freedom from servitude: Freedom is ability of people to determine their destiny. It involves an expanded range of choices for societies and their members together with a minimization of external constraints in the pursuit of devolvement. No man is free if s/he cannot choose; if s/he is imprisoned by living on the margin of subsistence with no education and no skills The Objectives of Development Whatever the specific components of these desirable changes are, 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, and protection. 2) To raise level of living standard. This involves in addition to higher income, 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. 3) To expand the range of economic and social choices available to individuals and nations by freeing them from servitude and the dependence not only in relation to other people and nation-states but also to the forces of ignorance and human misery Criteria for Development Based on the objectives of development, the following can be said to be the criteria for development: 1) Development must be people oriented. 2) It has to be a long term process. 3) Development creates the capacity for people to be self reliant. 4) It must not be abstract that is, it must be observable and measurable. Economic growth What is economic growth? The meaning of economic growth is unambiguous. Almost all economists would accept the increase in the output of goods and services of a country per unit time as its definition. To an economist, economic growth is the sustained increase in the National Income (NI) or the total output of all goods and services produced in an economy. It is an increase in the capacity of an economy to produce goods and services, compared from one period of time to another. Kuznets (1973), a Nobel laureate in economics, defined a country’s economic growth as “a long-term rise in capacity to supply increasingly diverse economic goods to its population, this growing capacity based on advancing technology and the institutional and ideological adjustments that it demands. Economic growth according to Todaro and Smith (2006), is the steady process by which the productive capacity of the economy is increased over time to bring about rising levels of national output and income. Economic growth therefore occurs whenever people take resources and efficiently rearrange them in ways that make them more productive overtime. Advantages and Disadvantages of Economic Growth. • Advantages of Economic Growth 1. Higher living standards - since growth means a sustainable increase in the total output of goods and services produced in a country, consumers are able to enjoy more goods and services, increased income and a general improvement in living standard. 2. Employment effects - growth stimulates more jobs in an economy and this would address the issue of unemployment. 3. Lower government borrowing - economic growth boosts tax revenues and provides the government with extra money to improve public services such as education and healthcare. It helps to reduce government borrowing and makes it easier for a government to reduce the size of their budget deficit. 4. Environmental protection - growth can also help provide the funds to protect the environment such as low-carbon investment, innovation/research and development, in the use of more efficient and environmental friendly production processes. • Disadvantages of Economic Growth 1. Working hours – sometimes there are fears that a fast-growing economy places increasing demands on the hours that people work and can upset work-life balance. 2. Environmental issues - a fast growing economy can put pressure on the environment in terms of depletion of the non- renewable natural resources, and damage caused by industrial/economic activities on the environment e.g. air, water and noise pollutions. 3. Inequality- not all of the benefits of economic growth are evenly distributed. There could be a rise in national output but also growing income and wealth inequality in the society. There could also be regional differences in the distribution of rising income and spending. 4. Risk of inflation - if the economy grows too quickly, there is the danger of inflation as spending would likely grow faster than production. Economic Growth Economic Development
Definition The sustained increase in Economic Growth
the aggregate output or accompanied by desirable supply of goods and social and institutional services produced in a changes country
Effect Quantitative: Brings about Qualitative and
quantitative increase in the Quantitative: Brings about economy qualitative and quantitative changes in the economy and society Applicability/ Relevance Growth theories are Development theories are associated with developed specific to the developing countries. countries
Concept Narrower concept Broader concept
Measurement Increase in GDP per capita Human Development Index
(HDI) Determinants of Economic Growth • The determinants of economic growth are factors that are at work in an economy that give rise to the expansion of production capacity through the fuller and more efficient utilization of available production capacity. • Economic Factors Natural resources Capital accumulation Division of labor Organization Technological progress Structural changes • Non-Economic Factors Political and Administrative Factors Social Structure of Population Human Capital and Cultural Traits HAVE A NICE DAY