Transcript Lec 32

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Lecture 32
Lecture 1
What is Development
Economics?
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Use of economic analysis, methods and tools to understand
the problems, constraints and opportunities facing developing
countries
– Causes of poverty
– Roads to escape poverty
– Development and growth over time
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Theoretical and empirical work
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We study the economic, social, political and institutional
mechanisms that lead to development and transformation of
the economies
CAN YOU GIVE EXAMPLES OF DEVELOPING COUNTRIES?
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What is Development
Economics?
continued
• How do people achieve material opportunities to live an
acceptable life? (and what is acceptable anyway?)
• We discuss broad tendencies and stylized facts, that
depend on the context of each country. We have no (or
few) universal laws….
• We want to:
– Achieve a better understanding of the problems of
poor countries
– Achieve a better understanding of how to apply
economics
– Answer policy questions
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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 well-being, more broadly
understood
• The Central Role of Women
– To make the biggest impact on development, societies must
empower and invest in women
• Amartya Sen’s “Capability” Approach
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Why Study Development
Economics?
1. Moral and ethical reasons
– Poverty is unfair
– Inequality is unfair (at least at current levels)
– Development is human right
2. Our own welfare
– Global interactions (wars, environment, refugee)
– Global coexistence
– Trade and investment
3. Private interests
– Job prospects
– Perspectives on economics, common allround knowledge
4. Intellectuel curiosity
– What causes inequality and poverty and what can be
done?
– Why do some countries grow and others don’t?
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Lecture 2
Comparative Economic Development
Common Characteristics of developing countries
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Lower levels of living and productivity
Lower levels of human capital
Higher levels of inequality and absolute poverty
Higher population growth rates
Greater social fractionalization
Larger rural population- rapid migration to cities
Lower levels of industrialization and manufactured exports
Adverse geography
Underdeveloped financial and other markets
Colonial legacies- poor institutions etc.
Some Basic Indicators of Development
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Health
Life Expectancy
Education
HDI as a holistic measure of living levels
– HDI also varies for groups within countries
– HDI also varies by region in a country
– HDI also reflects rural-urban differences
Lecture 3
Characteristics of the Developing World:
Diversity within Commonality
10 Characteristics of the Developing World:
Diversity within Commonality
• 1. Lower levels of living and productivity
• 2. Lower levels of human capital (health, education,
skills)
• 3. Higher Levels of Inequality and Absolute Poverty
– Absolute Poverty
– World Poverty
• 4. Higher Population Growth Rates
– Crude Birth rates
10 Characteristics of the Developing World:
Diversity within Commonality
• 9. Underdeveloped Financial and Other markets
– Imperfect markets
– Incomplete information
• 10. Colonial Legacy and external dependence
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Institutions
Private property
Personal taxation
Taxes in cash rather than in kind
Low Income Countries Today And
Developed Countries Then
• Eight differences
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Physical and human resource endowments
Per capita incomes and levels of GDP
Climate
Population size, distribution, and growth
Historic role of international migration
International trade benefits
Scientific/technological research
Efficacy of domestic institutions
Lecture 4
Measuring Economic Growth and
Development
The Process of Economic Development
Is Development synonymous simply with
Economic Growth?
Different Development Goals of Society
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Equality of opportunity
Rising income and standard of living
Equity in the distribution of income and wealth
Political democracy and wide-spread participation
Expanded role for women, minorities and all social classes
in public life
Increased opportunities for education and selfimprovement
Expanded availability of and improvements in health care
Public and private safety nets to protect the vulnerable
A clean and healthy environment
Efficient, competent and fairly administered public sector
A reasonable degree of competition in the private sector
Measuring Economic Growth and
Development
What is the criterion for development?
1. The economic growth / income criterion:
GNP, GDP, rate of growth
• Simple and easy to use
• Yet does it really capture development?
2. The indicators criterion:
e.g. Human Development Index (HDI), PI, GDI, GPI
• More comprehensive and realisitc
• Yet difficult to measure and use for international
comparisons
Lecture 5
Human Development Approach and
Capability Approach: Concepts and Evolution
HD Approach
• HD approach differ from other approaches in three
important ways
-- definition of ends and means
--concern with human freedoms and dignity
--concern with human agency i.e. the role of people in
development
 There are several implications in adopting HD approach and
framework as compared to other approaches
-- The focus of policy can not be based merely on the
generation of more and more income. How additional
income is used, and the degree to which it improves the
quality of people’s lives must be given equal weight.
Measuring Economic Growth and
Development - Human Rights
Approach
Lecture 6
Human Rights Approach
• standard of living, education, protection of the family,
democracy, participation, rule of law, and protection against
enslavement, torture, cruel or inhuman or degrading
treatment or punishment.
• Subsequent human rights conventions have translated these
human rights into legally binding form (under human rights
international law).
• First generation rights (civil, political), second generation:
economic, social, cultural
• Legally binding international treaties provide more specific
protection to particular groups (e.g. women and children)
and in relation to particular violations (e.g. slavery and racial
discrimination)
Human Rights Approach
• The primary burden for upholding human rights is assigned
to nationa-states or governments.
• Coordination with others:NGOs,national institutions, other
countries, international organizations
• What are the obligations of nation states? More than 150
countries have promised to defend the core civil, political
rights and social, cultural, economic rights recognized in
international human rights law.
• Three types of obligations: (a) to respect human rights; (b) to
protect human rights; (c) to promote human rights
• International recognition of individual and collective
obligations was underlined by the adoption of the
Declaration on the Right to Development by the UN General
Assembly in 1986
2. Economic Development –
Basic Need Approach or Physical
Quality of Life Approach
Lecture 7
The following aspects are analyzed under basic needs
approach,:
• (i) How much goods and services are produced?
• (ii) What goods and services are being produced?
• (iii) How goods and services are being produced?
• (iv) What will be the effects of production and
distribution on the society?
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Measurement of Economic
Development with Good
Governance and Humane
Governance Index
Lecture 8
Types of Good Governance:
The good governance has three types:
(1) Good political governance
(2) Good civic governance and
(3) Good economic governance
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1. Re-Distribution with Growth (RWG)
Lecture 9
Theories or Methods of Income Distribution:
(1) To enhance the growth of GNP by raising the savings, and
allocate the resources in a better way so that all the
sections of the economy could be equally benefited.
(2) To take steps to get education, loans and other public
services for the poorest sections of the society.
(3) The fiscal systems of the countries be devised in such a
way that the distribution of income could move in favor of
the poor class.
(4) The existing assets of the countries be mobilized in favor
of the poorest class as the case of taking up Land Reforms.
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MILLENIUM DEVELOPMENT GOALS
(MDGs)
A global agenda for development
Lecture 10
MDG FRAMEWORK
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COMMITS INTERNATIONAL COMMUNITY TO AN EXPANDED VISION OF DEVELOPMENT
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PROMOTES HUMAN DEVELOPMENT AS KEY TO SOCIAL AND ECONOMIC PROGRESS
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CREATES GLOBAL PARTNERSHIP FOR DEVELOPMENT
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CONSOLIDATES TARGETS ESTABLISHED BY INTERNATIONAL CONFERENCES INTO EIGTH
ESSENTIAL GOALS
FIRST SEVEN MUTUALLY REINFORCING, AIMED AT REDUCING POVERTY IN ALL FORMS
EIGTH GOAL – GLOBAL PARTNERSHIP FOR DEVELOPMENT – IS ABOUT MEANS TO ACHIEVE
FIRST SEVEN – “A GRAND BARGAIN”
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Theories of Economic
Development - 1
Lecture 11
Nurkse's Model of Vicious Circle
of Poverty (VCP) and Economic
Development
Theories of Economic
Development - 2
Lecture 12
Big Push Theory By Rosenstein Rodan
Definition and Explanation:
The Big Push Theory has been presented by
Rosenstein Rodan. The idea behind this theory is
this that a big push or a big and comprehensive
investment package can be helpful to bring
economic development. In other words, a certain
minimum amount of resources must be devoted for
developmental programs, if the success of programs
is required.
Theories of Economic
Development - 3
Lecture 13
W.W. Rostow's Stages of Economic Growth:
W.W. Rostow was an American economist who presented
'Stages of Growth' model of development. According to
Rostow,
the process whereby all the developed industrial nations of
the world transformed themselves from backwardness to
prosperity can be described in terms of a series of stages.
These stages of economic growth are:
(1) Traditional society,
(2) Pre-conditions to take-off,
(3) Take-off,
(4) Drive to maturity,
(5) High mass consumption. They are discussed below:
Theories of Economic
Development - 4
Lecture 14
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Leibenstein's Critical Minimum
Effort
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Harvey Leibenstein is of the view that UDCs are characterized
by vicious circle of poverty (VCP) which keeps them around
a low income per capita equilibrium state. The way out of
this impasse is a certain 'Critical minimum effort' which
would raise the per capita to a level at which sustained
development could be maintained.
In other words, a UDC will have to introduce 'Stimulus' in an
amount which should be more than a critical level for the
sake of change.
Leibenstein says that every economy is subject to 'Shocks and
Stimulants'. A shock has the impact of reducing the per
capita income initially; while a stimulant tends to increase
it.
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Dualism and the Concept of
Dual Societies
Lecture 15
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Definition of Dualism
Dualism is a concept which represents the existence
and persistence of increasing divergences between
rich and poor both at world level and at country
levels.
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Dualistic Theories
Lecture 16
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There are different theories which are of the view that
the poverty and underdevelopment of poor
countries is attributed to their dualistic character.
(1) Social Dualism,
(2) Technological Dualism and
(3) Financial Dualism.
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Technological Dualism
Lecture 17
Definition and Explanation:
Professor Higgins has developed the theory of
Technological Dualism.
"The use of different production functions in the
advance sector and in the traditional sectors of
UDCs".
Rural-Urban Migration Model
Lecture 18
1. Lewis Model of Unlimited Supply of Labor
Arthur Lewis in the mid 1950s presented his model of
unlimited supply of labor or of surplus labor
economy.
By surplus labor it means that part of manpower
which even if is withdrawn from the process of
production there will be no fall in the amount of
output.
Fei-Ranis (FR) Model of Dual
Economy
Lecture 19
The two economists John Fei and Gustav Ranis
presented their dual economy model.
There was a flaw in Lewis model that it did not pay
enough attention to the importance of agriculture
sector in promoting industrial growth.
But Fei-Ranis (FR) model of dual economy explains
how the increased productivity in agri. sector would
become helpful in promoting industrial sector.
In this respect, it presents three stages whereby a
UDC moves from stagnation to self-sustained
economic growth.
Thus, this model is treated as an improvement over
Lewis model of unlimited supply of labor.
Michael P. Todaro's Model of
Rural-Urban Migration
Lecture 20
In case of UDCs it is being observed that inspite of heavy unemployment and under
employment in urban areas a big migration is taking place from rural areas to urban
areas.
This situation contradicts Lewis model. As during 1960s to 1970s the urban population
increased by 60%, 52% and 51% in Africa, Latin America and South Asia
respectively.
While in these regions the rural population increased by 16%.
This shows that the massive unemployment exists in the urban areas of these regions.
This, according to Todaro, is due to that mobility and migration which is taking place
from rural areas to urban areas. Thus, the Todaro model of rural-urban migration
states:
"Despite mass unemployment in cities people are migrating from villages to towns and
cities".
Agriculture and Economic
Development
Lecture 21
Economics of Agricultural
Development/Stages of Agricultural
Development
Lecture 22
Transformation from Peasant Subsistence Farming to Specialized Farming:
In respect of agri. production and agri. development the economists present three
stage, which are as:
(1) The subsistence farming: It is most primitive type of farming which is characterized
with low productivity and the produced output is just for the sake of subsistence.
(2) The mixed farming: Where the farmers not only produce for their personal
consumption but also for the sale in the market.
(3) The commercialized farming: In such stage of farming the agri. productivity is
higher and whole of the produced output is sold in the market. Now we discuss
them in a turn.
Strategy for Agricultural and
Rural Development
Lecture 23
Most of the developing countries of Asia, Africa and Latin America are passing
through stage I to stage II.
They have to face a lot of problems in their agri. sector whereby agri. sector fails to
contribute to their development.
The economists present a lot of proposals whereby the agri. sector would be able to
play its dynamic role in the development of poor countries.
They are as:
(1) Improving Small Scale Agriculture - Technology and Innovation
(2) Institutional and Pricing Policies - Providing the Necessary Economic Incentives
Role of Agriculture in Economic
Growth
Lecture 24
Land Reforms or Agrarian
Reforms
Lecture 25
Meaning and Definition:
The land reforms or agrarian reforms means all those measures which are aimed at
removing those obstacles which are responsible for keeping the agriculture sector
backward socially and economically.
Through these measures not only changes will be brought in the use and the
distribution of the land, but the relationships between land lords and tenants will
also be improved.
Thus due to land .reforms govt. gets legal right over the possession of the lands of
people (big landlords).
However, in this connection govt. pays the compensation, in certain cases.
Green Revolution (GR)
Lecture 26
When better and superior seeds are used; the fertilizers, pesticides, herbicides and
sprays are used; and the farm machinery like tractors, harvesters, tube wells and
threshers etc., are used to enhance the agriculture output and agri. productivity such all is given the name of Green Revolution (GR).
Thus because of GR, the high yielding seeds, fertilizers, agri. machinery water and
better technology will become available.
Consequently, the production function for any crop or crops will shift upward in
agriculture sector leading to increase the agri. output.
Problems/Demerits of Green
Revolution (GR)
Lecture 27
Apparently this scheme of GR looks very attractive that it will lead to bring a revolution
in agri. But Prof. Hala Mynit has presented a lot of problems regarding GR.
(1) Technical Problems:
(2) Organizational Problems:
(3) Central Economic Issues:
(4) Side Effects of Green Revolution:
Human Capital: Education and
Health in Economic Development
Lecture 28
Poverty, Inequality, and
Development
Lecture 29
Trade Policy in Developing Countries
Lecture 30
Policies
• Import-Substituting Industrialization
• Problems of the Dual Economy
• Export-Oriented Industrialization: The East
Asian Miracle
Foreign Aid for Development
Assistance
Lecture 31
Revision
Lecture 32