Transcript Economic Development

Economic Development
I. Measuring Development
II. Understanding Development
III. Managing Development
I. Measuring Economic Development
1. Concepts
* Growth: an economic phenomenon
increase of GNP/GDP, income not
necessarily better social welfare
* Development: an spatial, social
phenomenon relief of poverty,
unemployment reduction of income
inequality
* Modernization: a social phenomenon
2. Measurement
Monetary Measures:
use the value of product as indicators
GNP (Gross National Product):
measure production that is owned by
residents of the country, no matter it takes
place within the country or abroad
GDP (Gross Domestic Product):
measure production that take place
within the country regardless of who
owns the factories
e.g.
USA – GNP > GDP
Canada – GDP > GNP
China – GDP > GNP
Hong Kong – GNP > GDP
GNP = GDP + incomes earned by domestic
residents from investment abroad –
incomes earned in domestic market
by foreigners.
Problems:
- Official exchange rates may not be realistic
- Does not reflect unofficial monetary market
- Does not reflect equality
- Indicate national wealth but no individual
disposable income
- Foreign own company may not benefit national
economy (GDP)
- Depends on population census (citizenship)
Figure 10.7 Gross National Income per Capita
Figure 10.8
Purchasing Power Parity
Physical – Economic Measures
i.
ii.
iii.
iv.
v.
vi.
Electricity Consumption
Efficiency: labour productivity
capital intensity
Employment in R&D
Economic Structure
Urbanization
Unemployment
Figure 10.10 Labour Force in Agriculture
Social Measures
i.
ii.
iii.
Life Expectancy
Birth/Death Rate and Growth Rate
Education
Figure 10.21 Economically Active Women, 2004
Figure 10.22 Gender Empowerment Measure
Physical - Social Measures
i.
ii.
iii.
iv.
Telephones per capita
Nutrition – dietary intake
Social Services
Crime rates
Combined Measures
Rank countries according to
individual measures
Figure 10.3 Comparative Development Levels
Figure 10.18 Country rankings by Human Development Index
II. Understanding Economic Development
Two schools of thought:
- Efficient, quick economic growth
concentrated top-down approach
- Equality, Basic-needs
dispersed bottom-up approach
Export Base Theory
A theory of regional development that suggests
that the major stimulus generating development
is external demand for regional resources or
products.
Basic Activities: export goods and services to
outside areas
Non-basic Activities: provide services to the local
economy
Multiplier: A cumulative change in the total regional
income/ employment as a result of a change in external
oriented production
K=
e.g.
Total employment (basic + non-basic)
Employment in basic activities
Basic Workers = 2000
Non-basic workers = 2000
2000 + 2000
=2
2000
A new factory hires 2000 workers
ΔB = 2000
Total Employment created ΔT
ΔT = ΔB × K = 2000 × 2 = 4000
K=
Polarized Growth and Core-peripheral
Relations
The Multiplier Effect
Perroux’s Growth Pole Theory
Growth Pole: an economic concept
a vector of economic forces from which centrifugal
forces emanate and to which centripetal forces are
attracted
e.g. leading industries, firms
Polarization: rapid growth of the leading industries
which induce the polarization of other economic
activities into the pole of growth
e.g. flow of resources, capital, migration, etc.
Boudeville’s Regional Growth Pole:
A set of expanding industries located in an
urban area and inducing further development
of economic activity throughout its zone of
influence
Myrdal: Cumulative Upward Causation
Backwash Effects: negative effects caused by
prosperous regions on less prosperous regions.
e.g. concentration of resources in the core at the
cost of periphery, growing spatial inequality
Spread Effects: beneficial impact of the prosperous
regions on less prosperous regions. e.g.
increased demand, capital investment,
technology transfer
Polarization
Backwash Effect
Spread Effects
Inequality
Convergence
Time
1979
1980
1985
2000
Hirschman: Polarization/Trickle Down
Polarization Effect: growth centers attract or
“drain” regional resources
Trickle Down Effect: diffusion of growth and
innovation from the growth center to the
periphery
Myrdal VS. Hirschman
John Friedmann planner
Reasons for polarization:
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High demand in the center
Good facilities & infrastructure
Psychological effect
Tax revenue for further expansion
Reasons for spread effect:
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Increased demand for agricultural
products & raw materials
Diffusion of advanced technology
Diseconomies of scale in the center
(high labour cost, congestion)
Government intervention for
political considerations
Core-Periphery/Heartland-Hinterland
Core/heartland: centers of innovative changes
Common Features:
Favourable physical environment
Accessible to markets
Diversified economy
Urbanized population
Integrated urban system
Capable of innovation
Decision-making at the national level
III. Managing Development:
----Measure to counter spatial polarization
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British Approach
e.g. London: 13 new towns
French Approach
e.g. Paris: 8 regional centers
Taiwan
Korea
Hong Kong
Stage Theories of Economic
Development
*
*
Marx’s Theory of Revolutionary Social
Change
Rostow’s Theory of Evolutionary
Economic Growth
Marx: Forces of Production VS.
Relation of Production
1.
-
Primitive Communism
Equal relation of production, no class
Common ownership
Simple division of labour: sex division
common
ownership
equal
relation
1st
Domestication
surplus
exploitation
division of labour
demand
slave
class
private
ownership
unequal
relation
2.
*
*
*
*
*
Slavery
Slave-owner exploits slave
Private ownership
Labour more specialized
State emerged
Financial/ legal institutions
in-built crisis: growing tension between
slave and slave-owner
3. Feudalism
* landlord exploits peasant
merchant exploits serf
* landlord owned the land
* peasant was tied to the land but had certain
freedom as compared with slave
* 2nd division of labour town/city emerged
* exchange flourished
in-built crisis: growing tension between slave
and slave-owner
4.
Capitalism
* Capitalist exploits worker
* Bourgeoisie exploits proletariat
* Capitalist own the means and instruments
* Workers sell labour for wage
* Intensive division of labour
* 3rd division of labour
* Monopoly, colonialism, income inequality, urban/
rural disparity
in-built crisis: growing tension between capitalist and
worker; bourgeoisie and proletariat
5. Socialism
* Proletariat become master of the
society
* Public ownership
* Centrally planned economy
* Participation in decision-making by the
general mass
6. Communism
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*
*
*
*
No class struggle, no conflict
Common ownership
High productivity
Equal income distribution
No state, no family, no war
Critiques:
* mechanic/ inflexible
* Production deterministic
* Communist men not realistic
utopian
Rostow’s Theory of the stage of
Economic Growth
Rostow, 1960. The Stages of Economic
Growth: An non-Communist Manifesto
1. Traditional Society
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Low productivity, poor technology
Low urbanization, agriculture
Centralized political power
Conservative society
2. Precondition for take-off
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Infrastructure development
Secondary/ tertiary sector
Ready for innovation
3. Take-off
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Technology
Saving/investment rate 5~10% of
income
“leading industries” create
multiplier effect
4. Drive to Maturity
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Join the world economy
Leading sector expand to all sectors
High rate of reinvestment 10~20%
of income
Technology capable to produce
anything
5. High Mass-Consumption
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Production of durable goods
High per capita income
Tertiary/ quaternary economies
Welfare
High urbanization, life expectancy
Critiques:
Development Continuum
Colonialism as an accelerator