Chapter-1

Introducing Economic Development:

A Global Perspective

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 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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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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 Economics and Development Studies
– The Nature of Development Economics
• Greater scope than traditional neoclassical economics and political economy.
– Why Study Development Economics? Some Critical Questions
– The Important Role of Values in Development Economics

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Nature of Development Economics
o Traditional economics: approach to economics that emphasizes utility,
profit maximization, market efficiency, and determination of equilibrium.
o An Political economy: The attempt to merge economic analysis with
practical politics- to view economic activity in its political context.
o Development economics: The study of how economies are transformed
from stagnation to growth and from low- income to high-income status,
and overcome problems of absolute poverty.

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Why Study Development Economics?
o What is the real meaning of development? Do the SDGs fit with these
meanings?
o What can be learned from the historical record of economic progress in the now
developed world? Are the initial conditions similar or different for
contemporary developing countries from what the developed countries faced on
the eve of their industrialization or in their earlier phases?
o Why do some countries make rapid progress toward development while many
other remain poor?
o Which are the most influential theories of development, and are they
compatible?

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Why Study Development Economics?
o What are the causes of extreme poverty, and what policies have been most
effective for improving the lives of the poorest of the poor?
o Why is there so much unemployment and under-employment?
o Does education system promote development?
o What is environmentally sustainable development?
o Why so many developing countries are get into serious foreign debt?

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The Important Role of Values in Development
Economics

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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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What is Development?
Development is all about:
GDP Growth
Assurance of basic necessities of life
Equitable distribution of income
Political Freedom
Cultural Freedom
Freedom of Speech & Expression

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What is Development Economics?

Use of economic analysis method and tools to understand the problem,

constraints and opportunities facing developing countries.
•* Causes of Poverty
•*Road to escape from the poverty
•*Development and growth over time

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What Do We Mean by Development?

• Traditional Economic Measures

– Gross National Income (GNI)
– Gross Domestic product(GDP)
– 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

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Traditional Economic Measures
o Income per capita: Total gross national jncome of a country divided by its total
population.
o Gross national income (GNI): The total domestic and foreign output claimed by
residents of a country. It Comprises grosS domestic product (GDP) plus factor
incomes accruing to restdents from abroad, less the incomé earned in the domes tic
econonmy accruing to persons abroad.
o Gross domestic product (GDP) The total final output of goods and services produced
by the country's economy, within the country's territory, by residents and nonresidents,
regardless of its allocation between domestic and foreign claims.

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The New Economic View of Development
• During the 1970s, economic development came to be redefined in terms of the reduction
or elimination of poverty, inequality, and unemployment within the context of a growing
economy. Dudley Seers posed the basic question about the meaning of development
succinctly when he asserted: The questions to ask about a country’s development are
therefore:
• What has been happening to poverty? What has been happening to unemployment? What has been
happening to inequality? If all three of these have declined from high levels, then beyond doubt this has
been a period of development for the country concerned. If one or two of these central problems have been
growing worse, especially if all three have, it would be strange to call the result “development” even if per
capita income doubled.

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Amartya Sen Capability Approach
• Amartya 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.

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Amartya Sen Capability Approach
For example, a book is of little value to an illiterate person
(except perhaps as cooking fuel or as a status symbol). Or
as Sen noted, a person with a parasitic disease will be less
able to extract nourishment from a given quantity of food
than someone without parasites.

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Amartya Sen Capability Approach
 Development can be seen, it is argued, as a process of expanding the real freedoms that
people enjoy.
 Development enhancing the capability to lead the kind of lives we have reason to value.
 Focusing on human freedoms contrasts with narrower views of development, such as
identifying development with the growth of gross national product, or with the rise in
personal incomes, or with the industrialization, or with technological advance, or with
social modernization.
 Development consists of the removal of various types of unfreedoms that leave people
with little choice and little opportunity.

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Amartya Sen Capability Approach
o Functionings : What people do or can do with the commodities of given
characteristics that they come to possess or control. Freedom of choice, or
control of one’s own life, is itself a central aspect of most understandings
of well-being.
o Capabilities : Refers to the set of valuable functionings that a person
has effective access to. The freedoms that people have, given their
personal features and their command over commodities.

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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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Core Values of Development

• Three Core Values of Development

– Sustenance: The Ability to Meet Basic Needs
– Self-Esteem: To Be a Person
– Freedom from Servitude: To Be Able to Choose

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Development and Happiness
 One of the findings is that the average level of happiness or satisfaction
increases with a country’s average income.
 Factors affect happiness:
1. Family relationships
2. Financial situation
3. Work
4. Community and friends
5. Health
6. Personal freedom
7. Personal values
In particular, aside from not being poor, the evidence says people are happier when they are not unemployed, not
divorced or separated, and have high trust of others in society, as well as enjoy high government quality with
democratic freedoms and have religious faith.

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Figure Income and Happiness: Comparing Countries

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The Three Objectives of Development
– Increase availability of life-sustaining goods
– Raise levels of living
– Expand range of economic and social choices

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Sustainable Development Goals (SDGs)

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