EconomicDevelopment,12thEdi)onM.P.TodaroandS.C.Smith

SlidesforChapterOne

UpdatedandExpandedStephenC.Smith

Fall2017ssmith@gwu.edu

Chapter One: Introducing Economic Development: A Global Perspective

•  Prologue:AnExtraordinaryMoment•  Substan)al–evendrama)c–progressingrowthandpovertyreduc)on

inthedevelopingworldinthelastquartercentury•  Developingcountrieshavefastergrowththanrichcountries–butuneven•  Theincomepovertyratehasbeenmorethanhalved

•  Interna)onaleconomicrela)onslessone-sided–alsomorefragile•  Thescaleofchallengesforsustainableeconomicdevelopmentand

endingpovertyremainsenormous–  Violentconflict–  Othergovernancechallenges–  Environment–climatechange;plusdomes)cenvironmentaldeteriora)on–  Anotherac;vediscussion-Futureofthetradi;onalpathofmanufactures-led

growth:ManufacturingjobsforAfricanext?Orforrobots?–  Keepingthetradepeace?–  Afinalconcern:Condi;onsforrepeatofglobalfinancialcrisis/greatrecession?

•  InclusiveGrowth,andthedrivetozero-poverty–notasimplemaUerofcon)nuingalongatrendline!

Box1.1:TheExperienceofPoverty•  Whenoneispoor,shehasnosayinpublic,shefeelsinferior.Shehasnofood,sothereis

famineinherhouse;noclothing,andnoprogressinherfamily.—ApoorwomanfromUganda•  Forapoorpersoneverythingisterrible—illness,humilia)on,shame.Wearecripples;weare

afraidofeverything;wedependoneveryone.Nooneneedsus.Wearelikegarbagethateveryonewantstogetridof.—AblindwomanfromTiraspol,Moldova

•  Lifeintheareaissoprecariousthattheyouthandeveryablepersonhavetomigratetothetownsorjointhearmyatthewarfrontinordertoescapethehazardsofhungerescala)ngoverhere-Par)cipantinadiscussiongroupinruralEthiopia

•  Whenfoodwasinabundance,rela)vesusedtoshareit.Thesedaysofhunger,howevernotevenrela)veswouldhelpyoubygivingyousomefood.—YoungmaninNichimishi,Zambia

•  Wehavetolineupforhoursbeforeitisourturntodrawwater.—Mangochi,Malawi•  [Povertyis]...lowsalariesandlackofjobs.Andit’salsonothavingmedicine,food,and

clothes.--Discussiongroup,Brazil•  Don’taskmewhatpovertyisbecauseyouhavemetitoutsidemyhouse.Lookatthehouse

andcountthenumberofholes.LookattheutensilsandtheclothesIamwearing.Lookateverythingandwritewhatyousee.Whatyouseeispoverty.—PoormaninKenya

•  A universal theme reflected in these seven quotes alone is that poverty is more than lack of income – it is inherently multidimensional, as is economic development

1.2 Outline: Economics and Development Studies

•  TheNatureofDevelopmentEconomics•  Greaterscopethantradi)onalneoclassicaleconomicsand

poli)caleconomy.•  WhyStudyDevelopmentEconomics?SomeCri)calQues)ons•  TheImportantRoleofValuesinDevelopmentEconomics

•  EconomiesasSocialSystems:NeedtoGoBeyondBasicEconomics

•  SocialSystems•  Interdependentrela)onshipsbetweeneconomicandnon-economicfactors

•  Successorfailureofdevelopmentpolicy•  Importanceoftakingaccountofins)tu)onalandstructuralvariablesalongwithmoretradi)onaleconomicvariables

Figure 1.1 World Income Distribution

1.3 What Do We Mean by Development?

•  Tradi)onalEconomicMeasures–  GrossNa)onalIncome(GNI)–  Incomepercapita–  U)lityofthatincome?

•  TheNewEconomicViewofDevelopment–  Leadstoimprovementinwellbeing,morebroadlyunderstood

•  AmartyaSen’s“Capability”Approach–  Func)oningsasanachievement–  Capabili)esasfreedomsenjoyedintermsoffunc)onings–  Developmentandhappiness– Wellbeingintermsofbeingwellandhavingfreedomsofchoice

–  “BeingsandDoings”:

Some Key “Capabilities” •  SomeImportant“Beings”and“Doings”inCapabilitytoFunc)on:

–  Beingabletolivelong–  Beingwell-nourished–  Beinghealthy–  Beingliterate–  Beingwell-clothed–  Beingmobile–  Beingphysicallysecure–  Beingabletotakepartinthelifeofthecommunity–  Beinghappy–asastateofbeing-maybevaluedasafunc)oning

Details on Amartya Sen’s Capability Approach

•  Sen: “Economic growth cannot be sensibly treated as an end in itself. Development has to be more concerned with enhancing the lives we lead and the freedoms we enjoy.”

•  So what matters fundamentally is not things a person has—or feelings these provide—but what a person is, or can be, and does, or can do.

•  That is, not just characteristics of commodities consumed as in the utility approach (recall Sen’s bread example in the text), but the uses a consumer can and does make of commodities

•  Think beyond availability of commodities and consider uses to address “functionings” - what a person does (or can do) with commodities of given characteristics they come to possess or control

•  Valued functionings range from very basic - being adequately nourished to very complex - e.g. being able to take part in community life

Details on Amartya Sen’s Capability Approach 2

•  Disparities between income and advantages are due to:

•  personal heterogeneities; •  environmental diversities; •  variations in social climate; •  intra-household distribution; and •  differences in relational perspectives such as

minimal social expectations

Details on Sen’s Capability Approach 3

•  Measuring individual well-being by levels of consumption of goods and services obtained confuses the role of commodities by regarding them as ends in themselves rather than as means to an end.

•  In the case of nutrition, the end is health and what one can do with good health, as well as personal enjoyment and social functioning.

•  Measuring well-being with utility is not sufficient improvement over measuring consumption to capture the meaning of development.

•  A person’s own valuation of what kind of life would be worthwhile is not necessarily the same as what gives pleasure to that person.

Details on Sen’s Capability Approach 4

•  Consider functionings as resulting from choices, given capabilities

•  “The functioning of a person is an achievement; it is what the person succeeds in doing with the commodities and characteristics at his or her command… bicycling has to be distinguished from possessing a bike… [and] from the happiness generated by [bicycling]…

•  Or, you can think of goods leading in part to functioning, and from there to “utility” (as happiness resulting from that functioning)

•  To clarify, Sen suggests that subjective well-being as a psychological state of being is a functioning—that could be pursued alongside other functionings such as health and dignity.

Figure 1.2 Income and Happiness: Comparing Countries

1.3 What Do We Mean by Development? 2

•  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

1.3 What Do We Mean by Development? 3

•  The Central Role of Women – To make the biggest impact on

development, societies must empower and invest in women

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

choices

1.4 Update: The Millennium Development Goals and The 2015-2030 Sustainable Development Goals

•  Millennium Development goals (MDGs): Eight goals adopted by the United Nations in 2000, a blueprint for the next 15 years (to 2015)

•  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

Millennium Development Goals (MDGs), adopted by the United Nations in 2000, with Some Targets that were set for 2015

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

MDG Retrospective: Glass Half Full Or half empty

•  Shorthand: “Halving Poverty” (and Halving Hunger) •  Income poverty target reached – by official definition of fraction

living under $1 a day equivalent (now adjusted to $1.90) •  Progress on hunger (fraction hungry fell from about 23% to

14%) but not halved – and nearly 900 million still hungry •  Under-5 Mortality dropped about 41%: progress; but not

halved, let alone cut by two-thirds •  Maternal deaths about halved – but not cut by three-quarters •  Clean drinking water target met, and slum target met; but the

sanitation goal not met •  Great progress on several diseases including TB and malaria •  Progress on enrollments, but universal goal not met - 57 million

children still not in primary school – generally the poorest •  Development assistance is now about flat, and probably falling

in real terms

Some Criticisms that have been raised concerning the Original MDGs Framework

•  Not ambitious enough, it merely projects past rates of improvement •  Goals not prioritized; stove-piped: overlooks goal complementarity •  Setting a specific end date could discourage aid if targets not met •  The $1 a day poverty measure misses intensity of poverty •  $1.25 (or $1.90 as purchasing-power adjusted) per day is too low a bar •  Lack of goals on reducing rich country agricultural subsidies, which harm

low income farmers in developing countries •  Nothing on improving legal and human rights of the poor •  No goals for slowing climate change harming developing countries •  Nothing on expanding gender equity outside of / beyond education •  15 years was too long to prod early action and accountability of leaders •  No goal on global social safety net guaranteeing minimums of life •  Did not seem to apply to developed countries except as aid donors •  Question for discussion: To what extent addressed in the new

(2015-2030) Sustainable Development Goals (SDGs)?

Update:SustainableDevelopmentGoals

•  SustainableDevelopmentGoals(SDGs)–•  AdoptedbytheUNon26Sept.2015•  Tobeachievedby2030•  Features17goals,with169targets•  hUps://sustainabledevelopment.un.org/sdgs•  NewUnderlyingPrinciples:•  Universalityprinciple:Appliestoeveryna)on(withac)onencouragedfromeverysector)

•  Integra)onprinciple:Mustachieveallgoals;todosoaccountfortheirinterrela)onships

•  Transforma)onprinciple:Not“piecemeal”steps

The17SustainableDevelopmentGoals2015-2030•  Goal1.Endpovertyinallitsformseverywhere•  Goal2.Endhunger,achievefoodsecurityandimprovednutri)onandpromotesustainableagriculture•  Goal3.Ensurehealthylivesandpromotewell-beingforallatallages•  Goal4.Ensureinclusive&equitablequalityeduca)on&promotelifelonglearningopportuni)esforall•  Goal5.Achievegenderequalityandempowerallwomenandgirls•  Goal6.Ensureavailabilityandsustainablemanagementofwaterandsanita)onforall•  Goal7.Ensureaccesstoaffordable,reliable,sustainableandmodernenergyforall•  Goal8.Promotesustained,inclusiveandsustainableeconomicgrowth,fullandproduc)ve

employmentanddecentworkforall•  Goal9.Buildresilientinfrastructure,promoteinclusiveandsustainableindustrializa)on,foster

innova)on•  Goal10.Reduceinequalitywithinandamongcountries•  Goal11.Makeci)esandhumanseUlementsinclusive,safe,resilientandsustainable•  Goal12.Ensuresustainableconsump)onandproduc)onpaUerns•  Goal13.Takeurgentac)ontocombatclimatechangeanditsimpacts•  Goal14.Conserveandsustainablyuseoceans,seas,marineresourcesforsustainabledevelopment•  Goal15.Protect,restoreandpromotesustainableuseofterrestrialecosystems,sustainablymanage

forests,combatdeser)fica)on,andhaltandreverselanddegrada)onandhaltbiodiversityloss•  Goal16.Promotepeacefulandinclusivesocie)esforsustainabledevelopment,provideaccessto

jus)ceforallandbuildeffec)ve,accountableandinclusiveins)tu)onsatalllevels•  Goal17.Strengthenmeansofimplementa)onandrevitalizeglobalpartnershipforsustainable

development

DiscussionTopic:TheSDGs•  Whataresomekeysimilari)esanddifferencesbetweentheSDGs

andtheearlierMDGs?•  Towhatextentdothesamecri)cismsapplytoSDGsaswere

raisedinthepastconcerningtheMDGs?•  Ifyouthinkoneormorecri)cismsareaddressed–atleastinpart

–pleaseexplain•  Example:Howsignificantisadop)ngthe“Universality”principle?•  Ifyouthinkanewcri)cismisrelevant–specifictoSDGs,orthat

appliesalsotoMDGsbutnotlistedabove–pleasespecify;explain•  RegardlessofyourspecificviewsabouttheSDGs:doyouthinkitis

beUertohavethesegoals[orperhapsevenanygoals]thannottospecifyinterna)onaldevelopmentgoals?How,orwhynot?

•  Doyouhaveaproposalforhowtoremedyaproblemthatyouspecifyorthathasbeenraised?

1.5 Concluding Observations •  TheimportanceofDevelopmentEconomics•  Inclusionofnon-economicdimensionsindesigningdevelopmentstrategies

•  Increasingcapabili)estofunc)onasacentralconceptofdevelopment–Developmentasfreedom

•  AchievingtheMillenniumDevelopmentGoals(MDGs)andbeyondtotheprospec)veSustainableDevelopmentGoals(SDGs)

•  “…Onefuture-ornoneatall”

Concepts for Review •  Absolute Poverty •  Attitudes •  Capabilities •  Developing countries •  Development •  Development economics •  Freedom •  Functionings •  Globalization •  Gross domestic product •  Gross national income (GNI) •  Income per capita •  Institutions

•  Less developed countries (LDCs) •  Millennium Development Goals

(MDGs) •  More developed countries

(MDCs) •  Political economy •  Self-esteem •  Social system •  Subsistence economy •  Sustenance •  Traditional economics •  Values