Econ 336- Economic Development TOPIC ONE: What is Development?

1. Econ 336- Economic Development TOPIC ONE: What is Development? Source: http://cdn.archdaily.net/wp-content/uploads/2009/07/sao_paulo_-_fotograaf_nelson_kon-886x900.jpg

2. Incomes are growing across the world, but the gap between rich and poor countries is widening OECD Countries (US, Europe, Japan, Korea, Chile, Turkey) Latin America, South Asia, East Asia, Sub-Saharan Africa, Middle East and North Africa

3. Differences in level of GDP and growth of GDP across the developing world. Latin America stagnated in the 1980s (“lost decade”) East Asia has grown most rapidly South Asia and Sub-Saharan Africa show slow growth

4. Variations in decline of poverty across the developing world South Asia, sub-Saharan Africa East Asia Latin America, Middle East-North Africa

5. http://siteresources.worldbank.org/DEC/Images/84796-1179761045903/3798749-1330548119519/number_of_poor_450x378.gifhttp://siteresources.worldbank.org/DEC/Images/84796-1179761045903/3798749-1330548119519/number_of_poor_450x378.gif

6. Criticisms of income-based measures • Per capita (mean) values don’t tell us anything about income distribution. Is that a problem? Why or why not? • Only market-based activity is measured. What does that leave out? • Activities that carry social costs such as environmentally polluting production, destruction of forests, arms manufacture add less to the welfare of society than their market contribution suggests. Why? • GDP can increase without increase in living standards of the majority. • After a point, more income does not mean more happiness.

7. Adjusting for population (per capita measures) • Adjusting for inflation (GDP deflator) • Adjusting for cross-country variation in purchasing power (PPP-adjusted dollars) • Looking at the distribution of income (GINI) • Accounting for unpaid work, leisure time (GPI) • Discounting environmental bads (GPI) • Measuring human development (HDI)

8. Spectacular inequalities Source: PED, Ch. 1, Table 1.3 • Developed economies account for 16% of the world’s population but 78% of its income. • The richest 1% of the world’s population receives as much income as the poorest 57%. • World's 85 richest people have same wealth as 3.5 billion poorest.

9. Inequality in greenhouse gas emissions http://www.worldmapper.org/images/largepng/299.png

10. Genuine Progress Indicator

11. Sen: Perspective of freedom • Constitutive Role • Instrumental Role • China-India contrast • Divergence between high economic growth and social outcomes (health, education) • Growth-mediated development versus support-led development.

12. China: Life Expectancy and GDP Per Capita: 1960-2007

13. Human Development Index • Attempts to go beyond GDP in measuring development. • Includes per capita income as well as education and health indicators. • Life expectancy at birth, adult literacy rate, school enrollment ratio, PPP-adjusted GDP per capita. • Maximum possible values are 85 yrs,100%, 100%, and $40,000. • The extent to which a country falls short is indicated by its position on a scale of 0 to 1. • Under what circumstances might GDP rankings and HDI rankings diverge?

14. Rostow’s Stages of Economic Growth • Traditional society • “Ad-hoc” technical inventions, largely agricultural • No expectation of continual increase in living standards • Pre-conditions for take-off • Systematic application of Science to production • Economic progress is possible, good, necessary. • Take-off • Resistance to growth are overcome, growth is normal condition. • Emergence of political group which pushes modernization. • Savings rate rises dramatically, allowing greater investment. • Drive to maturity • Diversification of industrial base • Higher savings and investment, income per capita grows steadily. • Age of high mass-consumption • Ordinary people consume more than most elites did in the past. • Emergence of welfare state.

15. Mies • A response to Rostow and other “stagist” thinking. • “Catching-up” development is a myth. Nowhere has it led to the desired goal. • Not “lagging behind,” instead in exploitative relationship. • Not only political decolonization, but cultural, mental decolonization.

16. Mies • Ill-effects of modern industrial, mass production – mass consumption economy denied. • Techno-optimism. • Growth is viewed as having only benefits, no costs. • Because costs are externalized. • Catching-up impossible because of resource limitations. • Equal distribution of energy would mean a reduction in living standards for the affluent societies. • Even if resources were unlimited: catching-up impossible because growth in one place depends on poverty in another. • Contuining and pepetual war – with others, with nature.