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Economic Development, 12th Edi)on

M. P. Todaro and S. C. Smith
Slides for Chapter One

Updated and Expanded
Stephen C. Smith
Fall 2017
ssmith@gwu.edu

Chapter One: Introducing Economic Development:
A Global Perspective
•  Prologue: An Extraordinary Moment
•  Substan)al – even drama)c – progress in growth and poverty reduc)on
in the developing world in the last quarter century
•  Developing countries have faster growth than rich countries – but uneven
•  The income poverty rate has been more than halved
•  Interna)onal economic rela)ons less one-sided –also more fragile
•  The scale of challenges for sustainable economic development and
ending poverty remains enormous
–  Violent conflict
–  Other governance challenges
–  Environment – climate change; plus domes)c environmental deteriora)on
–  Another ac;ve discussion - Future of the tradi;onal path of manufactures-led
growth: Manufacturing jobs for Africa next? Or for robots?
–  Keeping the trade peace?
–  A final concern: Condi;ons for repeat of global financial crisis/ great recession?
•  Inclusive Growth, and the drive to zero-poverty – not a simple maUer of
con)nuing along a trend line!

What you see is poverty. and no progress in her family. she feels inferior. so there is famine in her house. we depend on everyone. --Discussion group. Brazil •  Don’t ask me what poverty is because you have met it outside my house. humilia)on. And it’s also not having medicine. we are afraid of everything. shame. Malawi •  [Poverty is] . rela)ves used to share it. no clothing. however not even rela)ves would help you by giving you some food. She has no food. . food.1: The Experience of Poverty •  When one is poor. —A poor woman from Uganda •  For a poor person everything is terrible—illness. These days of hunger. Look at the utensils and the clothes I am wearing. as is economic development . Look at the house and count the number of holes. 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 escala)ng over here - Par)cipant in a discussion group in rural Ethiopia •  When food was in abundance. —Mangochi. low salaries and lack of jobs. —Poor man in Kenya •  A universal theme reflected in these seven quotes alone is that poverty is more than lack of income – it is inherently multidimensional. —Young man in Nichimishi. Zambia •  We have to line up for hours before it is our turn to draw water. and clothes. No one needs us. Look at everything and write what you see. We are like garbage that everyone wants to get rid of. —A blind woman from Tiraspol. Box 1. We are cripples. . she has no say in public.

2 Outline: Economics and Development Studies •  The Nature of Development Economics •  Greater scope than tradi)onal neoclassical economics and poli)cal economy. •  Why Study Development Economics? Some Cri)cal Ques)ons •  The Important Role of Values in Development Economics •  Economies as Social Systems: Need to Go Beyond Basic Economics •  Social Systems •  Interdependent rela)onships between economic and non- economic factors •  Success or failure of development policy •  Importance of taking account of ins)tu)onal and structural variables along with more tradi)onal economic variables . 1.

Figure 1.1 World Income Distribution .

3 What Do We Mean by Development? •  Tradi)onal Economic Measures –  Gross Na)onal Income (GNI) –  Income per capita –  U)lity of that income? •  The New Economic View of Development –  Leads to improvement in wellbeing. 1. more broadly understood •  Amartya Sen’s “Capability” Approach –  Func)onings as an achievement –  Capabili)es as freedoms enjoyed in terms of func)onings –  Development and happiness –  Well being in terms of being well and having freedoms of choice –  “Beings and Doings”: .

Some Key “Capabilities” •  Some Important “Beings” and “Doings” in Capability to Func)on: –  Being able to live long –  Being well-nourished –  Being healthy –  Being literate –  Being well-clothed –  Being mobile –  Being physically secure –  Being able to take part in the life of the community –  Being happy – as a state of being - may be valued as a func)oning .

or can do. Development has to be more concerned with enhancing the lives we lead and the freedoms we enjoy.e. Details on Amartya Sen’s Capability Approach •  Sen: “Economic growth cannot be sensibly treated as an end in itself. being able to take part in community life . not just characteristics of commodities consumed as in the utility approach (recall Sen’s bread example in the text). or can be.” •  So what matters fundamentally is not things a person has—or feelings these provide—but what a person is.being adequately nourished to very complex . 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 . •  That is. and does.g.

Details on Amartya Sen’s Capability Approach 2 •  Disparities between income and advantages are due to: •  personal heterogeneities. •  variations in social climate. and •  differences in relational perspectives such as minimal social expectations . •  intra-household distribution. •  environmental diversities.

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. as well as personal enjoyment and social functioning. •  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. . •  Measuring well-being with utility is not sufficient improvement over measuring consumption to capture the meaning of development. •  In the case of nutrition. the end is health and what one can do with good health.

and from there to “utility” (as happiness resulting from that functioning) •  To clarify. . Details on Sen’s Capability Approach 4 •  Consider functionings as resulting from choices. given capabilities •  “The functioning of a person is an achievement. 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. you can think of goods leading in part to functioning. 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.

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. malaria.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. and other diseases •  Ensure environmental sustainability •  Develop a global partnership for development .

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

1 Millennium Development Goals and Targets for 2015 (cont’d) .Table 1.

57 million children still not in primary school – generally the poorest •  Development assistance is now about flat. and slum target met.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. but universal goal not met . 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. but the sanitation goal not met •  Great progress on several diseases including TB and malaria •  Progress on enrollments. and probably falling in real terms . let alone cut by two-thirds •  Maternal deaths about halved – but not cut by three-quarters •  Clean drinking water target met.

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 •  $1.90 as purchasing-power adjusted) per day is too low a bar •  Lack of goals on reducing rich country agricultural subsidies. Some Criticisms that have been raised concerning the Original MDGs Framework •  Not ambitious enough. 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)? .25 (or $1.

un. with 169 targets •  hUps://sustainabledevelopment. 2015 •  To be achieved by 2030 •  Features 17 goals. Update: Sustainable Development Goals •  Sustainable Development Goals (SDGs) – •  Adopted by the UN on 26 Sept. to do so account for their interrela)onships •  Transforma)on principle: Not “piecemeal” steps .org/sdgs •  New Underlying Principles: •  Universality principle: Applies to every na)on (with ac)on encouraged from every sector) •  Integra)on principle: Must achieve all goals.

sustainable and modern energy for all •  Goal 8. accountable and inclusive ins)tu)ons at all levels •  Goal 17. seas. reliable. Strengthen means of implementa)on and revitalize global partnership for sustainable development . Ensure sustainable consump)on and produc)on paUerns •  Goal 13. and halt and reverse land degrada)on and halt biodiversity loss •  Goal 16. inclusive and sustainable economic growth. restore and promote sustainable use of terrestrial ecosystems. End poverty in all its forms everywhere •  Goal 2. achieve food security and improved nutri)on and promote sustainable agriculture •  Goal 3. Reduce inequality within and among countries •  Goal 11. Take urgent ac)on to combat climate change and its impacts •  Goal 14. Promote peaceful and inclusive socie)es for sustainable development. Protect. combat deser)fica)on. provide access to jus)ce for all and build effec)ve. End hunger. Build resilient infrastructure. The 17 Sustainable Development Goals 2015-2030 •  Goal 1. Achieve gender equality and empower all women and girls •  Goal 6. resilient and sustainable •  Goal 12. Make ci)es and human seUlements inclusive. sustainably manage forests. Ensure access to affordable. marine resources for sustainable development •  Goal 15. Promote sustained. safe. Conserve and sustainably use oceans. Ensure inclusive & equitable quality educa)on & promote lifelong learning opportuni)es for all •  Goal 5. foster innova)on •  Goal 10. promote inclusive and sustainable industrializa)on. full and produc)ve employment and decent work for all •  Goal 9. Ensure healthy lives and promote well-being for all at all ages •  Goal 4. Ensure availability and sustainable management of water and sanita)on for all •  Goal 7.

Discussion Topic: The SDGs •  What are some key similari)es and differences between the SDGs and the earlier MDGs? •  To what extent do the same cri)cisms apply to SDGs as were raised in the past concerning the MDGs? •  If you think one or more cri)cisms are addressed – at least in part – please explain •  Example: How significant is adop)ng the “Universality” principle? •  If you think a new cri)cism is relevant – specific to SDGs. explain •  Regardless of your specific views about the SDGs: do you think it is beUer to have these goals [or perhaps even any goals] than not to specify interna)onal development goals? How. or why not? •  Do you have a proposal for how to remedy a problem that you specify or that has been raised? . or that applies also to MDGs but not listed above – please specify.

5 Concluding Observations •  The importance of Development Economics •  Inclusion of non-economic dimensions in designing development strategies •  Increasing capabili)es to func)on as a central concept of development – Development as freedom •  Achieving the Millennium Development Goals (MDGs) and beyond to the prospec)ve Sustainable Development Goals (SDGs) •  “…One future-or none at all” . 1.

Concepts for Review •  Absolute Poverty •  Less developed countries (LDCs) •  Attitudes •  Millennium Development Goals •  Capabilities (MDGs) •  Developing countries •  More developed countries •  Development (MDCs) •  Development economics •  Political economy •  Freedom •  Self-esteem •  Functionings •  Social system •  Globalization •  Subsistence economy •  Gross domestic product •  Sustenance •  Gross national income (GNI) •  Traditional economics •  Income per capita •  Institutions •  Values .