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!
 Box 1.1: The Experience of Poverty
•  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, humilia)on, 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 escala)ng
over here - Par)cipant in a discussion group in rural Ethiopia
•  When food was in abundance, rela)ves used to share it. These days of hunger, however not
even rela)ves 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. —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 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
•  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
Figure 1.1 World Income Distribution
 1.3 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, 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
 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: Sustainable Development Goals
•  Sustainable Development Goals (SDGs) –
•  Adopted by the UN on 26 Sept. 2015
•  To be achieved by 2030
•  Features 17 goals, with 169 targets
•  hUps://sustainabledevelopment.un.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; to do so
account for their interrela)onships
•  Transforma)on principle: Not “piecemeal” steps
 The 17 Sustainable Development Goals 2015-2030
•  Goal 1. End poverty in all its forms everywhere
•  Goal 2. End hunger, achieve food security and improved nutri)on and promote sustainable agriculture
•  Goal 3. Ensure healthy lives and promote well-being for all at all ages
•  Goal 4. Ensure inclusive & equitable quality educa)on & promote lifelong learning opportuni)es for all
•  Goal 5. Achieve gender equality and empower all women and girls
•  Goal 6. Ensure availability and sustainable management of water and sanita)on for all
•  Goal 7. Ensure access to affordable, reliable, sustainable and modern energy for all
•  Goal 8. Promote sustained, inclusive and sustainable economic growth, full and produc)ve
employment and decent work for all
•  Goal 9. Build resilient infrastructure, promote inclusive and sustainable industrializa)on, foster
innova)on
•  Goal 10. Reduce inequality within and among countries
•  Goal 11. Make ci)es and human seUlements inclusive, safe, resilient and sustainable
•  Goal 12. Ensure sustainable consump)on and produc)on paUerns
•  Goal 13. Take urgent ac)on to combat climate change and its impacts
•  Goal 14. Conserve and sustainably use oceans, seas, marine resources for sustainable development
•  Goal 15. Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage
forests, combat deser)fica)on, and halt and reverse land degrada)on and halt biodiversity loss
•  Goal 16. Promote peaceful and inclusive socie)es for sustainable development, provide access to
jus)ce for all and build effec)ve, accountable and inclusive ins)tu)ons at all levels
•  Goal 17. Strengthen means of implementa)on and revitalize global partnership for sustainable
development
 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, or that
applies also to MDGs but not listed above – please specify; 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?
 1.5 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”
 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