Eugene D.

Alipio 20193479
ECOPE05: Economic Development Online
MR. FRANCIS A. GUMAWA

Read and answer the following questions below.

1. Is economic growth possible without economic development? Economic

development without economic growth?

It is possible to have economic growth without development. i.e. an increase in GDP, but
most people don’t see any actual improvements in living standards. This could occur due to:

 Economic growth may only benefit a small % of the population. For example, if a country
produces more oil, it will see an increase in GDP. However, it is possible, that this oil is
only owned by one firm, and therefore, the average worker doesn’t really benefit.
 Corruption. A country may see higher GDP, but the benefits of growth may be syphoned
into the bank accounts of politicians.
 Environmental problems. Producing toxic chemicals will lead to an increase in real GDP.
However, without proper regulation, it can also lead to environmental and health
problems. This is an example of where growth leads to a decline in living standards for
many.
 Congestion. Economic growth can cause an increase in congestion. This means people
will spend longer in traffic jams. GDP may increase but they have lower living standards
because they spend more time in traffic jams.
 Production not consumed. If a state-owned industry increases output, this is reflected in
an increase in GDP. However, if the output is not used by anyone then it causes no actual
increase in living standards.

2. What do you consider the most urgent goals for LDCs by 2015? Why are these
goals important? What policy changes should LDCs undertake to increase the
probability of attaining these goals?

The goals and targets of the 2015 Agenda for Sustainable Development will guide
development policy action over the coming years, in the pursuit of a revitalised Global
Partnership for Sustainable Development. The eradication of poverty is among the most
prominent of the Sustainable Development Goals, and the challenge of poverty eradication is the
greatest for the least developed countries, where almost half of the population still lives in
extreme poverty. This is why UNCTAD argues that the LDCs is the battleground where the
Sustainable Development Goals will be won or lost.

At least eighteen of the 169 Sustainable Development Goal targets refer explicitly to the
least developed countries, and dozens more are of central importance to their development
success. This testifies to the concern of the international community with the development
challenges of these countries.

Revitalizing sustained and sustainable economic growth and employment creation in the
LDCs, and accelerating the structural transformation of their economies, will be indispensable
to achieve the SDGs. In particular, achieving an annual growth rate of 7 per cent as established
in the Istanbul Programme of Action for the Least Developed Countries for the Decade 2011-
2020 and reiterated under SDG 8, is of paramount importance.

3. Give an example of a LDC that you think has had an especially good (poor)
development record in the past two to three decades. Why did you choose this
LDC?

Until now, international support for LDCs has focused too much on international
demand for these countries’ existing or potential products. In essence, LDCs face almost
unlimited demand for their exports. What has been relatively neglected has been domestic
production, sustainable or otherwise — and whether or not orientated toward export or
domestic consumption. In very blunt and simplistic terms, many LDCs simply do not make
enough to meet the significant demand that would potentially exist for their products, and
however good the incentives, their economies will not adapt to take advantage of that demand.

These insights map directly on to the experience of LDCs, many of which feature
extremely undeveloped capital stocks, low rates of investment and permanent shortfalls of
demand. Gross fixed capital formation is 23% on average in LDCs, well below the level of 25-
30% believed to be necessary for structural transformation. In a classic 1963 paper Nicholas
Kaldor extended this point when he said that: “It is shortage of resources, and not inadequate
incentives, which limits the pace of economic development. Indeed the importance of public
revenue from the point of view of accelerated economic development could hardly be
exaggerated.” Ha-Joon Chang follows Kaldor in stating that the investment rate is the most
important indicator of structural transformation.

4. List three or four countries that have moved significantly upward or downward
in the GNP per capita rankings in the last several decades. What factors have
contributed to their movements?

Comoros Lower-middle income Low income 1,320 760

Lower-middle
Georgia Upper-middle income 4,130 3,790
income
Lower-middle
Kosovo Upper-middle income 4,230 3,890
income
Senegal Lower-middle income Low income 1,410 950

In each country, factors such as economic growth, inflation, exchange rates, and
population growth influence GNI per capita. Revisions to national accounts methods and data
can also influence GNI per capita. The updated data on GNI per capita data can be accessed
here.