Ong Jenzlee Ivannil S.

Jan. 15, 2019

BSA-1

1. Economic Development is the process of improving the quality of life of a

nation, region or community. This typically involves objectives such as
social well-being, economic growth and sustainability.
ED, the process whereby simple, low-income national economies are
transformed into modern industrial economies. Although the term is
sometimes used as a synonym for economic growth, generally it is employed
to describe a change in a country’s economy involving qualitative as well as
quantitative improvements. The theory of economic development—how
primitive and poor economies can evolve into sophisticated and relatively
prosperous ones—is of critical importance to underdeveloped countries, and
it is usually in this context that the issues of economic development are
discussed.

2. Economic Growth is an increase in the capacity of an economy to produce

goods and services, compared from one period of time to another. It can be
measured in nominal or real terms, the latter of which is adjusted for
inflation. Traditionally, aggregate economic growth is measured in terms of
gross national product (GNP) or gross domestic product (GDP), although
alternative metrics are sometimes used.
*In simplest terms, economic growth refers to an increase in aggregate
productivity. Often, but not necessarily, aggregate gains in productivity
correlate with increased average marginal productivity. This means the
average laborer in a given economy becomes, on average, more productive.
It is also possible to achieve aggregate economic growth without an
increased average marginal productivity through extra immigration or higher
birth rates.
Economic growth has a ripple effect. By expanding the economy, businesses
start to see a surge in profits, which means stock prices also see growth.
Companies can then raise more money in order to invest more, therefore
adding more jobs to the labor force. That leads to an increase in incomes,
inspiring consumers to open up their wallets and buy more.

3. Economic Globalization involves the global expansion of international

capitalism, free markets and the increase in international trade, a process
which has accelerated since the 1950s. Nearly every country on earth now
imports and exports more from and to other countries than it did
immediately after World War Two, and even ex-communist countries are
now part of the global capitalist economy.
 In the eighteen hundreds in the world economy generally, people and capital
crossed borders with ease, but not goods. In this century, people do not cross
borders easily, but technologies, capital and goods do.
Over the past two to three decades, under the framework of General
Agreement on Tariffs and Trade (GATT) and World Trade Organization,
economic globalization has been expanding at a much faster pace. Countries
have rapidly been cutting down trade barriers and opening up their current
accounts and capital accounts.

4. An Economic System is an organized way in which a country allocates

resources and distributes goods and services across the whole nation or a
given geographic area. It is includes the combination of several institutions,
entities, agencies, decision-making processes and patterns of consumption
that make up the economic structure of a specific community. Hence it is a
type of social system.

An economic system defines how all the entities in an economy interact.

Defining them today is much more complicated than it used to be. Ancient
systems were relatively simple – trade was carried out using barter and there
were very few treaties and rules of engagement.

5. 5 Stages of EG.
a. Traditional Society: This stage is characterized by a subsistent,
agricultural based economy, with intensive labor and low levels of
trading, and a population that does not have a scientific perspective on
the world and technology. This is an agricultural economy of mainly
subsistence farming, little of which is traded. The size of the capital stock
is limited and of low quality resulting in very low labor productivity and
little surplus output left to sell in domestic and overseas markets.
b. Preconditions to Take-off: Here, a society begins to develop
manufacturing, and a more national/international, as opposed to regional,
outlook. Agriculture becomes more mechanized and more output is
traded. Savings and investment grow although they are still a small
percentage of national income (GDP). Some external funding is required
- for example in the form of overseas aid or perhaps remittance incomes
from migrant workers living overseas.
c. Take-off: Rostow describes this stage as a short period of intensive
growth, in which industrialization begins to occur, and workers and
institutions become concentrated around a new industry. Manufacturing
 industry assumes greater importance, although the number of industries
remains small. Political and social institutions start to develop - external
finance may still be required. Savings and investment grow, perhaps to
15% of GDP. Agriculture assumes lesser importance in relative terms
although the majority of people may remain employed in the farming
sector. There is often a dual economy apparent with rising productivity
and wealth in manufacturing and other industries contrasted with
stubbornly low productivity and real incomes in rural agriculture.
d. Drive to Maturity: This stage takes place over a long period of time, as
standards of living rise, use of technology increases, and the national
economy grows and diversifies. Industry becomes more diverse. Growth
should spread to different parts of the country as the state of technology
improves - the economy moves from being dependent on factor inputs for
growth towards making better use of innovation to bring about increases
in real per capita incomes.
e. Age of High Mass Consumption: At the time of writing, Rostow believed
that Western countries, most notably the United States, occupied this last
"developed" stage. Here, a country's economy flourishes in a capitalist
system, characterized by mass production and consumerism. Output
levels grow, enabling increased consumer expenditure. There is a shift
towards tertiary sector activity and the growth is sustained by the
expansion of a middle class of consumers.

6. 25 Types of ED.
a. Infrastructure; foundational services that improve the efficiency of an
economy such as an internet backbone.
b. Education; institutions, systems, tools and facilities that support the
acquisition of knowledge and skills.
c. Health & Wellness; healthcare such as hospitals and wellness programs
such as after-school sports programs.
d. Justice; an open and fair system of law provided by law enforcement,
administrative bodies, courts and other systems such as a human rights
tribunal. Fairness is key, a justice system that isn't perceived as fair can
hinder economic development.
e. Safety; the systems that make people feel they live in a safe and stable
environment including areas such as crime prevention, disaster
preparedness and information security.
f. Human Rights; principles and frameworks that guarantee human rights
such that people are free to pursue happiness. For example, a constitution
that is upheld by the branches of government.
g. Consumer Protection; regulating the quality, commercial terms and
safety of products and services. For example, a system that ensures that
food products are safe and healthy
h. Fair Competition; bodies that ensure free competition to prevent anti-
competitive practices that inhibit the efficiency of markets.
i. Markets; markets for securities, assets, goods and services that are fair,
efficient and liquid.
j. Finance; stable, reputable and efficient financial institutions and systems.
For example, a nation where it is easy to get a loan when you are
reasonably likely to pay it back.
k. Political Stability; a fair system of politics such that a population has
trust in its leaders and administrators and feel that things are always
getting better.
l. Culture; preservation of the things that people value such as
architecture, art, performance art, literature, festivals, rituals and
pastimes. Support for creative pursuits and cultural industries.
m. Transportation; a transportation system that is accessible and efficient
in terms of both time and money.
n. Energy; a system of energy production and distribution that provides
ample energy without polluting the environment.
o. Water; infrastructure that provides a region with water security such as
infrastructure for groundwater recharge.
p. Food; food security such as a region that grows much of its own food
including a diversity of crops.
q. Information Technology; technology companies, IT infrastructure and a
significant pool of people who are knowledgeable about technology such
as software developers and architects.
r. Research; research and related things such as science facilities,
universities and a space program.
s. Industrial Base; a developed industrial sector with capabilities to
manufacture a significant variety of complex products.
t. Service Economy; developed economies are undergoing a shift whereby
services are an increasingly large component of economic output. As
such, the transition from an industrial economy to a service economy can
be viewed as a modern form of economic development.
u. Knowledge Economy; a shift to jobs that require and produce significant
knowledge such as medical research or software development.
v. Experience Economy; products and services that compete at the level of
customer experience such as a video game or resort hotel.
 w. Public Space; public space such as a city filled with pleasant blue and
green spaces.
x. Community; elements of a nation or city that create a shared experience
such that people identify with each other and don't become isolated. For
example, a popular local sports team that draws locals together.
y. Sustainability & Resilience; a nation that has systems and practices
designed to endure time and stresses. For example, industries that don't
create harmful waste or consume excessive resources.

7. Top 10 Richest Countries in the World and its GNP/GDP.

8. TOP 10 Poorest Countries in the World and its GNP/GDP.

i. Central African Republic (GDP Per Capita + PPP =$700)
ii. Burundi (GDP Per Capita + PPP = $770)
iii. Democratic Republic of The Congo (GDP Per Capita + PPP =
$800)
iv. Liberia (GDP Per Capita + PPP = $900)
v. Somalia (GDP Per Capita + PPP = Unknown)
vi. Malawi (GDP Per Capita + PPP = $1,168)
vii. Niger (GDP Per Capita + PPP = $1,200)
viii. Mozambique (GDP Per Capita + PPP = $1,250)
ix. Eritrea (GDP Per Capita + PPP = $1400)
x. South Sudan (GDP Per Capita + PPP = $1500)

9. Top 10 Richest Countries in Asia and their GNP/GDP.

 GDP Per
Rank Country
Capita (in US$)
1 Qatar 129,360
2 Macao SAR, China 125,170
3 Singapore 93,680
4 Brunei 77,700
5 Kuwait 71,930
6 United Arab Emirates 69, 900
7 Hong Kong SAR, China 63, 350
8 Japan 38,894.5
9 Israel 37,292.6
10 Korea, Rep. 27,538.8

10. Top 10 Poorest Countries in Asia and their GNP/GDP.

Rank Country in Asia GDP Per Capita

1 Afghanistan 1,889
2 Yemen 2,300
3 Nepal 2,690
4 Tajikistan 3,131
5 Kyrgyzstan 3,652
6 Papua New Guinea 3,803
7 Cambodia 4,010
8 Timor-Leste 5,008
9 Pakistan 5,354
10 Myanmar 6,285
11. What are the concepts of ED?
Development, on the other hand, looks at a much wider range of statistic than
simply GDP or GDP per capita. GDP per capita is GDP divided by the total
population. Economic development looks at how the citizens of a country are
affected. Apart from their living standards, it also looks at the freedom they
have to enjoy those living standards.
Economic development takes into account the following information:
i. Average life expectancy, i.e., how long people people’s lifespans are.
 ii. Education standards.
iii. Literacy rates, i.e., what percentage of the population can read.
iv. Environmental standards.
v. Availability of housing, plus the quality of housing.
vi. Access to healthcare. This takes into account the number of doctors per
thousand people, access to affordable medicine, etc.
vii. Income per capita.

12. What are the concepts of EG?

Economic growth has a ripple effect. By expanding the economy, businesses
start to see a surge in profits, which means stock prices also see growth.
Companies can then raise more money in order to invest more, therefore
adding more jobs to the labor force. That leads to an increase in incomes,
inspiring consumers to open up their wallets and buy more.
13. Importance of ED.
It is incumbent upon communities to remain attractive places that can stimulate
new economic opportunities through all sorts of economic cycles.
Communities that are intentional in supporting their businesses communities
have better economic and social results than those that don’t. Economic
development programming is a prime example of how elected officials and
communities can support their businesses.
14. What are the problems to ED?
a. Lack of Statistical Data:
In order to measure economic development accurately, we should have
correct assessment of national income, per capita income, per capita
consumption etc.

But in under-developed economies the data on national income, per capita

income and per capita consumption are not available. Due to lack of
statistical data, it is difficult to assess economic development accurately in
such countries.

b. Controversy over national Income and per capita Income:

The economists also differ over the issue weather to use national income or
per capita income as the measure of economic development. In reality we
require both of these measures. If in two countries the national income is
 increasing at same rate but in country. A population is doubled whereas
population remains the same in country B, in that case the per capita income
in country B will reduce to half as compared to country A.
The national income measure will put both the countries at same economic
level. But per capita income would indicate country B as more important
than country A. Therefore, we are required to know both these measures to
assess economic development accurately.

c. Lack of Accurate measure of Economic Development:

Another controversy arises over the accurate measure of economic
development. Some regard national income and other regard per capita
income as the suitable measure of economic development. These economists
give importance to per capita consumption of electricity food etc. There is
no unanimity over the measure of economic development.

d. Difficulties of the Measurement of Living Standard:

Some economists favors living standard as a measure of economic

development. But it is very difficult to determine which living standard is
high and which is low. The living standard depends on the price level, but
not on income level. But this is not a good measure of economic
development as it poses similar type of problems in its measurement.

e. Non-Economic Factors Ignored:

It is not only economic factors which affect economic development. But it is

greatly affected by non-economic factors like social, political, religious,
cultural etc. for determining economic development non-economic factors
are indispensable. But the measurements of economic development do not
take into account the non-economic factors.

f. Difficulties of International Comparisons:

There is no universal measure of economic development with the help of
which International comparisons can be made possible.

15. What are the problems to EG?

Inflation risk: If demand races ahead of aggregate supply the scene are set for
rising prices – many of the faster-growing countries have seen a trend rise in
inflation – this is known as structural inflation.
 Environmental concerns:
 Fast growth can create negative externalities e.g. noise pollution and lower
air quality arising from air pollution and road congestion.
 Increased consumption of de-merit goods which damage social welfare
 The huge increase in household and industrial waste; these externalities
reduce social welfare and can lead to market failure.
 Growth that leads to environmental damage may lower the sustainable rate
of growth. Examples include the destruction of rain forests through
deforestation, the over-exploitation of fish stocks and loss of natural
habitat and bio-diversity from the construction of new roads, hotels, malls
and industrial estates.

Growth and the Environment: The Sustainability of Economic Growth

Growth may lead to a rapid destruction of rain forests, the over-
exploitation of fish stocks and loss of natural habitat created through the
construction of new roads, hotels, retail malls and industrial estates. Some of
the main environmental threats include:
 The depletion of the global resource base and the impact of global
warming; there are plenty of examples of the “tragedy of the commons”;
the permanent loss of what should be renewable resources from over-
extraction of some of our environmental resources.
 A huge expansion of waste and pollution arising from both production
and consumption
 Over-population (particularly in urban areas) putting increased pressure
on scarce land and other resources. More than half of the world's
population lives in cities in 2009, most of them in developing countries
according to the United Nations Population Fund.
 Species extinction leading to a loss of bio-diversity - Scientists predict
that at least a third and as much as two-thirds of the world's species could
be on their way to extinction by the end of this century, mostly because
people are destroying tropical forests and other habitats, over-fishing the
oceans and changing the global climate.

Economic Growth and Income and Wealth Inequality

Not all of the benefits of growth are evenly distributed. A rise in real
GDP can often be accompanied by widening income and wealth inequality
in society that is reflected in an increase in relative poverty.
 The Gini coefficient is one way to measure the inequalities in the
distribution of income and wealth in different countries. The higher the
value for the Gini co-efficient (the maximum value is 1), then greater the
inequality. Countries such as Japan, Denmark and Sweden typically have
low values for the Gini coefficients whereas African and South American
countries have an enormous gulf between the incomes of the richest and the
poorest elements of the population.

16. What are the strategies to ED?

Economic Development
i. Driven by Job Creation – The mission of economic development is
to create jobs, generate property tax revenues and facilitate economic
activity.
ii. Focuses on Geography – The focus is a specific geographic area and
the creation of economic activity in the geographic area. The goal is
to generate economic activity by attracting businesses to locate in the
geographic area. Business profitability is of secondary importance.
iii. Attracts Businesses – Economic activity is generated by attracting
businesses to the geographic area. This is done by promoting its
unique characteristics. The businesses sought are the ones that will
create the most economic benefits for the geographic area.
iv. Originates in Public Sector – Because the beneficiaries are the
people living in the geographic area, economic development often
originates from public organizations in the area.
v. Answers to Community – The community of people located in the
geographic area receive the economic activity generated by economic
development. So, people in the community drive the economic
development process.

17. Give 5 presentation of Business Development.

Business Development
i. Driven by Profits - The mission of business development is to generate
profits.
ii. Focuses on Markets – The focus is identifying business opportunities in
the marketplace. The goal is to generate profits by creating businesses
to exploit market and business opportunities. The creation of economic
activity is of secondary importance.
 iii. Creates Businesses – Profits are generated by creating businesses.
These businesses are located in the geographic location where the
business can generate the most profits. During this process, the unique
characteristics of various sites are examined.
iv. Originates in Private Sectors – Because the beneficiaries of the
business are individual owners, business development usually originates
in the private sector of the economy.
v. Answers to Investors – The investors are the owners of the business
and receive the profits generated by the business. So, investor/owners
drive the business development process.

18. Barriers to ED and/or EG

i. Poverty cycle
 Low incomes --> Low savings --> Low investment --> Low productivity
--> low income...
ii. Institutional and political factors
 Ineffective taxation structure
 Lack of property rights
 Political instability
 Corruption
 Unequal distribution of income
 Formal and informal markets
 Lack of infrastructure
iii. International trade barriers
 overdependence on primary products
 consequences of adverse terms of trade
 consequences of a narrow range of exports
 protectionism in international trade
iv. International financial barriers
 Causes of the Debt Crisis
 Poor project evaluation
 Rescheduling & Restructuring
v. Social and cultural factors acting as barriers
 Religion
 Culture
 Tradition
 gender issues
  Periods of economic growth are associated with structural
transformation and social and ideological changes. In the past, 1/3 of
growth came from population increases and 2/3s from productivity
increases
 Productivity increased due to technological change in terms of capital
and human skills, encouraging research and development which led to
further growth
 The rise in income led to increased consumption:
 Demand for income elastic industrial products rose quickly
 Demand for income inelastic agricultural goods grew only slowly
 This led to a rapid rural-urban shift which often destroyed
traditional values

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Growth