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Chapter 1 Introducing Economic Development: A Global

Perspective
Economic Development (Wilfrid Laurier University)

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Chapt
er1
I
ntr
oducingEconomicDe
vel
opme
nt:
AGlobalPer
spect
ive

 KeyConcept
s
Asc uriousasstudent
swhor e gi
stert
otakeDe velopmentEconomicsmaybe,thei
rknowle
dgeand
experienceofthede v
elopin
gwor ldwi l
lvarywide l
y.Thefir
stmainpoi
ntofCha p
ter1ist
oemphasiz
ehow
diffe
rentli
feinthede vel
opingwor l
dis.Throughe xampl
eso fde
btcri
sesandoilshoc
ks,t
heideat
hatt
he
wo rl
disbe comingincreas
inglyint
e r
dependen
ta ndthatact
ionst
akeninthedevel
opedworl
dc a
nhavea
profoundimpa ctonthedevelopingwo r
ld.

Thes e
condpointistoprovi
deanoverviewofthenatur
eofdeve
lopmenteconomic
sa safiel
d.Ad e f
enseof
devel
opmenteconomicsasad i
st
inc
tfield
,rat
herth
ana naggl
omerat
ionofothe
reconomi c
ssubfie
lds,is
offe
red.Ama j
orthemeo fth
ebook,thatdev
elopmentecono
micsmu s
tencompasst
hes tudyofi
nstitu
tiona
l
andsocia
l,aswellaseconomic
,me c
ha ni
smsformod er
nizi
nganeconomywhi l
eeli
mi nat
ingabsolut
e
povert
y,i
sintr
oduced.

Theplanofthebookisintrodu
cedthrou
ghaseri
esof30c r
it
icalque
sti
onsofdev
elopme
nte
conomic
s.
Dependi
ngont heamoun tofmate
rialco
ver
edbytheins
truct
or,st
udent
sshoul
dbea b
let
oin
tel
li
gent
ly
addr
essmostofthes
eq uesti
onsbytheendoft
hecourse
.

Secti
on1.3looksde eperint
otheme anin
go fdev e
lopme ntando ffer
sb oththetr
aditi
onaleco n
o micme asur
es
andthenewe conomi cviewofde v el
opme ntthatismu lt
idime nsional.Thisalt
ernati
veappr oachisclos
ely
tie
dtothediscuss
iono fSen’
s“ Ca pabi
lit
ie
s”a pproach,fir
stintroducedi nthe7the d
iti
on. Furthe
r,this
sect
iontal
ksspecifica
llyaboutha ppinessi
nt hec ont
extofe conomi cde vel
opme nt,r
elat
ingt heleve
lof
happine
ssnotonlyt olevelofincomebu tt
oo therfact
orss ucha sdemoc r
ati
cfreedomsa ndt hequalit
y
ofsocia
lrel
ati
onshi ps
.Ther oleofno r
ma t
iveva l
uesinde vel
opme nteconomi cs—as ubj
ectde ali
ngwi t
h
huma nmiser
ya ndhu ma npo t
ential,wit
he quit
ya swe l
la seffic
iency ,
wi t
hc ul
turalchan
g ethatcauses
loss
esaswe l
lasga ins,andwithtra n
s f
eraswe llascreat
ionofwe al
th—i sals
os t
ressed
.

Thec oncl
usi
onisthatdeve
lopmentisbot
haph ys
icalrea
li
tyandast
ateo
fmi nd
.Theme a
ningand
obje
c t
ive
sofde v
elopmenti
ncludethepr
ovis
ionofba s
icneeds
,re
duci
ngine
quali
ty
,rai
si
nglivi
ngsta
ndards
thr
ougha ppr
opria
teeconomicgrowth,i
mprovi
ngself-
est
eeminrel
at
iont
othedevel
opedcount
rie
s,and
expandin
gf r
eedom ofchoi
ceinthema r
keta
ndbe y
ond .

Sect
ion1.
4p r
ese
ntsani
nd ep
thexamin
atio
noftheUN’
sMi l
le
n n
iumDe vel
opme n
tGo al
s(MDGs).This
incl
udesamorecompre
hensi
velis
tofthegoa
lst
hemse
lve
s(appe a
rin
ginTable1.1)andadi
scus
sionofthe
short
comin
gsoftheMDGs .Fina
ll
y,t
hec a
sest
udyonBraz
ilattheendofthechapte
rhasbe
enrevis
edand
update
d.

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 Lect
ureSuggest
ions
Itmightbebesttobeginwithadisc
ussi
onoft hischap
ter
’sprologueandtofocusonthea uthor
s’s
tate
ment
(page3)thatt
hes c
a l
eoftransf
ormat
ioninthewor lde
conomyi simme nse
.Ha nsRosli
ng’svideo“200
countr
ies,200year
s ,
4mi nutes
”(re
adil
ya v
a i
lableonYouTube)c a
nbeus edtoconfir
mt hispoi
ntinan
enter
tai
ningway .Itmightals
obehelpfult
ome nt
iont
hatgrosswo r
ldproducthasmoret handoub
led
between1985a nd2012.

De s
pi t
esucha dvanc es,
treme ndousdi s
pari
tiescontinuetoe xist
.Intermso fea si
lyac cessibl
estatis
tics
“Pove r
tyFactsandSt at
is
tics”(http:
//www.globa l
issues.
org/art
icl
e/26/povert
y_ fact
s_a nd_sta
ts)pr o
vides
dataont heshareo fthewor ld’spopu l
ati
onlivingon$1, $1.25,$1.45,$2,$2.5 ,and$10ada y
. Parti
cular
ly
str
ikingforma nys tudentsisthefa c
tthat,i
n2005 ,80%o ftheworld’spopu l
atione arned$10orl essad a
y.
Severalexcel
lentbooksa t
temp ttogivesomei deaofther angeoflivingst
a ndardsfoundt hr
oughou tthe
wo r
ld.Fo rexampl e,TheMat erialWo rd(
l http:/
/wwwpb s.org/
wgbh/ n
o v
a/wo rl
dba la
nc e/materi
a l
.html)by
PeterMe nzel
l.Th isbookpr esentsphotogr
aphi cprofil
esoft ypi
calfamili
esa roundt hewor l
dwi tha l
lof
thei
rpos se
ssi
onsp l
a cedinfrontoft hei
rho me s.Asoneg oe sfr
omonef amilyt othene xttheinstruct
orhas
theopportunit
yt ohi ghli
ghtthei mpor t
antdiffer
encesbe t
we ennationsandr egionsa ndt otouchonk ey
iss
ue sofgrowtha ndde velopme nt.

Oneoft hekeys t
rengt hsoft hisc hapterist
ha titdoe sno trusht otheha rdnumbe rstha tsupposed l
y
mea s
ur edevelopme nt.Thed iscussi
ono fSe n’sCa pa bi
liti
e sapproach,thefarlessthanpe r
fectrelations
h i
p
bet
we e nincomea ndha ppine s
s, andwha tt
hea u t
hor srefertot hethreecorev al
uesofde velopme nta r
ewe ll
worths pendingafai ra moun tofc l
asstimee xplori
n g.Cl assti
mes houldalsobes pentd iscussi
ngt he30
cri
tic
a lquesti
onslistedonpa ges11- 14ofthet exta ndt hena skings t
udentstoidenti
f y3or4q uestionsthat
the
ya rep art
icula
rlyi nterest
e dine xploring
.As kinge a chs t
ude ntt
ol i
stwha tthe
yc on sidertobe
“cr
iti
c all
y”c r
iti
calq ue s
tionsonas heetofpa per,collectingthe i
rresponses,andthent ryingt odirectthe
res
to fthetermt oaddr essi
ngt hemos tcommonl yme ntionedc rit
icalquest
ionsfortha tclasswi l
lbehe l
pful
infurtherdrawings tude ntsi
na ndhol dingthe i
ratt
e ntiont hroughoutthet e
rm.

Atthissamepoi nt,t
hei nst
ruc tormi gh
talsowi s
htog etsomei deao fstudents’exper
ie ncest
rav
elin
gto
devel
opingc ountri
esa nd, i
na ssubtleawa ya si
spo s
sibl
e,de t
ermi neho ws hakytheirunde r
st
andingofthe
widerwor ldis.Thei nstructorpe rhapscoulddrawonhi so rhero wne xperiencesandgi vesome
backgrounda stohowheors hefirstbecamei nt
ere
stedinDe velopme ntEc onomi c
s.Thi sma y–thr
ought he
kindsofq uest
ionsask ed-he lpt heinst
ruct
orf ur
thergaugestudents’le
v elofs ophi
sti
ca t
ioninthi
sarea.
Thisisno tsome t
hingth atshoul dbeor ,can,beset
tle
di nthefirstoneo rtwoc l
ass
esa ndwi l
ldevel
opove r
thecourseoft heter
m.

Inma n
yuni versi
ties
,theecono micde velopme n tcoursewi l
lbefill
edwi t
hs tudentswhoa reno tma jori
n gin
economi cs.The s
es t
udentsma yc omef romdi ffer
entcollegeswithma jor
ss ucha sa nthr
opology ,sociol
o gy,
orpol i
ti
cals cie
nceorbus i
ness( ma na
g eme nt,finance,etc
.).Theyma yh aveh ada slitt
leason es eme st
erof
intr
oduc t
orye conomics.Givent hatyoua rete achingane conomi cscl
a s
s,youma ywi shtor emindt he
stude ntsofthisfactandofferwha teverhe l
py ouc an.Gi v
e nvideocap t
uresoftwa r
e ,youmi ghtc onsider
recor dingso mep ri
me r
sthatthenc ouldbema d eavail
abletostudentsthroughc oursema nag e
me ntsoftware
sucha sBla ckboardorMood le.Youc e r
tainlys houldus ethefirs
tclassortwot os etthestagefort he
app roachy ouwi llta
ke,whe t
he ritwillbemor ei nte
rdisci
p l
inary
,mor eeconomi c, mor ema t
hema t
icalan d
qua ntit
a t
iv
e ,mor ehis
tori
cal
,ors omec omb ina ti
on.

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Empha sizet
ha tdeve
lopmente conomicsi sane x
c i
ti
ngsubjecttostudyandt e
achbecauseitdoesnotf
ocus
justononec ountry
,butona l
lle s
s-developedcoun t
ri
es.Furt
he rempha s
izethatyouwil
ltrytoteac
hk e
y
conc ep
tsandide a
swhi c
hc anbea pp l
iedtothee xper
iencesofma nyde v
elopingcount
ri
e s
.The s
econcept
s
andi deasar
eimpor t
antforunde r
standi
n gwhe rethedevel
opingc ountr
iesaretoday
,aswe l
laswhatthei
r
optionsareforthefut
ure.Youmi ghtalsowi shtoempha s
izethattherearguabl
yisnoo t
he rar
eaof
economi cst
hatismor erel
evanttothema jor
it
yoft hewo r
ld’speop l
e.

The30ba s
icquest
ionsc a
nbeus edtomo ti
vat
es t
udenti
nter
esti
nthesub jectaswe llaspres
entanover
vie
w
ofwhatthecla
ssisa l
labout.Itcanbee mphasi
zedthatt
hereisnoonea nswe rtotheg ener
alques
ti
onof
whysomec ountr
iesaremor edevelopedthanother
s.Therear
ea smanydi ffer
entopi ni
ons
onwhatal e
ssdeveloped-
c ountr
ys houlddotobecomemor edevel
oped.Ag ooda pproachist
oprese
nt
di
ffe
rin
gvi e
wpointsthroughoutthec ours
eandletthest
udent
sma keupt heirmi ndsont he
irown.

I
fy ouha
vede
vel
opin
g-c
ountr
yexpe r
ien
ce,me nt
ioni
ngsomeofyouro
wne xperi
enc
eswith,“Ho
wthe
OtherHal
fLi
ve,
”isawayofint
roduci
ngthefirs
tchapt
erandr
eal
lyge
tti
ngstude
nts
’at
tenti
on.

 Di
scussi
onTopi
cs
Enc
ouragi
ngcla
sspart
ici
pat
ionisagoodwaytomoti
vat
ethest
ude
ntsandmaket
hemfee
lin
volv
edi n
t
helea
rnin
gprocess
.Thefir
stf
ewwe eksofc
las
sinpar
ti
cula
rarec
onduci
vet
othi
ssor
tofexe
rci
se.Two
i
deasf
ordisc
ussi
onsatt
hisst
ageare
:
 Wha tist
h emea n
ingofeconomicde
vel
opme nt
?Wh ydoweno tse
eas t
rongerre
lat
ionshi
pbet
we e
n
incomeandha ppine
ss,e
specia
ll
yonceinc
omeha sri
senabo
ve$10 ,
000-
$20,000ay earpe
rpers
on?
 Isitposs
iblef
o rt
hewholewo rl
dtobedeve
loped?Thi
scanbea ni
nter
esti
ngq ue
sti
ont oas
katthe
beginni
ngofthec our
seandthenaga
inatt
hee ndoft
hecours
e.

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 Sampl
eQuest
ions
Shor
tAnswer
1.Pro
videadefini
ti
onofdev
elopmentec
ono mics.Justi
fyyourchoi
cecar
eful
ly
.
Answer:Seethesecti
oni
nCha pt
er1enti
tl
e d,“
TheNa tur
eofDe vel
opmentEconomics
,”on
page
s9–10f ors
omei de
asabouthowt hes t
udentsmighta
nswert
hisquest
ion.The
y
shou
ldi nsomewaysaytha
tdevelopme nteconomicsismoret
hanjus
tgrowthinGDP.

2.I ndefiningdev e
lop me nttoinc l
udemor ethanj us
tthegr owthofpe rcapitaincome ,
therei
san
implici
tas sump t
iontha tthegrowt ho fpe rcapitainc
o mea loneisno tsuffici
enttogu ar
anteet
he
reducti
ono fpovert
ya ndt hegr owt hofs elf
-este
e m.Isitpossiblethattherecoul dbegrowthof
perc a
pit
ai ncomewi thoutt heachi e
veme ntoft heseotherob j
e c
tiv
e s
?
Ans wer:Pe rcapit
ai ncomec ans howgr o wthev enwhe nthatgrowthdoe sno ttouchvastpor
ti
ons
ofthepopu lati
on. Thispo i
nti sc l
earl
yma dei nCha pter5. Thegr owthma ybecent
eredi
n
oneareao rse c
toroft hee conomyf orexample.Al so,mostde ve l
opedc ountr
ieshave
,at
sometimei nt heirhistori
es,introducedpol i
ciesempha sizinge quali
ty.

3.I
nwhatwayisde v
elopme n
teconomicsgreat
eri
ns c
opet h
ant r
adit
ionaleconomics?
Ans
we:De
r vel
op mente c
onomicsmus tencompas
sthestudyofinst
it
ut i
onal,poli
ti
cal
,andsoci
alas
wel
lase conomicme chani
smsf ormoder
nizi
nga neconomywhi l
ee l
iminat
ingabs
olut
e
pov
e r
tya ndtrans
formin
gs t
at
e sofmindaswellasphysic
alc ondi
ti
ons .Moredet
ail
sfound
int
hec hapter
.

4.Makeacasethatdeve
lopmenteconomi
csmightbeme
rel
yac
omb
ina
ti
onofa
llt
heo
the
rsubfie
lds
ofe
conomic
s,onlyappli
edtolow-i
ncomecount
ries
.
Answer:SeeQuestion3abov
e .

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5.Wha
tdoyout
hinkarethemosts
eri
ousobst
acle
stofur
the
rp rogre
ssinthedeve
lopingwor
ld?
Ans
wer:Themai
npoi nthe
rei
stoens
uretha
tstudent
sar
ethinki
n gcare
full
yabouttheis
sue
srai
sed
i
nthet
ext.Youma ya
lsowis
htodrawf r
omthecri
ti
c a
lq ues
ti
onsonPa g
es9–11.

6.Inr
evi
ewingdi
scus
sionso fl
if
eindeve
lopi
ngco
un t
ries,whatisi
taboutli
fes
tyl
esi
nthelow-
inc
omecount
ri
escomparedwi t
hli
fes
tyl
esint
hehi
gh-incomec ount
ri
esthatmostst
ri
kesyou
?Wh y
?
Answe
r:Th i
sisanopen-endedques
ti
ontost
imul
atereflec
ti
on.

7.I
tha
sbeensa
idtha
t“under
devel
opmenti
sas
tateofmi
nd.
”Comment.
Ans
wer:Youmaylookforadi
scuss
ionoft
her
oleofmoder
nval
uesi
nthede
vel
opme
ntpr
oce
ss,
asonPag
es12–14ofthetext
.

8.Doy outhinkitisi
nthema te
rialinte
rest
sofhi gh-
incomec ountr
iestohe
lplow-incomecountr
ies
impr
ovetheireconomicperf
ormanc e?Wh yorwh yno t?
Answer:Ans we r
smi gh
ttouchoni ncre
asingthema rketf
orp r
oductsinwhichhigh-i
ncomecountr
ies
h
a veac ompar
ati
veadvantage,re
du c
ingt h
ed ang
erso fre
gionalwarandterr
ori
sm,reduc
ing
i
nternat
ionalt
ransmis
siono fdis
ease,andc ur
binginter
nati
onalmigrat
ion.

9.Howish a
ppinessrel
atedtodevelopme nt
?
Answe
r:Ans we r
ss houl
dma kereferencetothecorre
lat
ionb e
tweenhappines
sandinc omele
velas
wellastouchont heconnectionbet
we enhappi
nessa ndsoc
ialre
lat
ionsh
ips,pers
onaland
democrati
cf r
eedoms, r
eli
giousbeli
e f
s,andhealt
h,amon got
h e
rfact
orsli
st
e donPage20.
Furthe
r,answersshouldincludeadiscussi
ononha ppine
ssasbeingapartofAma rt
yaSen’s
conceptoffunct
ionin
g s.

10.Whataret
heMi ll
enn
iumDe v
elopmen tGoa ls(
MDGs )andho wdidtheycomea bout?Wha tdoyou
cons
ide
rtobet hemostimportantofthe seandwh y
?
Answer:Th ea ns
wershouldstr
essthatt hegoalsc
overabr oadr angeofobj
ecti
vesbo t
heconomicand
social.The
sewe reputfor
wa rds othatdev
elopingc ountri
eswouldhavenu meri
caltar
get
s
againstwhichthei
rprogressc ouldbejudge
da nd, wherewa rr
ant
ed,appropri
ateassi
st
ance
offer
e d.Anint
e r
ima ss
essme ntoftheMDGsc anbef oundat:www.unmill
eniumproje
ct.
org.

11.Whyar
ewo me no f
tenreferr
edtoa spla
yingac entr
alrolei neconomi cdevel
opme nt?
Ans
wer:Ana nswershouldincludehowwo menc aninfluencewhethe rornotthenextgene
rat
ionwi
ll
bei mpo v
e r
ishedthroughtheirrol
eofc hi
ldrearingbasedont heresourc
estheybri
ng
tothistaskandt hev a
luestheypasstotheirchildre
n. Anotherkeypointthats
houldbe
me ntionedisthatempiri
c a
lly
, woment e
ndt oa ll
ocateahighe rpe
rcentageoft
heincome
unde rthei
ro wnc ontr
oltothefamilyandc hil
dr enthanme n.

12.Whatar
ethemos timport
antcharact
eri
st
icstha
th av
es hape
dBr a
z i
l’se
c onomicandsoci
alprogr
ess
dur
ingt
helastthreedecades?
Answe:Di
r scussionshouldincl
udethelarg
edegr e
eofi nc
omei nequa
lity,t
heneedforla
ndrefor
ma s
aresulto ft
hedualis
ti
cna t
ureofthelandtenuresys
tema ndthee n
viron
me nt
alcha
ll
e n
ge
fa
ce dbywha ti
soneo ftheworl
d’smos tenvir
onmenta
l l
ydiversecount
ri
es.

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 Mul
ti
pleChoi
ce
1.Countr
iestendtobecla
ssi
fieda
smor
eorl
essde
vel
ope
dba
sedon
a.thelit
eracyrate.
b.thepove r
tyrate.
c.thelevelofincomeperca
pita.
d.thetypesofg oodst
heyproduc
e.
Answer:C

2.Whichofthefol
lowi
ngde
mons
tr
ate
sin
ter
nat
iona
lint
erde
pende
nce
?
a.theoilshoc
ks
b.thedebtcri
sis
c.globalwarming
d.alloftheabove
.
Ans
we r
:D

3.As ub
sist
enc
ee c
onomyis
a. averylowinc
omee c
onomy
.
b.a neconomyinwhic
hp e
opl
emakewha
tthe
yconsume
.
c.a neconomyinwhic
hp e
opl
ere
cei
vef
oodforp
ay.
d.a l
loftheabov
e.
Answer:B

4.Developme n
teconomicsi
sthestud
yofthe
a.a l
leviat
ionofabsol
utepove
rty
.
b.transfor
ma ti
onofinst
it
uti
ons.
c.a l
locati
onofr e
sourc
esindeve
lopi
ngcount
ri
es.
d.a l
lo fth
ea bove.
Answer:D

5.Developmentecono
micsmusthav eascopewidertha
ntradi
ti
onale
cono
mic
sbe
caus
e
a.v al
ue sandatt
it
ude
splayli
tt
leroleinthepaceofdevel
opment
.
b. peopleindevel
opi
ngsoci
eti
esdol es
sutil
it
y-maximizi
ng.
c.t r
ansfor
ma t
ionofsoc
iali
nst
it
utionsisnece
ssaryf
ordevel
opment.
d.a l
lo fth
ea b
o v
e.
Answer:C

6.Ag ooddefini
ti
onoft heme anin
gofde v
elopme
nti
sthe
a.eli
mi nat
ionofa bsol
u t
epove r
ty.
b.impr ove
me ntintheq ua
li
tyo fli
fe.
c.fulfil
lmentofthepotenti
alofindivi
dual
s.
d.allo ft
hea bo
ve .
Ans
we r:D

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 lOMoARcPSD|15801866

7.Whichofthefoll
owingisno tanimportantobj
ecti
veofdeve
lopme
nt?
a.incr
ease
si npercapit
ainc ome
b.theexpansi
onofa vai
lablechoices
c.incr
ease
si nindi
vidualandn at
ionalsel
f-
este
em
d.alloft
hea boveareimportantobje
c t
iv
esofde v
elopment
Ans
we r
:D

8.TheMi ll
enniumDe vel
opmentGoalsi
ncl
ude
a.e li
minati
ngtheproport
ionofpeop
leli
vin
gonl
esst
han$1pe
rda
y.
b. univer
salpr
imaryeducati
on.
c.i ncr
easi
ngexport
sb yonehalf
.
d.a lloft
hea b
o v
e.
Answe r
:B

9.Thecorevaluesofdevel
opme ntinc
lude
a.increa
singincomep erper
son.
b.r e
ducin
gt heinequal
it
yofinc ome.
c.theabili
tytome etbasi
cneeds .
d.a l
lofthea b
ove.
Answer:C

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