SOUTHERN PHILIPPINES AGRI-BUSINESS AND MARINE AND AQUATIC

SCHOOL OF TECHNOLOGY

POSITION PAPER

ECONOMIC DEVELOPMENT IS AN ANSWER TO POVERTY

CORPUZ, RALPH JAY V.

BACHELOR OF SCIENCE IN SOCIAL WORK – 1B

KARLA C. ASPACIO

INSTRUCTOR

DECEMBER 21, 2023

 Introduction

Poverty is a state or condition in which one lacks the financial resources and

essentials for a certain standard of living. Poverty can have diverse social, economic,

and political causes and effects.

Material prosperity and high quality of life are universal goals for

democratically elected governments.

According to Feldman (2018), economic development is defined as the

development of capacities that expand economic actors’ capabilities. These actors

may be individuals, firms, or industries. While actors have different perceived

potential, it is difficult to predict the next new idea or to understand how genius may

arise. In contrast to a resource-based economy, where location was constrained to

natural endowments, a modern, knowledge-based economy depends on capacity

that is constructed over time.

Moreover, Sen (1990), stated that economic development is defined as the

expansion of capacities that contribute to the advancement of society through the

realization of individuals’, firms’ and communities’ potential. Economic development

thus depends on the expansion of human capital in its broadest sense, such that

individuals can more fully participate in the economic, social and cultural patterns of

behavior that encourage initiative, engagement, co-operation and competition.

Defining development in this way, and contrasting it with growth gives sense

to the expected outcomes of economic development. Economic development,

according to Joseph Schumpeter (1961), involves transferring capital from

established methods of production to new, innovative, productivity-enhancing

methods. Schumpeter’s conceptualization was focused on understanding the origins

of the business cycle and the conditions that gave recondition opportunities that

propelled the economy forward to a higher economic growth trajectory. In

Schumpeter’s view, economic development is a fundamental transformation of an

economy. This includes altering the industrial structure, the educational and

occupational characteristics of the population, and indeed the entire social and

institutional fabric.

Overall, economic development is defined as the expansion of capacities that

contribute to the advancement of society through the realization of individuals’, firms’

and communities’ potential. Economic Development is a sustained increase in

prosperity and quality of life realized through innovation, lowered transaction costs,

and the utilization of capabilities towards the responsible production and diffusion of

goods and services. Economic development requires effective institutions grounded

in norms of openness, tolerance for risk, appreciation for diversity, and confidence in

the realization of mutual gain for the public and the private sector. Economic

development is essential to creating the conditions for economic growth and

ensuring our economic future

 Body

Yes, economic development is widely recognized as an effective solution to

poverty. According to Bartik (1965), in his study “Economic Development

Strategies,” he highlights that economic development provides opportunities for job

creation, income generation, and improved living standards. Bartik argues that when

economies grow, more jobs are created, leading to increased employment

opportunities for individuals living in poverty. This, in turn, enables them to earn a

stable income and escape the cycle of poverty. Economic development fosters

entrepreneurship and innovation, which can further contribute to poverty alleviation

by creating new industries and markets.

Income inequality and economic growth for years has been seen as the major

contributor to poverty, and higher initial inequality tends to diminish positive growth,

and reduced growth impacts on absolute poverty. Moreover, it is now widely agreed

that economic growth alone is not a sufficient condition for achieving the poverty

alleviation goal successfully. Understandably, economic development brings lower

poverty rates, since without economic progress we would not have an increase in the

average income, thus increasing the poverty rate through time. Nonetheless, this

development is not the sole necessity. The occurrence of poverty is determined by

income distribution as well. The greater the share of any growth that the poor

capture, the quicker the poverty alleviation rate will be.

Additionally, Bouguignon (2002) presents several analytical results on poverty

measuring the extent to which economic growth reduces poverty. It offers several
propositions to demonstrate that the initial levels of economic development and

income inequality can have significant impacts on poverty reduction. It offers several

propositions to demonstrate that the initial levels of economic development and

income inequality can have significant impacts on poverty reduction. It also

demonstrates that the poverty tradeoff between growth and inequality can be

explained in terms of initial levels of development and inequality.

Moreover, Sinding (2009), stated that, economic development can help the

individuals and families to escape from poverty. The efforts of international

institutions and public authorities on sustainable development can also support the

process of reducing poverty and increasing the wellbeing of the population.

Economists and demographers for the most part agree that important ingredients of

improved living standards, such as urbanization, industrialization and rising opportunities for

non-agrarian employment, improved educational levels, and better health all lead to changed

parental perceptions of the costs and benefits of children, leading in turn to lower fertility.

Furthermore, Godo (2005), highlighted in his book “Development Economics: From

the poverty to the wealth of nations” the importance of targeted interventions, such as

investments in education, healthcare, and infrastructure, as well as the need for effective

governance and inclusive policies. Development Economics provides important lessons on

what institutions can promote economic growth, reduce poverty, and conserve the

environment through the borrowing of technology. The book serves as a valuable resource

for policymakers, researchers, and anyone interested in understanding and combating

poverty.
 Conclusion

Overall, economic development is a crucial answer to poverty. It creates job

opportunities, allowing individuals to earn a stable income and escape the cycle of poverty.

With more jobs available, people have the means to provide for their basic needs and

improve their quality of life. Additionally, economic development leads to increased

productivity and innovation, which in turn drives economic growth. As a result, the overall

wealth of a nation increases, providing more resources for poverty alleviation initiatives.

Moreover, economic development promotes investment in education and healthcare, which

are essential for breaking the poverty cycle. Access to quality education equips individuals

with the skills and knowledge needed to secure better-paying jobs, while improved

healthcare services ensure a healthier and more productive workforce. Economic

development fosters social mobility, allowing individuals from disadvantaged backgrounds to

rise above poverty and achieve upward mobility. By creating equal opportunities for all,

economic development addresses the root causes of poverty and paves the way for a more

inclusive and prosperous society. Economic development plays a pivotal role in combating

poverty by generating employment, driving growth, investing in education and healthcare,

and promoting social mobility.

 References:

Bartik, T. J. (1995). Economic development strategies (No. 95-33). Upjohn Institute

Working Paper.

Bourguignon, F. (2002). The distributional effects of growth: case studies vs. cross-

country regressions (No. 2002-23). DELTA (Ecole normale supérieure).

Elliott, J. E. (1985). Schumpeter’s theory of economic development and social

change: Exposition and assessment. International Journal of Social Economics,

12(6/7), 6-33.

Feldman, M., & Storper, M. (2018). Economic growth and economic development:

Geographical dimensions, definition, and disparities. The new Oxford handbook of

economic geography, 143, 143-157.

Godo, Y. (2005). Development economics: From the poverty to the wealth of nations.

OUP Oxford.

Nafziger, E. W. (2007). From Seers to Sen: the meaning of economic development.

In Advancing development: Core themes in global economics (pp. 50-62). London:

Palgrave Macmillan UK.

Sinding, S. W. (2009). Population, poverty and economic development. Philosophical

Transactions of the Royal Society B: Biological Sciences, 364(1532), 3023-3030.