DEVELOPMRNT THEORIES AND

PERSPECTIVES
GESD511

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 Course Background
Course Description:
Introduces to the evolution of main tradition of thinking about
dev’t
The diverse meaning and understanding on development
Critical appraisal of development
The key issues frequently raised in conjunction to development
Provides an inter-disciplinary base on various thinking and
understanding about development
The broad contours of development theories and practices
 Course Background ---
Learning Outcomes:
Understand the concepts of development discourse and
thoughts
Understand the evolution of main traditions of thinking about
dev’t
Appreciate the diversity of ideas, concepts and thoughts about
development
Evaluate theories and ideas that orient development approaches
and interventions.
Critique the opportunities and challenges of the development
concept
 Course Contents
Unit One: Introduction
Unit Two: Theories of Development
Unit Three: The sociology of Development
Unit Four: Theories of Developmental State
Unit Five: Contemporary Development Perspectives
Unit Six: The Development Project and social
Responses
Unit Seven: Cross-cutting issues in Development
 INTRODUCTION
Brainstorming Questions
• Why is the world so much richer today than it was
fifty or a hundred years before?
• What are the prospects for increasing prosperity in
the future?
• Why is the world today so unequal as we look across
countries?
• Can we find one comprehensive answer to the above
questions?
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 What do theories and models of
development tries to explain?

Economic development theories and models seek

to explain and predict how:
1.Economies develop(or not) over time
2.Barriers to growth can be identified and
overcome
3.Government can induce, sustain and accelerate
growth with appropriate development policies
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• There is no one agreed model of development
applicable to all countries
• Though LDCs share similarities, every country has
unique economic, social cultural and historical
experience. Means the implication of a given
theory vary widely from country to country.
• Each theory gives an insight into one/two
dimensions of the complex process of
development
• For instance Harrod-Domar model explain the
importance of adequate savings for development
process 7
• it is widely agreed that preservation of human
dignity and fulfillment of basic needs are the
foremost duties of every society.
• While there is a wide agreement on this goal,
differences of opinion exist on the question of
the degree to which these basic should be
supplied and as well, how they should be
supplied
• These differences allow for different paths of
development.

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For the common denominator of “basic needs” one can
deduct goals of development as:
1.Economic growth: to secure food and other requirements
for the population;
2.Social justice: to reduce inequality; Gender/ethnic/relegious
3.Employment: as means of earning, and because of its
ethical and social value;
4.Participation: as political involvement and social sharing
5.Independence: freedom from external domination
While individual societies have different opinion on the
priorities of these goals, in the absence of a general theory of
devt.
One can use the criterion of fulfillment of these goals as a
yardstick in development. Development is then understood
as a simultaneous progress towards these five goals
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 Economic development theory-Definition
• Economic Theory is a systematic explanation of
interrelationships among economic variables. Growth,
productivity, income, saving, inflation,
• An economic variable is any measurement that helps to
determine how an economy functions. Examples
include population, poverty rate, inflation, and available
resources.
Why theory?
• Purpose – to explain causal relationships among
variables, to understand world better and provide basis
for policy
• Production, Saving, investment, growth
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• Theories of development have been
motivated by the need to explain mass
poverty/ underdevelopment. Interest in
development issues is of rather recent
origin, dating back not much earlier than
the nineteen fifties and early sixties.
• As represented by their more influential
proponents, the development schools of
thought reflect roughly the following
chronological order of appearance:
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• Theories are generalizations. While Less Developed
Countries (LDCs) share similarities, every country’s
unique economic, social, cultural, and historical
experience means the implications of a given theory
vary widely from country to country.
• There is no one agreed “model of development”.
Each theory gives an insight into one or two
dimensions of the complex process of development.
For example, the Rostow model helps us to think
about the stages of development LDCs might take,
while the Harrod-Domar model explains the
importance of adequate savings in that process.

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 Attention
• Development is not a final state of things but a
process
• Development is a social, political and economic
issue , not simply the provision of material goods
• It is a continuous process
• In many theories, it is understood as something
static, to be achieved, as a ‘final’ state

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 What is theory?
Definition:
The formal scientific definition of "theory" is quite
different from the everyday meaning of the word.
1. “a system of ideas explaining something”; or
Example: urban land use, continental drift
2. “a system of ideas based on general principles
independent of the facts or phenomena to be
explained”; or
3. “a scientific statement or a group of scientific
statements”.
 Classification: Simple vs. scientific
theory
• Arba Minch is located across lake shores---
simple statement
• One finds the big cities generally located
across the rivers in the world—
complex/scientific statement. Because the
‘scientific statements’ are based on
generalizations, derived from a number of
simple statements (facts). This mainly of our
interest
• After searching out some relationship /
order(pattern), we state it or express it in the form
of scientific statements. The lowest order
statements are ‘generalizations’ followed by ‘laws’
or ‘theories’ at higher order of explanation.
Example: laws of migration
4. Thus, the theories are the highest order scientific
statements or the universal statements. They state
some rule of action, behavior, process or
development.
5. Theory is a systematic and general attempt to
explain something like:
– Why do industries agglomerate?
– Why agricultural/urban land use pattern varies
spatially?
– What should be the spacing of urban settlement?
Each of these questions contains a reference to some
observed phenomenon. A suggested explanation for
the observed phenomenon is theory.
6. More formally, a theory is a coherent set of general
propositions/plan/ suggestions, used as principles
of explanations of the apparent relationship of
certain observed phenomena.

7. It is a system of interconnected ideas that

condenses and organizes knowledge about
the natural/social world. People are always
creating new theories to talk about how the
world works.
 Purposes of a theory
• It helps us organize our thoughts, interpret the
world, & evaluate our actions
• It explains & predicts
– Human behavior —consumption/marketing
– The impact of social structures--family
– Social problems –fertility/migration
• It directs research & informs policy
• It guides practice
• It gives credibility(trustworthiness) to the
profession
 Characteristics
• Conditional, negotiated understandings (there is
uncertainty)
• Incomplete, recognizes uncertainty , Growing,
open, unfolding, expanding (ex. New variables)
• Welcomes tests,
• Changes based on evidence ,
• Strongly seeks logical consistency, coherence
• Allow us to generalize from known to unknown
• Theories generate explanation (why people need
social life? Motivation of travel)
 Summary
• Theories are general
• Theories are abstract: the process of mapping a
representation of a problem onto a new
representation. 
• Theories are self-contained
• Theories explain and predict : that is Theories
are analytical tools for understanding, explaining,
and making predictions about a given subject
matter
 Assumptions
• Theories contain built-in assumptions
Assumptions: are statements about the nature
of things that are not observable or testable.
• We accept them as a necessary starting point,
such as assumptions about the nature of
human beings (Man is rational), or a particular
phenomenon (isotropic land).
• Assumptions often remain hidden or unstated.
One way for a researcher to deepen his or her
understanding is to identify the assumptions
on which a theory is based.
 Concepts
• Theory development is essentially a process of
describing phenomena at increasingly higher levels
of abstraction.
• A concept (or construct) is a generalized idea about
a class of objects, attributes, occurrences, or
processes that has been given a name.
• Such names are created or developed or
constructed for the identification of the
phenomenon, be it physical or non-physical.
• All these may be considered as empirical realities
e.g. leadership, productivity, morale, motivation,
inflation, happiness. Migration,
• That is, concepts are expressed in words, letters,
signs, and symbols that refer to various events or
objects.
 Relationships
• In addition to making assumptions and
providing concepts, theories specify
relationships among concepts.
• Theories tell us whether the concepts are
related to one another and, if they are
related, the kind of relationship.
• By outlining an entire complex of
assumptions\ concepts, and interconnections,
a theory often states why a specific
relationship does or does not exist.
 Assignment
• Can you mention theories you know?
• What are their assumption?
• What are their basic concepts?
• What relationship do you find among these
concepts?
• Therefore theories are a conceptualizing
framework that gives answer to various problems
identified in the scientific world.
• systematic explanation of interrelationships
among economic variables.
• Purpose – to explain causal relationships among
these variables, to understand world better and
provide basis for policy
Models
• Model is a visual, symbolical or verbal
representations of a concept in order to make
clear understanding of something
• That is, it is representation created to explain a
theory.
 More Detailed Goals of development
• Equality of opportunity
• Rising income and standard of living
• Equity in the distribution of income and wealth---does it mean
unequals should receive equals?
• Political democracy and wide-spread participation
• Expanded role for women, minorities and all social classes in
public life
• Increased opportunities for education and self-improvement
• Expanded availability of and improvements in health care
• Public and private safety nets to protect the vulnerable
• A clean and healthy environment
• Efficient, competent and fairly administered public sector
• A reasonable degree of competition in the private sector

• Yet if we wanted to compare countries with one another in

terms of all these criteria, imagine how complex and difficult
the comparison would turn out to be.
 Definitions of Economic Development

• The term 'economic development' is generally

used in many other synonymous terms such as:
• economic growth,
• economic welfare /wellbeing/benefit,
• economic progress.
• secular change, and
• social justice
• As such, it is not easy to give any precise and
clear definition of economic development.
• Economic development, as it is now generally
understood, includes the development of
agriculture, industry, trade, transport, means
of irrigation, power resources, etc.
• Broadly speaking, economic development has
been defined in different ways and as such it is
difficult to locate any single definition which
may be regarded entirely satisfactory.
 1. Prof. Meier and Baldwin

• According to Prof. Meier and Baldwin; "Economic

development is a process whereby an economy's
real national income increases over a long
period of time".
• This definition explains three ingredients of
economic development.
a) process, b) real national income, c) long period.
• The discussion of these three factors would help
in understanding the concept of economic
development.
 a) Process

• The term 'process' here refers to the operation of

certain forces which bring about changes in
certain variables.
• Various types of economic changes take place
during the development process.
• The most important of these changes can be
broadly divided into two categories;
i) changes in the supply of fundamental factors, and
ii) changes in the structure of demand for the
products.
• Supply will be determined by factors such as price,
the number of suppliers, the state of
technology, government subsidies, weather
conditions and the availability of workers to
produce the good.
• Generally, if a good's price increases so will
the supply. The price of related goods and the price
of inputs (energy, raw materials, labor) also affect
supply as they contribute to increasing the overall
price of the good sold.

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• The quantity demanded : is a function of five
factors
– price,
– buyer income,
– the price of related goods,
– consumer tastes, and
– any consumer expectations of future supply and price.
– As these factors change, so too does
the quantity demanded.

theories and indicatirs of development 33

• Changes in factor supply take place due to discovery of
additional resources, capital accumulation, population
growth, adoption of better techniques of production
and institutional changes.
• Again, changes in the structure of demand for products
take place due to changes in the size and composition
of the people, changes in the level and distribution of
income, changes in tastes etc.
• Hence economic development may be defined as
development of factor, supplies and product demand.
• These changes bring about an increase in real national
income over a long period.
 b) Real National Income

• Other things being equal, there is a positive

correlation between the real national income
and economic development.
• Higher real national income of a country is
considered an index of higher economic
development and vice versa.
• In brief, we can say that the real national
income is the measuring rod of economic
development.
• Though it may be an imperfect method for
measuring development, it is, however, used for
global development comparisons.
• It implies that price stability is an essential
condition for promoting development.
• Here emphasis is on the word "real" which
signifies that purchasing power of national
income should be taken into account for
quantifying development
• Thus, economic development signifies higher real
national income.
 Long Period

• Economic development refers to an upward trend in

real national output over a long period.
• "Although the upward trend means that each
successive cyclical peak and trough is generally at a
higher level of real national output than the preceding
peak and trough respectively, it is the increase in real
national income between cycles rather than the
increase within a cycle that denotes development".
• Long term process here refers to a sustained increase
in real output over a period of at least 25 years.
• Thus, economic development is a process
consisting of a long chain of interconnected
changes in fundamental factor supplies and in
the structure of demand for products leading
to a rise in real national income over a long
period.
 2. Okun and Richardson
• According to Benard Okun and Richard W,
Richardson,
• "Economic development may be defined as a
sustained secular/material improvement in well
being, which may be considered to be reflected
in an increasing flow of goods and services".
• A close examination of this definition reveals that
it is more or less similar to the concept of
development as explained by G.M. Meier.
• According to this definition, economic
development implies continuous material
increase in national output for promoting
material welfare of the society. It stresses on
three important aspects of development;
• a) Economic development is a dynamic and long
term phenomenon;
• b) It implies improvement in material welfare and
• c) National output is the measuring rod of
material welfare.
• This definition is not regarded satisfactory as it
fails to explain the role of social, political,
institutional and international forces.
• These forces are considered vital as they
shape and direct the global economic
development. So this definition leaves much
to be desired.
• In board terms, it implies that in a developing
economy.
ΔYr > ΔP
• resulting in an increase in per capita income.
Here,
• Δ = refers to increase,
• Yr = to real national income and
• P = to size of population.
• In other words, for economic development the rate of
increase real income should be higher than the rate of
population growth.
 Prof. Colin Clark
• Prof. Colin Clark defines economic
development from the angle of economic
welfare.
• "Economic progress can be defined simply as
an improvement in economic welfare."
• Economic welfare, can be defined in the first
instance as an abundance of all those goods
and services which are normally exchanged
for money.
United Nations Expert Committee
According to this Committee,
• Development concerns not only man's
material needs but also the improvement of
the social condition of his life.
• Development is, therefore, not only economic
growth, but growth plus change– social,
cultural and institutional as well as economic".
• This definition encompasses economic and
non-economic aspects of development.
• Not only the increased quantity of capital is
needed but the improvement in its productivity is
also required for development.
• Similar instances can be given in respect of other
development variables.
• The central point of this definition is that
quantitative and qualitative changes in
development variables are considered essential
ingredients of economic development.
 Mabogunje

• Development as Economic Growth- too often

commodity output as opposed to people is
emphasized-measures of growth in GNP. Note
here the persistence of a dual economy where
the export sector contains small number of
workers but draws technology as opposed to
traditional sector where most people work
and is dominated by inefficient technology
 Michael Todaro
• Development, according Todaro, it is a
process by which members a society increase
their personal and institutional capacities to
mobilize and manage resources to produce
sustainable improvements in the quality of
life.
• Thus it has to be seen as a complex
multidimensional concept involving
improvements in human wellbeing.
Michael Todaro
• Development is not purely an economic
phenomenon but rather a multi-dimensional
process involving reorganization and
reorientation of entire economic AND social
system
• Development is process of improving the quality
of all human lives with three equally important
aspects. These are:
 Todaro’s Three Objectives of Development
• 1. Raising peoples’ living levels, i.e. incomes and
consumption, levels of food, medical services,
education through relevant growth processes
• 2. Creating conditions conducive to the growth of
peoples’ self-esteem through the establishment of
social, political and economic systems and
institutions which promote human dignity and
respect
• 3. Increasing peoples’ freedom to choose by
enlarging the range of their choice variables, e.g.
varieties of goods and services
 Marxist View of Development
• Emphasizes Mode of Production - elements
and activities necessary to produce and
reproduce real, material life
• Capitalist (market economy) mode depends
on wage labor whose labor power produces a
surplus which is accumulated and
appropriated by the employer-result is often
class conflict in capitalist societies
Alternatives
Economic growth: to secure food and other requirements
for the population;
Social justice: to reduce inequality;
Employment: as means of earning, and because of its
ethical and social value;
Participation: as political involvement and social sharing
Independence: freedom from external domination
While individual societies have different opinion on the
priorities of these goals, in the absence of a general theory
of devt.
One can use the criterion of fulfillment of these goals as a
yardstick in development. Development is then understood
as a simultaneous progress towards these five goals
 Alternative Interpretations of Development
• Development as Distributive Justice- view
development as improving basic needs
• Interest in social justice which has raised three
issues:
1.Nature of goods and services provided by
governments
2. Matter of access of these public goods to
different social classes
3. How burden of development can be shared
among these classes
• Target groups include small farmers, landless,
urban under-employed and unemployed
 Comprehensive Definition
• In the end we may give a simple but
comprehensive definition of economic
development which runs as, "Economic
development is a continuous process which
has to be extended over a long period of time
so as to break the vicious circle of poverty and
lead a country to a stage of self-sustaining
growth or to self-generating economy“.
• From the above definition we can
conclude that development is a complex
concept that encompasses economic,
social and political dealings that are
manifested in an improvement in the
standard of life, stable social, political
and political systems and in creating
enabling democratic institutions allowing
citizens to exercise human and
democratic rights.
 Characteristics of a Developed
Economy
A developed economy is the characterised by
a. increase in capital resources,
b. improvement in efficiency of labour,
c. better organisation of production in all spheres,
d. development of means of transport and communication,
e. Growth of banks and other financial institutions,
f. urbanisation and a rise in the level of living,
g. improvement in the standards of education and
expectation of life,
h. Greater leisure and more recreation facilities and
i. the widening of the mental horizon of the people, and so
on
• In short, economic development must break the
poverty barrier or the vicious circle and bring into
being a self-generating economy so that
economic growth becomes self-sustained.
The main characteristics of developed countries are
as follows.
• 1. Significance of Industrial Sector.
• 2. High Rate of Capital Formation.
• 3. Use of High Production Techniques and Skills.
• 4. Low Growth of Population.
 Distinction Between Developed and
Underdeveloped Economies
• We may now distinguish between the features of
an underdeveloped
• economy from that of developed one as follows;
• 1. Underdeveloped economies are distinguished
from developed economies on the basis of per
capita income.
• In general, those countries which have real per
capita incomes less than a quarter of the per
capita income of the United States, or roughly
less than 5000 dollars per year, are categorised
as under-developed countries.
• 2. An underdeveloped economy, compared
with an advanced economy, is underequipped
with capital in relation to its population and
natural resources.
• The rate of growth of employment and
investment in such an economy lags behind
the rate of growth of population.
• 3. High rate of growth of population is an
important characteristic of most of the
underdeveloped economies.
• Population growth in underdeveloped
countries neutralises economic growth.
• 4. The central problem of underdeveloped
economies is the prevalence of mass poverty
which is the cause as well as the consequence
of their low level of development.
• 5. In an underdeveloped economy, the fundamental
problem is that of output, real income or the standard
of living, as these economies are characterised by low
productivity, low income and a poor standard of living.
• A vast majority of people in an underdeveloped
country are ill-clothed, undernourished and without
adequate shelter.
• On the other hand, most of the developed countries
at present enjoy a high rate of mass-consumption.
• In their economies, per capita real income has risen to
a level at which a large number of people can afford
consumption transcending food, shelter and clothing.
• 6. Capital deficiency is the main cause of
poverty of a poor country
• 7. In an underdeveloped economy, the problem
of under-employment is more important than
that of unemployment, whereas a developed
economy may have a cyclical unemployment
problem.
• There is chronic unemployment in an
underdeveloped economy.
• An advanced economy may have unemployment
occasionally due to business failure
• 8. Poor countries are poor in technology,
advanced countries are advanced in
technology.
 Economic Growth
• Economic Growth is a narrower concept than
economic development.
• It is an increase in a country's real level of national
output.
• In another way an increase in the value of goods and
services produced by every sector of the economy.
• Increase in per capita real GDP measured by its rate of change
per year
• Economic Growth can be measured by an increase in a
country's GDP (gross domestic product).
Economic growth
• Economic growth is a necessary but not
sufficient condition of economic development.
 Comparison
Items Economic development
Implications Economic development implies an upward
movement of the entire social system in terms
of income, savings and investment along with
progressive changes in socioeconomic
structure of country (institutional and
technological changes).
Factors Development relates to growth of human capital
indexes, a decrease in inequality figures, and
structural changes that improve the general
population's quality of life.
Measurement Complex; Qualitative.HDI (Human Development
Index), gender- related index (GDI), Human
poverty index (HPI), infant mortality, literacy
rate etc.
Effect Brings qualitative and quantitativechanges in
the economy
relevance Economic development is more relevant to
measure progress and quality of life in
developing nations
Economic growth
Economic growth refers to an
increase over time in a country`s real
output of goods and services (GNP)
or real output per capita income.
Growth relates to an increase in one
of the components of Gross Domestic
Product: consumption, government
spending, investment, net exports.
Simple; Quantitative. Increases in 
real GDP.
Brings quantitative changes in the
economy
Economic growth is a more relevant
metric for progress in developed
countries. But it's widely used in all
countries because growth is a
necessary condition for development
 Perspectives of Development

Regardless of any particular framework, many

would view development as follow:
Dev’t as multi-dimensional and multi-
sectoral process, involving social, economic and
political change aimed at improving people’s lives.
Dev’t process use and manage natural resources to
satisfy human needs and improve
people’s quality of life.
However, those who hold these views may still
range from Marxist to neo-classical ideologies.
 Perspectives of Dev’t…
Different views of what is development
Two Examples:
1.A country is considered as developed because its
inhabitants command higher incomes percapita and
because investment and employment rates are higher
than other regions.
•Economic growth and productive investments are
considered indicators of development here.
2. In another view, concerns of people’s health and
education are important key indicators of
the dev’t of a country.
•In this example, health and education are as key
indicators on the foreground of what dev’t means.
 Aspects of Development

Development is understood in terms of the

following:
Social, Political and Economic:
1. Social Dev’t: process of growth and dev’t of the
capacities of the people and the improvement of
society in which they live in order to obtain better life
for all.
2. Economic Dev’t: discussed in terms of economic
growth and aware of non-economic factors.
3. Political Dev’t: process of increasing rationality,
participation and secularization in the political system.
 Core values of Development

Three basic core values as practical guideline for

understanding dev’t are:
1.Sustenance: the ability to meet basic needs.
When life sustaining basic human needs like food, shelter, health and
protection
To create an env’t in which all people can expand their capabilities
and opportunities
2.Self-Esteem: to be a person
Having a sense of worth and self-respect,
not being used as tool by others for their own needs
3. Freedom from servitude: to be able to choose
To be understood in sense of emancipation from alienating material
conditions of life and from social servitude to nature, ignorance, other
people, misery, institutions and dogmatic beliefs
 Explaining Global
Development
 Terms to explain level of development:
- Developed/Developing or Underdeveloped - LDC/MDC/NIC

- North/South (vs. East/West) - Transition

economies
- First/Second/Third World - Emerging economies
 North-South Gap-most countries in the Core are above 30
degrees latitude, clustered in an inner core, while less
developed countries are relegated to a periphery or outer
ring.
 20% of the World’s population controls 85% of the wealth
 Poorest 20% lives in the Southern Hemisphere
 When to say that growth is good
for the poor?
• Can we say what ever be the situation and its
effect that economic growth is good for the
poor?
• Is there a situation that growth would be bad
for the poor?
• Discussion
 QUESTION
• Do you believe that economic development is
always good for the poor?
• Is there a situation of being bad/good?

75
UNDP, Report

76
UNDP, Report

77
 CHAPTER TWO

Theories of
Development/Underdevelopment

78
 Introduction
Theory: is a systematic explanation of the
interrelationships among assumptions & the
reality
 Usually, a theory is used not only to understand the
world better, but also to provide a basis for policy
decision
Theorizing about dev’t didn’t begin TILL the
middle of 20thc,
We may look roots of contemporary dev’t
theories in the work of classical scholars such as
Adam Smith, Marx and Engels, who, writing in
the 1840s,
Evolution of Development
Theories
 Modern Theories & models
of Development
 Early years of Post WWII is considered as
the birth of ‘modern’ thinking of
development
 Here, we broadly classify theories
development in to two broader
categories:
1. Classic Theories of Economic
Development
2. Contemporary Models of Development &
Under-Development
 1. Classic Theories of Ec.
Dev’t:
Four Approaches
 Literature dominated by the
following four strings of thought:
 Linear-stages-of-growth model: 1950s
and 1960s
 Theories and patterns of structural
change: 1970s
 International-dependence revolution:
1970s
 Neo-classical, free-market
counterrevolution:
1980s and 1990s
 A. Linear-stages theory
• Viewed the process of development as a
series of successive stages of economic
growth
• Mixture of saving, investment, and
foreign aid was necessary for economic
development
• Emphasized the role of accelerated capital
accumulation in economic development

83
 Theories of economic stages
• Historically oriented
• Evolution of human society has passed
through different stages until the present
• Key element: progress
• What is progress? Change in standard of life
 High variety of stages and explanations, de-
pending on the perspective of the individual
author
84
Historical background to modernisation theory

1. Post world war two’s deepening poverty in some

countries
2. Ideological competition from communism
Increasing unrest in some countries
4 The above posed a threat to capitalism, and
especially the USA
5 This led to the development of modernisation
theory (mainly by US economists and policy
makers)
 W. Rostow: devt stage
Capital accumulation and technological change will lead to
emergence of leading sectors. The model claims that
economic modernization occurs in five basic stages, in
changeable time period.
1. Traditional society
2. Preconditions for take-off /transitional
3. Take-off
4. Drive to maturity
5. Age of high mass consumption
Rostow argues this is a universal historical
categorization of stages of growth that all societies
necessarily go through with similar experiences.
86
1. Traditional society (agricultural, no growth)
2. Transitional society (slow technological
change, slight growth, development of
institutions, organizations, and infrastructure
3. “Take-off” society large investment in
selected industry (10 to 15% of GDP)
4. Mature society (high growth, efficient
resource-use, new industries, new labour
requirements)
5. Society of mass consumption (high income,
consumption and leisure society)

87
 Traditional
• output consumed by producers rather than traded
• trade carried out by barter; goods exchanged for
other goods
• agriculture → dominating sector; labor-intensive
• Landholders plays a dominant and important role in
the determination of political and economic power
• Question: where do we find this stage?

88
Precondition for take-off-transitional
society
• destruction of traditional ways of life through
outside forces such as colonialism/trade
• emergence of entrepreneurial and managerial
class
• development of a financial sector and increase
in investment
• infrastructural development
• modern business using new and sophisticated
methods of production

89
 Take-off—to sustained growth

increasing industrialization, production and employment

switches from agriculturee to manufacturing
growth concentrated in a few regions of the country and in
one or two manufacturing industries
investment reaches over 10% of GNP
evolution of new political and social institutions supporting
the industrialization
growth becomes self-sustaining as investment leads to
increasing incomes in turn generating more savings to
finance further investment
90
 Drive to Maturity
• the economy starts spreading into new areas
• technological innovation provides expanded
range of investment opportunities.
• the economy starts producing a wide range of
goods and services and there is less reliance
on imports
• this diversity leads to greatly reduced rates of
poverty and rising standards of living

91
Age of High mass consumption
• the economy is oriented towards mass
consumption :The use or purchase of goods
or services by a large number of people.
'industrialization allows for high mass
consumption of material goods

• service sector becomes increasingly

dominant :tertiarization

• society is now devoted to the pleasures of

consumer choice, the pursuit of security,
and the enjoyments of the arts and leisure
92
93
 USA Path to Development

 Stage 5: early 20th century

 Stage 4: late 19th century
 Stage 3: middle of 19th century
 Stage 2: first half of 19th century
 Stage 1: prior to independence(1776)

94
Take-off period

95
 Modernisation theory – role of the West in
developing countries

i. Western investment in factories, expertise

and equipment – use loans from World Bank
(Trickle down)

ii. Western funding to introduce meritocratic

education
 Modernisation theory – the West and the
developing countries (continued)
iii Mass media to
disseminate modern
ideas e.g. nuclear
families
(Inkles)

iv Urbanisation to be
encouraged
(Hoselitz)
 With such help from the west poor countries would
develop

a. capitalist entrepreneurial middle class to

develop business opportunities

b. High mass consumption

c. An urban population

d. Lifestyles of conspicuous/obvious/noticable
consumption
 Criticism of modernisation theory
1. It is ethnocentric because
(a) it devalues traditional values and social
institutions e.g. extended families
(b) it ignores increasing inequality within and
between countries
(c) it is not a neutral theory as it suggests (it
promotes western capitalist values)
2 Education in developing
world mainly benefits
small, local elites (those
at the top)

3 It assumes unlimited
natural resources for
industrial expansion.
(ignores ecological
issues)
4 There is no, one single way to advancement and
historical context is also important.

5 The cultures of developing countries e.g the

importance of the family, may be a response to
economic insecurity and low levels of material
well-being not the cause of it. (Inglehart and
Baker 2000)
 Strength

• It enabled social scientists to identify

several aspects of social and cultural
change that lead to development

102
 Other forms of stages
E. Friedrich
• Reflexive/ spontaneous economy (focus:
spontaneous needs; subsistence)
• Instinctive economy (adaptation to nature, de-
cline of pure subsistence economy)
• Traditional economy (less dependence from
nature, division of labour, market economy)
• Scientific economy (independent from nature
thanks to science and technology, market
economy)
103
 Friedman, M.

• Pre-industrial (isolated settlements, spatial equi-

librium, no competition)
• Transitional (industrialization, spatial inequali-
ties, primary cities as growth poles, dependent
and exploited peripheries, competition)
• Industrial (urban networks, more growth poles,
less peripheries, competition)
• Post-industrial (functional interdependence,
equilibrium situation, less competition)
104
 K. Marx
stages based on changes in technology, property
rights, and ideology
•Primitive society
•Slave society
•Feudalism
•Capitalism
•Socialism/communism

105
Growth stage theories (continued)

• Colin Clark (1930’s)

– Agriculture
– Manufacturing
– Tertiary or services
Growth results from:
– Increased output per worker in any sector
– Workers moving from sectors with low output
per worker to high output per worker
Technological change important
 Critique –for all
• Retrospective/traditional outlook and
descriptive
• Created from a Northern perspective
• They suggest that history has come to an end
but development is continuous

107
An alternative model for the African
context

• Tribal society: subsistence and low surplus eco-

nomy
• Colonial society: economic exploitation, Africa
as dependent and exploited periphery
• Postcolonial society: economic exploitation un-
der a new/old system
• Independent society of the future: development
of autonomous forms of the economy

108
 Summary
 Rostow identified 5 stages of
growth:
1. The traditional society
2. The pre-conditions for take-off
3. The take-off
4. The drive to maturity
5. The age of high mass consumption
 All advanced economies have
passed the stage of take-off into self
sustaining growth
 Developing countries are still in the
traditional society or the pre-
conditions stage.
 Different countries are at different
stages of development.
109
 Harrod-Domar model
The Harrod-Domar model developed in the l930s suggests
savings provide the funds, for investment purposes.
The economy's rate of growth depends on:
1.- the level of saving and the savings ratio
2.- the productivity of investment i.e. economy's capital-output
ratio
For example, if £8 worth of capital equipment produces each £1
of annual output, a capital-output ratio of 8 to 1 exists. A 3 to 1
ratio indicates that only £3 of capital is required to produce
each £1 of output annually.
Which one is preferable?

110
 Harrod-Domar model (1950)
• Savings leads to economic growth
• Output per unit of capital increases leads to
economic growth

The H-D model: g=s/k where:

g = rate of growth in national income
s = savings rate
k = ratio of capital to output
- Developing countries have an abundant supply of labor.
So it is a lack of physical capital that holds back
economic growth hence leads to economic
development.
- More physical capital generates economic growth.
- Net investment (i.e. investment over and above that
needed to replace worn out capital (deprecation) leads
to more producer goods (capital appreciation) which
generates higher output and income.
Higher income allows higher levels of saving
Economic growth requires policies that encourage
saving and/or generate technological advances, which
lower capital-output ratio

112
Criticisms of the model
- It is difficult to stimulate the desired level of domestic savings
- Meeting a savings gap by borrowing form overseas causes debt
repayment problems later.
- Diminishing marginal returns to capital equipment exist so each
successive unit of investment is less productive and the capital to
output ratio rises.
- The amount of investment is just one factor affecting
development e.g. supply side approach (free up markets); human
resource development (education and training)
- Economic growth is a necessary but not sufficient condition for
development
- Sector structure of the economy important (i.e. agriculture v
industry v services)

113
• Is Savings a necessary & sufficient condition?
• Savings & Capital accumulation may be
necessary for economic growth, but NOT a
sufficient condition.
• Other factors such as institutions, human
capital, skilled labor, transparency, etc.. may
be lacking.

theories and indicatirs of development 114

 Structural Change Models
• The focus of these theories is on the way
economies are transformed over time, from
traditional to modern/industrial economies.

theories and indicatirs of development 115

 Growth with unlimited supply of labor
Arthur Lewis: Structural Change Models

Focuses on the mechanism by which

underdeveloped economies transform their
domestic economic structures from traditional
to an industrial economy

Representative examples of this strand of

thought are
– The Lewis theory of development
– Chenery’s patterns of development

116
The Lewis model is structural change model that explains how
labor transfers in a dual economy. For Lewis growth of the
industrial sector drives economic growth.
The Lewis Model argues economic growth requires structural
change in the economy whereby surplus labor in traditional
agricultural sector with low or zero marginal product, migrate to
the modern industrial sector where high rising marginal product.
Transferring surplus labor from rural to urban areas has no
effect on agricultural productivity
Firm’s profits are reinvested. Growth means jobs for surplus
rural labor. Additional workers in urban areas increase output
hence incomes and profits. Extra incomes increase demand for
domestic products while increased profits fund increased
investment. Hence rural urban migration offers self-generating
growth.
117
 Main features of labor-surplus
dual-economy model
• 2 sectors – agriculture & industry
• Marginal product of labor in agriculture
• Wage rate in agriculture equals average
product of labor in agriculture
• Land fixed
• Wage rate higher in industrial sector
 (features continued)

• Labor moves from agriculture to industry

• Profits reinvested in capital items resulting in
greater Marginal Profits & demand for labor
• Shifts in M P of labor creates more profits, etc.
• This happens as long as marginal cost of labor is
constant
• If marginal cost of labor (wage rate) goes up, profits
stop increasing as fast and eventually the process
stops.
120
 Criticisms/Weaknesses in the
model
• Says nothing about the cost of moving people and
food
• May not have excess labor in some countries
• Says nothing about cost of and how to develop the
agricultural sector
• Assumes profits reinvested in labor-intensive
industries (what if not invested or invested in
capital-intensive industries due to subsidies)?
• Ignores international trade
Critics on Lewis contd---
The ability of the modern sector to absorb surplus works depends
on the speed of investment and accumulation of capital. Where
firms invest in new labor saving capital equipment, surplus workers
are not taken on by the formal sector. Recently arrived rural
migrants join the informal economy and live in shanty towns
Given urban growth drives economic growth it can lead to the
neglect of agriculture by government
Neglect of Agriculture – yet most people live in rural areas where
incomes are relatively low
Increased profits may be invested in labor saving capital rather than
taking on newly arrived workers
For many LDC's, rural urban migration levels have been far greater
than the formal industrial sector’s ability to provide jobs. Urban
poverty has replaced rural poverty.
 Food prices increase from more demand from urban sector
122
 Structural Changes and
Patterns of Development :
Chenery’s Model
• Empirical structural change analysis stresses both domestic and international
constraints, including institutional ones for successful transformation.. stresses both
domestic and international constraints, including institutional ones for successful
transformation.
• In addition to capital accumulation (H-D), transformation of production,
composition of demand, and changes in socio-economic factors are all important
• Chenery and colleagues examined patterns of development for developing
countries at different percapita income levels

123
 Chenery’s Model ….
The empirical studies identified several
characteristic features of economic development:
– Shift from agriculture to industrial production
– Steady accumulation of physical and human capital
– Change in consumer demands
– Increased urbanization
– Decline in family size
– Demographic transition

124
 Chenery’s Model ….

• Differences in development among the countries

are ascribed to:
– Domestic constraints
– International constraints

• To summarize, structural-change analysts believe

that the “correct mix” of economic policies will
generate beneficial patterns of self-sustaining
growth

125
 The International-Dependence
Revolution: Various Versions
• LDCs beset by institutional, political & economic rigidities
both domestic and international
3.1.The neocolonial dependence model assumes Unequal
relationship between the center (developed countries) and
the periphery (LDCs).
3.2.The false-paradigm model: inappropriate advice by
developed countries experts and donors.
3.3.The dualistic-development thesis: leads to increased
inequality and poverty or greater gap between the few rich
and a large poor
theories and indicatirs of development 126
Dependency theories (late 1960's,
early 1970's).

• The theoretical trust of the dependency

perspectives was that capitalist penetration
leads to and reproduces a combined and
unequal development of its constitutive parts.
• The policy implication is that indigenous
economic and social development in third
world social formations must be fundamentally
predicted upon the removal of industrial
capitalist penetration and dominance 127
1.In the beginning (1500) LDCs were self-sufficient
at low level.
 2. The argument: Europe used its empire to
market surplus goods and pay sub-economic
costs for raw materials, agricultural products
and minerals.
 3. During 500 Years of colonialism the Northern
states used colonialism to extract from LDCs
creating a three part World made up of
Metropoles/cores, peripheries, sub-peripheries
 4. The result often was the destruction of local
production, agriculture and food production
 
5. The colonialgovernment supported export
import trade and where possible, SETTLERS
 6. Colonies whether land based or sea based
functioned through extractive taxation and
as systems of labor reserves
 7. Attempts to become self-reliant and
progressive are suppressed/blocked by this
relationship
8. Europe became dependent on extraction
from the “third world.”
.
• Moreover certain elites in the developing world (e.g
landlords, entrepreneurs, merchants) enjoy high
incomes, social status and political power and thus
perpetuate inequality and conformity and are
rewarded
• They serve international power groups such as multi-
national firms, assistance agencies (World Bank) and
other agents
 The International
Dependence Revolution
(IDR)
• The IDR models reject the exclusive emphasis on GNP growth rate
as the principal index of development
• Instead they place emphasis on international power balances and on
fundamental reforms world-wide.
• The IDR models argue that developing countries are up in a
dependence and dominance relationship with rich countries

131
 (IDR) ….
• Three streams of thought:

– Neoclassical dependence model

– False-paradigm model
– Dualistic-development thesis

132
 Neoclassical Dependence
Model
• “Dependence is a conditioning situation in which
the economies of one group of countries are
conditioned by the development and expansion of
others.”

• “Dependence, then, is based upon an international

division of labor which allows industrial
development to take place in some countries, while
restricting it in others, whose growth is conditioned
by and subjected to the power centers of the world.”
Theotonio Dos Santos

133
 The False-Paradigm Model
• Attributes under development to the faulty and
inappropriate advice provided by biased and
ethnocentric international “expert advisers”

• The policy prescriptions serve the interests of

existing power groups, both domestic and
international

134
 The Dualistic- Development
•
Thesis
Dualism represents the existence and persistence of increasing divergences
between rich and poor nations and rich and poor peoples at all levels.
• The concept embraces four key arguments:
1. Superior and inferior conditions can coexist in a given space at given
time
2. The coexistence is chronic and not transitional
3. The degrees of the conditions have an inherent tendency to increase
4. Superior conditions serve to “develop under development”

135
 Weaknesses of IDR Models

•Do not offer any policy prescription for how poor

countries can initiate and sustain economic development

•Actual experience of developing countries that have

pursued policy of autarky/closed economy has been
negative

136
 D. The Neoclassical Counter-
revolution:
Market Fundamentalism
• Market fundamentalism gained resurgence/rebirth in the
1980s.
• It dominated economic policies of the US, Britain, Canada &
Germany, as well as the thinking of International
Development agencies such as the World Bank & the IMF.
• There are three variations or approaches:
1. Free Markets,
2. Public-Choice or New Political Economy,
3. Market-friendly Approach.

137
 1. The Free Market Approach

Assumes:
 markets are efficient.
 Competition is effective.
 The state or Government intervention is
ineffective.

 Given the efficiency of markets, any

imperfections in markets are of little
significance.

138
 2. Public-Choice or New Political
Economy Approach
• Argues that governments can not solve economic
problems, since the state itself is dominated by
politicians, bureaucrats, that use power for selfish
ends.
• State officials extract “rents”, taking bribes, and
confiscate /take away or nationalize property, and
reduce freedom of citizens. Therefore, it is best to
minimize the role of governments.
•
139
 3. The Market-friendly Approach
• This is the most recent variant of Neo-Classical Theory. It is
an
approach used by World Bank & IMF economists.
• This approach recognizes market imperfections, missing
markets, and externalities.
• Therefore, there is a need for government role in areas
such as providing public goods, developing market
supporting institutions or rules, and defining and
protecting property rights.
• The state or the government has a necessary role of being
an “impartial” referee in the economic game.
140
 2. Contemporary Models of
Development & Under-
Development
•The new models of economic development have
broadened the scope for modeling a market in a
developing country

•Departs from neoclassical economics in its

assumptions of perfect information, the relative
insignificance of externalities, and the uniqueness
and optimality of equilibria
141
Basic needs approaches (late 1970's).
• The other school of thought, the basic needs
approach, shifts development emphasis from
a singular concern with restructuring of the
world economy to that of restructuring the
domestic economy towards a new internal
economic order', primarily aimed at the
eradication of mass poverty and social
injustices

142
Sustainable livelihood approach: 1980
• The SL construct has emerged as "the
integration of population, resources,
environment and development in four
aspects:
1. stabilizing population;
2. reducing migration;
3. protecting of core exploitation; and
4. supporting long term sustainable resource
management.
143
 Endogenous development
• Every region and every country has a certain
potential of its own
• Economic circuits are often limited in space
(local, regional)
• The world-market must not be considered as
the only outlet for products but must be
integrated into a wider economic philosophy

144
 Endogenous vs. exogenous
development

Exogenous Endogenous
• The North as exclusive • Appreciating southern val-
model ues and local knowledge
• Orientation towards • Local, regional, national
the global market and global markets side by
• Primary aim: moderni- side
zation • Primary aim: autonomy in
• Result: dependency survival
from the outside world • Result: interaction with
outside world
145
 Requirements
Endogenous development requires to be
compatible with a number of factors
• These factors can be seen in isolation, but in
reality they are all interrelated
• They comprise space (environment, local and
regional activity space) and society (social
organization, economic needs and cultural
life)

146
Compatibilities of endogenous
development

local/regional social
compatibility compatibility

Endogenous
development

cultural ecological
compatibility compatibility
economic
compatibility

147
The internal matters

148
 Theory of Balanced Growth
• Fredrick List was first put forward the theory
of balance growth. According to him a balance
could be established among agriculture,
industries and service sectors.

• In the year 1928, Arthur Young gave the

concept of different industries were mutually
interdependent, then all of them should be
developed simultaneously.
 Balanced growth
• Definition : According to Lewis
“Balance growth means that all sectors of
economy should grow simultaneously so as to
keep a proper balance between industry and
agriculture and between production for home
consumption and production for exports. The
truth is that all sectors should be expanded
simultaneously.”
Advantage of Theory of Balanced Growth
 Large size of Market
 External Economies
 Horizontal Economies
 Vertical Economies
 Better Division of Labour
 Better Use of Capital
 Rapid Rate of Development
 Encouragement of Private Enterprises
 Breaking of Vicious Circle of Poverty
 Encouragement of International
Specialization
 Development of Social Overhead Costs
 Criticism of Theory of
Balanced Growth
This theory Criticized by Fleming, Singer, Hirschman and
Kurihara.
• Unrealistic or Ignores Scarcity of Resources
• Ignores the Need of Planning
• External Diseconomies
• Development from Scratch
• Not a Theory of Development
• Same Policy for Developed and Underdeveloped countries
• Not supported by History
• Scarcity of Factors of Production
• Inflation
• Contrary to the Theory of Comparative Costs
 Theory of Unbalanced Growth
• Hirschman, Rostow, Fleming, Singer have
propounded the concept of unbalanced
growth as a strategy of development for the
underdeveloped nations.
• stress the need for investment in strategic
sectors of the economy, rather than in the all
sectors simultaneously.
• Unbalanced growth is a situation in which the
various sectors of a given economy are not
growing at a rate similar to one another
 Feature of the Theory of
Unbalanced Growth
 Investment should first be made in the
key sectors of the economy.
 Based on the principle of inducement
& pressures.
 Big Push
 Real life observations
 Significance of the Public sector with
regard to SOC activities
 Merits of the Theory of Unbalanced
Growth
 Realistic Theory
 More Importance to Basic Industies
 Economies of Large Scale Production
 Encouragemence to New Inventions
 Self-Reliance
 Economic Surplus
 Criticisms of the Theory of Unbalanced
Growth
• Inflation
• Wastage of Resources
• No Mention of Obstacles
• Increase in Uncertainty
• Unbalance is not Necessary
• Neglect of Degree of Unbalance
• Lack of basic Facilities
• Disadvantages of Localisation
 Criticisms
 Balanced growth
 The strategy is beyond the resources of
most poor countries
 Balanced growth within a closed
economy rather than specialisation
and trade contradicts comparative
advantage
 Government planning results in
government failure ie government
intervention in the market fails to bring
about an efficient allocation of
resources eg planning process creates
a bureaucracy.
 LDC development policies focusing on
import substitution, agricultural self-
sufficiency and state control of
production yield poor growth.
 Unbalanced Growth
 The model leaves a lot to
chance;
o Have the correct sectors been
focused upon?
o What criteria has the
government used to identify
the sector to focus upon?
o Bottlenecks may occur where
there is a shortage in supply to
the growth sector
o There may not be a sufficient
demand for the output from
the growth sector
157
 Big-push theory
Paul Rosenstein-Rodan

• There is hidden potential in developing

economies---natural and human resources
• Large-scale industrialization and
infrastructural development is key
• more investment is needed in many places at
one time
• But this cannot be left to the market due to
information and appropriation failures
• the big push needs to come from the state
to escape the low-level equilibrium trap 158
 Government intervention in the form of a
coordinated investment body alleviates poverty:
coordinating complementary industries; viewing
externalities as profits; and gathering sufficient
information to correctly calculate risk
 Once a threshold level of industrialisation has
been achieved, normal private incentives may
operate successfully and investment can be left
to the market.
 Thus, a big push breaks an economy out of a
vicious circle and permits the possibility of
achieving a virtuous/worthy circle of growth
159
• A country lacks resources to finance
balanced growth. Resources are therefore
concentrated on strategic industries with:
• - Significant forward linkages i.e. firms
creating essential inputs for other key firms
in the economy
• - Significant backward linkages i.e. key firms
buy industrial inputs from a large number of
domestic firms
• - Import substitution. Developing domestic
industries replaces imports and so improves
the balance of payments. 160
161
162
 Neoclassicism’s Washington
consensus/neoliberalism

• Price decontrol/free market

• Fiscal /money discipline
• Reduce public spending
• Tax reform
• Financial liberalization
• Competitive exchange rates
• Trade liberalization
• Domestic savings
• Foreign direct investment
• Privatization
• Deregulation
• Property rights
163
 Criticism of neoclassicism

• Neoclassicism concerned with operation of

markets, not with how markets develop or with
policies to induce development
• Stiglitz – Washington Consensus benefits few at
expense of many, rich relative to poor.
• Assumption of perfect competition, technological
change exogenous, technology same throughout
world, does not incorporate decisions by people,
firms, & governments.
164
 World system theory
Immanuel Wallerstein
• Sees the world as interconnected unit and he
Divided the world into
– Core
– Semi-periphery
– Periphery

165
166
167
 Three Tier Structure
Core
Processes that incorporate higher
levels of education, higher salaries,
and more technology
* Generate more wealth in the world
economy
Periphery
Processes that incorporate lower levels
of education, lower salaries, and
less technology
* Generate less wealth in the world
economy

Semi-periphery
Places where core and periphery
processes are both occurring.
Places that are exploited by the
core but then exploit the periphery.
* Serves as a buffer between core and
periphery
168
 Core Periphery Model

• Core Regions
– High levels of socioeconomic prosperity
– Dominant players in global economic game
Anglo America HDI .94
Japan and the South Pacific HDI .93
Western Europe HDI .92
• Periphery
– Poor regions
– Dependent on the core
169
– Do not have much control over their own affairs
170
 Vicious circle theory
• Complex web of interlocking vicious circles
each of which constitutes a chain of cause and
effect relationships where one unfavorable
circumstance leads to another and produces
downward spiral
• High Birth Rate- Large Families-Low PCI-
Poverty- Low Output Per Worker
• Low PCI- Low Productivity- Poor Health-
Inadequate Housing
• Remedy --not reversible without massive aid

171
 virtuous circle and vicious circle
• The terms virtuous circle and vicious circle
(also referred to as virtuous cycle and vicious
cycle) refer to complex chains of events which
reinforce themselves through a feedback loop.
• A virtuous circle has favorable results, while a
vicious circle has detrimental/unfavourable
results.

172
Which one is virtuous/vicious circle

173
174
 Critics on vcp
• Saving depends on relative income.
• Personal savings small percentage of total
savings.
• Large-scale economies overrated/
overestimated. Market is ample for most goods.
• Economies of experience (how/what to
produce; ways of accessing to the international
markets) important

175
 HRBA to Development

• Poverty and inequities between and within countries

are now the gravest/highest human rights concerns
that we face on one hand, The problems of
development can be considered the gravest human
rights concerns
• On the other hand, persistent poverty, inequalities and
deprivations in income, food, health, wáter and
education are all too often generated,
perpetúate/reproduce or exacerbated by policies that
amount to various forms of human rights violations 176
 Why HRBA?
• Provides a universally shared legal framework for
development
• Articulates an ultimate goal for all development
activities
• Reinforces focus on inequalities and
discrimination
• Enables to ascribe responsibilities (to various duty-
bearers)
• Provides voice and empowers excluded or
vulnerable groups
• Helps strengthen democratic institutions of the state

177
Economic growth and human right
• Economic growth: instrumental for the
realization of human rights. How?

• However, economic growth must be achieved

in a manner consistent with human rights
principles. What does it mean?

• Need of policies and institutions consciously

designed to convert resources into rights
178
 HRBA to Development

1. Human rights standards: specific accountability

standards, important role of the State in
context of economic liberalisation;
2. Accountability and empowerment:
information, transparency, monitoring, remedy
3. Participation: ‘Active, free and meaningful’
4. Non-discrimination and equality: focus on the
most disadvantaged
5. Efficience: shortening and eliminating lines of
responsibility 179
6. Equal relevance of all human rights: integrated
approaches to root causes of problems
7. Sustainability: participation, embedded legal
foundations for devt, ‘progressive realisation’
8. Rights and responsabilities go hand-in-hand
9. Preventing conflict and ‘élite capture’
10. Empirical justifications and research

180
 Human right principles
 Equality and Non-Discrimination
 Participation and Inclusion
 Accountability and Rule of Law

181
 What causes underdevelopment?

• Very easy to focus on characteristics of

development
• For example we know that underdevelopment
is usually characterized by: low per capita
incomes, low literacy and educational
attainment, lack of basic services- water and
power
• But how do we EXPLAIN underdevelopment?
 Some Common ‘Theories”

• Old view that absence of development caused by

certain physical environments, particular cultural
traditions and value systems-environmental and
cultural determinism
• Lack of natural resources certainly impediment to
development but not impossible- example of Japan
• Why has Japan succeeded?
 Reasons for Japanese Success

• Strong cooperation between government and

business
• Able to adapt to spatial-physical situation
• Early development of transport and banking
systems
• Highly literate population
• Technology driven development
 Other Common Explanations of
Underdevelopment
• Instability and other adverse internal situations-
political factors
• Some truth to this as extended periods of turbulence
are not conducive to development
• Poor physical environment- lack of rainfall, poor soils
also may pose barriers to development
 Summary: What to Do With Development
Theory ?
• Several theories have been advanced have
been criticized and some also discredited—to
be replaced by other theories
• Third World is very heterogeneous-dissimilar
in terms of population, resources, climates,
culture , economic structure and location
• Unlikely that one theory will be powerful
enough to explain underdevelopment
everywhere
187
theories and indicatirs of development 188
 What to Say About Development Theory ?
• Underdevelopment must be seen as a
product of an array of complex and
continuously changing interactions between:
1. Past and Present
2. Natural and Human Environments
3. External and Internal Conditions
• Multitude of obstacles to development vary
with place and time
 Theories of Development:
Reconciling the Differences
• Development economics has no simplistic and
universally accepted paradigm:
• But it is also not the case that any policy or strategy
will work! History & Evidence shows this.
• Insights and understandings are continually evolving..
• Each theory has some strengths and some
weaknesses. Incites can be gained from a combination
of alternative theories and experiences of successful
countries to guide development policy.

theories and indicatirs of development 190

 Individual Assignment (broad
topics)= 30%
• 1. The developmental state
• 2. African development
• 3. women and development
• 4. Poverty and inequality
• 5.Democracy and development
• 6.population growth, environment and
development
• 7.international trade and development
• 8.socio-cultural practices/norms and development
191
 Chapter Three

Indicators/Measures of development

192
 Dimensions of development
• Development is a multi-dimensional concept
in its nature, because any improvement of
complex systems, as indeed actual socio-
economic systems are, can occur in different
parts or ways, at different speeds and driven
by different forces.

193
• Economic development: i.e., improvement of the
way endowments and goods and services are used by
the system to generate new goods and services in
order to provide additional consumption and/or
investment possibilities to the members of the
system.
• Production, GDP/CAPITA; saving; investment; etc
• Human development: people-centred development,
where the focus is put on the improvement of the
various dimensions affecting the well-being of
individuals and their relationships with the society
(health, education, entitlements/rights, capabilities,
empowerment etc.)
194
• Territorial development: development of a specific
region (space-Region/country) achievable by
exploiting the specific socio-economic,
environmental and institutional potential of the
area, and its relationships with external subjects.
• Sustainable development: development which
considers the long term perspectives of the socio-
economic system, to ensure that improvements
occurring in the short term will not be
detrimental /harful to the future status or
development potential of the system
• i.e. development will be “sustainable” on
environmental, social, financial and other grounds.

195
• meets the needs of the present without
compromising the ability of future generations
to meet their own needs”.
• Sustainable development implies minimising
the use of exhaustible resources. Land
degradation, due to soil erosion and
salinisation, persistent water and air pollution,
depletion of fish stock and deforestation are
all examples of consequences of non-
sustainable activities.

196
• Soil conservation practices; Good Agricultural
Practices (GAP) based on reduced use of energy,
pesticides and chemicals; waste management
and recycling, waste water treatment, use of
renewable energy sources such as biomasses and
solar panels, are frequently cited as techniques
for sustainable development.
• The concept of sustainability has also been
extended beyond environmental concerns, to
include social sustainability, i.e. long term
acceptance and ownership of development
changes by the citizens, their organisations and
associations (civil society), and financial and
economic sustainability.

197
 DEVELOPMENT PARADIGMS
A number of possible development paradigms/MODELS/ or
examples are identified & used by countries/ institutions
Here are different but specific ways for achieving
development

1. Free-market Trickle-down Growth-led development.

Under this paradigm growth, even if it accrues to the rich,
trickles-down to the poor through the normal income
distribution channels and the functioning of free markets,
associated with the withdrawal of national governments,
the liberalisation of foreign trade and the promotion of
foreign investments.
Two things: Free-market and trickling-down

198
• 2. Pro-poor (broad-based or balanced) growth-led
development.
• Growth matters for development only if associated with an
equitable distribution of income, to be achieved through the
promotion of activities generating a broad-based primary
income distribution and institutional mechanisms (e.g. fiscal
systems) ensuring an equitable secondary distribution of real
income, without necessarily relying on trickle-down
mechanisms. The poor directly are involved in devt works

3. Low-wage industry-led development.

This model is characterised by capital accumulation especially for
the promotion of heavy industry, at least in the first stage,
which leads to investing a large share of national output and
compressing consumption, thus extracting the surplus from
labour.
In many situations this has occurred or occurs essentially at the
expense of the rural poor who migrate to urban areas
199
4. Low-wage labour-intensive export-led development.
• This type of development is based on the export of labour-
intensive manufactured commodities in a context low-wage.
It is a variant on the previous paradigm where the focus is
placed on export-oriented industrialisation. (The case of
China as described in could fit into this category).
• These evelopment paradigms are often associated with a
process of “import substitution” industrialisation.

5. Agriculture-based development.
Agricultural growth is seen as directly contributing to the
various dimensions of socio-economic development, not only
through its contributions to the general growth of the
economic system, but also for its specific contributions to
poverty reduction (in its small-scale version), resilience of
local communities, preservation of the environment etc.

200
6. Endogenous growth-based development.
• Technological changes required to support economic growth and by way
of consequence development don’t need to be “exogenous”, i.e.
generated from outside national socio-economic systems , for example,
by “learning-by-doing” processes generating knowledge and therefore
technology improvements.
• Emphasis is placed on policies favouring local processes, context-specific
technologies and the creation and maintenance of human capital.

7. Rural development paradigm.

• Here the accent is placed not only, or not mainly, on agriculture or any
other sector per se, but on the socio-economic relationships among
agents present in the same rural space and also on the relationship of the
rural space as regards other spaces, whether be they urban, peri-urban or
rural. This concept of development fits into the frame of “territorial
development” and embodies the concept of “community-based
development”.
• Polices to maintain and enhance the above-mentioned relationships play
a key role in the development process.

201
• 8. Washington Consensus-based development.
• Development is only possible if countries are able to benefit from
the ‘globalised’ environment. They have to liberalise foreign trade,
privatise public assets, lower marginal tax rates and broaden the tax
base; keep public deficits tight, refrain from market interventions,
liberalise exchange and interest rates, allow free FDI. This will
complement domestic savings and bring about new ‘modern’
technologies. Countries which do not adjust their policies
accordingly are more likely to be marginalised from the
‘development’ mainstream.

9. Strategic openness-based development.

• Balancing openness and protection by differentiating across
commodities, partners, periods etc, rather than simply and blindly
adhering to the ‘Washington Consensus’.
• This implies, for example, the protection of infant industry, of
strategic sectors including food producing ones, preferential trade
agreements with selected countries with complementary economies
etc, building comparative advantages on selected commodities
through direct public interventions etc.

202
10. Exhaustible-resource export-led development. Most oil-
mineral-timber endowed countries have enjoyed and are still
enjoying the possibility of accumulating financial resources to
start-up and feed development processes through the export
of primary resources. This is the type of development path
adopted by most oil producing countries for instance,
particularly in the Middle East and Africa.

11. Agricultural commodity export-led” development. This

export-oriented development paradigm is often adopted by
countries which are neither endowed with exportable primary
resources nor with any significant industrial system.
•This is the case of countries producing and exporting mainly
primary or semi-processed agricultural commodities (tea,
coffee, cocoa, cotton, bananas etc).

203
12. Emigration-based development.
• Countries with a weak industrial sector may find themselves with
excess labour because the primary sector is not capable of
absorbing all the existing labour force even at subsistence wage
levels, due to the lack of complementary factors (e.g. capital,
infrastructures) and/or natural resources (land, water etc). Their
development (including their social stability) is substantially based
on consumption/accumulation mechanisms driven by remittances
of expatriated workers.

13. Immigration-based development.

• Countries able to attract labour thanks to financial resources
accumulated through the export of their natural resource base
(such as selected Gulf countries) or thanks to a consolidated
industry-services system (physical capital, know-how etc) may
develop further by attracting labour from excess labour countries
and extract the surplus to further feed their development process.

204
14. FDI-based development.
• A further consideration applies to financial sources that
may be used to fund capital accumulation to start up
and feed development processes. Further to funds from
exports, selected countries rely heavily on FDI; above
all when they are endowed with natural resources
(land, water, minerals, oil) and/or with cheap labour.
15. Foreign aid-based development.
• Whenever foreign aid is not fully absorbed by
immediate emergency-related consumption of
subsistence goods (e.g. staple food), selected countries
may attempt to kick-start their development process
using grants, either channelled to the country through
the funding of specific development projects or
through the public budget support.

205
• The above-mentioned paradigms are far from
being mutually exclusive, as several countries
have adopted and are adopting more than one
paradigm at a time, because they refer to
different phases of economic processes (funding,
production, trade), different dimensions of
development (economic, social) and having
different endowments and resources.
• For example, a country relying on Exhaustible-
resource export-led development may have also
adopted a Washington-consensus set of policies
concerning FDI, exchange rate and trade,
associated with a strong commitment to
promote rural development in selected areas.

206
Measuring development

207
208
 MEASURING DEVELOPMENT LEVEL
What is the criterion for development?
1. The economic growth / income criterion:
GNP, GDP, rate of growth
• Simple and easy to use
• Yet does it really capture development?

2. The indicators criterion:

e.g. Human Development Index (HDI),
• More comprehensive and realistic
• Yet difficult to measure and use for
international comparisons 209
• The most common criterion used as an indicator of development:
income per capita – as a substitute or proxy for evaluating the
overall level of national development and welfare.

• The level of income (or per capita income) is then be used to judge
the progress a nation makes over time.

• While using this criterion, actually economists/researchers/policy

makers are quite aware that the development of a nation actually
incorporates much more than average income per person and the
growth rate of that income.

• Yet the common criterion of income per capita is continued to be

used as a substitute or proxy for evaluating the overall level of
national development and welfare BECAUSE it is so SIMPLE

210
 The economic growth or income
criteria
These are the two most commonly used measures
for international comparisons :GDP and GNP.
1. Gross Domestic Product (GDP) is the total value
of all income (= value of final output) created
within the borders of a country, regardless of
citizenship

2. Gross National Product (GNP) is the total value

of all income (= value of final output) received to
residents of a country, regardless of the sources
of that income earned by citizens living inside
and abroad.

211
 IDENTIFY GDP & GNP
1. The total income earned by an Ethiopian
national working in USA
IT is the GDP of----------
It is the GNP -------------
2. Income earned by an Indian citizen working in
Ethiopia.
GDP:
GNP:
212
GNP per capita = GNP
total population

GDP per capita = GDP

total population

% change GNI per capita = % (total GNI/total population)

= % total GNI > %  population = for an economy to grow
Per capita GNP/GDP: is the per-head value of final
goods
and services produced by permanent residents of a
country in a given period of time. It is converted to
USD using the current exchange rate.
• Caution: this is simply an identity, no causal relation
– not correct to infer from this equation that slow population
growth causes a faster rate of growth of income per person or
that rapid population growth causes slower growth in income per
person.

213
GDP (gross domestic product) vs. GNP (gross
national product) – common measures of the
output of an economy:
• • GDP is defined as the sum of the value of finished goods and
services produced by a society in a given year
• note that the definition of GDP excludes intermediate goods (for
example, the steel used to produce a car is not included by itself in
GDP because it will be counted as part of the car)
• GDP considers all output produced within the borders of a country,
regardless of the citizenship of the producers
• GNP is similar to GDP but counts only the income of the citizens of
the country – thus, GNP does not include the income of foreign
citizens within the country but does include the income of its
citizens working outside the country
• although GDP is more commonly used to refer to the value of what
is produced while GNP is often refers to the value of what is
earned, we will use them interchangeably

214
Total nominal GDP = in PiQi
n :the no. goods and services produced;
P the price of each good (current market price)
Q the quantity of each good
Real GDP at base year’s prices
2008 GDP at 1992 prices = i1n Pi,1992 Qi,2008; i.e (the price of 1992 * the
total quantity of 2008)

Alternatively:
Real GDP = nominal GDP / GDP deflator
total nominal GDP in 2008 = US$3,337 million,
the price index for 2008 (deflator)= 331.7% ==3.317
1992, the base year deflator = 100
Then 2008 total GDP x 100 = US$3,337 million x 100
2008 Price Index 331.7
Or US$3,337 million /3.317 = US$1,006 million

215
• This implies 1 USD in 1992, due to inflation
becomes 3.317 USD in 2008
• That is 1 USD in 1992 = mean 3.317 USD in
2008
• What happened to the purchasing power of
money? Increased or decreased?
• To buy X item in 1992 you were needed only 1
USD , but for the same commodity, in 2008 you
need 3.317 USD.
216
Example 2. In a country GDP has increased
due to inflation (or rise in prices) from
1049.2 thousand dollars in 1993 to 1426.7
thousand dollars in 2000. Considering
1993 as base year, what is the GDP
deflator of this country? Interpret your
answer.
 Interpretation: The rate of deflation/the
average increase of price of goods and
services in the country was about 135.9%
Or 1.359=1.4

218
 GDP does not include:
• Intermediate goods which are sold from
one firm to another for immediate
transformation into other goods.
• financial transactions like buying stocks.
• purchases of used goods which have been
sold before.
• goods produced overseas by domestic
firms.
 Three Methods for Calculating GDP
1. Production Method - The value added created
in all the sectors of the economy.
2. Expenditure Method - The sum of the
domestic spending on final goods (less/minus
domestic demand satisfied by imports).
3. Income Method – a method of calculating GDP
by adding together all incomes in the economy
• The Wage, Rent, Interest and Profit Income
generated by the domestic economy.
 1. Income Method
• Survey domestic residents and calculate their
wage, income, interest income, rental income
plus the income of proprietors/owners of
small firms plus the profits & depreciation of
the corporate sector.
– Subtract net international income flows.
 Income Method, Japan 2003

(1) Generation of Income Account

Calendar Year
(Billion Yen)

Items 2003

Compensation of employees ,payable 265,484.8 53.70%

(1) Wages and salaries 223,445.0 45.20%
(2) Employers' social contributions 42,039.8 8.50%
Taxes on production (less) Subsidies 36,562.4 7.40%
Proprieters Income 19,884.5 4.02%
Corporate Profits and Interest Payments 71,160.3 14.39%
Depreciation 101,301.0 20.49%
(regrouped) Value added ,gross/gross domestic product 494,393.0 100.00%
 2. Expenditure Method
C Consumption Consumer durables, non-
+ durables, services
I Investment Structures (incl. Residential),
+ Equipment, and Inventory
G Government Government Spending on
+ Consumption Goods, Services, and Salaries.
X EXports Goods & Services Shipped
+ Abroad
IM IMports Goods & Services from Abroad
_
= GDP (C + I + G) + (X – IM)
• GDP found using this approach is the sum of
purchases in the product markets
• There are two types of excluded purchases:
financial exchanges and second-hand
purchases
• These are excluded because they are not
related to current production
 3. Production Method
• Value Added: the extra worth of product at each stage in its
production
• At the plant level, Value added =
Sales + Change in inventories - materials, intermediate inputs and
energy costs.
Change in inventories(or stocks) are defined as the difference
between additions to and withdrawals from inventories
• GDP is the sum of VA across establishments.
• The value of a final good is equal to the value added at each stage of
production.
• In order to prevent double counting, the concept of value added is
applied to the GDP
• Increases in business inventories are counted
in the calculation of GDP so that new goods
that are produced but go unsold are still
counted in the year in which they are
produced.
• More generally, transfers (or transformations)
of wealth do not count in the calculation
of GDP

theories and indicatirs of development 226

 Rate of economic growth
• GDP Growth rate = Y2-Y1 * 100
NY1
Where:Y1= year one;
Y2 =year two; and
N is the number of years between Y1 & Y2.

227
 Example
• An economy was having a total GDP of 150
billion. Five years after the economy has grown
to 200 billion. What is the average annual rate of
growth of the economy?
• Assuming the rate remains unchanged, when will
this economy reach to 400 billion(double)?

228
 Discussion
• If an economy is closed what would happen to
the level of GDP & GNP? Do they remain equal
or vary?
1.If closed, no interaction
2.Interaction with the rest of the world(ROW)

229
• If an economy were closed, GNP = GDP.
• when capital & labor flows across borders,
GNP & GDP diverge from one another.
– profits
– dividends
– interest payments
– worker remittances
• net income from the rest of the
world=income flows into the country from
the ROW – income leakages from the
country to the ROW
• If inflows > outflows, then GNP > GDP
• If inflows < outflows, then GDP > GNP
230
 Problems of GDP/GNP
• Reliability of data?
– How accurate is the data that is collected?
• Distribution of income?
– How is the income distributed – does a small proportion of the population
earn a high percentage of the income or is income more evenly spread?
• Quality of life?
– Can changes in economic growth measure changes in the quality of life?
– Does additional earnings power bring with it additional stress, increases in
working hours, increased health and family problems?
• Impact of exchange rate?
– Difference in exchange rates can distort the comparisons – need to
express in one currency, but which one and at what value?

231
• Black/informal economy?
• Some economic activity not recorded –
subsistence farming and barter activity, for
example Some economic activity is carried out
illegally – building work ‘cash in hand’, drug
dealing, etc.
• Work of the non-paid may not be considered
but may contribute to welfare – charity work,
housework, etc.

232
value of home or non-market production
– Non-market activities left out:
• Home-baked cake vs. market bought cake
• Kindergarten care vs. home care
• Cleaning lady vs. self-cleaning
– Mostly women’s work –invisible work
– Yet very important
• Women’s unpaid activities estimated around 50% of global GDP
• they account for an important share of a population’s
consumption contributing to higher life standards.
• After all isn’t this what development is all about? Higher life
standards.

233
• Considering for environmental destruction:
• A number of productive activities that distract from quality of life,
– production of military weapons
– operations that cause environmental destruction of forests,
– production processes that
• emit toxic wastes into the air and water and then force society to
pay for their clean-up or
• which create health problems requiring remediation
These are still counted as positive contributions to the measured
level of GNP and GDP.
• Rather than adding to welfare, actually these are negative
externalities of the production process.

234
 Ethiopian economic profile
Ethiopia/GNI per capita :1,890 PPP dollars (2017)
• GDP per capita : 767.56 USD (2017)
• Gross domestic product : 80.56 billion USD(2017)
• Population :81.19 million (2009)

235
 HDI
• HDI – A socio-economic measure
• Focus on three dimensions of human welfare:
• Longevity – Life expectancy
• Knowledge – Access to education, literacy
rates
• Standard of living – GDP per capita:
Purchasing Power Parity (PPP)

236
237
238
 HD Indices
• The HDI (Human Development Index)
- a summary measure of human development

• The GDI (Gender-related Development Index)

- the HDI adjusted for gender inequality

• The GEM (Gender Empowerment Measure)

- Measures gender equality in economic and political participation and
decision making

• The HPI (Human Poverty Index)

- Captures the level of human poverty

239
Why the Human Development Index?
• It does not rely solely on income/wealth, it
gives an indicator of quality of life by including
health and education.
• By including education, for example, it gives an
indication of the country’s future development
potential. It reveals how a country uses its
wealth. For example, if a country has a high
GNP, but spends little on education, it will have
a low HDI.

240
 HDI = 1/3 L + 1/3 E + 1/3 Y
E = Educational attainment
L = Life Expectancy /longevity
I = Income/GDP/capita
xi = E, L, I

xi = actual value of xi – minimum value of xi

maximum value of xi – minimum value of xi

E = 2/3 adult literacy rate (A) + 1/3 combined enrollment ratio (C)
Example:
max E = 100%; min E = 0%;
min L= 25 yrs; max L = 85 yrs
Max I=40000; min I 100
I= log (GDP per capita) – log (100)
log (40,000) – log (100)

241
 EXAMPLE

Indicators Maximum Minimum Actual

1. Education
-Adult literacy 100 0 0.85
-Combined enrolment 100 0 0.69

2. GDP/Capita 40000 100 3680

3. Life expectancy 85 25 73

242
 HDI Calculation example
L = 73 – 25 = 0.807
85 – 25
(Education) Adult = 85.3 – 0 = 0.853, A max=100; actual=85.3
100 – 0
C = 69 – 0 = 0.690
100-0
E = 2/3(0.853) + 1/3 (0.690) = 0.798

I = log(3680) – log(100) = 0.602

log(40,000) – log (100)

HDI = 1/3 L + 1/3 E + 1/3 Y = L + E + I

3
= 1/3 (0.807) + 1/3 (0.798) + 1/3 (0.602)
= 0.735

243
COMPARISON
• The HDI is an index just as crude as GDP but it
stands for better things like health and education
• HDI aggregates health, education and income
• GDP:HDI: commodity-centred vs human-
centred
• Indicators need to be: relevant, internationally
comparable, available for many countries
• HDI--Neglected dimensions: gender, equity,
sustainability

244
• It puts emphasis again on economics , rather
than spiritual and moral development-
happiness- should suicide rates be used?
• It doesn’t include ecological concerns or the
quality of the living environment.

245
 HDI World
HDI Africa
• The top five countries based on 2013 HDI were:
1) Norway
2) Australia
3) United States
4) Netherlands
5) Germany
• The category of “Very High Human Development" includes places like
Bahrain, Israel, Estonia and Poland.
• There is a category called "Medium Human Development" which includes
Jordan, Honduras, and South Africa.
• Countries with “Low Human Development” include Togo, Malawi and
Benin.

246
 Adjustments to the HDI-Inequality
adjusted HD
• The gender-related development index: GDI
– takes into account the differences between
women and men on the values of the indicators
that enter the HDI.
• The human poverty index: HPI
– corrects for another weakness of HDI in that it
does not show what’s happening to the poorest
members of society.
– slightly different variables in the index – e.g. % of
people not using improved water sources; % of
children under five who are underweight, etc.

247
 Differences
• As HDI/GDI measures average achievement,
the HPI measures deprivations
• HDI and GDI focus on national
averages
• HPI focuses on the worst off
(deprivational aspect)

248
 Economic Growth and Equity:
Are they at odds or are they
•
complimentary?
If a country places emphasis on factors such as education, equity,
health, will this adversely affect growth?
• Or, if a country places emphasis on growth, how will that affect
equity?
• Kuznets, 1955:
– explores historical relation between per capita income and
income distribution for a number of countries.
– Finds an inverted U-shape; an empirically derived statistical
relationship.
– at low income levels economic growth and rising average
income tended to create more income inequality
– After a threshold level of income further economic growth and
even higher average income tended to reduce a nation’s overall
income inequality

249
 Kuznets‘ Curve

0.6
Gini Coefficient

0.5
0.4
0.3
0.2
0.1
0
0 500 1000 1500 2000 2500
Income per capita

250
Inequality might initially increase because:
• • industry pays a wage premium to workers hired away
from agriculture, and industry will hire more and more
of these workers
• • the growing capitalist class that owns industry might
take part of the industrial profit as income, instead of
investing it back into industry
following this rise, inequality might decrease because:
• • as still more workers are drawn into industry, the
wages in industry and agriculture eventually equalize
• • the monopoly power of the initial industrialists
decreases as industry becomes more competitive
• • human capital becomes more prevalent and becomes
distributed over a greater proportion of the population
251
Inequality and growth: lower inequality is
correlated with faster growth this may be due
to:
1) political stability – there is less demand for
harmful interventionist actions by the
government
2) a better distribution of education and a wider
distribution of skills

252
Physical Quality of Life (PQLI):
• PQLI was developed by Morris
• PQLI considers life expectancy, infant
mortality, and literacy (two health measures
and one education measure)
• What is its difference with HDI?

253
 Social specific indicators
• Life Expectancy - is the average lifespan of someone
born in that country. The higher the life expectancy the
more developed the country.
• Birth Rate - Measures the number of babies born per
thousand people per year. The higher this is, the less
developed a country is supposed to be..
• Death rate: This is number of people who die per
thousand people per year. It will be a clear indicator of
the level of health care, quality of water, sanitation,
accommodation, and food supply.
• Adult Literacy - Is the percentage of the adult
population able to read and write.
• Infant Mortality - Measures the number of children
who die before they reach the age of one for every
thousand live births per year.

254
 Human suffering index
The country is ranked from 0 to 10 for each of the following indicators (0 is
very good, 10 very bad):

1. Life expectancy
2. Daily calorie supply/lack
3. Access to clean water
4. Per capital income
5. Civil rights
6. Political freedom
7. Inflation
8. Communications system
9. Percentage in secondary school
10.Immunisation of infants
The countries scores are totalled and then ranked accordingly. The worst a
country could have is 100, the best 0.
• Using this score the worst countries would be Mozambique, Somalia and
Afghanistan whilst the best would be Denmark, The Netherlands and
Belgium.
255
 Happy Planet Index
• Is an index of human well-being and environmental
impact that was introduced by the New Economics
Foundation (NEF) in July 2006.
• The index is designed to challenge well-established
indices of countries’ development, such as GDP and the
(HDI), which are seen as not taking sustainability into
account.
• In particular, GDP is seen as inappropriate, as the usual
ultimate aim of most people is not to be rich, but to be
happy and healthy.
• To what extent citizens are happy in their life?
256
theories and indicatirs of development 257
The quaternary sector consists of
those industries providing information services,
such as computing, ICT (information and
communication technologies), consultancy (offering
advice to businesses) and R&D (research,
particularly in scientific fields).
Quinary activities
Often referred to as 'gold collar' professions, they
represent another subdivision of the
tertiary sector representing special and highly paid
skills of senior business executives, government
officials, research scientists, financial and legal
consultants, et theories and indicatirs of development 258
 CHAPTER FOUR
DEVELOPMENTAL STATE
 Developmental state
• Mostly bred by experiences of Japan and
newly industralized economy’s from 1960s to
1980s
– choice of efficient, coherent, and flexible
economic policies
– effective implementation
 Developmental state
• places top priority on economic development
– growth, productivity, and competitiveness
• actively intervene in market
– guide, discipline, and coordinate private sector
– strategic allocation of resources
– use of diverse policy instruments
• rational and competent bureaucrats
– Insulated/protected from political pressures
 Paradigm
• Departure from traditional neoclassical
development strategies
– government intervene only to correct market
failure
– “Washington consensus” of US Treasury, IMF, and
World Bank
– free market, free trade, free capital mobility, and
limited government
 Paradigm
• Deviation from “dependence” school of
thought
– integration into the international capitalist
division of labor
– developing economies at the periphery depend on
developed economies at the core
– developing economies are denied the opportunity
for self-sustained growth
 Problematic premises
• Insulated bureaucrats make rational policies
– often not insulated: under political pressures
– often not rational: politicized
• Efficient, coherent, and consistent policies
• State policies determine economic
performance and outcomes
– supply-side factors, demand-side conditions,
corporate structure and strategy, luck, etc.
 Case study 1
• Hong Kong and Singapore
– both are entry ports to mainland
– both are former British colonies
– both are mostly ethnic Chinese societies
• Profoundly different development strategies
• But, both invested heavily in human capital
and public spending to enhance international
competitiveness
 Case study 2
• Hong Kong and the Philippines
– both are “weak” states
– difference in economic performance
• A weak state
– doesn’t necessarily lead to free market
– can be dominated by powerful economic interests
– creates opportunities for powerful economic
groups to manipulate and distort economy
 Dependency theory
• International capitalist economy
– exploit weak third-world countries at the
periphery
– perpetuate poor nations’ dependence on rich
nations at the core
• Multinational corporations and foreign capital
play significant role in the economies of Hong
Kong and the Philippines, with different
consequences
 Case study 3
• South Korea and India
• both states are strongly committed to
promoting economic growth
• both states had significant intervention in the
industrialization
– India was one of the first states in the developing
world to produce a detailed development plan
(1952)
 Restriction on foreign capital
• South Korea and India
• both states restrict multinational corporations
and foreign capital
• different economic outcomes
– protection of domestic industries
– build up efficiency of domestic firms
– increase competitiveness of domestic firms
 Different strategies
• Import-substituting industrialization
– tariff and non-tariff barriers to protect domestic
industries
• Export-oriented industrialization
– selective protection and free trade regime
• State intervention in financial and labor
market
• State-owned enterprises
 Case study 4
• Firm size & competitive strategy
• Hong Kong and Taiwan
– small and medium enterprises
• China’s mainland
– township and village enterprises
• South Korea and Japan
– large integrated conglomerates
Strong states, weak states
theories and indicatirs of development 273
 Poverty and inequality
• What is poverty? Condition where people's basic
needs for food, clothing, and shelter are not being
met.
• Poverty is generally of two types:
• (1) Absolute poverty: destitution occurs when people
cannot obtain adequate resources (measured in
terms of calories or nutrition) to support a minimum
level of physical health.

274
• (2) Relative poverty : the condition in which
people lack the minimum amount of income
needed in order to maintain the average standard
of living in the society in which they live.
• The relative position of some economic unit (e.g.
individual, household, racial group) compared to
another economic unit. A person can be relatively
poor but not absolutely poor
• Relative poverty is considered the easiest way to
measure the level of poverty in an individual
country.

275
• E.g. Economic growth will generally result in
a reduction of absolute poverty but will only
change relative poverty if there is a change in
distribution of income.

276
Absolute Poverty Lines

Poverty line measures signal to researchers where poverty is and becomes the
first place to start in analyzing poverty in a certain country, within a certain
economic group etc…..

Examples of Poverty Lines:

(1) $1 a day and $2 a day lines that the World Bank and United Nations
Development Programme (UNDP) use.

(2) Calories per capita or per household

Both measures are absolute in that people can be lifted out of poverty if they can
increase income or calories and poverty can be eradicated.
Relative Poverty Lines

Calculate a poverty line that is based on the income level of

the population. Relative poverty cannot be eradicated unless
income inequality is addressed.

(1)Standard percentage of people earnings below 50% of the

median or mean wage: can vary the 50% figure down to 10%
or 25%.

Note: If income increases for all then relative poverty will

still be apparent since you will always have some who fall
below 50% of the new (higher) median income level.
Who are the Poor?

The poor of any country share similar characteristics.

In developing countries the poor tend to be Black, female, young,

rural, unskilled and perhaps semi-skilled (this is determined by the
nature of economic growth, trade liberalization policy, subsidies
etc…).

The factors that determine who is poor include socio-economic

institutions, e.g. Indian caste system, apartheid, racism (still in
Malaysia).
What Determines Poverty?

Research indicates that the quality and quantity of education, urban-rural

location, racial group, gender, health and employment status all impact on
whether somebody is poor or not.

Other factors include socio-economic factors, the historical legacy of a

country, social customs, property rights, economic dependence, political
system/affiliations etc. This is where much debate lies.

There is a large, positive correlation between unemployment and poverty.

However the direction of causality is not straightforward.

 Poverty of what?
Look directly at material deprivation
Will form part of Government’s child
poverty target
Is it a good proxy for overall living
standards?
Living standards – income or consumption?
Permanent income against transitory income
Consumption better in principle
But… income data is more readily available

theories and indicatirs of development 281

 Main causes of poverty

• Lack of good governance

• Population growth/distribution
• Poor planning
• Debt.
• Corruption.
• Extreme weather.
• Lack of access to education.
• Epidemic diseases.
theories and indicatirs of development 282
theories and indicatirs of development 283
theories and indicatirs of development 284
 Who is North and Who is South?
• North = World’s Rich
• South = World’s poor, or developing nations,
or emerging markets (more complicated)
– Used to be called the Third World
– We can no longer lump together the countries of
the “south”
– Some are growing and “emerging” and some are
not.

theories and indicatirs of development 285

 Inequality (Economic)
• Definition: disparity in income level; living
standards; access to opportunity among
individuals, groups, regions
• Income gap in the world generally is increasing
over time

theories and indicatirs of development 286

 How to measure inequality
• There are two models for measuring income
inequality among people
1.Lorenz curve
2.Gini coefficient
3.Quintiles and deciles
4.Coefficient of variation

theories and indicatirs of development 287

theories and indicatirs of development 288
theories and indicatirs of development 289
theories and indicatirs of development 290
1. Which country is more equal?
2. High level of Inequality
3. Rank them based on level of equality

theories and indicatirs of development 291

theories and indicatirs of development 292
Gini coefficient

theories and indicatirs of development 293

Development and Income Inequality
Kuznet’s Curve

theories and indicatirs of development 294

 The good news
• Economic growth and Improvement in human
welfare
• But increasing inequality between the rich and
the poor---BAD NEWS

theories and indicatirs of development 295

 The Bad News: From Local to
Global Inequality
• The Pre-modern world: inequality within
societies
• Today: inequality between societies
• What determines whether you will be rich or
poor?
• Where is the “class struggle” now?

theories and indicatirs of development 296

 Who consumes the most?
Global consumption in 2004
in billion USD

theories and indicatirs of development 297

 CHAPTER FIVE
SOCIAL DEVELOPMENT
• Generally, the term ‘development’ is used and
understood in terms of economic development.
• But it is more than purely economic and physical.
It is directly related with satisfaction which may
have little or nothing to do with objective
statistical measures, such as GNP, GDP or per
capita income.

theories and indicatirs of development 298

• Economic development with no concern for
social development is dubbed as ‘development
without human face’.
Definition፡ ‘Social development is the process of
planned institutional change to bring about
better adjustment between human needs and
aspirations on the one hand and social policies
and programmes on the other’ (Ahuja, 1993).

theories and indicatirs of development 299

• Social development encompasses a wide
range of issues—social and economic equality,
universal education, health and food security,
provision of housing and sanitation
conditions, safeguarding environment,
upliftment of weaker section of society,
redistribution of wealth, moral development,
etc. All these may be regarded as indicators of
social development.
theories and indicatirs of development 300
• Development cannot be understood in
isolation. It is part of a more general process
of social transformation. At no point in that
process we are simply concerned with the
attainment of economic goals or the creation
of a new economic system.
• That when there is Development, there is
change in social life, ways of life, standard of
living, ways of interaction, health, education
etc
theories and indicatirs of development 301
•  Social transformation: is the process by
which an individual alters the socially
ascribed social status of their parents into a
socially achieved status for themselves.
• However another definition refers to large
scale social change as in cultural reforms
or transformations.
• Social transformation in this context requires
a shift in collective consciousness of a society
- local, state, national or global - so that
reality is refined by consensus.

theories and indicatirs of development 302

• As a sociological term is defined as,
alterations in basic structures of a social
group or society

• Changes attitudes, behaviors, laws, policies

and institutions to better reflect the values
of inclusion, fairness, diversity and
opportunity.

theories and indicatirs of development 303

 Why do we need Social Transformation/ Change?

Most African communities are plague by the following social

concerns:

(i) Poverty:
Example: Research conducted on Poverty and Inequality in South
Africa 2004 – 2014, J P Landman has found that 46% of South
Africans live in poverty meaning an estimated 20,5 million in the
year 2000

(ii) Unemployment:
• Rate of unemployment in South Africa: 24%
Almost 100 000 people lost their jobs in 2009 due to recession
 Why do we need Social Transformation / Change?

(iii) Diseases such as HIV and AIDS:

(iv) Incidence of Crime:Growing prison population:

(vi) Spiritual and Moral decay:
• The goals and priorities, and the phasing of
economic development, are deeply affected
by overall social transformation requirement.
• An important aspect of development is that it
is concerned with improving the overall
welfare of human beings. It includes more
than just increased production/productivity; it
includes the resulting rise in the ability of
people to consume the things they need to
improve their level of living.

theories and indicatirs of development 306

Social development entails changes in
everything and achieve the following:

• 1. Elimination of poverty.
• 2. High literacy rate.
• 3. Social justice—equal distribution of
opportunities, gender equity.
• 4. Improvement in social welfare amenities.
• 5. A safe environment.
• 6. Opportunity for personal growth.

theories and indicatirs of development

• 7. Protection and improvement of health—
security in old age.
• 8. Upliftment of weaker sections of the society.
• 9. Providing security against various contingencies
(UNFORESEEN) of life.
• 10. Enrichment and access to goods and services
beyond the absolute minimum to sustain life.
• 11. High expectation of life at birth and low
fertility.
• 12. Increase in level of employment—low
proportion of labour engaged in agriculture.
theories and indicatirs of development 308
According to Ram Ahuja (1993), social
development involves four things:
• (i) assessing the needs of the people;
• (ii) introducing some structural changes in
society such as discarding some old institutions
and creating some new institu­tions, or changing
some existing institutions;
• (iii) making institutions responsible to people;
and
• (iv) associating people with decision-making.

theories and indicatirs of development 309

• S.C. Dube (1988) argued that ‘development that
makes no visible changes in the degraded
lot/group of common man—the majority in the
country’s population—is no development.
• Thus, the above and similar non-economic
criteria constitute the main basis of
development. The achievements of
development must also be seen in terms of
individual and collective well-being.

theories and indicatirs of development 310

• Some of the major indicators of social
development are as follows:
• 1. Social Aspects 2. Cultural Aspects 3. Political
Aspects!
1. Social Aspects:
• 1. The society is more modern and less
traditional.
• 2. The society is more democratic and less
authoritarian.

theories and indicatirs of development 311

• 3. The social status is largely determined by
achievements and not by birth as in the
traditional caste-based society. Social
discrimination, if at all exists, is determined by
acquired attributes of individuals and not by
where they are born.
• 4. The structure of family is no longer
authoritarian and large in size as the traditional
joint family used to be. It is small household,
nuclear type and democratic in nature as the
most urban families seem to be today.

theories and indicatirs of development 312

• 5. There is no religion-based hierarchical division of
society.
• 6. The society is urbanized and the general way of
life of people is urban. Rural-to-urban and urban-to-
urban migra­tions are high in a developing society.
• 7. Social and occupational mobility in society is
unrestricted and fast. For example, the traditional
Indian caste system had relatively restricted social
and occupational mobility. The modern Indian
society is now least caste-bound in its social and
connubial interactions and occupational choice.
However, the Indian society is still largely
endogamous.
theories and indicatirs of development 313
• 8. Various governmental and non-
governmental agencies are developed to carry
out the responsibilities traditionally being
carried out by the family. For example, creche,
old age homes, home delivery of commodities
from the market and the like.

theories and indicatirs of development 314

• 9. The rate of population growth is lower.
• 10. Rates of mortality, including maternal
deaths and infant mortality are also lower.
• 11. Literacy rates – both male and female –
are high.
• 12. Health facilities are expanded and made
available to all – from top to the bottom in the
class structure.

theories and indicatirs of development 315

2. Cultural Aspects:
• 1. Attitude of people in developed societies is
essentially individualistic, materialistic and
profit-oriented. Maximi­zation of
achievements is the goal of people.

theories and indicatirs of development 316

• 2. Primeval sentiments are no longer
dominant in the social behaviour of
individuals. Human behaviour is largely
governed by existing situations. Casteism,
racism, familialism, fundamentalism,
dogmatism and so on are faded and phased
out in the wake of social development. People
become secular and humanist in their value-
orientation.
• 3. Nationalism and pluralism develop along
with social devel­opment.

317
• 4. . The institutions and agencies of human rights
grow.
• 5. The value orientation of a modern person in a
developed society is more individual and family-
centred and not community-centred. What is to
be done or not to be done is determined only by
how much satisfaction the individual derives from
that action.
• 6. Customs and traditions become weak. The rate
of change in the context of social intercourse,
foodstuff, clothes and housing pattern is
accelerated. Food habits undergo change to
become more metropolitan and continental.
theories and indicatirs of development 318
• 7. Religions and the believers exist but
religious practices and rites seem to be on the
wane/diminishes.
• 8. People become more rational and less
superstitious and dogmatic.

319
 3. Political Aspects:
• Democracy is the most acceptable form of
political system in the developed and
developing societies. Except a few countries
like Myanmar, Pakistan, Nepal and Bhutan,
which do not fall in the category of sound
democracies, most of the countries of the
world have democracy of one form or other.

320
• Some characteristics of political development
are:
• 1. Nation and nationhood develop.
• 2. Liberty to every citizen is ensured. People
enjoy freedom of speech, choice of
profession, practice of religion, etc.
• 3. The state is secular. It does not discriminate
one citizen from the other on the basis of
caste, creed, religion and region.
• 4. State seeks to guarantee equality among its
citizens
321
• 5. Consciousness about the human rights and
civil society develops with social development
and maturity of democracy. The state and the
non-governmental organiza­tions (NGOs)
become concerned about these matters and
the welfare of citizens gains paramount
attention.

322
• It can easily be concluded from the above
discussion that human development is not
concerned with economic growth only but
encompasses the whole gamut/range of human
life. The political, cultural and social factors are
given as much importance as the economic
factors.
• Besides, a careful distinction is maintained
between ends and means of development. While
expansion of human options is regarded as the
criteria of development, the expansion of income is
treated as an essential means to it. The entire
process has been made anthropocentric.—human
centered 323
END

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