Meaning and Concepts of Development PDF

Module 1: Meaning and Concepts of Development Charlon Mayo, MA Department of Economics Ateneo de Manila University  Outline ▧ Why do we need to study development economics? ▧ What is Development? ▧ Objectives of Development ▧ Development Taxonomies ▧...

Module 1: Meaning and Concepts of Development Charlon Mayo, MA Department of Economics Ateneo de Manila University  Outline ▧ Why do we need to study development economics? ▧ What is Development? ▧ Objectives of Development ▧ Development Taxonomies ▧ Characteristics of Developing Countries ▧ Development Research Problem ▧ Clinical Economics Approach ▧ Case Study Discussion 2 Why do we need to study development economics? ▧ An example from disaster in Haiti in 2010 and Earthquake in the US (1989 Loma Prieta) and 1906 San Francisco Earthquake ▧ The historical events killed Country Number people: of Deaths Haiti (2010) 200,000 Loma Prieta - US (1989) 63 deaths San Francisco (1906) Thousands 3  Haiti in 2010 ▧ Continuing cost in Haiti: Large destruction of infrastructure, homelessness, lack of food and water, disease spreading, cholera in camps from poor sanitation, and lastly difficulties getting aid. ▧ Why was the earthquake in Haiti so much more devastating than the one in California? 4  Development Economics is an optimistic field ▧ By studying the poor and economies of poor countries, we aim to understand what holding us back? ▧ We study economics development in the hope that by better understanding how development occurs we can make the world a better place ▧ We are in search of Development! 5 What is Development? 6  Three Related Approaches and definition of development economics ▧ Todaro and Smith: Economics of contemporary underdeveloped economies ▧ Study of how the developed countries became developed, and why the rest of the world did not develop ▧ Study of the poor within any country 7  In a nutshell… ▧ 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 8  Objectives of Development ▧ Raising peoples’ living levels, i.e. incomes and consumption, levels of food, medical services, education through relevant growth processes ▧ 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 ▧ Increasing peoples’ freedom to choose by enlarging the range of their choice variables, e.g. varieties of goods and services 9  What about Economic Growth? ▧ One way that economic growth could increase is if there is an expansion in the inputs used to produce it: ○ natural capital ○ human capital ○ social capital ○ financial capital 10 Economic Growth 11  Economic Growth ▧ Quantitative change or expansion in a country’s economy ○ Extensive (Using more resources) ○ Intensive (Efficiency) 12  What accounts for the striking difference in economic growth across countries? ▧ Economies such as the U.S., Europe, and Japan benefitted from many decades of economic growth (with periods of slowdown or recession) ▧ GDP increase due to a combination of factors: ○ aggregate demand ○ labor productivity ○ technological innovation ○ investment in manufactured capital ○ taking advantage of trade opportunities 13 Other aspect of Development 14 “It’s not about the money money money” -Jessie J, 2011) 15  Development and Freedom Source: https://www.theguardian.com/world/2019/mar/29/winston -churchill-policies-contributed-to-1943-bengal-famine- study] 16 Futureless Growth 17 Sustainable Development 18  Development Taxonomies of World Economies UNDP IMF World Bank World Trade Organization Name of Developed Country Deve loped Countries Advanced Countrie s High income countries Developed Countries Emerging and Developed Economies developing Economies in Transition Countries Developing Economies 1. 1) Low-income Others developing Name of Developing Least Developed Countries countrie s High, uppe r-middle, lower-middle, and Country Highly Indebted P oor Countries Developing Countries (2) Emerging and low. Small Island De veloping States other developing La ndlocke d Deve loping Countries Countries Other Classification Economies in Transition Highly Indebted Country Deve loping Economies Development 75 per cen tile in the (unweighted) HDI Membership of the O ECD or th e E uropea n Not explicit US$12,475 G NI per ca pita in 201 1-prices Threshold distribution Union Sha re of Developed 25% Countries (%; as of 17-18% 26% 24% 2011) 19  Characteristics of Developing Countries 1. Levels of income and productivity 2. Human capital attainments 3. Inequality and absolute poverty 4. Population growth and age structure 5. Rural population and rural-to-urban migration 6. Social fractionalisation 7. Level of industrialisation and manufactured exports 8. Geography and natural resource endowments 9. Extent of financial and other markets 10.Quality of institutions and external dependence 20  Characteristics of Developing Countries ▧ Countries like South Korea and Taiwan, now high-income economies, were among the poorest in the world. While some middle-income countries have experienced little growth, others have surged ahead, with China and, more recently, India, being notable examples. ▧ Over the past 25 years, significant improvements in health and education have been observed across most developing nations. However, in comparison with developed countries, some countries are experiencing learning poverty due to incompetent education bureaucracy and poor education policies. 21  Characteristics of Developing Countries ▧ In comparison to developed countries, many developing nations, particularly the least-developed, continue to fall behind in areas such as nutrition, health (measured by life expectancy and rates of undernourishment), and education (measured by literacy rates). ▧ The number of people living on less than $1.90 per day decreased from about 1.9 billion (approximately 42%) in 1981 to roughly 750 million (around 10%) by 2017, even as the global population grew by 3 billion during this time. Despite this progress, nearly 46% of the world's population still lives on less than $5.50 per day. 22  Characteristics of Developing Countries ▧ Key indicator of economic development is the transition from an agriculture-based economy to one focused on manufacturing and services. ▧ In many low- and middle-income countries, a significant portion of the population still resides in rural areas, with fewer people living in urban centers. 23  Characteristics of Developing Countries ▧ Countries with high levels of ethnic, linguistic, and religious diversity are more prone to internal conflict and political instability, especially if there is inequality among these identity groups. ▧ Some of the most successful development stories, like South Korea, have taken place in culturally homogeneous societies. 24  Characteristics of Developing Countries ▧ Developing nations often rely heavily on primary exports. Low-income countries, particularly in Africa, remain especially dependent on a limited range of agricultural and mineral exports. 25  Characteristics of Developing Countries ▧ Geography undoubtedly influences issues related to agriculture, public health, and broader patterns of comparative development. ▧ In developing countries, markets are often imperfect, and information is incomplete, leading to less efficient functioning of domestic markets, particularly in the financial sector. ▧ Moreover, agreements within the World Trade Organization (WTO) and its predecessors, particularly those concerning agricultural subsidies in wealthy nations and the imbalanced regulation of intellectual property rights, have frequently disadvantaged developing countries. 26 How to be a Clinical Economist? 27  Framing of Development Research Problem ▧ If all these top-ranked economists have seen their ideas implemented, shouldn't global poverty have been eradicated by now? Yet, the world remains full of impoverished people, and underdevelopment continues to be one of the most persistent challenges in the global economy. ▧ Reasons: Cyclical Nature of Research in Development, Systematically Failed Research Question, and Disastrous Policies 28 Three Important Elements of Clinical Economics ▧ Identification of Constraints ▧ Importance of Context ▧ Sequential Implementation 29 Diagnostician 30  Diagnostician ▧ Rather than being categorical advocates of specific development approaches, it’s crucial to act as diagnosticians that can help to find the right model. ▧ Growth diagnostics emphasize that not all constraints are equally binding, and a practical strategy involves pinpointing the most significant constraints at work ▧ An experimental approach advocates for an adaptive economy, like China's, which has successfully grafted a market system onto a heavily regulated state sector. This dual nature has proven to be a source of strength rather than weakness 31  Lessons from Diagnostician ▧ China's policy reform process involved diagnosing the nature of binding constraints and identifying potential remedies in an innovative, experimental manner, with few preconceptions about what would work best. ▧ The complementary roles of diagnostics and randomized field experiments are vital in demonstrating the effectiveness of interventions. 32  Case Study ▧ Case Study 1: Why some Countries remain Poor? (Sachs, 2015) ▧ Case Study 2: Poor Quality of Economic Growth in the Philippines 33 Case Study 1: Why some Countries remain Poor? (Sachs, 2015) 34  Why some countries are developed, and others stayed poor? ▧ Poverty Trap ▧ Physical Geography ▧ Culture (Demography, Education, and Gender) ▧ Government (Poor policies) 35  Poverty Trap ▧ A mechanism or cycle that cause and persist poverty across generations due to lack of capital to climb the economic ladder of social classes. 36  Why some countries are developed, and others stayed poor? ▧ Poverty Trap ▧ Physical Geography ▧ Culture (Demography, Education, and Gender) ▧ Government (Poor policies) 37  Physical Geography ▧ Economic development has strong correlation with Geography. ▧ Factors such as “Landlocked”, Water- Stressed, Heavy Disease burden, Natural Hazards, and Lack of Fossil Fuels heavily impacted the development of developing countries. 38  Landlocked ▧ Landlocked Countries ▧ Developed countries territory that doesn’t like in Western Europe have territory and United Kingdom connected to an ocean are very close to ports or coastline. and have low cost ▧ Maritime trading transport condition. system plays a key in the economic development 39 Landlocked Countries are poorer than Coastal Areas (UK vs Sub- Saharan Africa 40  Vulnerability to Natural Hazards ▧ Countries situated along the Pacific Ring of Fire are highly vulnerable to disasters. ▧ Climate change has significantly impacted economic activity by intensifying droughts and floods, which, in turn, reduce agricultural yields." 41  Water and Sanitation Services ▧ Access to water is crucial for achieving economic development. ▧ Countries with high rates of diarrheal disease often struggle with poor economic growth, highlighting the strong link between health and economic progress 42  Fossil Fuels ▧ Coal reserves continue to be a critical component of economic development. ▧ However, Sachs (2005) notes that some countries have suffered from the 'resource curse,' often due to the legacy of colonialism and corruption among public officials, as seen in cases like Afghanistan’s natural resources and Nigeria's state-owned oil company." 43 44  Climate-induced Disease ▧ Sachs (2005) highlighted that ecological condition of African countries, making them vulnerable to diseases ▧ Significant difference of malaria based on climate ▧ This is the result of specific mosquito specific that thrive in a humid condition. 45  Why some countries are developed, and others stayed poor? ▧ Poverty Trap ▧ Physical Geography ▧ Culture (Demography, Education, and Gender) ▧ Government (Poor policies) 46  Culture ▧ Demography ▧ Education ▧ Gender 47  Demography ▧ High Fertility affects economic development, as countries with larger population have difficulty in providing basic needs of their children ▧ Concepts: Population Pyramid, Demographic Transition Theory, and Dependency Ratio, etc., 48 49  Balisacan, 2007) ▧ Lagging performance of the Philippines in poverty reduction can be attributed to its failure to sustain an income growth higher than its population growth ▧ Balisacan (2007) attributed the poor performance in terms of poverty and economic growth to significant disparities and unequal access to infrastructure and social services across regions (e.g. BARMM and NCR) 50  Education ▧ Society’s attitude towards education affect the transition of one country to a more developed country (e.g. South Korea) ▧ Concepts: Poor Quality of Education, Job Mismatch (Under-employment), Teacher and Student Ratio (160-200 students; 1 professor), and Unequal Access to Education (Digital divide) 51 Education (South Korea) 52  Women Empowerment ▧ Improvement of Male: Female Ratio for Public Office and Education 53 Women Empowerment 54 Female Leaders during the Covid- 19 Pandemic 55 “Who run the world?! Girls” - Beyonce, 2011 56 “Who run the world? Boys” 57  Why some countries are developed, and others stayed poor? ▧ Poverty Trap ▧ Physical Geography ▧ Culture (Demography, Education, and Gender) ▧ Government (Poor policies) 58  Role of Government Institution ▧ Infrastructure and Human Capital Development (“social and invisible infrastructure”) ▧ Effective and Fair Regulation to avoid Financial Crisis (e.g. Fiscal Insolvency and Deregulation) ▧ Resiliency of Government Institution to Corruption and Injustices ▧ Social Assistance Program (Intergenerational Mobility) 59 60  Conclusion ▧ Geography doesn’t prevent development, but it determines the amount and type of investments needed to overcome geographical obstacle. ▧ Demography, culture, and institutions can affect the trajectory (acceleration/deceleration) of economic development. 61  Case Study 2: Poor (Quality) Economic Growth in the Philippines 62  Economic Growth ▧ According to the Human Development Report (1996), Growth can also be jobless, ruthless, voiceless, rootless, and futureless. ▧ Economic Growth is a means to an end, but not an end in itself. 63 GDP Growth (Pre-Pandemic) Source: Punongbayan, 2019 64 GDP Growth (Pandemic) Source: S&P 65 Global Jobless Growth (Where, Where, Where?) Source: Punongbayan, 2019 66 Jobless Growth (Where, Where, Where?) 67 Labor Market Outlook (PSA, 2024) 68  Rootless Growth ▧ Ibon Foundation estimated that 6,000 Households, including the Dumagat and Remontado indigenous people will be displaced by the construction of Kaliwa Dam. 69  Rootless Growth ▧ According to Bulatlat (2019), 20,000 Dumagat and Remontado will be uprooted from their homes, affecting their culture and tradition. 70 Rootless Growth 71 Voiceless Growth (Buan, 2020 and Dulce 2020) ▧ World’s deadliest country for land and environmental defenders for the first time in this time period, with 157 defenders murdered. (Bulatlat, 2020) 72  Futureless Growth (Dulce, 2020) ▧ Climate vulnerability brought about by climate-related disasters (increase from 2.8 billion to 3.1 billion) ▧ One of the countries with the most air- pollution related deaths. ▧ Lost an estimated P990.3 billion worth of our sovereign natural resources 73  Policy Recommendations ▧ Improvement of economic and institutional conditions (e.g. per capita income, initial human capital stock, ethno-linguistic fragmentation, literacy rate, access to infrastructure, and agrarian reform program implementation) ▧ Use of Clinical Economics to contextualize the problem and solution 74  References ▧ Balisacan, A. (2007). Why does Poverty Persist in the Philippines? Facts, Fancies and Policies. ▧ Buan, L. (2020). In alarming rise of PH lawyer killings, what is being done?. Retrieved from https://www.rappler.com/nation/what-is-being-done-rise-of-lawyer-killings-philippines ▧ Dulce L. (2020). The Duterte era: A state of nature under attack Retrieved from https://www.bulatlat.com/2020/07/25/the-duterte-era-a-state-of-nature-under-attack/ ▧ Images from Google ▧ Punongbayan, JC. (2019). The poor quality of economic growth under Duterte. Retrieved from https://www.rappler.com/voices/thought- leaders/analysis-poor-quality-economic-growth-under-duterte ▧ Rodrik, D. (2010). Diagnostics before prescription. Journal of Economic Perspectives, 24(3), 33-44. ▧ Sachs, J. (2015) The Age of Sustainable Development. ▧ Todaro, M. and Smith, S.(2015). Economic Development. Pearson Education Ltd. Twelve Edition. 75