CBM 122 - Economic Development - University of Mindanao Tagum College - PDF

UNIVERSITY OF MINDANAO Tagum College Department of Accounting Education Accountancy Program Physically Distanced but Academically Engaged Self-Instructional Manual (SIM) for Self-Directed Learning (SDL)...

UNIVERSITY OF MINDANAO Tagum College Department of Accounting Education Accountancy Program Physically Distanced but Academically Engaged Self-Instructional Manual (SIM) for Self-Directed Learning (SDL) Course/Subject: CBM 122 – Economic Development Name of Teacher: Rex Lord V. Ranalan THIS SIM/SDL MANUAL IS A DRAFT VERSION ONLY; NOT FOR REPRODUCTION AND DISTRIBUTION OUTSIDE OF ITS INTENDED USE. THIS IS INTENDED ONLY FOR THE USE OF THE STUDENTS WHO ARE OFFICIALLY ENROLLED IN THE COURSE/SUBJECT. EXPECT REVISIONS OF THE MANUAL.  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 Table of Contents Page Part 1. Course Outline and Policies............................................................ 4 Part 2. Instruction Delivery CC’s Voice............................................................................…….. 7 Course Outcomes............................................................................…….. 7 Big Picture A: Unit Learning Outcomes............................................. 8 Big Picture in Focus:ULOa ……………………………………………… 8 Metalanguage.......................................................................... 8 Essential Knowledge............................................................... 9 Self-Help.................................................................................... 14 Let’s Check.................................................................................... 15 Let’s Analyze......................................................................... 15 In a Nutshell.................................................................................... 16 Q&A List.................................................................................... 17 Keywords Index......................................................................... 17 Big Picture in Focus:ULOb …………………………………………….. 18 Metalanguage.......................................................................... 18 Essential Knowledge............................................................... 19 Self-Help.................................................................................... 29 Let’s Check.................................................................................... 30 Let’s Analyze......................................................................... 31 In a Nutshell.................................................................................... 32 Q&A List.................................................................................... 33 Keywords Index......................................................................... 33 Big Picture in Focus:ULOc …………………………………………….. 34 Metalanguage.......................................................................... 34 Essential Knowledge............................................................... 34 Self-Help.................................................................................... 39 Let’s Check.................................................................................... 39 Let’s Analyze......................................................................... 40 In a Nutshell.................................................................................... 43 Q&A List.................................................................................... 44 Keywords Index......................................................................... 44 Big Picture B: Unit Learning Outcomes............................................. 45 Big Picture in Focus:ULOa ……………………………………………… 45 Metalanguage.......................................................................... 45 Essential Knowledge............................................................... 45 Self-Help.................................................................................... 49 Let’s Check.................................................................................... 49 Let’s Analyze......................................................................... 50 In a Nutshell.................................................................................... 50 Q&A List.................................................................................... 51 Keywords Index......................................................................... 52 Big Picture in Focus:ULOb …………………………………………… 52 Metalanguage.......................................................................... 52 Essential Knowledge............................................................... 52 Self-Help.................................................................................... 61 1  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 Let’s Check.................................................................................... 61 Let’s Analyze......................................................................... 62 In a Nutshell.................................................................................... 62 Q&A List.................................................................................... 63 Keywords Index......................................................................... 64 Big Picture C: Unit Learning Outcomes............................................. 64 Big Picture in Focus:ULOa ……………………………………………… 64 Metalanguage.......................................................................... 64 Essential Knowledge............................................................... 65 Self-Help.................................................................................... 76 Let’s Check.................................................................................... 77 Let’s Analyze......................................................................... 78 In a Nutshell.................................................................................... 78 Q&A List.................................................................................... 79 Keywords Index......................................................................... 80 Big Picture in Focus:ULOb …………………………………………… 80 Metalanguage.......................................................................... 80 Essential Knowledge............................................................... 81 Self-Help.................................................................................... 96 Let’s Check.................................................................................... 97 Let’s Analyze......................................................................... 98 In a Nutshell.................................................................................... 98 Q&A List.................................................................................... 99 Keywords Index......................................................................... 99 Big Picture in Focus:ULOc …………………………………………….. 100 Metalanguage.......................................................................... 100 Essential Knowledge............................................................... 101 Self-Help.................................................................................... 112 Let’s Check.................................................................................... 112 Let’s Analyze......................................................................... 113 In a Nutshell.................................................................................... 113 Q&A List.................................................................................... 114 Keywords Index......................................................................... 115 Part 3. Course Schedule......................................................................... 116 Online Code of Conduct.............................................................. 117 Monitoring of OBD and DED............................................................ 118 2  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 Course Outline: CBM 122 – Economic Development Course Coordinators : Rex Lord V. Ranalan Email : [email protected] Student Consultation : by appointment Mobile Number : 09096773818 Phone Number : (084) 655 9591 Local 116 Date of Effectivity : June 2021 Mode of Delivery : Online Blended Delivery Time Frame : 54 Hours Student Workload : Expected Self-Directed Learning Requisites : None Credit : 3-unit Lecture Attendance Requirements : Minimum of 95% attendance in all scheduled virtual or face to face sessions and the Learning Management System (LMS) Course Outline Policy Areas of Concern Details Contact and Non- This 3-unit course self-instructional manual is designed contact Hours for blended learning mode of instructional delivery with scheduled face to face or virtual sessions. The expected number of hours will be 54, including the face to face or virtual meetings. A Learning Management System (LMS), Quipper, will be used to facilitate your learning. Other sessions may also be conducted through online communication channels such as Facebook, Messenger, WhatsApp, Viber, E-mail, Line, Zoom, Skype, or any other similar applications. You may also contact the course coordinator through a mobile number or telephone. Assessment Task Submission of assessment tasks shall be on the 2nd, 4th, Submission and 6th week of the summer class. The assessment paper shall be attached with a cover page indicating the title of the assessment task (if the task is a performance), the name of the course coordinator, date of submission, and the name of the student. The document should be e-mailed to the course coordinator. It is also expected that you already paid 3  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 your tuition and other fees before the submission of the assessment task. If the assessment task is done in real-time through the features in the Learning Management System, the schedule shall be arranged ahead of time by the course coordinator. Turnitin submission To ensure honesty and authenticity, all assessment tasks are required to be submitted through Turnitin (if necessary) with a maximum similarity index of 30% allowed. This means that if your paper goes beyond 30%, the students will either opt to redo her/his paper or explain in writing addressed to the course coordinator the reasons for the similarity. Also, if the document has reached a more than 30% similarity index, the student may be called for disciplinary action following the University’s OPM on Intellectual and Academic Honesty. Please note that academic dishonesty such as cheating and commissioning other students or people to complete the task for you have severe punishments (reprimand, warning, expulsion). Penalties for Late The score for an assessment item submitted after the Assignments / designated time on the due date, without an approved Assessments extension of time, will be reduced by 5% of the possible maximum score for that assessment item for each day that the assessment item is late. However, if the late submission of the assessment paper has a valid reason, a letter of explanation should be submitted and approved by the course coordinator. If necessary, you will also be required to present/attach pieces of evidence. Return of Assignments / Assessment tasks will be returned to you within two (2) Assessments weeks after the submission. This will be returned through e-mail or via the Quipper. For group assessment tasks, the course coordinator will require some or few of the students for online or virtual sessions to ask clarificatory questions to validate 4  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 the originality of the assessment task submitted and to ensure that all the group members are involved. Assignment You should request in writing addressed to the course Resubmission coordinator your intention to resubmit an assessment task. The resubmission is premised on the student’s failure to comply with the similarity index and other reasonable grounds such as academic literacy three (3) standards or other reasonable circumstances, e.g., illness, accident financial constraints. Re-marking of You should request in writing addressed to the course Assessment Papers coordinator your intention to appeal or contest the score and Appeal given to an assessment task. The letter should explicitly explain the reasons/points to contest the grade. The course coordinator shall communicate with you on the approval and disapproval of the request. If disapproved by the course coordinator, you can elevate your case to the program head or the dean with the original letter of request. The final decision will come from the dean of the college. Grading System Your grades will be based on the following: Examinations Prelim 15% Midterm 15% Final 40% = 70% Class Participations = 30% Total = 100% Submission of the final grades shall follow the usual University system and procedures. Preferred Referencing Use the general practice of the APA 6th Edition. Style Student Communication You are required to have an e-mail account, which is a requirement to access the LMS portal. Then, the course coordinator shall enroll the students to have access to the materials and resources of the course. 5  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 You may call or send SMS to your course coordinator through his/her phone number. Online communication channels, such as those stated above, may be used. You can also meet the course coordinator in person through the scheduled face to face sessions to raise your issues and concerns. Contact Details of the Dr. Gina Fe G. Israel Dean Dean of College E-mail: [email protected] Phone: 09158325092 / 09099942314 Larcyneil P. Pascual, MAED Assistant Dean E-mail: [email protected] Phone: 0975 0517 851 Contact Details of the Mary Cris L. Luzada, CPA, MSA Program Head Email: [email protected] Mobile: 09228321794 Students with Special Students with special needs shall communicate with the Needs course coordinator about the nature of his or her special needs. Depending on the nature of the need, the course coordinator with the approval of the program head may provide alternative assessment tasks or extension of the deadline for submission of assessment tasks. However, the alternative assessment tasks should still be in the service of achieving the desired course learning outcomes. Library Contact Details Clarissa R. Donayre, MSLS E-mail:[email protected] Phone: 0927 395 1639 Well-being Welfare Rochen D. Yntig, RGC Support Help Desk GSTC Head Contact Details E-mail: [email protected] Phone: 0932 771 7219 Mersun Faith A. Delco, RPm Psychometrician E-mail: [email protected] Phone: 0927 608 6037 Alfred Joshua M. Navarro Facilitator E-mail: [email protected] 6  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 Phone: 0977 341 6064 Course Information – See or download the course syllabus in Quipper CC’s Voice : Hello there! Good day! Welcome to this course CBM 122: Economic Development. After learning basic economic concept during your Applied Economics course, this time we are going to explore fundamental concept of development economics. This course will give insights in understanding why some countries have been able to go through a process of economic and human development while others have languished. As such you will also encounter terms that are practical in everyday activities that would add information to fully understand the nature of development aspect of a country. CO : As a student of this course you are expected to: 1. Understand the nature of economic development and its related concepts and determine theories that would facilitate in diagnosing the root causes of economic development; and 2. Explain government policies (both local and international) and describe how they can be pursued in addressing economic problems that hinders the development of a country like population, health and education. Let us begin! 7  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 BIG PICTURE A Week 1-2: Unit Learning Outcomes (ULO): At the end of the unit, you are expected to: a. Discuss the nature of Economic Development; b. Identify different measures of development in classifying economies; and c. Differentiate classical theories of economic development. Big Picture in Focus: ULOa. Discuss the nature of Economic Development. Metalanguage The following are terms to be remembered as we go through in studying this unit. Please refer to these definitions as supplement in case you will encounter difficulty in understanding the concept of economic development. 1. Absolute Poverty. A situation of being unable to meet the minimum levels of income, food, clothing, health care, shelter, and other essentials. 2. Capabilities. The freedoms that people have, given their personal features and their command over commodities. 3. Developing Countries. Countries that are presently characterized by low levels of living and other development deficits. Used in the development literature as a synonym for less developed countries. 4. Development. The process of improving the quality of all human lives and capabilities by raising people’s levels of living, self-esteem, and freedom. 5. Freedom. A situation in which a society has at its disposal a variety of alternatives from which to satisfy its wants and individuals enjoy real choices according to their preferences. 6. Functionings. What people do or can do with the commodities of given characteristics that they come to possess or control. 7. Gross Domestic Product (GDP). The total final output of goods and services produced by the country’s economy, within the country’s territory, by residents and nonresidents, regardless of its allocation between domestic and foreign claims. 8. Gross National Income (GNI). The total domestic and foreign output claimed by residents of a country. It comprises gross domestic product 8  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 (GDP) plus factor incomes accruing to residents from abroad, less the income earned in the domestic economy accruing to persons abroad. 9. Self-esteem. The feeling of worthiness that a society enjoys when its social, political, and economic systems and institutions promote human values such as respect, dignity, integrity, and self-determination. 10. Social System. The organizational and institutional structure of a society, including its values, attitudes, power structure, and traditions. 11. Subsistence Economy. An economy in which production is mainly for personal consumption and the standard of living yields little more than basic necessities of life—food, shelter, and clothing. 12. Sustenance. The basic goods and services, such as food, clothing, and shelter, that are necessary to sustain an average human being at the bare minimum level of living. Essential Knowledge This unit will highlight basic concept of development economics. This will discuss the emergence of economic development with view from traditional, modern and Sen’s approach. This will also discuss the core values and objectives as well as the MDGs and SDGs. Please note that you are not limited to exclusively refer to these resources. Thus, you are expected to utilize other books, research articles and other resources that are available in the university’s library e.g.ebrary, search.proquest.com etc., and even online tutorial websites. 1. Economics, Political Economics and Development Economics The study of economic development is one of the newest, most exciting, and most challenging branches of the broader disciplines of economics and political economy. Although development economics often draws on relevant principles and concepts from other branches of economics in either a standard or modified form, for the most part it is a field of study that is rapidly evolving its own distinctive analytical and methodological identity. But what makes development economics distinct to Economics and Political Economics? The answer to this lies on the scope of each discipline. Traditional Economics is concerned primarily with the efficient, least-cost allocation of scarce productive resources and with the optimal growth of these resources over time so as to produce an ever-expanding range of goods and services. Traditional neoclassical economics deals with an advanced capitalist world of perfect markets; consumer sovereignty; automatic price adjustments; decisions made on the basis of marginal, private-profit, and utility calculations; and equilibrium outcomes in all product and resource markets. It assumes economic “rationality” and a purely materialistic, individualistic, self- interested orientation toward economic decision making On the other hand, Political Economy goes beyond traditional economics to study, among other things, the social and institutional processes through which certain groups of economic and political elites influence the allocation of scarce productive resources now and in the future, either for their own benefit exclusively or for that of the larger population as well. Political economy is therefore concerned 9  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 with the relationship between politics and economics, with a special emphasis on the role of power in economic decision making. Setting the focus of Economics and Political Economy, Development Economics has an even greater scope. In addition to being concerned with the efficient allocation of existing scarce (or idle) productive resources and with their sustained growth over time, it also deal with the economic, social, political, and institutional mechanisms, both public and private, necessary to bring about rapid (at least by historical standards) and large-scale improvements in levels of living for the peoples of Africa, Asia, Latin America, and the formerly socialist transition economies. It focuses on the mechanisms that keep families, regions, and even entire nations in poverty traps, in which past poverty causes future poverty, and on the most effective strategies for breaking out of these traps. Transforming the economy are usually viewed as essential components of development economics with the ultimate purpose of understanding developing economies in order to help improve the material lives of the majority of the global population. Development economics must be eclectic, attempting to combine relevant concepts and theories from traditional economic analysis with new models and broader multidisciplinary approaches derived from studying the historical and contemporary development experience of Africa, Asia, and Latin America. 2. What is Development? The term development may mean different things to different people. Thus, it is important that we have common core perspective on its meaning. This will help us in understanding how development is being measured among countries. There are different views about this concept of which among are as follows: a. Traditional View Development has traditionally meant as achieving sustained rates of growth of income per capita to enable a nation to expand its output at a rate faster than the growth rate of its population. Levels and rates of growth of “real” per capita gross national income (GNI) are then used to measure the overall economic well-being of a population—how much of real goods and services is available to the average citizen for consumption and investment. The emphasis is often on increased output, measured by gross domestic product (GDP) by which problems of poverty, discrimination, unemployment, and income distribution were of secondary importance. b. New Economic View An increasing number of economists and policymakers clamored for more direct attacks on widespread absolute poverty, increasingly inequitable income distributions, and rising unemployment paved way in redefining economic development in terms of the reduction or elimination of poverty, inequality, and unemployment within the context of a growing economy. “Redistribution from growth” became a common slogan. Development in this view is conceived as a multidimensional process involving major changes in social structures, popular attitudes, and national institutions, as well as the acceleration of economic growth, the reduction of inequality, and the eradication of poverty. Development now represent the whole gamut of change by which an entire social system, tuned to the diverse basic needs and evolving aspirations of individuals and social 10  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 groups within that system, moves away from a condition of life widely perceived as unsatisfactory toward a situation or condition of life regarded as materially and spiritually better. c. The Capability Approach View Amartya Sen’s capability approach is a moral framework which proposes that social arrangements should be evaluated primarily according to the extent of freedom people have to promote as well as achieving functions they value (Centeno – CMI Business School, n.d.) Capabilities are the doings and beings that people can achieve if they so choose, such as being well-nourished, getting married, being educated, and travelling (Robyns & Mortens, 2020). Sen argues that poverty cannot be properly measured by income or even by utility as conventionally understood; what matters fundamentally is not the things a person has—or the feelings these provide—but what a person is, or can be, and does, or can do. What matters for well-being is not just the characteristics of commodities consumed but what use the consumer can and does make of commodities. Thus, looking at real income levels or even the levels of consumption of specific commodities cannot suffice as a measure of well-being. One may have a lot of commodities, but these are of little value if they are not what consumers desire. One may have income, but certain commodities essential for well- being, such as nutritious foods, may be unavailable. As Sen stresses, a person’s own valuation of what kind of life would be worthwhile is not necessarily the same as what gives pleasure to that person. For Sen, human “well-being” means being well, in the basic sense of being healthy, well nourished, well clothed, literate, and long-lived, and more broadly, being able to take part in the life of the community, being mobile, and having freedom of choice in what one can become and can do. 3. Core Values of Development There are at least three basic components or core values serve as a conceptual basis and practical guideline for understanding the inner meaning of development. These core values—sustenance, self-esteem, and freedom— represent common goals sought by all individuals and societies. They relate to fundamental human needs that find their expression in almost all societies and cultures at all times. Let us therefore examine each in turn. a. Sustenance: The Ability to Meet Basic Needs. All people have certain basic needs without which life would be impossible. These life-sustaining basic human needs include food, shelter, health, and protection. When any of these is absent or in critically short supply, a condition of “absolute underdevelopment” exists. A basic function of all economic activity, therefore, is to provide as many people as possible with the means of overcoming the helplessness and misery arising from a lack of food, shelter, health, and protection. To this extent, we may claim that economic development is a necessary condition for the improvement in the quality of life that is development. Without sustained and continuous economic progress at the individual as well as the societal level, the realization of the human potential would not be possible. One clearly has to “have enough in order to be more.” Rising per capita incomes, the elimination of absolute 11  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 poverty, greater employment opportunities, and lessening income inequalities therefore constitute the necessary but not the sufficient conditions for development. b. Self-Esteem: To Be a Person. A second universal component of the good life is self-esteem—a sense of worth and self-respect, of not being used as a tool by others for their own ends. All peoples and societies seek some basic form of self-esteem, although they may call it authenticity, identity, dignity, respect, honor, or recognition. The nature and form of this self- esteem may vary from society to society and from culture to culture. However, with the proliferation of the “modernizing values” of developed nations, many societies in developing countries that have had a profound sense of their own worth suffer from serious cultural confusion when they come in contact with economically and technologically advanced societies. This is because national prosperity has become an almost universal measure of worth. Due to the significance attached to material values in developed nations, worthiness and esteem are nowadays increasingly conferred only on countries that possess economic wealth and technological power—those that have “developed.” c. Freedom from Servitude: To Be Able to Choose. A third and final universal value that we suggest should constitute the meaning of development is the concept of human freedom. Freedom here is to be understood in the sense of emancipation from alienating material conditions of life and from social servitude to nature, other people, misery, oppressive institutions, and dogmatic beliefs, especially that poverty is predestination. Freedom involves an expanded range of choices for societies and their members together with a minimization of external constraints in the pursuit of some social goal we call development. 4. Objectives of Development We may conclude that development is both a physical reality and a state of mind in which society has, through some combination of social, economic, and institutional processes, secured the means for obtaining a better life. Whatever the specific components of this better life, development in all societies must have at least the following three objectives: a. To increase the availability and widen the distribution of basic life-sustaining goods such as food, shelter, health, and protection; b. To raise levels of living, including, in addition to higher incomes, the provision of more jobs, better education, and greater attention to cultural and human values, all of which will serve not only to enhance material wellbeing but also to generate greater individual and national self-esteem; and c. To expand the range of economic and social choices available to individuals and nations by freeing them from servitude and dependence, not only in relation to other people and nation-states, but also to the forces of ignorance and human misery 5. The Millennium Development Goals (MDGs) and Sustainable Development Goals (SDGs) 12  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 A. MDGs The United Nations (UN) Millennium Development Goals are eight goals that all 191 UN member states have agreed to try to achieve by the year 2015. The United Nations Millennium Declaration, signed in September 2000 commits world leaders to combat poverty, hunger, disease, illiteracy, environmental degradation, and discrimination against women. The MDGs are derived from this Declaration, and all have specific targets and indicators. “Yet the job is unfinished for millions of people—we need to go the last mile on ending hunger, achieving full gender equality, improving health services and getting every child into school. Now we must shift the world onto a sustainable path.”- UNDP B. SDGs The SDGs replace the Millennium Development Goals (MDGs), which started a global effort in 2000 to tackle the indignity of poverty. The legacy and achievements of the MDGs provide us with valuable lessons and experience to begin work on the new goals. But for millions of people around the world the job remains unfinished. The SDGs are also an urgent call to shift the world onto a more sustainable path. The Sustainable Development Goals are the blueprint to achieve a better and more sustainable future for all. They address the global challenges we face, including those related to poverty, inequality, climate, environmental degradation, prosperity, and peace and justice. The Goals interconnect and in order to leave no one behind, it is important that we achieve each Goal and target by 2030. 13  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 Self Help: You can also refer to the sources below to help you further understand the lesson: Todaro, M.P., & Smith, S.C. (2015). Economic Development (12th Ed.). Jurong, Singapore: Pearson Education South Asia Pte Ltd. (Main source where lessons are lifted from) Nafziger, E.W. (2015). Economic Development (5th Ed.). United States of America: Sheridan Books, Inc Robeyns, I. & Morten, F.B. (2020). The Capability Approach (Winter Edition). The Stanford Encyclopedia of Philosophy : URL =. Let’s Check Let us try the following activities to check your understanding in this unit. 14  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 Activity 1. Identification. In the space provided, write the term/s being asked in the following statements. (One point each) 1. Replaces the Millennium Development Goals (MDGs), which started a global effort in 2000 to tackle the indignity of poverty. 2. Involves an expanded range of choices for societies and their members together with a minimization of external constraints in the pursuit of some social goal we call development. 3. Is concerned primarily with the efficient, least-cost allocation of scarce productive resources and with the optimal growth of these resources over time so as to produce an ever-expanding range of goods and services. 4. Refers to what people do or can do with the commodities of given characteristics that they come to possess or control. 5. Refers to the organizational and institutional structure of a society, including its values, attitudes, power structure, and traditions. Let’s Analyze Let us try the following activity to know how deep your understanding on the topics in this unit. Research Presentation. The class will be divided into five groups and each group will be assigned a topic in relation to the lessons discussed. Set of topics for presentation are as follows: I. Role of Women in Development II. Development and Happiness III. Role of Values in Development Economics IV. Development and Freedom V. Current Status of SDGs and the Philippines Stance. Each group will undergo research of the above topics and present it in the class. Rubric for the written report and oral presentation are as follows: For Written Report: Organization 5 pts Content 10 pts For Oral Presentation Brevity 5 pts Delivery 10 pts PPT 5 Total Points: 35 pts. In a Nutshell In this part you are going to jot down what you have learned in this unit. The said statement of yours could be in a form of concluding statements, arguments, or perspective you have drawn from this lesson. The first two items is done for you. 15  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 1. Development economics is a distinct yet very important extension of both traditional economics and political economy. While necessarily also concerned with efficient resource allocation and the steady growth of aggregate output over time, development economics focuses primarily on the economic, social, and institutional mechanisms needed to bring about rapid and large-scale improvements in standards of living for the masses of poor people in developing nations Now it’s your turn! 2. 3. 4. Q&A List You are free to list down all the emerging questions or issues in the provided spaces below. These questions or concerns may also be raised in the LMS or other 16  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 modes. You may answer these questions on your own after clarification. The Q&A portion helps in the review of concepts and essential knowledge. Questions/Issues Answers 1. 2. 3. 4. 5. Keywords Index Absolute Poverty Capabilities Developing Countries Development Development Economics Freedom Functionings Gross Domestic Product (GDP) Gross National Income (GNI) Millennium Development Goals (MDG's) Political Economy Self-Esteem Social System Subsistence Economy Sustainable Development Goals (SDG's) Sustenance Traditional economics Big Picture in Focus: ULOb. Identify different measures of development in classifying economies. 17  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 Metalanguage The following are terms to be remembered as we go through in studying this unit. Please refer to these definitions as supplement in case you will encounter difficulty in understanding in measuring development. 1. Absolute Poverty. The situation of being unable or only barely able to meet the subsistence essentials of food, clothing, shelter, and basic health care. 2. Brain Drain. The emigration of highly educated and skilled professionals and technicians from the developing countries to the developed world. 3. Dependency Burden. The proportion of the total population aged 0 to 15 and 65+, which is considered economically unproductive and therefore not counted in the labor force. 4. Fractionalization. Significant ethnic, linguistic, and other social divisions within a country. 5. Free Trade. Trade in which goods can be imported and exported without any barriers in the forms of tariffs, quotas, or other restrictions. 6. Human Capital. Productive investments in people, such as skills, values, and health resulting from expenditures on education, on-the-job training programs, and medical care. 7. Imperfect Market. A market in which the theoretical assumptions of perfect competition are violated by the existence of, for example, a small number of buyers and sellers, barriers to entry, and incomplete information. 8. Incomplete Information. The absence of information that producers and consumers need to make efficient decisions resulting in underperforming markets. 9. Infrastructure. Facilities that enable economic activity and markets, such as transportation, communication and distribution networks, utilities, water, sewer, and energy supply systems. 10. Least Developed Countries. A UN designation of countries with low income, low human capital, and high economic vulnerability. 11. Research and Development (R&D). Scientific investigation with a view toward improving the existing quality of human life, products, profits, factors of production, or knowledge. 12. Resource Endowment. A nation’s supply of usable factors of production, including mineral deposits, raw materials, and labor. 13. World Bank. An organization known as an “international financial institution” that provides development funds to developing countries in the form of interest- bearing loans, grants, and technical assistance. Essential Knowledge In this part, measuring development will be presented in different metrics. Characteristics among developing countries as well as differences between 18  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 developing countries now and the developed countries then during their development stages will also be discussed. Please note that you are not limited to exclusively refer to these resources. Thus, you are expected to utilize other books, research articles and other resources that are available in the university’s library e.g. ebrary, search.proquest.com etc., and even online tutorial websites. 1. Measuring Development The most common way to define the developing world is by per capita income. Several international agencies, including the Organization for Economic Cooperation and Development (OECD) and the United Nations, offer classifications of countries by their economic status, but the best-known system is that of the International Bank for Reconstruction and Development (IBRD), more commonly known as the World Bank. In this section we are going to introduce three metrics in determining the development status of a country. a. Base on World Bank’s Per Capita GNI Low Income - $875 or less Lowe-Middle Income - $876 - $3,465 Upper-Middle Income - $3,466 - $10,725 High Income - $10,726 or more b. Base on World Bank’s Degree of International Indebtedness Severely Indebted - exceeds 80% of GNI Moderately Indebted - exceeds 60% but do not reach the critical level Less Indebted - less than 60% c. Base on UNDP’s Level of HDI Very High HD - 0.80 – 1.00 High HD - 0.712 – 0.799 Medium HD - 0.536 – 0.711 Low HD - 0.535 – 0.0 2. Basic Indicators of Development Total nominal Gross Domestic Product - is the total economic value of domestic and foreign output by residents of a country. Gross National Income per capita (PPP) - calculation of GNI using a common set of international prices for all goods and services, to provide more accurate comparisons of living standards. Human Development Index Score - a composite index measuring average achievement in three basic dimensions of human development - a long and healthy life, knowledge and a decent standard of living. School enrollment ratios - number of students enrolled in a given level of education, regardless of age, expressed as a percentage of the official school-age population corresponding to the same level of education. For the tertiary level, the population used is the 5-year age group starting from the official secondary school graduation age. The infant mortality rate - is the number of deaths per 1,000 live births of children under one year of age. The rate for a given region is the number of 19  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 children dying under one year of age, divided by the number of live births during the year, multiplied by 1,000. Healthy life expectancy - is the expected number of remaining years of life spent in good health from a particular age, typically birth or age sixty-five, assuming current rates of mortality and morbidity. The Gender Inequality Index (GII) - a composite measure reflecting inequality in achievement between women and men in three dimensions: reproductive health, empowerment and the labour market. Click this link to view the current trend of GII: http://hdr.undp.org/en/content/gender-inequality-index-gii The Global Peace Index (GPI) - conducted by the Institute for Economics & Peace (IEP) which measures the relative position of nations' and regions' peacefulness. The GPI ranks 172 independent states and territories (collectively accounting for 99.7 per cent of the world's population) according to their levels of peacefulness. Click this link to view the current trend of GPI: https://www.visionofhumanity.org/maps/#/ The Corruption Perception Index (CPI) - refers to an index that scores countries on the perceived levels of government corruption by country. Scores range from zero to 100, with zero indicating high levels of corruption and 100 indicating low levels. The CPI is published annually by Transparency International, an organization that seeks to stop bribery, fraud, and other forms of public sector corruption. Click this link to view the current trend of CPI: https://www.transparency.org/en/cpi/2020/index/nzl The Happiness Index - is an annual publication of the United Nations Sustainable Development Solutions Network which contains a ranking of national happiness based on the respondents’ ratings of their own lives which also correlates it with various other life factors. Click this link to view the current trend of Happiness Index: https://countryeconomy.com/demography/world-happiness- index 3. Human Development Index An index measuring national socioeconomic development, based on combining measures of education, health, and adjusted real income per capita. It ranks each country on a scale of 0 to 1 based on three goals or end products of development: a long and healthy life as measured by life expectancy at birth; knowledge as measured by a combination of average schooling attained by adults and expected years of schooling for school-age children; and a decent standard of living as measured by real per capita gross domestic product adjusted for the differing purchasing power parity. HDI is computed base on the following formula: HDI = H1/3E1/3I1/3. Human Development Index, has made a major contribution to improving our understanding of what constitutes development, which countries are succeeding (as reflected by rises in their NHDI over time), and how different groups and regions within countries are faring. By combining social and economic data, the HDI allows nations to take a broader measure of their development performance, both relatively and absolutely. Click this link for viewing of current status of HDI: http://www.hdr.undp.org/ 20  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 4. Characteristics of Developing World There are important historical and economic commonalities among developing countries that have led to their economic development problems being studied within a common analytical framework in development economics. Among are as follow: A. Lower Levels of Living and Productivity Common among developing nations is having a low-income level. At a very low-income levels, a vicious circle may set in, whereby low income leads to low investment in education and health as well as plant and equipment and infrastructure, which in turn leads to low productivity and economic stagnation. This is known as a poverty trap or what Nobel laureate Gunnar Myrdal called “circular and cumulative causation.” One common misperception is that low incomes result from a country’s being too small to be self-sufficient or too large to overcome economic inertia. However, there is no necessary correlation between country size in population or area and economic development. B. Lower Levels of Human Capital Human capital—health, education, and skills—is vital to economic growth and human development. Compared with developed countries, much of the developing world has lagged in its average levels of nutrition, health (as measured, for example, by life expectancy or undernourishment), and education (measured by literacy). Moreover, there are strong synergies (complementarities) between progress in health and education. For example, under-5 mortality rates improve as mothers’ education levels rise. The well- performing developing countries are much closer to the developed world in health and education standards than they are to the lowest income countries. C. Higher Levels of Inequality and Absolute Poverty Globally, the poorest 20% of people receive just 1.5% of world income. The lowest 20% now roughly corresponds to the approximately 1.2 billion people living in extreme poverty on less than $1.25 per day at purchasing power parity. Bringing the incomes of those living on less than $1.25 per day up to this minimal poverty line would require less than 2% of the incomes of the world’s wealthiest 10%. Thus, the scale of global inequality is also immense. But the enormous gap in per capita incomes between rich and poor nations is not the only manifestation of the huge global economic disparities. To appreciate the breadth and depth of deprivation in developing countries, it is also necessary to look at the gap between rich and poor within individual developing countries. Consequently, we cannot confine our attention to averages; we must look within nations at how income is distributed to ask who benefits from economic development and why. Extreme poverty is due in part to low human capital but also to social and political exclusion and other deprivations. Great progress has already been made in reducing the fraction of the developing world’s population living on less than $1.25 per day and raising the incomes of those still below that level, but much remains to be done. Development economists use the concept of absolute poverty to represent a specific minimum level of income needed to satisfy the basic physical needs of food, clothing, and shelter in order to ensure continued survival. A problem, however, arises when one recognizes that these minimum subsistence levels will vary from country to country and region to 21  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 region, reflecting different physiological as well as social and economic requirements. Economists have therefore tended to make conservative estimates of world poverty in order to avoid unintended exaggeration of the problem. The incidence of extreme poverty varies widely around the developing world. Extreme poverty represents great human misery, and so redressing it is a top priority of international development. Development economists have also increasingly focused on ways in which poverty and inequality can lead to slower growth. That is, not only do poverty and inequality result from distorted growth, but they can also cause it. D. Higher Population Growth Rates More than five-sixths of all the people in the world now live in developing countries; and some 97% of net population growth (births minus deaths) in 2012 took place in developing regions. However, population dynamics varies widely among developing countries. Middle-income developing countries show greater variance, with some having achieved lower birth rates closer to those prevailing in rich countries. A major implication of high birth rates is that the active labor force has to support proportionally almost twice as many children as it does in richer countries. By contrast, the proportion of people over the age of 65 is much greater in the developed nations. Both older people and children are often referred to as an economic dependency burden in the sense that they must be supported financially by the country’s labor force. So, dependency has a further magnified impact in developing countries. Not only are developing countries characterized by higher rates of population growth, but they must also contend with greater dependency burdens than rich nations, though with a wide gulf between low- and middle-income developing countries. E. Greater Social Fractionalization Low-income countries often have ethnic, linguistic, and other forms of social divisions, sometimes known as fractionalization. This is sometimes associated with civil strife and even violent conflict, which can lead developing societies to divert considerable energies to working for political accommodations if not national consolidation. It is one of a variety of governance challenges many developing nations. The greater the ethnic, linguistic, and religious diversity of a country, the more likely it is that there will be internal strife and political instability. Conflict can derail what had otherwise been relatively positive development progress. If development is about improving human lives and providing a widening range of choice to all peoples, racial, ethnic, caste, or religious discrimination is pernicious. Ethnic and religious diversity need not necessarily lead to inequality, turmoil, or instability. Unqualified statements about their impact cannot be made. The broader point is that the ethnic and religious composition of a developing nation and whether or not that diversity leads to conflict or cooperation can be important determinants of the success or failure of development efforts. F. Larger Rural Populations but Rapid Rural-to-Urban Migration One of the hallmarks of economic development is a shift from agriculture to manufacturing and services. In developing countries, a much higher share of the population lives in rural areas, and correspondingly fewer in urban areas. Although modernizing in many regions, rural areas are poorer and tend to suffer 22  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 from missing markets, limited information, and social stratification. A massive population shift is also under way as hundreds of millions of people are moving from rural to urban areas, fueling rapid urbanization, with its own attendant problems. G. Lower Levels of Industrialization and Manufactured Exports One of the most widely used terminologies for the original Group of Seven (G7) countries and other advanced economies such as smaller European countries and Australia is the “industrial countries.” Industrialization is associated with high productivity and incomes and has been a hallmark of modernization and national economic power. It is no accident that most developing-country governments have made industrialization a high national priority. The share of employment in industry in many developed countries is smaller now than in some developing countries, particularly among women, as developed countries continue their secular trend to switch to from industry to service sector employment. However, many developed country industrial jobs require high skills and pay high wage. Along with lower industrialization, developing nations tended to have a higher dependence on primary exports. Most developing countries have diversified away from agricultural and mineral exports to some degree. H. Adverse Geography Many analysts argue that geography must play some role in problems of agriculture, public health, and comparative development more generally. Developing countries are primarily tropical or subtropical, and this has meant that they suffer more from tropical pests and parasites, endemic diseases such as malaria, water resource constraints, and extremes of heat. The extreme case of favorable physical resource endowment is the oil-rich Persian Gulf states. At the other extreme are countries like Chad, Yemen, Haiti, and Bangladesh, where endowments of raw materials and minerals and even fertile land are relatively minimal. However, as the case of the Democratic Republic of Congo shows vividly, high mineral wealth is no guarantee of development success. Conflict over the profits from these industries has often led to a focus on the distribution of wealth rather than its creation and to social strife, undemocratic governance, high inequality, and even armed conflict, in what is called the “curse of natural resources.” Clearly, geography is not destiny; high- income Singapore lies almost directly on the equator, and parts of southern India have exhibited enormous economic dynamism in recent years. Prior to colonization, some tropical and subtropical regions had higher incomes per capita than Europe. However, the presence of common and often adverse geographic features in comparison to temperate zone countries means it is beneficial to study tropical and subtropical developing countries together for some purposes. Redoubled efforts are now under way to extend the benefits of the green revolution and tropical disease control to sub-Saharan Africa I. Underdeveloped Markets Imperfect markets and incomplete information are far more prevalent in developing countries, with the result that domestic markets, notably but not only financial markets, have worked less efficiently. In many developing countries, 23  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 legal and institutional foundations for markets are extremely weak. Some aspects of market underdevelopment are that they often lack: a) a legal system that enforces contracts and validates property rights; b) a stable and trustworthy currency; c) an infrastructure of roads and utilities that results in low transport and communication costs so as to facilitate interregional trade; d) a well-developed and efficiently regulated system of banking and insurance, with broad access and with formal credit markets that select projects and allocate loanable funds on the basis of relative economic profitability and enforce rules of repayment; e) substantial market information for consumers and producers about prices, quantities, and qualities of products and resources as well as the creditworthiness of potential borrowers; and f) social norms that facilitate successful long-term business relationships. These six factors, along with the existence of economies of scale in major sectors of the economy, thin markets for many products due to limited demand and few sellers, widespread externalities (costs or benefits that accrue to companies or individuals not doing the producing or consuming) in production and consumption, and poorly regulated common property resources (e.g., fisheries, grazing lands, water holes) mean that markets are often highly imperfect. Moreover, information is limited and costly to obtain, thereby often causing goods, finances, and resources to be misallocated. And we have come to understand that small externalities can interact in ways that add up to very large distortions in an economy and present the real possibility of an underdevelopment trap. J. Lingering Colonial Impacts and Unequal International Relations Despite important variations that proved consequential, colonial era institutions often favored extractors of wealth rather than creators of wealth, harming development then and now. Decolonization was one of the most important historical and geopolitical events of the post–World War II era. But several decades after independence, the effects of the colonial era linger for many developing nations, particularly the least developed ones. Colonial history matters not only or even primarily because of stolen resources but also because the colonial powers determined whether the legal and other institutions in their colonies would encourage investments by (and in) the broad population or would instead facilitate exploitation of human and other resources for the benefit of the colonizing elite and create or reinforce extreme inequality. Development-facilitating or development-inhibiting institutions tend to have a very long life span. In a related point of great importance, European colonization often created or reinforced differing degrees of inequality, often correlated with ethnicity, which have also proved remarkably stable over the centuries. In some respects, postcolonial elites in many developing countries largely took over the exploitative role formerly played by the colonial powers. High inequality sometimes emerged as a result of slavery in regions where comparative advantage in crops such as sugarcane could be profitably produced on slave plantations. It also emerged where a large, settled indigenous population could be coerced into labor. Where inequality was 24  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 extreme, the result was less movement toward democratic institutions, less investment in public goods, and less widespread investment in human capital (education, skills, and health). These are among the ways in which extreme inequality is harmful to development and so is also an important long-term determinant of comparative development. Relatedly, developing countries have also been less well organized and influential in international relations, with sometimes adverse consequences for development. More generally, developing nations have weaker bargaining positions than developed nations in international economic relations. Developing nations often also voice great concern over various forms of cultural dependence, from news and entertainment to business practices, lifestyles, and social values. The potential importance of these concerns should not be underestimated, either in their direct effects on development in its broader meanings or indirect impacts on the speed or character of national development. Developing nations are also dependent on the developed world for environmental preservation, on which hopes for sustainable development depend. Of greatest concern, global warming is projected to harm developing regions more than developed ones; yet both accumulated and current greenhouse gas emissions still largely originate in the high-income countries, despite the role of developing-country deforestation and growing emissions from lower middle-income countries. Thus, the developing world endures what may be called environmental dependence, in which it must rely on the developed world to cease aggravating the problem and to develop solutions, including mitigation at home and assistance in developing count. 5. Commonality Among Developed and Developing World The position of developing countries today is in many important ways significantly different from that of the currently developed countries when they embarked on their era of modern economic growth. We can identify eight significant differences in initial conditions that require a special analysis of the growth prospects and requirements of modern economic development: A. Physical and human resource endowments Contemporary developing countries are often less well endowed with natural resources than the currently developed nations were at the time when the latter nations began their modern growth. Some developing nations are blessed with abundant supplies of petroleum, minerals, and raw materials for which world demand is growing; most less developed countries, however - where more than half of the world’s population resides - are poorly endowed with natural resources. The difference in skilled human resource endowments is even more pronounced. The ability of a country to exploit its natural resources and to initiate and sustain long-term economic growth is dependent on, among other things, the ingenuity and the managerial and technical skills of its people and its access to critical market and product information at minimal cost. Paul Romer argues that today’s developing nations “are poor because their citizens do not have access to the ideas that are used in industrial nations to generate economic value.” For Romer, the technology gap between rich and poor nations can be divided into two components, a physical object gap, involving factories, roads, and modern machinery, and an idea gap, including knowledge about marketing, distribution, inventory control, transactions processing, and worker 25  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 motivation. This idea gap, and what Thomas Homer-Dixon calls the ingenuity gap (the ability to apply innovative ideas to solve practical social and technical problems), between rich and poor nations lies at the core of the development divide. There were no comparative human resource gaps for the now developed countries on the eve of their industrialization. B. Per capita incomes and levels of GDP in relation to the rest of the world The people living in low-income countries have, on average, a lower level of real per capita income than their developed-country counterparts had in the nineteenth century. First of all, nearly 40% of the population of developing countries is attempting to subsist at bare minimum levels. Obviously, the average standard of living in, say, early-nineteenth-century England was nothing to envy or boast about, but it was not as economically debilitating or precarious as it is today for a large fraction of people in the 40 or so least developed countries, the people now often referred to as the “bottom billion.” Second, at the beginning of their modern growth era, today’s developed nations were economically in advance of the rest of the world. They could therefore take advantage of their relatively strong financial position to widen the income gaps between themselves and less fortunate countries in a long period of income divergence. By contrast, today’s developing countries began their growth process at the low end of the international per capita income scale. C. Climate Almost all developing countries are situated in tropical or subtropical climatic zones. It has been observed that the economically most successful countries are located in the temperate zone. Although social inequality and institutional factors are widely believed to be of greater importance, the dichotomy is more than coincidence. Colonialists apparently created unhelpful “extractive” institutions where they found it uncomfortable to settle. But also, the extremes of heat and humidity in most poor countries contribute to deteriorating soil quality and the rapid depreciation of many natural goods. They also contribute to the low productivity of certain crops, the weakened regenerative growth of forests, and the poor health of animals. Extremes of heat and humidity not only cause discomfort to workers but can also weaken their health, reduce their desire to engage in strenuous physical work, and generally lower their levels of productivity and efficiency. There is evidence that tropical geography does pose significant problems for economic development and that special attention in development assistance must be given to these problems, such as a concerted international effort to develop a malaria vaccine. D. Population size, distribution, and growth Population size, density, and growth constitute another important difference between less developed and developed countries. Before and during their early growth years, Western nations experienced a very slow rise in population growth. As industrialization proceeded, population growth rates increased primarily as a result of falling death rates but also because of slowly rising birth rates. However, at no time did European and North American countries have natural population growth rates in excess of 2% per annum, and they generally averaged much less. By contrast, the populations of many developing countries have been increasing at annual rates in excess of 2.5% in recent decades, and some are still rising that fast today. Moreover, the 26  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 concentration of these large and growing populations in a few areas means that many developing countries have considerably higher person-to-land ratios than the European countries did in their early growth years. Finally, in terms of comparative absolute size, no country that embarked on a long-term period of successful economic growth approached the present-day population size of India, Egypt, Pakistan, Indonesia, Nigeria, or Brazil. Nor were their rates of natural increase anything like that of present-day Kenya, the Philippines, Bangladesh, Malawi, or Guatemala. In fact, many observers doubt whether the Industrial Revolution and the high long-term growth rates of contemporary developed countries could have been achieved or proceeded so fast and with so few setbacks and disturbances, especially for the very poor, had their populations been expanding so rapidly. E. Historical role of international migration In the nineteenth and early twentieth centuries, a major outlet for rural populations was international migration, which was both widespread and large scale. The irony of international migration today, however, is not merely that this traditional outlet for surplus people has effectively been closed off but that many of the people who migrate from poor to richer lands are the very ones that developing countries can least afford to lose: the highly educated and skilled. Since the great majority of these migrants move on a permanent basis, this perverse brain drain not only represents a loss of valuable human resources but could also prove to be a serious constraint on the future economic progress of developing nations. Migration, when it is permitted, reduces poverty for migrants and their families, and most of the poverty- reducing benefits of migration for those remaining in the origin countries come through remittances. This is an extremely important resource. Paradoxically, a potential benefit is that the mere possibility of skilled emigration may encourage many more workers to acquire information technology or other skills than are ultimately able to leave, leading to a net increase in labor force skills. At least in theory, the result could actually be a “brain gain.” F. International trade benefits International free trade has been called the “engine of growth” that propelled the development of today’s economically advanced nations during the nineteenth and early twentieth centuries. Rapidly expanding export markets provided an additional stimulus to growing local demands that led to the establishment of large-scale manufacturing industries. Together with a relatively stable political structure and flexible social institutions, these increased export earnings enabled the developing countries of the nineteenth century to borrow funds in the international capital market at very low interest rates. This capital accumulation in turn stimulated further production, made increased imports possible, and led to a more diversified industrial structure. In the twentieth century, the situation for many developing countries was very different. With the exception of a few very successful Asian countries, the non- oil-exporting (and even some oil-exporting) developing countries faced formidable difficulties in trying to generate rapid economic growth on the basis of world trade. For much of the past century, many developing countries experienced a deteriorating trade position. Their exports expanded, but usually not as fast as the exports of developed nations. Their terms of trade (the price 27  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 they receive for their exports relative to the price they have to pay for imports) declined over several decades. Export volume therefore had to grow faster just to earn the same amount of foreign currency as in previous years. Where developing countries are successful at becoming lower-cost producers of competitive products with the developed countries (e.g., textiles, clothing, shoes, some light manufactures), the latter have often resorted to various forms of tariff and nontariff barriers to trade, including “voluntary” import quotas, excessive sanitary requirements, intellectual property claims, antidumping “investigations,” and special licensing arrangements. G. Basic scientific and technological research and development capabilities Basic scientific research and technological development have played a crucial role in the modern economic growth experience of contemporary developed countries. Their high rates of growth have been sustained by the interplay between mass applications of many new technological innovations based on a rapid advancement in the stock of scientific knowledge and further additions to that stock of knowledge made possible by growing surplus wealth. And even today, the process of scientific and technological advance in all its stages, from basic research to product development, is heavily concentrated in the rich nations, despite the emergence of China and India as destinations for research and development (R&D) activities of multinational corporations. Moreover, research funds are spent on solving the economic and technological problems of concern to rich countries in accordance with their own economic priorities and resource endowments. In the important area of scientific and technological research, low-income developing nations in particular are in an extremely disadvantageous position vis-à-vis the developed nations. In contrast, when the latter countries were embarking on their early growth process, they were scientifically and technologically greatly in advance of the rest of the world. They could consequently focus on staying ahead by designing and developing new technology at a pace dictated by their long-term economic growth requirements. H. Efficacy of domestic institutions Another difference between most developing countries and most developed countries at the time of their early stages of economic development lies in the efficacy of domestic economic, political, and social institutions. By the time of their early industrialization, many developed countries, had economic rules in place that provided relatively broad access to opportunity for individuals with entrepreneurial drive. High inequality and poor institutions facilitating extraction rather than providing incentives for productivity were often established by colonial powers. Today such extraction may be carried out by powerful local interests as well as foreign ones. But it is very difficult to change institutions rapidly. As Douglass North stresses, even if the formal rules “may be changed overnight, the informal rules usually change only ever so gradually.” The developed countries also typically enjoyed relatively stronger political stability and more flexible social institutions with broader access to mobility. States typically emerged more organically over a longer period of time in the developed regions, and consolidation as nation-states generally occurred before the industrial era. In contrast, national boundaries were more arbitrarily dictated by colonial powers. The “failed state,” and states in danger of becoming so, is a phenomenon of the postcolonial period, 28  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 with roots in imperial and colonial practices. Although many developing nations have roots in ancient civilizations, a long hiatus often existed between autonomous regimes. Self-Help: You can also refer to the sources below to help you further understand the lesson Todaro, M.P., & Smith, S.C. (2015). Economic Development (12th Ed.). Jurong, Singapore: Pearson Education South Asia Pte Ltd. (Main source where lessons are lifted from) Nafziger, E.W. (2015). Economic Development (5th Ed.). United States of America: Sheridan Books, Inc United Nations Development Programmes (2020). Human Development Report. Retrieved from http://www.hdr.undp.org/ Let’s Check Let us try the following activity to check your understanding in this unit. Matching Type. Match the items indicated in Column A to the specific choices in Column B. Write your answers on the space provided before each item. Strictly NO Erasures. (One point each). Column A Column B 1. Adverse Geography a. HDI 2. Global Peace Index b. Common Features of Developing Worlds 3. Greater Social Fractionalization c. World Bank’s Level of Per Capita 4. Happiness Index d. HDI Score 29  DEPARTMENT OF ACCOUNTING EDUCATION Accountancy Program Mabini Street, Tagum City Davao del Norte Telefax: (084)655-9591 Local 116 5. Upper-Middle Income e. UNDP’s Level of HDI 6. Lower Levels of Human Capital f. Lingering Colonial Impact 7. Medium Human Development g. Characteristic of Developing World 8. Climate h. Standard of Living 9. Gender Inequality Index i. Development Indicator 10. External Dependence j. WB Degree of Indebtedness k. PPP Let’s Analyze Let us try the following activity to know how deep your understanding about the topics of this unit. Venn Diagramming. Class will be divided