DEVELOPMENT ECONOMICS DEVELOPMENT ECONOMICS

Prof Upali VidanapathiranaProf Upali VidanapathiranaDepartment of Social Studies Department of Social Studies

The Open University of Sri Lanka The Open University of Sri Lanka April, 2014April, 2014

Topics for today Topics for today

Definitions Definitions

Why ‘development economics’ is different from ‘other Why ‘development economics’ is different from ‘other economics’economics’

Major attributes Major attributes

55 Development is context specificDevelopment is context specific

66 Core values Core values

55 Objectives of DEObjectives of DE

Development Economics Development Economics Concerned with rapid, large scale and Concerned with rapid, large scale and overarching improvements in levels of living for overarching improvements in levels of living for the majority in Asia, Africa and Latin Americathe majority in Asia, Africa and Latin America

These countries report frequent and deep-These countries report frequent and deep-rooted problems of under-developmentrooted problems of under-development

Development is value based and Development is value based and multidimensional and hence cannot be multidimensional and hence cannot be effectively tackled by the traditional tools of effectively tackled by the traditional tools of economics economics

Nature of DENature of DETraditional approach believes in the Traditional approach believes in the mechanism -market is suprememechanism -market is supreme

All economic problems are answered by All economic problems are answered by the ‘invisible hand of price’ in a value free the ‘invisible hand of price’ in a value free mannermanner

The questions and answers are about The questions and answers are about ‘what is’ and it has no room for the ‘what is’ and it has no room for the questions concerning ‘why’ and what questions concerning ‘why’ and what ‘should be’‘should be’

Is Real World Value Free ?Is Real World Value Free ?People hold attitudes, values and perceptions People hold attitudes, values and perceptions that colour their answers to ‘what is’that colour their answers to ‘what is’

Most questions and answers are ‘value loaded’Most questions and answers are ‘value loaded’

Examples-Should students be given hostels? Examples-Should students be given hostels? Should graduates be given jobs by the state? Should graduates be given jobs by the state? Should the prices be controlled? These are Should the prices be controlled? These are matters for the state-not for the marketmatters for the state-not for the market

When market fails in stopping recession and When market fails in stopping recession and environmental decay state intervenes- environmental decay state intervenes- recession package for Spain, Ireland etc. recession package for Spain, Ireland etc.

Development is Not Value FreeDevelopment is Not Value Free• ‘‘D’ is not only ‘What is’ but rather ‘Why it is D’ is not only ‘What is’ but rather ‘Why it is

so’ and ‘What should be’so’ and ‘What should be’

• ‘ ‘D’ is reinforced or retarded by;D’ is reinforced or retarded by;a)a)attitudes towards life, work and power,attitudes towards life, work and power, b) system of bureaucracy, legal structure, b) system of bureaucracy, legal structure,

administrative structure and systems, norms, administrative structure and systems, norms,

c) land tenure, religion, c) land tenure, religion,

d) influence of global forcesd) influence of global forces

Scope of development economics Scope of development economics Studying about developing countriesStudying about developing countries

Studying about underdevelopmentStudying about underdevelopment

Studying about diversityStudying about diversity

Studying about multi-dimensional Studying about multi-dimensional nature of development nature of development

Policy goals of developmentPolicy goals of developmentReal income growthReal income growth

Reduction of inequalityReduction of inequality

Reducing unemploymentReducing unemployment

Reducing povertyReducing poverty

Improving std of livingImproving std of living

Changing social structuresChanging social structures

Metrics of Development-1Metrics of Development-1GNP/GDP if growing faster than 5% its GNP/GDP if growing faster than 5% its development (1950s and 1960s)development (1950s and 1960s)

Lately it was modified with GNP per capita-Lately it was modified with GNP per capita-population growth (GY-GP) orpopulation growth (GY-GP) or

‘‘Real per-capita’ where GDP / P was deflated by Real per-capita’ where GDP / P was deflated by inflationinflation

This approach was known as ‘growth first’ This approach was known as ‘growth first’

If growth is given a chance its benefits will If growth is given a chance its benefits will ‘trickle down’‘trickle down’

GDP grows over the yearsGDP grows over the years

Mere growth creates problems Mere growth creates problems

Popular definitions of developmentPopular definitions of developmentChanges in output and technical and Changes in output and technical and institutional structures of economies institutional structures of economies (Kindlebeiger, 1965)(Kindlebeiger, 1965)

Upward improvement of the entire Upward improvement of the entire social system (Myrdal, 1968)social system (Myrdal, 1968)

Reducing poverty, inequality and Reducing poverty, inequality and unemployment (Seers, 1970)unemployment (Seers, 1970)

Meaning of DevelopmentMeaning of Development ‘…‘…if poverty, unemployment, inequality if poverty, unemployment, inequality have declined from high levels then have declined from high levels then undoubtedly there has been a period of undoubtedly there has been a period of development…(Seers)development…(Seers)

‘…‘…but if all of them have been growing but if all of them have been growing worse it would be strange to call the result worse it would be strange to call the result ‘development’ even if per capita income ‘development’ even if per capita income doubled’ doubled’

……Can mere growth accompanied by ‘a Can mere growth accompanied by ‘a reduction of poverty, unemployment, reduction of poverty, unemployment, inequality’ be called developmentinequality’ be called development……

Capabilities Capabilities Amartya Sen identified development in terms of Amartya Sen identified development in terms of improvements in the capabilities and functioningsimprovements in the capabilities and functionings

Freedom of people vary due to a) personal factors like Freedom of people vary due to a) personal factors like ignorance b) command over commodities like lack of ignorance b) command over commodities like lack of fundsfunds

Personal factors like mal-nutrition, poor health, lack of Personal factors like mal-nutrition, poor health, lack of education makes capability deprivationeducation makes capability deprivation

Capabilities increase command over commodities or Capabilities increase command over commodities or functionings- say educated have better chance of being functionings- say educated have better chance of being rich and one can acquire education or employment if rich and one can acquire education or employment if she has financial (high income) or social capital she has financial (high income) or social capital (networking) (networking)

Definition of developmentDefinition of developmentDefinition is difficult owing to context specific nature of Definition is difficult owing to context specific nature of the subjectthe subject

Easy to develop a common framework for different Easy to develop a common framework for different situationsituation

Three core values are identified in this frameworkThree core values are identified in this framework

This framework was effective during the past two This framework was effective during the past two decadesdecades

It has been sufficiently flexible and adjustable to suit It has been sufficiently flexible and adjustable to suit time/space variationstime/space variations

Sustenance Sustenance Ability to meet ‘basic needs’ –food, shelter, health and Ability to meet ‘basic needs’ –food, shelter, health and protectionprotection

This is an outcome of ‘entitlements’ having endowed’ or This is an outcome of ‘entitlements’ having endowed’ or having ‘command over’ endowments having ‘command over’ endowments

This is called ‘deprivation’; one may be deprived of This is called ‘deprivation’; one may be deprived of income, job, security (food, income, shelter, medicine income, job, security (food, income, shelter, medicine and clothing). and clothing).

Absence of sustenance cause ‘deprivation’-its presence Absence of sustenance cause ‘deprivation’-its presence makes ‘development’makes ‘development’

Underdevelopment is capability deprivation Underdevelopment is capability deprivation

To find self-sustenance economies must progress; To find self-sustenance economies must progress; income growth is a necessary condition of develoincome growth is a necessary condition of develo

Self-esteem*Self-esteem*‘‘Ability to stand up and say what is right and what is Ability to stand up and say what is right and what is not right’ according to one’s consciences not right’ according to one’s consciences

It is the sense of ‘self-worth’ and ‘self respect’.It is the sense of ‘self-worth’ and ‘self respect’.

It may be used by others to meet their own ends.It may be used by others to meet their own ends.

Self worth is context specific; it is about acceptance, Self worth is context specific; it is about acceptance, identity and being part of the society in which one livesidentity and being part of the society in which one lives

There are no universal values in self-worth/respectThere are no universal values in self-worth/respect

Markets or products cannot make it universal-‘Rexona’, Markets or products cannot make it universal-‘Rexona’, ‘pizza’ or ‘Mc-Donald’ can not create universal self-‘pizza’ or ‘Mc-Donald’ can not create universal self-esteemesteem

Freedom*Freedom*Sen sees ‘Development as Freedom’ (1999)Sen sees ‘Development as Freedom’ (1999)

Freedom here is about ‘freedom from servitude’ and Freedom here is about ‘freedom from servitude’ and increasing ability to make ‘informed choices’increasing ability to make ‘informed choices’

It’s a sense of emancipation- ‘French Revolution’; It’s a sense of emancipation- ‘French Revolution’; prevents alienation from material conditions of lifeprevents alienation from material conditions of life

Landlessness, and social servitudes arise from Landlessness, and social servitudes arise from cast/ethnicity/poverty- based conditionscast/ethnicity/poverty- based conditions

They deny employment/housing/cultural acceptance They deny employment/housing/cultural acceptance

Growth has to increase range of human choices –Growth has to increase range of human choices –what to read, with whom to associate, what religion what to read, with whom to associate, what religion to believe, which political idea to hold etc. to believe, which political idea to hold etc.

Objectives of Development*Objectives of Development*Therefore development aims at;

a) increasing the availability of life sustaining goods-food, water, shelter, cloths, medicine at an affordable price

b) increase the level of living by providing better education, employment, attention to cultural and human values to raise self esteem

c) To expand the range of economic and social choices –eliminate dependence on others (groups/communities/countries)

Development is Multi-dimensionalDevelopment is Multi-dimensional