Chapter 1

Introducing
Economic
Development:
A Global
Perspective

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1.1 How the Other Half Live

When one is poor, she has no say in public, she feels inferior. She has
no food, so there is famine in her house; no clothing, and no progress
in her family.
—A poor woman from Uganda

For a poor person everything is terrible—illness, humiliation, shame.

We are cripples; we are afraid of everything; we depend on everyone.
No one needs us. We are like garbage that everyone wants to get rid
of.
—A blind woman from Tiraspol, Moldova

Life in the area is so precarious that the youth and every able person
have to migrate to the towns or join the army at the war front in
order to escape the hazards of hunger escalating over here.
—Participant in a discussion group in rural Ethiopia

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1.1 How the Other Half Live

• When food was in abundance, relatives used to share it. These days of
hunger, however not even relatives would help you by giving you some
food. —Young man in Nichimishi, Zambia
• We have to line up for hours before it is our turn to draw water.
—Mbwadzulu Village (Mangochi), Malawi
• [Poverty is] . . . low salaries and lack of jobs. And it’s also not having
medicine, food, and clothes. --Discussion group, Brazil
• Don’t ask me what poverty is because you have met it outside my house.
Look at the house and count the number of holes. Look at the utensils and
the clothes I am wearing. Look at everything and write what you see. What
you see is poverty. —Poor man in Kenya
• A universal theme reflected in these seven quotes is that
poverty is more than lack of income – it is inherently
multidimensional, as is economic development.

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1.2 Economics and Development Studies
– The Nature of Development Economics
• Greater scope than traditional neoclassical economics
and political economy.
– Traditional economics – An approach to economics that
emphasizes utility, profit maximization, market efficiency,
and determination of equilibrium.
– Political economy – The attempt to merge economic
analysis with practical politics—to view economic activity
in its political context.
• Development economics - The study of how
economies are transformed from stagnation to growth
and from low income to high-income status, and
overcome problems of absolute poverty.

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Figure 1.1 World Income Distribution

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1.2 Economics and Development Studies
• Why Study Development Economics? Some Critical
Questions
• The Important Role of Values in Development
Economics
– It is necessary to recognize from the outset that ethical or
normative value premises about what is or is not desirable are
central features of the economic discipline in general and of
development economics in particular.
• Economies as Social Systems: The Need to Go Beyond
Simple Economics
• Social Systems
– The organizational and institutional structure of a society, including its
values, attitudes, power structure, and traditions.
– Interdependent relationships between economic and non-economic factors
• Success or failure of development policy
– Importance of taking account of institutional and structural variables along
with more traditional economic variables

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1.3 What Do We Mean by Development?
• Development – is the process of improving the quality of all
human lives and capabilities by raising people’s levels of
living, self-esteem, and freedom.
• Traditional Economic Measures
– Gross National Income (GNI) - The total domestic and foreign output
claimed by residents of a country. It comprises gross domestic product
(GDP) plus factor incomes accruing to residents from abroad, less the
income earned in the domestic economy accruing to persons abroad.
– Income per capita – Total gross national income of a country divided by
total population.
– Utility of that income?
• The New Economic View of Development
– Leads to improvement in wellbeing, more broadly understood
• Amartya Sen’s “Capability” Approach
– Functionings as an achievement
– Capabilities as freedoms enjoyed in terms of functionings
– Development and happiness
– Well being in terms of being well and having freedoms of choice
– “Beings and Doings”:

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Some Key “Capabilities”

• Some Important “Beings” and “Doings” in Capability to

Function:
– Being able to live long
– Being well-nourished
– Being healthy
– Being literate
– Being well-clothed
– Being mobile
– Being able to take part in the life of the community
– Being happy – as a state of being - may be valued as a
functioning

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1.3 What Do We Mean by Development?
(cont’d)

• Three Core Values of Development

– Sustenance: The Ability to Meet Basic
Needs
– Self-Esteem: To Be a Person
– Freedom from Servitude: To Be Able to
Choose

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Figure 1.2 Income and Happiness:
Comparing Countries

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1.3 What Do We Mean by Development?
(cont’d)

• The Central Role of Women

– To make the biggest impact on development,
societies must empower and invest in women
• The Three Objectives of Development
– Increase availability of life-sustaining goods
– Raise levels of living
– Expand range of economic and social choices

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1.4 The Millennium Development Goals

• Millennium Development goals (MDGs)

– Eight goals adopted by the United Nations in
2000
• Eradicate extreme poverty and hunger
• Achieve universal primary education
• Promote gender equality and empower women
• Reduce child mortality
• Improve maternal health
• Combat HIV/AIDS, malaria, and other diseases
• Ensure environmental sustainability
• Develop a global partnership for development

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Table 1.1 Millennium Development Goals and
Targets for 2015

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Table 1.1 Millennium Development Goals and Targets
for 2015 (cont’d)

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1.5 Conclusions

• The importance of Development Economics

• Inclusion of non-economic variables in
designing development strategies
• Achieving the Millennium Development
Goals
• “…One future-or none at all”

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Concepts for Review

• Absolute Poverty • Gross national income

• Attitudes (GNI)
• Capabilities • Income per capita
• Developing countries • Institutions
• Development • Less developed countries
• Development economics (LDCs)
• • Millennium Development
Freedom
• Goals (MDGs)
Functionings • More developed countries
• Globalization (MDCs)
• Gross domestic product • Political economy

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Concepts for Review (cont’d)

• Self-esteem
• Social system
• Subsistence economy
• Sustenance
• Traditional economics
• Values

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