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Chap 9 Development
Definition
Michael Todaro's definition -- development
should be perceived as a
multidimensional process involving the
reorganization and reorientation of
entire economic and social systems
Breakdown
• multidimensional process – not just
economic
• reorganization and reorientation -- implies
that development is a dynamic process that is
continuous
• entire economic and social systems -- this
means that increased Women's rights in the
United States can be a form of development.
What about minority rights or gay rights?
What about democracy in a Third World
nation?
Creative Destruction
In Capitalism, Socialism and Democracy, Schumpeter
popularized and used the term to describe the process of
transformation that accompanies radical innovation.[2] In
Schumpeter's vision of capitalism, innovative entry by
entrepreneurs was the force that sustained long-term
economic growth, even as it destroyed the value of
established companies and laborers that enjoyed some
degree of monopoly power derived from previous
technological, organizational, regulatory, and economic
paradigms.
http://www.answers.com/topic/creative-destruction
In a Nutschell: http://bigthink.com/videos/creativedestruction-from-genesis-to-picasso-to-applecomputers-2
•
http://www.youtube.com/watch?v=IaIek5MQ6Hs
Creative Destruction?
http://www.youtube.com/watch?v=siJF_jvcmN0
Capitalism or Corporate Welfare???
http://www.scpowerteam.com/advantages.aspx
Jury Still out.
http://edq.sagepub.com/content/15/1/90.short
Development
Rubenstein’s Definition:
A process of improvement in the material
conditions of people through diffusion of
knowledge and technology.
Note this only deals with economic
development – material goods
Development
Indirectly Rubenstien implies development
includes Economic, Social, and
Demographic Characteristics
As will be seen throughout this Chapter
9.1 & 9.5
Index City – Many ways to divide the world
into “North” (developed) and “South”
(developing)
Human Development Index:
Ordinal Combination of
1. Economics -- Measure of GDP (Gross Domestic
Product)
2. Education -- Literacy Rate and Amount of
Education
3. Demographics – Life Expectancy (Health)
Human Development Index (HDI)
Human Development Index (HDI)
Calculation Example
Go to example
U:/Lecture 1/HDI Index.xls
Recent HDI Results
Variation on HDI
• Difference: Subtract from the HDI Ranking
the Per Capita GDP Ranking
– basically how well are you doing (HDI) versus
your economic potential (per capita income)
• Note how Africa Shows a different pattern
then simply HDI, also notice the North
American Variation
Red represents poor use of
Economic Potential Green above
average use Beige as neutral
Difference in Africa
HDI Measure
HDI Rank
minus Wealth
Rank
Algeria & Madagascar Reverse Patterns – Appears
Madagascar uses its limited wealth more wisely
Note the USA Position
Criticism (Blah Blah Blah – for those who want to know)
HDI for a sample of 150 countries shows a very high correlation with logarithm of GDP per capita.
The Human Development Index has been criticised on a number of grounds, including failure to include any
ecological considerations, focusing exclusively on national performance and ranking, not paying much attention
to development from a global perspective and based on grounds of measurement error of the underlying
statistics and formula changes by the UNDP which can lead to severe misclassifications of countries in the
categories of being a 'low', 'medium', 'high' or 'very high' human development country. [22] The index has also been
criticized as "redundant" and a "reinvention of the wheel", measuring aspects of development that have already
been exhaustively studied.[23][24] The index has further been criticised for having an inappropriate treatment of
income, lacking year-to-year comparability, and assessing development differently in different groups of
countries.[25]
Economists Hendrik Wolff, Howard Chong and Maximilian Auffhammer discuss the HDI from the perspective of
data error in the underlying health, education and income statistics used to construct the HDI. [22] They identify
three sources of data error which are due to (i) data updating, (ii) formula revisions and (iii) thresholds to classify
a country’s development status and find that 11%, 21% and 34% of all countries can be interpreted as currently
misclassified in the development bins due to the three sources of data error, respectively. The authors suggest
that the United Nations should discontinue the practice of classifying countries into development bins because
the cut-off values seem arbitrary, can provide incentives for strategic behavior in reporting official statistics, and
have the potential to misguide politicians, investors, charity donators and the public at large which use the HDI.
In 2010 the UNDP reacted to the criticism and updated the thresholds to classify nations as low, medium, and
high human development countries. In a comment to The Economist in early January 2011, the Human
Development Report Office responded[26] to a January 6, 2011 article in the magazine[27] which discusses the Wolff
et al. paper. The Human Development Report Office states that they undertook a systematic revision of the
methods used for the calculation of the HDI and that the new methodology directly addresses the critique by
Wolff et al. in that it generates a system for continuous updating of the human development categories whenever
formula or data revisions take place.
Each year, UN member states are listed and ranked according to the computed HDI. If high, the rank in the list can
be easily used as a means of national aggrandizement; alternatively, if low, it can be used to highlight national
insufficiencies. Using the HDI as an absolute index of social welfare, some authors have used panel HDI data to
measure the impact of economic policies on quality of life.[28]
Ratan Lal Basu criticises the HDI concept from a completely different angle. According to him the Amartya SenMahbub ul Haq concept of HDI considers that provision of material amenities alone would bring about Human
Development, but Basu opines that Human Development in the true sense should embrace both material and
moral development. According to him human development based on HDI alone, is similar to dairy farm economics
Another index
http://www.transparency.org/files/content/pressrelease/CPI2013_map-and-countryresults_english_embargoed.pdf
9.2 Standard of Living: Economic
Indicators
Gross Domestic Product per captia
• Gross Domestic Product (GDP) = all
goods and services produced in a country
in one year measured usually in US $
• GDP per capita = GDP/ total population
• All kinds of problems with these measures
not the least being every fluctuating
exchange rates between foreign
currencies and US $
Recent Change In Euro and
Dollar
http://www.usforex.com/exchangerate/?cid=890&kid=2513&mkwid=scDVJZTAQ&pdv=c&pcrid=39630699448&gclid=CMzEocT737oCFe
h0QgodOGMAqQ
GDP Percapita for an unknown year
Economic Structure:
Development and Job Type
• Less Developed more primary employment
– Agriculture, logging, primary resource extraction
• More Developed more secondary employment
– Manufacturing – think China today
• Most Developed more tertiary & quarternary
– More Tertiary Service jobs (as well as Quarternary
Information based jobs – also referred to as IT or
Information Technology
As development occurs employment type migrates from
primary to secondary to tertiary (and today to quarternary jobs)
Secondary – Manufacturing Value added per worker
9.3 Education
% Enrolled in School
Percent of Adults that are Literate
9.4 Health
% Undernourished
Health Care Expenditures
But who is
healthier – show of
hands
COLUMN ONE : Diagnosis: Healthier in Europe : By most
standards, Western Europeans are in better medical shape than
Americans. And costs are sharply lower. But bureaucracies and
under-the-table payments mar the system.
http://articles.latimes.com/1992-12-30/news/mn-2582_1_health-care-system/2
Gender Specific
Measures
9.5 Two Gender Based
Measures
• Gender-related Development Index (GDI)
– Compares income, literacy, and life
expectancy across genders
• Gender Empowerment Measurement
(GEM)
– Compares ability of women to men in
participation in economic and political matters
GDI – How well are women
provided for?
College comparison by gender
Literacy Rate female to males
Incomes relationship
Percent of seats in national legislature
How many women are seen here
in the EU Parliament?
GOP Wave Yields More Racially Diverse Congress,
But No Gains for Women
By HUMA KHAN and DEVIN DWYER
Nov. 5, 2010
Come January, the halls of Congress will be filled with dozens of new
Republican members, many of whom will help make the chamber
more diverse than it was before.
By numbers alone, the Congress that will meet in 2011 will be slightly
more racially and ethnically mixed than the current one, according to
an ABC News analysis of the election results. But the vast majority of
representatives in Washington will continue to be white, straight
men…. while women candidates faced mixed results, leaving their
overall representation in Congress flat or declining
http://abcnews.go.com/Politics/vote-2010-election-results-racially-diverse-congress-gains/story?id=12060145
9.6 Two Paths of Development
For a more complete
discussion of this area see
the additional Power Point
we used in class Chap 9 -Development -- How to &
Rostow's 5 Stages
Key Concepts
• Self-sufficiency erects barriers to trade – all
equally well-off/poorly-off – equality by design
• International trade path allocates scarce
resources to few activities – some get rich
before others – division of wealth by design
http://www.theatlantic.com/china/archive/2013/09/
mapping-chinas-income-inequality/279637/
Bolivia And Trade
• The economy of Bolivia is the 95th
largest in the world
• Lower Middle Income country.
• Human Development Index 0.663
ranked 108th (medium human
development).
• The Bolivian economy has had a
historic pattern of a single-commodity
focus. From silver to tin to coca
Tin Mining
As Development Goes Up
Population Growth Slows
9.7 World Trade
Foreign Direct Investment (FDI)
9.8 Financing Development
Debt Service By LDCs
New Kid
on the
Block
China’s investment in
Africa & elsewhere
9.9 Fair Trade
9.10 Millenial
Goals
Many times referred to as the
North-South divide – almost
all developed countries are in
the Northern Hemisphere
9.10 Millennium Goals
Slowly but surely the
Goals appear to be
obtainable.