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Economic Development, Poverty & Human Development - Conceptual Linkages. Part 1:. Structure of the present lecture. How Poverty and Human Development link up with Economic Development – A historical perspective. The lecture will have two broad parts:. Part 2:. - PowerPoint PPT Presentation
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Economic Development, Poverty & Human Development
- Conceptual Linkages
Structure of the present lecture
The lecture will have two broad parts:
Part 1:
How Poverty links up with Human Development
How Poverty and Human Development link up with Economic Development – A historical perspective
Part 2:
Economic Development: How the notion evolved over time
• Economic history of the modern world started with the Industrial Revolution (17th Century)
• Factory-based industrial production came into being
• Markets expanded : - Division of labour promoted large-scale production. - Larger surplus led to greater capital formation,
investment, production capacity and growth of income
• The economy transformed gradually - From a primarily agricultural to an industrial economy
• Arthur Lewis’ model of Economic Development –
Economic Development: How the notion evolved over time (Contd…)
- Mobilize surplus generated by agriculture.
- Use this surplus to set up industry.
- Shift surplus labour from agriculture to newly set up industry.
- This will set in a process of industrialization and income growth.
Economic Development: How the notion evolved over time (Contd…)
• Experiences of Developed nations broadly matched this story.
• However, country experiences of exactly how agricultural surplus got mobilized and led to industrialization differed.
- Britain, United States of America, Japan and Soviet Russia had model experiences.
• The Capital Growth Paradigm of Economic Development :
Economic Development: How the notion evolved over time (Contd…)
• A higher Saving Rate
• A higher Investment Rate
• A higher Income Growth Rate
• A higher Consumption level for the Nation as a whole
• Experience of countries during the 1960s :
Economic Development: How the notion evolved over time (Contd…)
• The Trickle Down question :
- Does a higher overall income growth rate mean a higher income level for all?
(1) Most developing countries of Asia, Africa & Latin America experienced income growth along with rising income inequality
(2) In most of these countries incidence of absolute poverty increased.
• Simon Kuznets’ hypothesis :
Economic Development: How the notion evolved over time (Contd…)
– With rising per capita income, income inequality rises first and then starts declining after a threshold income level has been crossed.
- Intervention needed to improve income distribution & alleviate poverty of the population.
• Many country experiences corroborated this hypothesis.
• Policy implication of Kuznets’ hypothesis:
• Poverty took up the centre stage of development discussions in late 1970s.
Economic Development: How the notion evolved over time (Contd…)
• Concept of Absolute Poverty in terms of Food Security & Nutritional Inadequacy evolved
• Along with per capita income & income inequality measure, incidence of poverty became a major development indicator of the developing countries of the World.
• In mid 1980s, Professor Amartya Sen enunciated a comprehensive notion of Human welfare in terms of his now famous Entitlement, Capabilities & Functioning concepts.
Economic Development: How the notion evolved over time (Contd…)
• In brief :- Welfare / Well being derives from consumption (of goods & services) - Access to consumption requires Entitlement (in terms of purchasing power for procuring goods & services for
consumption)
- Capabilities (defined in terms of health, access to education, Knowledge & information) helps converting consumption into welfare. - Lack of entitlement / capabilities is defined to be violation of proper Functioning
• In late 1980s, Professor Mahbub Ul Haq, under the auspices of UNDP concretized & implemented Human Development as a measurable concept.
Economic Development: How the notion evolved over time (Contd…)
• As a core concept, Human Development encompasses three basic dimensions :
– Income
– Health– Literacy
• The index of Human Development, which is an aggregation of the component indices, is a macro measure of development or lack of it for a given community of people.
• Many other dimensions such as Gender discrimination, Environment & Ecology, Human Rights, Governance etc. are also thought to be ingredients of Human Development and are brought into the ambit of its discussion and measurement.
Economic Development: How the notion evolved over time (Contd…)
• Human Development, which has income growth & inequality as just one of many dimensions, is clearly a much broader & comprehensive concept of economic development.
How Poverty links up with Human Development
• Originally, Poverty used to be viewed as uni-dimensional relating to inadequacy of income / consumption.
• Typically, a conventional Absolute Poverty measure would count the number of persons in a given community having income / consumption below a threshold level.
• Now Poverty is recognized to be multidimensional. Nutrition, Health, Housing, Clothing, access to Education, Knowledge & Information are regarded as the various relevant dimensions.
• One may define Poverty in respect of each dimension separately and a comprehensive overall measure of poverty may be defined.
• To the extent, components of Human Development constitute poverty dimensions, Poverty & Human Development become closely related notions.