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/creative-destruction-from-genesis-to-picasso-to-apple-computers-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 BeigeBeige 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 Sen-Mahbub 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 to improve dairy farm output. To quote: "So human development effort should not end up in amelioration of material deprivations alone: it must undertake to bring about spiritual and moral development to assist the biped to become truly human."[29] For example, a high suicide rate would bring the index down.A few authors have proposed alternative indices to address some of the index's shortcomings. [30] However, of those proposed alternatives to the HDI, few have produced alternatives covering so many countries, and that no development index (other than, perhaps, Gross Domestic Product per capita) has been used so extensively—or effectively, in discussions and developmental planning as the HDI.However, there has been one lament about the HDI that has resulted in an extending of its geographical coverage: David Hastings, of the United Nations Economic and Social Commission for Asia and the Pacific published a report geographically extending the HDI to 230+ economies, whereas the UNDP HDI for 2009 enumerates 182 economies and coverage for the 2010 HDI dropped to 169 countries. [31][32]

Another index

http://www.transparency.org/files/content/pressrelease/CPI2013_map-and-country-results_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/exchange-rate/?cid=890&kid=2513&mkwid=scDVJZTAQ&pdv=c&pcrid=39630699448&gclid=CMzEocT737oCFeh0QgodOGMAqQ

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 declininghttp://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

Many times referred to as the North-South divide – almost all developed countries are in the Northern Hemisphere

9.10 Millenial Goals

9.10 Millennium Goals

Slowly but surely the Goals appear to be obtainable.