SZABIST

WELCOME TO
THE COURSE

OF
ECONOMIC
DEVELOPMENT

BY
MANZOOR ALI ISRAN
1
 Course outline
1. Introduction to the course; Economics, Institutions, and
Development
2. Theories of Economic Development
3. Theories of Economic Development (continued)
4. Hourly 1; Case Study Discussion
5. Historic Growth and Contemporary Development
6. Growth, Poverty, and Income Distribution
7. Growth, Poverty, and Income Distribution (continued)
8. Hourly 2; Case Study Discussion
9. Population Growth; Unemployment
10. Agricultural Transformation and Rural-Urban Migration
11. Education and Development

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1. Hourly 3; Case Study Discussion
2. Trade Theory and Trade Policy Debate
3. Macroeconomic Stabilization and Fiscal Reforms
4. Role of the State in Economic Development; Globalization
5. Final Test

Recommended Text Book

8. Economic Development, Michael P. Todaro, 8th Edition.
Reference Books
10. State, Market and Civil Society, John Martinussen
2. Neoliberalism and Democracy, Arthur MacEWAN
3. Politics and Development, Olle Tornquist.
4. In Defense of Globalization, Jagdesh Bagwati.
5 . Development Thinking at Millennium, Joseph Stiglitz
6. Development Policies in a World of Globalization, Joseph Stiglitz
7. The Natural State: The Political-Economy Of Non-Development, Douglass C. North, John
Joseph Wallis, and Barry R. Weingast
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• Introduction
– Sharp contrast in life style
– Haves and have nots.
• Examples.
– Example of rich
• North American Nuclear Family
• Earning $ 30,000 – 40,000 PM
• Living in comfortable house in the city apartment or
suburban house with small garden.
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• House has separate bedroom for each of the
two children.
• filled with numerous consumer goods/appliances
such as oven, computers/home theatre and etc.
• Most of the items are imported.
• It has mountain imported mountain bikes for kids
to play.
• Family consumes imported fruit from Brazil,
Kenya or Colombia and canned fish from Peru,
Japan & Australia.
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• Bananas from and other tropical fruit from
Central America.
• Both Children have access to good
education and health facilities.
• The life expectancy of the family is 72-76
years.
• Family because of strong financial position
is in position to sustain inflationary or
recessionary economic pressures.
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• Because of their high social status they
are in position to stroll, walk, breathe clean
air, drink pure mineral water. Overall
family lives in good environmental
conditions.

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Poor Family
• In contrast to what have discussed previously,
let us have a look at Asian Family:
• Average Asian family comprise 10 members.
– Parents, five to seven children, in some cases, eleven
children, two grand parents and some aunts and
uncles.
– They have annual income of $ 700 to 800 annual.
– They live one-room house.
– All the family members must work all the day to
survive.
– None of the adult can read and write.

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• Only one child goes to school and the rest
work either in sweatshops or restaurants
as daily wagers.
• And that can not proceed beyond three or
fours years of primary education.
• House has no electricity, sanitation or
drinkable water.
• Family even can not afford to get basic
Medicare.
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• Another view
• Suppose that we are visiting large and beautiful city situated along the coast
of South America.

• And there is another poor dwelling few hundred meters away from that
metropolis.

• The wealthy family lives in multi room complex on the top floor of modern
building overlooking the sea while poor family is cramped tightly into a small
makeshift shack or squatter slum on the hill behind that seafront building.

• For the illustrative purpose, let us assume it is sat. evening and family is
preparing for dinner.

• In the ABC apartment, a servant is setting table with expensive imported

china, high quality silverware and the fine Lenin.

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• Russian salads and French hors d’oeuvers and Italian wine will constitute the first of
several courses.

• Family first son is back home from his university in North America and the other two
children are on vacation from boarding schools in France and Switzerland.

• Father is prominent surgeon.

• His clientele consists of wealthy local and foreign dignitaries and business people.

• In addition to his practice, he owns considerable amount of land in the countryside.

• Annual trips aboard imported luxury cars and the finest fod and clothing are
commonplace amenities for this fortunate family in the penthouse apartment.

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Poor family living in the shanty house.
• Poor family lives in the dirt-floored shack on the side of
the hill.
• They can view see but it is not that much relaxing as it is
for the rich family.
• The stench of sewers make that enjoyment remote.
• There is no dinner table being set.
• Seven illiterate children spend their time on the streets
begging for money, shining shoes and stealing.
• Family income is not more than $200 per year.

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• This fleeting glimpse of the at life in different parts of the world, rich
and poor raises many question.

• Why one part is so rich and other so poor?

• Can traditional low-income, subsistence societies be transformed

into modern high productivity high income nation?

• To what extent the development aspiration of the poor helped or

hindered by the economic activities of the rich nations.

• By what process and under what conditions do rural subsistence

farmers in the remote regions of Nigeria, Brazil or Pakistan evolve
into successful commercial farmers.

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Some critical questions
• Apart from that so many other question such as variation in the standard of
living, health, nutrition, education, employment, population growth and life
expectancy can be asked on the basis of very superficial look at life around
the world.

– What is the real meaning of development, and how can different

economic concepts and theories contribute to a better understanding
of the development process.
– What are the sources of national and international growth.
– Which are the most influential theories of development. Is
underdevelopment internally or internationally induced phenomenon?
– What can be learned from the historical record of economic progress
in the developed world? Or the initial conditions similar or different for
contemporary LDCs from what the developed countries faced on the
eve of their industrialisation.

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Some critical questions
1. How can improvement in the role and women have a especially beneficial
impact on development prospects. Do large families make sense in an
environment of wide-spread poverty and financial insecurity.
2. Do Third World Educational system really promote economic development
or simply a mechanism to enable certain select groups or classes of
people to maintain the position of wealth and power and influence
3. As 60% to 70% of many LDC population still reside in rural areas, how can
agricultural and rural development best be promoted? Are agricultural
prices are sufficient to stimulate food production, or are rural institutions
changes (land, redistribution, roads, transport, education, credit, etc) also
needed.
4. What do we mean by environmentally sustainable development ? Are
there serious economic costs of perusing sustainable economic
development as opposed to simple output growth, and who bears the
major responsibility for global environmental damage – North South.

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Some critical questions
1. Is international trade desirable from point of view of development of poor
nations? Who really gains from trade and how the advantage distributed
among nations?
2. Should export of the primary good be promoted or should all LDCs attempt
to industrialize by developing their own heavy manufacturing industries as
rapidly as possible.
3. How do developing nations get into such serious foreign debt problem,
and what are the implications of this debt for the economies of less
developed countries.
4. When and under what conditions should LDC government adopt a policy
of foreign-exchange control, raise tariffs, or set quotas on the importation
of certain non-essential goods in order to promote their own
industrialisation or to ameliorate chronic balance of payment problems.
What has been the IMF stabilisation programme and World Bank
stabilisation programme lending on balance of payment & growth of LDC.

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Some critical questions

• Should large multinational corporations be encouraged to invest in the

economies of poor nations, and if, under what conditions? How have the
emergence of the “global factory” and globalisation of trade and finance
influenced international economic relations.
• What is impact of foreign economic aid from rich countries? Should
developing countries continue to seek such aid, and if so, under what
conditions and for what purposes? Should developed countries continue to
offer aid, and if so, under what conditions and for what purposes?
• Are free markets and economic privatisation the answer to development
problems of developing countries, or Third World governments have major
role to play in the their economies.
• What is the role of financial and fiscal policy in promoting economic
development? Do large military expenditure stimulate or retard economic
growth?

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Some critical questions

1. What are the most significant issues

facing the developing world in the twenty
first century? Will greater global
interdependence between the first and
Third World nations or hinder
development prospects.

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• Nature of Development Economics.
– It is the science through which material
(food, shelter, and clothing) and non-
material (education, knowledge and spiritual
fulfilment) are realized.
– What study Development Economics? Some
critical questions.

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• What do we mean by Development
– Traditional approach
– New approach
• Core values
– Sustenance – the ability to meet basic needs
– Self Esteem – To be a person with self
respect.
– Freedom from servitude – to be able to
choose.

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• Three objective Development Economics.
1. To make and increase the availability of and widen
the distribution of basic life-sustaining goods such
as food, shelter, health and protection.
2. To raise level of living by providing more jobs and
education while paying greater attention to cultural
and humanistic values.
3. To expand the range of economic and social
choices available to individual or nation by freeing
them from the servitude and dependence in relation
to others.
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• Conceptualisation of Development
• Understanding Development
• Neoclassical conception of Development
• Development was restricted to growth.
• Moreover, It was defined as “process whereby the real per capita income
of a country increased over a long period of time while simultaneously
poverty is reduced and the inequality in society is diminished”.

• Later on in the wake of growing criticism of the conception of the

development and the policies of the World Bank and IMF, the conception
was little bit altered and new strategy was adopted ---
• Basic Need or redistribution with growth.
• This was called Trickle Down/Trickle down plus

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• Late conception of Development forwarded by Amartya Sen, Paul
Streeten and Muhbool Haq and contained in the Human
Development Report 1990
• In contrast to the previous conception of the development, it was
seen as
• “Enlargement of the choices of People”
• It concentrated around three choices:
– The opportunity to lead a long and healthy life
– The opportunity to acquire knowledge
– And the opportunity to have access to resources needed for
decent standard of living

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• Latter addition
– Political Freedom
– Human rights
– Human Development for women and men
– Environmental and other aspects of sustainability
– Themes regarding citizen’s participation and opportunities to
affect the political decision in society.
– It was quite paradigm shift and this new paradigm called
“PARADIGM FOR SUSTAINABLE DEVELOPMENT’ or it was
just like Development by People.

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• Amartya Sen’s conception of Development
– Development as freedom – Virtuous Circles
– It consists of five freedoms
• Political freedoms
• Economic facilities
• Social opportunities
• Transparency guarantees
• Protective security
• Each of these distinct types of rights and opportunities helps to advance the
general capability of a person.
• Public policy to foster human capabilities and substantive freedoms in
general can work through the promotion of these distinct but interrelated
instrumental freedoms.

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• Dudley Seers, a British Development Economist, advocated ‘growth
fetishism’ with social development.
• He raise a three question to measure the level of development.
– What has been happening to poverty?
– What has been happening to unemployment?
– What has been happening to inequality?

• According to him if all three of thee have declined from

high level then there has been development.
• And if any one of these three growing worse then it
would be strange to call the result development.

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• Theories of Development
– Modernist ion Theory
– Dependency Theory
– Dialectical Modernization Theory
– Capacity building and development by people
– Development and security.

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• Actors of Development
– State
– Market
– Civil Society/NGO

• Approaches to Development
– Top Down/Bureaucratic
– Bottom up or People-centred.
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