Introducing to Economic Development for students

Introducing EconomicDevelopment: A Global
Perspective

Introduction
• Two pictures of the developing world compete in the media for the
public’s
attention.
• The first is misery in places such as rural Africa or unsanitary
and
overcrowded urban slums in South Asia.
• The second is extraordinary dynamism in places such as coastal
China. Both pictures convey important parts of
the great development drama.

Introduction to Some of the World’s Biggest Questions
• Why do living conditions differ so drastically for people across different countries and regions, with some so
poor and others so rich?
• Why are there such disparities not only in income and wealth, but also in health, nutrition, education, freedom
of choice, women’s autonomy, environmental quality, access to markets, security, and political voice?
• Why is output per worker many times higher in some countries than others? Why do workers in some countries
have fairly secure, formal jobs with regular, predictable pay, while in other countries such jobs are extremely
scarce and most work in informal settings with fluctuating and insecure earnings?
• Why are populations growing rapidly in some countries, while on the verge of shrinking in others?
• Why are public services so inefficient, insufficient, and corrupt in some countries and so effective in others?
• Why have some formerly poor countries made so much progress, and others so comparatively little?
• How have child illness and death rates fallen so much in the world, and what can be done in places where they
remain far higher than average?
• How can we measure the impacts that government policies and nongovernmental organisation (NGO)
programmes make in improving the well-being of the poor and vulnerable; and what lessons have we learned?
• And how did such great divergences across countries come about?
• How does history matter?

• Development The process of improving the quality of all human lives and capabilities by
raising people’s levels of living, self-esteem, and freedom.
• This text examines what lies behind the headline numbers, to appreciate the historical sweep
of development patterns, presenting the necessary analytic tools and the most recent and
reliable data—on challenges ranging from extreme poverty to international finance.
• This text examines key challenges faced by the spectrum of developing economies, from the
least developed countries to upper-middle-income nations striving to reach fully developed
status.
• While significant progress in public health has occurred in almost all countries, even today the
living standards of hundreds of millions of the world’s poorest people have benefited little, if
at all, from the rising global prosperity.

How Living Levels Differ Around the World
• Average living conditions differ drastically, depending largely on where a person was born.
• Often, countries as a whole are divided into four groups based on their average levels of
income or other standards of well-being, introduced in the following section.
• to get a sense of the scope and individual meaning of these differences, consider brief sketch
of four “stylised strata” of living standards around the world.
• Living standards strata Stylized sets of material living conditions; the 4-strata schema was
created by Hans Rosling.

The 4-strata schema was created by Hans
Rosling

Level 1
• At the “bottom,” more than one billion people live in extreme income
poverty, or suffer acute multidimensional deprivations in areas such as
nutrition, health, and primary education, or both.
• The World Bank estimated in 2017 that 768.5 million—nearly three-
quarters-of-a-billion people—subsist below the extreme poverty
income line of $1.90 per day adjusted for purchasing power (so it is
actually like living on this amount in the United States)
• A typical person living in such extreme income poverty subsists on
about $1.40 per day.
• In 2018 the United Nations estimated in its ‘Multidimensional Poverty
Index’ that nearly 1.3 billion people live with acute deprivationsin
health.

• One of the poorest communities may live in a remote rural area in the eastern part of Africa,
where many clusters of small houses contain groups of extended families.
• A majority of the food is grown by the people who consume it; and shelter and furnishings are
often made by those who use it—theirs is nearly a subsistence economy.
• Subsistence economy An economy in which production is mainly for personal consumption
and the standard of living yields little more than basic necessities of life—food, shelter, and
clothing.
• In western Africa the geography, culture, and languages are different, but many of the
conditions of poverty are strikingly similar.
• Such dire poverty can also still be found in areas of South Asia and elsewhere.
• More than three quarters of the extreme poor live in rural areas.

Level 2
• A typical person in the second-lowest of the “strata” is not officially classified as extremely
poor, though from the perspective of an average person in a rich country they would be
viewed as very poor indeed.
• a typical family in this stratum may live on about twice that line, $3.80 per day per person.
• Close to 3 billion people may be thought of as living in this stratum.
• They are almost as likely to live in an urban area (or nearby lower-income peri-urban area) as
in a rural area.
• Their employment is probably informal, in companies not registered and without worker
protections, or in their own small family enterprises.
• People in this strata likely suffer from one or more components of multidimensional poverty,
though for at least 80% of them the number of their deprivations are not enough for them to
be officially classified by the UN as “multidimensionally poor” (Chapter 5).

Level 3
• A typical family in the second-highest of the strata may live on about $15 per person per day.
(More than three-quarters of the world lives on less than $15 a day; this family is considered
solidly middle income by global standards.)
• More than two billion people may be thought of as living in this strata.
• Such families typically live in urban areas, but their jobs are usually not very stable and are
often informal.
• The Children probably attend some post-primary school, though they are unlikely to complete
it.
• Their city is likely to exhibit very high inequality, with sharp contrasts in living conditions from
one section of this sprawling metropolis to another.

Introducing to Economic Development for students

Level 4
• Close to a billion people live on the highest stratum, which most other people in the world
consider rich.
• A family in this stratum living in North America, Western Europe, or Japan might live on an
income of perhaps $75 per person per day. They work in formal jobs, generally with at least
some protections.
• They may have a comfortable suburban house that has a small yard with a garden, and two
cars.
• Both children would probably be healthy—except for a growing incidence of obesity and the
problems it brings—and generally get good medical care if they need it.
• They would be attending school, where most would expect to complete their secondary
education and, more likely than not, gain at least some post-secondary education; choose
from a variety of careers to which they might be attracted; and live to an average age of close
to 80 years.

How Countries Are Classified by Their
Average Levels of Development: A First Look
1. Countries are often classified by levels of income and human development, as we examine in
detail in the next chapter.
2. They are also grouped by levels of poverty, quality of governance, and many other
dimensions, as we will see later in the text.
3. The World Bank classifies countries according to four ranges of average national income:
Low, Lower-Middle, Upper-Middle, and High.
4. Of the world population of about 7.7 billion people in 2018, about 16% live in high-income
countries (HICs).
5. These countries have Gross national income (GNI) per capita of at least $12,056.
6. Gross national income (GNI) The total domestic and foreign output claimed by residents of
a country, consisting of gross domestic product (GDP) plus factor incomes earned by foreign
residents, minus income earned in the domestic economy by nonresidents.

1. After unprecedented growth in China, India, and Indonesia—each formerly a Low-Income
Country (LIC)—more than 60% of the world’s people now live in “middle-income countries.”
2. Low-Income Country (LIC) In the World Bank classification, countries with a GNI per capita
of less than $996 in 2018.
3. To be classified as upper-middle income (UMCs) in 2018, a country needed GNI per capita
between $3,896–$12,055.
4. Upper-middle income countries (UMCs) In the World Bank classification, countries with a
GNI per capita between $3,896 and $12,055 in 2018.
5. Lower-middle income countries (LMCs) have annual per capita GNI between $996–$3,895.
6. Lower-middle income countries (LMCs) In the World Bank classification, countries with a
GNI per capita incomes between $996 and $3,895 in 2018.
7. About three-quarters-of-a-billion people—roughly 10% of the world’s population—live in
LICs, with GNI per capita below $1,026.

1. The United Nation’s designation of “least-developed countries” is similar to LICs; for
inclusion, a country has to meet criteria of low education and health, and high economic
vulnerability, as well as low income.
2. Just over a billion people live in these 49 countries.
3. At the opposite end are the highest-income developed countries that are members of the
Organization for Economic Cooperation and Development (OECD), primarily in West Europe
and North America, plus Australia, New Zealand, Japan, and South Korea.
4. As recently as 1990, over half of the global population lived in low-income countries.
5. Several other countries have also joined the middle-income country groups since the 1990s.
6. Recognizing that well-being cannot be measured by income alone, the United Nations
Development Programme (UNDP) classifies countries taking account of their health and
education attainments in addition to income, in its Human Development Index (HDI).

1. A major theme of this text is understanding why incomes have grown so rapidly in some of
the countries that, until only a few decades ago, were among the poorest in the world,
including China.
2. Why other countries have grown very slowly, and continue to have high rates of extreme
poverty and deprivation.
3. The rankings of countries in these income and human development classifications differ,
sometimes to a substantial degree, as we will see in the next chapter.

Economics and Development Studies
Wider Scope of Study
1. 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 extreme
poverty.
2. The scope of development economics and the work that development economists do is
much broader than the name might suggest.
3. Development economics incorporates research in political economy and institutional,
behavioural and experimental economics; it overlaps and links with other subfields including
labour, public, urban, agricultural, environmental, and international economics.
4. In addition to traditional topics in economics such as the efficient allocation and growth of
productive resources, development economics must also address the economic, social,
political, and institutional mechanisms, both public and private, necessary to bring about
rapid (at least by historical standards) and large-scale improvements in levels of living.

1. Government role and some degree of coordinated economic decision making directed toward
transforming the economy are usually viewed as essential components of development economics.
2. The fact that both governments and markets typically function less well in low- and middle-income
countries than in high-income countries (HICs).
3. High-income countries (HICs) In the World Bank classification, countries with a GNI per capita
above $12,055 in 2018.
4. The geographic scope of development studies is generally considered to be most of Asia; sub
Saharan Africa, the Middle East and North Africa; Latin America and the Caribbean; and often the
formerly Communist transition economies of East and Southeast Europe.
5. Development economics must be eclectic, attempting to combine relevant concepts and theories
from traditional economic analysis with new models and broadermultidisciplinary approaches,
including studies of the historical and contemporary development experiences of countries
throughout the world.
6. The ultimate purpose of development economics, however, remains unchanged: to help us
understand how to improve the lives of the global population.

The Central Role of Women
1. Globally, women tend to be poorer than men; they are also more deprived in health,
education and in freedoms in all its forms.
2. women in developing countries have primary responsibility for child rearing and the
resources that they are able to bring to this task will determine how readily the cycle of
transmission of poverty from generation to generation can be broken.
3. most development specialists conceive of development as a multidimensional process
involving major changes in social structures, popular attitudes, and national institutions, as
well as acceleration of economic growth, reduction of inequality, and poverty eradication.
4. Institutions : Constitutions, laws, regulations, social norms, rules of conduct, and generally
accepted ways of doing things. Economic institutions are “humanly devised” constraints that
shape human interactions, including both informal and formal “rules of the game” of
economic life in the widely used framework of Douglass North.

• Development represents the whole gamut of change by which a social system, tuned to the
diverse basic needs and evolving aspirations of individuals and social groups within that
system, moves away from a condition of life widely perceived as unsatisfactory toward a
situation or condition of life regarded as materially and spiritually better.
• Social system The organisational and institutional structure of a society, including its values,
attitudes, power structure, and traditions.
• No one has identified the human goals of economic development as well as the Nobel
Laureate Amartya Sen, perhaps the leading thinker on the meaning of development.

The Meaning of Development: Amartya Sen’s
“Capability” Approach
1. Amartya Sen, winner of the 1998 Nobel Prize in economics, argues that “capability to
function” is what really matters for status as a poor or non-poor person.
2. Sen argues that poverty cannot be properly measured by income or even by utility as
conventionally understood; what matters fundamentally is not the things a person has—or
the feelings these provide—but what a person is.
3. To make sense of the concept of human well-being in general, and poverty in particular, we
need to think beyond the availability of commodities and consider their use: to address what
Sen calls functionings.
4. Functionings : What people do or can do with the commodities of given characteristics that
they come to possess or control.
5. Freedom of choice, or control of one’s own life, is itself a central aspect of most
understandings of well-being.

• Sen identifies five sources of disparity between (measured) real incomes and
actual advantages:
1. personal heterogeneities, such as those connected with disability, illness, age, or
gender.
2. environmental diversities, such as heating and clothing requirements in the cold or
infectious diseases in the tropics, or the impact of pollution.
3. variations in social climate, such as the prevalence of crime and violence, and “social
capital.
4. distribution within the family—economic statistics measure incomes received in a
family because it is the basic unit of shared consumption, but family resources may be
distributed unevenly, as when girls get less medical attention or education than boys
do.
5. differences in relational perspectives, meaning that some goods are essential because
of local customs and conventions.

1. In a richer society, the ability to partake in community life would be extremely difficult
without certain commodities.
2. Looking at real income levels or even the levels of consumption of specific commodities
cannot suffice as a measure of well-being.
3. Sen goes on to note that functioning depends also on:
1. Social conventions in force in the society in which the person lives,
2. the position of the person in the family and in the society,
3. the presence or absence of festivities such as marriages, seasonal festivals and other occasions such as funerals,
4. the physical distance from the homes of friends and relatives
4. In the case of nutrition, the end is health and what one can do with good health, as well as
personal enjoyment and social functioning.
5. The capacity to maintain valued social relationships and to network leads to what James
Foster and Christopher Handy have termed external capabilities, which are “abilities to
function that are conferred by direct connection or relationship with another person.

1. As Sen stresses, a person’s own valuation of what kind of life would be worthwhile is not
necessarily the same as what gives pleasure to that person.
2. Consider functionings as resulting from choices, given capabilities -> The functioning of a
person is an achievement.
3. Sen suggests that subjective well-being is a kind of psychological state of being—a
functioning— that could be pursued alongside other functionings such as health and dignity.
4. Sen then defines capabilities as “the freedom that a person has in terms of the choice of
functionings, given his personal features (conversion of characteristics into functionings) and
his command over commodities.
5. Sen’s perspective helps explain why development economists have placed so much emphasis
on health and education, and more recently on social inclusion and empowerment and have
referred to countries with high levels of income but poor health and education standards as
cases of “growth without development”.

1. Real income is essential, but to convert the characteristics of commodities into functionings, in
most important cases, surely requires health and education as well as income.
2. For Sen, human “well-being” means being well, in the basic sense of being healthy, well-nourished,
well-clothed, literate, and long-lived, and, more broadly, being able to take part in the life of the
community, being mobile, being physically secure, and having freedom of choice in what one can
become and can do.
3. Sen’s framework is related to the idea that development is both a physical reality and a state of
mind in which the means for obtaining a better life are secured, following at least three objectives:
1. increasing the availability and widening the distribution of life-sustaining goods such as food,
shelter, health, and protection.
2. raising levels of living, including higher incomes, provision of jobs, better education, and
greater attention to cultural and human values, to enhance material well-being and generate
greater self-esteem.
3. Expanding the range of economic and social choices available to individuals and nations by
freeing them from servitude and dependence both to other people and nation states, and to
ignorance and human misery.

Other perspectives
1. Dudley Seers addressed the meaning of development succinctly in 1969, asking rhetorically,
1. “What has been happening to poverty?
2. What has been happening to unemployment?
3. What has been happening to inequalityIf all three of these have declined from high levels, then beyond doubt this
has been a period of development for the country concerned.
2. In 1971, Denis Goulet asserted, “Development is legitimised as a goal because it is an
important, perhaps even an indispensable, way of gaining esteem.
3. Nobel Laureate in economics W. Arthur Lewis stressed the relationship between economic
growth and freedom from servitude when he concluded that “the advantage of economic
growth is not that wealth increases happiness, but that it increases the range of human
choice.
4. Happiness is a key concern for economic development.

1. Amartya Sen has argued, a person may well regard happiness as an important functioning
for her well-being.
2. Economists have explored the empirical relationship across countries and over time between
subjectively reported satisfaction and happiness and factors such as income
3. The average level of happiness or satisfaction increases with a country’s average income.

Income and Happiness: Comparing Countries

1. The importance of economic development in the developing world, whether the objective is
solely happiness or, more inclusively and persuasively, expanded human capabilities.
2. Not surprisingly, studies show that financial security is only one factor affecting happiness.
3. Happiness researcher Richard Layard identifies seven factors that surveys show affect
average national happiness: family relationships, financial situation, work, community and
friends, health, personal freedom, and personal values.
4. Layard reports that the fraction of people who are not happy and satisfied on average is over
three times as great in Turkey as in Colombia, despite somewhat higher incomes in Turkey at
the time of the study.
5. Many people, throughout the world, from low- to high-income countries, hope that their
societies can gain the benefits of development without losing traditional strengths such as
moral values and trust in others, sometimes called social capital.

1. The government of Bhutan’s attempt to make “gross national happiness” rather than gross
national income its measure of development progress has attracted considerable attention.
2. As the 2010 Stiglitz-Sen-Fitoussi Commission on the Measurement of Economic Performance
and Social Progress put it subjective well-being encompasses different aspects (cognitive
evaluations of one’s life, happiness, satisfaction, positive emotions such as joy and pride, and
negative emotions such as pain and worry); each of them should be measured separately to
derive a more comprehensive appreciation of people’s lives.
3. Following Sen, what people say makes them happy and satisfied as just one among valued
functionings is at best only a rough guide to what people value in life.

The Sustainable Development Goals: A Shared
Development Mission
1. In September 2015, the member countries of the United Nations adopted 17 Sustainable
Development Goals (SDGs), to be achieved by 2030, thereby committing to substantial
achievements in ending multidimensional poverty and improving the quality of life.
2. The resolution affirmed: “We are determined to end poverty and hunger, in all their forms
and dimensions, and to ensure that all human beings can fulfil their potential in dignity and
equality and in a healthy environment.
3. Sustainable Development Goals (SDGs) Successor to the earlier Millennium Development
Goals (MDGs), a set of 17 broad goals, among them to: end poverty and hunger; ensure
healthy lives, quality education, gender equality, water and sanitation, and modern energy;
promote inclusive growth, employment, resilient infrastructure, industrialisation, innovation,
and improved cities; reduce inequality; combat climate change and environmental damage;
and promote peace, justice, and global partnership.
4. The 17 goals span many, although not all, of the widely accepted goals of economic
development.

The 17 Sustainable
Development Goals

1. Goals were assigned 169 targets to be achieved by 2030; some were much more specific
than others.
2. There were also 304 indices to be used to track progress, of which 232 were agreed upon by
the end of 2018.
3. Along with the United Nations, the World Bank, the International Monetary Fund (IMF),
OECD, and the World Trade Organization (WTO), NGOs from developing as well as developed
countries had a voice in their formulation.
4. Compared with previous SDGs, their three underlying principles are new:
1. The universality principle: The SDGs apply to every nation (with action encouraged from every sector).
2. The integration principle: All the goals must be achieved; to do so it is necessary to account for their
interrelationships.
3. The transformation principle: It is not sufficient to take “piecemeal” steps.
5. Sector : A subset (part) of an economy, with four usages in economic development:
technology (modern and traditional sectors); activity (industry or product sectors); trade
(export sector); and sphere (private, public, and nonprofit or citizen sectors)

Global Ambitions: Selected
Targets of the Sustainable
Development Goals*

The Millennium Development Goals, 2000–2015
1. The scope and expanded ambition of the SDGs would not have been possible without the
Millennium Development Goals (MDGs) as a precedent.
2. Millennium Development Goals (MDGs) Precursor to the SDGs adopted by the United
Nations in 2000 to: eradicate extreme poverty and hunger; achieve universal primary
education; promote gender equality and empower women; reduce child mortality; improve
maternal health; combat diseases; ensure environmental sustainability; and develop a global
development partnership. Goals were assigned targets to be achieved by 2015.
3. Until the SDGs, the MDGs were the strongest statement of the international commitment to
ending global poverty.
4. The MDGs assigned responsibilities to rich countries, including increased aid, removal of
trade and investment barriers, and eliminating unsustainable debts of low-income countries

1. The eight MDG goals toward which progress was pledged were: to 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; and develop a global partnership for
development.
2. Some critics argued the MDG targets were not ambitious enough, others argued that goals
were not prioritised; for example, reducing hunger may leverage the achievement of many
of the other health and education targets.
3. when the MDGs measure poverty as the fraction of the population below the $1-a-day line,
this is arbitrary and fails to account for the intensity of poverty— that a given amount of
extra income to a family with a per capita income of, say, 70 cents a day makes a bigger
impact on poverty than to a family earning 90 cents per day.
4. other critics complained about the lack of goals on reducing rich-country agricultural
subsidies, improving legal and human rights of the poor, slowing climate change, expanding
gender equality, and leveraging the contribution of the private sector.

1. The first, “headline” MDG had two targets to be achieved by 2015:
1. to reduce by half the proportion of people living on less than $1 a day ($1.90 inflation-
adjusted).
• The United Nations reported that halving
income poverty was achieved by 2012, largely because incomes rose in China
2. to reduce by half the proportion of people who suffer from hunger.
• The world did not quite halve the hunger rate; although the fraction hungry
fell from about 23% in 1990 to about 12% in 2015, this still left close to 800 million people still
hungry.
2. There was significant progress on enrolments, but the universal goal was not met—
57 million children were still not in primary school in 2015—generally among the
poorest.
3. Under-5 mortality dropped about 41%: progress, but not halved, let alone cut by the targeted two
thirds—a difference meaning nearly 3 million extra child deaths annually.

• Maternal deaths were about halved—but the target three-quarters was not reached.
• The clean drinking water target was met, but the sanitation goal was not.
• Notably, significant progress was made on reducing several diseases, including TB and
malaria.
• Substantial progress would have been made even without official adoption and widespread
use of the MDGs, but they made a significant difference.

Implementing the Sustainable
Development Goals
• There are at least 232 indices intended to track progress, to be measured regularly.
Sustainable Development Goals: Progress and Challenges
1. Progress reports toward achieving the SDGs The United Nations issues annual reports on
progress and challenges toward achieving the SDGs.
2. A common critique is that the goals are not prioritised; for example, reducing hunger may
leverage the achievement of many of the other health and education targets.
1. when the SDGs measure the end of poverty as no one living on less than $1.90 per day, this avoids discussion
about prioritising help for the poor.

Development Policy: The 17 Goals,
and Where They are Examined in
This Text

Some Critical Questions for the Study of Development
Economics
• What are economic institutions, and how do they shape problems and prospects for
successful development? (Chapter 2)
• How can the extremes between rich and poor be so very great? (Chapters 2, 4, and 5)
• What are the sources of national and international economic growth? Who benefits from such
growth and why? (Chapters 3 and 5)
• Why do some countries make rapid progress toward development while others remain
desperately poor? (Chapters 2, 3, and 4)
• Which are the most influential theories of development, and are they compatible? Is
underdevelopment an internally (domestically) or externally (internationally) induced
phenomenon? (Chapters 2, 3, and 4).
• What constraints most hold back accelerated growth, depending on local
conditions? (Chapter 4)
• How can improvements in the role and status of women have an especially
beneficial impact on development prospects? (Chapters 5, 6, 7, 8, 9, and 10)

• With hundreds of millions of people still living in extreme poverty, what are the causes and
what policies have been most effective for improving the lives of the poorest of the poor?
(Chapters 5, 6, 7, 8, 9, 10, and 11).
• With hundreds of millions of people still living in extreme poverty, what are the causes and
what policies have been most effective for improving the lives of the poorest of the poor?
(Chapters 5, 6, 7, 8, 9, 10, and 11).
• With world population approaching 8 billion people, on its way to a projected 10 billion
shortly after mid-century, is rapid population growth threatening the economic progress of
low-income countries? Why do poor families have more children than families that have
moved out of poverty? Does having large families make economic sense in an environment of
widespread poverty and financial insecurity? (Chapter 6)
• With this in mind, why have births per woman (fertility rates) been falling so dramatically
throughout most of the world? But given this, why does world population continue to grow at
a historically rapid rate? (Chapter 6)

• Why are steady, formal jobs—such as many take for granted in rich countries—so scarce in low-
and lower-middle-income countries; and what can be done to promote formal job creation?
(Chapters 5 and 8).
• Many migrants to cities do not find the kind of job they seek, knowing there are more workers
than vacancies; why would they come anyway? (Chapter 7)
• Under what conditions can cities act as engines of productive economic transformation?
(Chapter 7)
• Wealthier societies are also healthier ones because they have more resources for improving
nutrition and health care. But does better health also help spur successful development?
(Chapter 8)
• What is the impact of poor public health on the prospects for human development, and what is
needed to address these problems? (Chapter 8)
• What are the causes of child labour and failures to keep more children in school, and what
policies help address these problems? (Chapter 8)
• As nearly half the people in low- and lower-middle-income countries still reside in rural areas, and
a large majority of those living in extreme poverty are rural, how can agricultural and rural
development best be promoted- (Chapter 9)

• What is meant by “environmentally sustainable economic development”? Are there serious
economic costs for pursuing sustainable development as opposed to simple output growth, and
how is the responsibility for global environmental damage being borne by different countries?
(Chapter 10)
• What is the impact of climate change on low- and middle-income countries, and how are they
responding to adapt and increase their resilience-(Chapter 10)
• What are the roles of markets and governments in economic development, and how is this
contingent on development constraints? (Chapters 4 and 11)
• Why do so many developing countries select such poor development policies, and what can be
done to improve these choices? (Chapter 11)
• What is the role of nongovernmental organisations (NGOs), sometimes called the non-profit
sector? (Chapter 11)
• Who receives the gains from international trade, and can trade be used successfully as an
engine of broad development? What policies can affect this under different circumstances?
(Chapter 12)

• What is meant by globalisation, and in what ways does it affect different countries?
(Chapters 12, 13, and 14)
• What has been the impact of international financial organisations including programmes of
the IMF and the World Bank Group on the growth and stability prospects of low- and middle-
income countries? (Chapters 12 and 13)
• Should exports of primary products such as agricultural commodities and ores be promoted,
or should policy support export diversification- (Chapter 12)
• How do many low- and middle-income countries get into serious foreign-debt problems, and
what are the implications of debt problems for economic development? How do financial
crises affect development- (Chapter 13)
• What is the impact of foreign aid from high-income countries? Should low-income countries
continue to seek such aid, and if so, under what conditions? Should high-income countries
continue to offer such aid, and if so, for what purposes? (Chapter 14)

• What is the role of the financial intermediation in economic development-
(Chapter 15)
• How can financial and fiscal policy help promote development? (Chapter 15)
• What is microfinance, and what are its potential and limitations for reducing
poverty and spurring grassroots development? (Chapter 15)

1. There has been substantial—even dramatic—progress in growth and poverty reduction in
Africa, Asia, and Latin America in the last three decades.
2. Inclusive growth, and the drive to zero-poverty, is not a simple matter of continuing along a
trend line.
3. Many middle- as well as low-income countries face other serious governance challenges
including corruption and repression.
4. Manufactured exports may not be as feasible in an age of robotics and a sudden resurgence
in
protectionism.
5. There remain risks of a repeat of the global financial crisis and great recession of 2007–2009.
6. Environmental problems are growing, through both climate change and domestic
environmental deterioration; and climate change is already presenting new and
unprecedented challenges, particularly in Africa and Asia.

Case Study
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• Create an essay : Comparative Economic Development: Pakistan and Bangladesh

Comparative Economic Development: Pakistan and
Bangladesh
1. Pakistan and Bangladesh make for an interesting exercise in comparative development, in
that the two shared a common national policy in the early years, even if they did not benefit
from it equally.
2. Analysts such as William Easterly have declared Pakistan a leading example of “growth
without development,” with low social indicator for its income and growth.
3. Bangladesh, though still afflicted with many of the social problems found in Pakistan, has
transformed itself from a symbol of famine to a symbol of hope.
4. Bangladesh poor social and economic development in comparison with West Pakistan was a
major impetus behind the independence movement, which complained that Bangladesh was
being drained of tax revenues to benefit West Pakistan.
5. Pakistan has held a lead in per capita income, which was more than 40% higher than
Bangladesh in 2017.
6. there was understandable widespread celebration in Bangladesh in 2014, when Bangladesh
passed the threshold from being a low-income country to reach lower-middle income status.

• Bangladesh has now moved to the lead in the new Human Development Index (HDI) rankings;
in the 2018 update, Bangladesh ranks #136, nine places above on the HDI than predicted for
its income level; while Pakistan, at #150, is 14 places below what would be predicted by
income alone.
• Pakistan remains significantly ahead in average income and Bangladesh continues to have
serious development problems that need to be addressed.
• Bangladesh now also has the conditions for accelerating economic progress in the coming
years, particularly if continuing problems of governance can be overcome.

Output and Income Growth
• PPP-adjusted income estimates vary, but all show average income remains higher in Pakistan
than in Bangladesh ($5,311 in Pakistan in 2017 and $3,677 in Bangladesh according to UNDP
estimates).
• Purchasing power parities (PPPs) are the rates of currency conversion that try to equalise the
purchasing power of different currencies, by eliminating the differences in price levels between
countries.
• In Pakistan, per capita income grew at about 2.2% per year in the half-century from 1950 to 2000.
• Pakistan growth rate declined over time as a result of the poor performance on social indicators,
for example with a less educated cohort entering the workforce.
• From 2000 to 2017, GDP growth in Pakistan averaged 5.1%; with population growth in this period
of 2.1%, per capita GDP growth was about 3%.
• In Bangladesh, GDP growth averaged 6% from 2000 to 2017 (World Bank).
• With a significantly lower 1.3% population growth in this period, per capita GDP growth in
Bangladesh was about 4.7%, outpacing Pakistan in this period

Agriculture
1. Agricultural development proceeded more rapidly in Bangladesh, and the benefits were less
unequally distributed.
2. Social constraints may have been the most important factor holding back agricultural
development in Pakistan.
3. Agricultural growth may also have run into diminishing returns, as irrigated land and human
capital did not grow at the same rate as other factors of production.

Textile and Garment Sectors
• The textile and garment sectors have been central to growth in Bangladesh.
• The outcome was substantially better than many predicted; and the impact of the 2008 global
financial crisis on employment in the sector was also comparatively modest.
• Horrifying mass factory deaths due to fire and building collapse in the early 2010s, such as
the 2013 Rana Plaza disaster that resulted in the loss of nearly 1,200 lives, were caused by
negligence and irresponsibility of owners and put future growth of this sector in jeopardy.
• Work conditions still have plenty of room for improvement, especially for women.

Poverty
• In Bangladesh, 14.8% live below the $1.90 per day poverty line, with 59.2% under $3.20, and
84.5% living on less than $5.50 per day based on 2015 data.
• In Pakistan, income poverty is lower than Bangladesh, with 4% living on less than $1.90 per
day, 34.7% with less than $3.20, and 75.4% less than $5.50 (World Bank WDI, survey data from
2016 and 2015 respectively).
• Many factors have contributed to the relatively rapid decrease in extreme poverty in the
country, including the early and quickly disseminating green revolution, the impressive role of
Bangladesh based nongovernmental organisations (NGOs) fighting poverty in rural areas,
opportunities for women’s employment in export industries, and remittances from relatives
working abroad.
• The Multidimensional Poverty Index (MPI) in Pakistan was 0.228, with 43.9% living in
multidimensional poverty; the corresponding figures for Bangladesh were a still-high 0.194
and 41.1% (survey data are from 2012–13 and 2014 respectively in the 2018 HDR statistical
update).

Education and Literacy
1. According to UNESCO, the youth (ages 15–24) literacy rate was 85.6% in Bangladesh but 72.8% in
Pakistan (2014 comparable data).
2. Bangladesh rated as having gender parity, but Pakistan rated as female strongly disadvantaged.
3. The UNESCO comparable (2011) estimates for Pakistan a female literacy rate of just 40% for all
women over the age of 15 (the male rate was 69%), while for Bangladesh there was 53% literacy for
all women over the age of 15 (the male rate was 62%).
4. In Pakistan, about 30 times as many public education dollars are spent per pupil for university
education as for primary school education.
5. Easterly and other analysts such as Ishrat Husain believe that Pakistan’s poor performance on
education and literacy may result from the incentives of the elite to keep the poor from gaining too
much education.
6. Bangladesh has the clear edge in school enrolments; for example, in 2016 Bangladesh had a 69.0%
(gross) enrolment in secondary school, compared with just 46.1% in Pakistan (2018 WDI, Table 2.8).
7. much greater parity in male and female literacy levels in Bangladesh.

Health
• Life expectancy in Bangladesh is now 69 years, compared with only 65 in Pakistan (2012
Population Reference Bureau); but in 1970 life expectancy was 54 in Pakistan and only 44 in
Bangladesh.
• Since 1990, the prevalence of child malnutrition in Bangladesh has fallen from two-thirds to
less than half.
• Child malnutrition remains lower in Pakistan, at about 38%.
• On the eve of independence in 1970, the under-5 mortality rate in Bangladesh was 239 per
1,000 live births; the rate in Pakistan was 180 per 1,000.
• In 1990, the rate in Bangladesh had fallen to 139, and in Pakistan to 122.
• By 2011, Bangladesh under-5 mortality rate falling to 46 per 1,000, but that in Pakistan only to
72 per 1,000 (2013 WDI, Table 1.2 ).

Population
1. After independence in 1971, both countries had an extremely high level of over six births per
woman.
2. In Bangladesh, fertility fell to 2.2 by 2011.
3. Pakistan fertility has fallen only to 3.3 (2013 WDI data), with much of Pakistan’s decline very
recent.
4. The populations were almost identical: Bangladesh had a population of 45 million, and
Pakistan 48 million.
5. Fertility tends to fall as social and economic progress increases.
6. The early and strong emphasis on an effective family planning strategy was an important
factor in the progress of Bangladesh.
7. Bangladesh is the most densely populated country in the world.
8. Bangladesh is more than twice as densely populated, with 1,265 people perkm2 (Pakistan
has 256 perkm2).

Geography
• Tropical and sub-tropical countries such as Bangladesh have done more poorly around the
world, other things being equal.
• Pakistan, though facing some geographic disadvantages, including difficult-to-reach
mountainous
areas, would seem to hold the edge here.
Natural Resources Not an Explanation
• Elites contest control of natural resources, an enclave economy develops with relatively few
strong links to other sectors of the economy, and social spending is crowded out by national
defence expenditures—nominally to ward off external attack, but at least implicitly also to
control the domestic population.
• Pakistan has minimal oil reserves, has to import about four-fifths of its crude oil
requirements, and may have to begin importing natural gas.
• Bangladesh has even fewer natural resources.

Fractionalisation
1. William Easterly and Ross Levine propose that countries with a multitude of social divisions,
ethnic groups, and languages tend to have lower social development and growth rates,
although the result is largely muted if the regime is democratic.
2. Bangladesh is quite homogeneous; as much as 98% of the population is considered ethnic
Bangla (Bengali) and speaks the Bangla language.
3. Pakistan has a very high level of ethnic and language diversity.
4. Pakistan’s official language is Urdu, but it is spoken as a first language by only 7% of the
population (the largest language group is Punjabi, at 48%).
5. The failure to provide a fair allocation of revenues and services and resolve other issues for
one of the largest ethnic groups, the Bangla, led to the division of Bangladesh from Pakistan
in the first place.

Gender Equality
• In Bangladesh, more girls than boys are enrolled in education, while in Pakistan, the
enrolment level of girls is less than three-quarters that of boys.
• But both countries have a male-to-female ratio of 1.05, an indicator of gender inequality
(higher mortality of girls and selective abortion).
• Incomes are still far higher than alternatives such as domestic work, in which women are
often abused; and the factory jobs have offered a way out for hundreds of thousands of
formerly impoverished Bangladeshi women.
• Ongoing risks facing women factory workers were brought into public view with a factory fire
that killed 112 people in November 2012, and a building collapse in April 2013 that killed
1,127 people—the most deadly garment factory disaster in Bangladesh history.
• Conditions do not seem to be much, if any, better in Pakistan; for example, in less-publicized
incidents, more than 300 garment workers died in factory fires in Pakistan in September 2012

Foreign Aid
• Since independence in 1947, Pakistan has been one of the top aid-receiving countries.
• Pakistan was also a major Cold War ally of the United States, but the poor seemed to derive
little benefit from that association.
• Effectiveness in the use of aid may be important, particularly the active involvement of
effective NGOs in Bangladesh, which received directly a significant portion of aid from some
sources.
• The major indigenous NGOs and similar groups in Bangladesh placed a central emphasis on
empowerment of women, and the impacts are generally viewed as having been very
strong.

Governance, Entrenched Elites, and the Role of the Military
1. The military has always played a prominent role in Pakistan, and from 1999 to 2008 the
nation was governed by a military ruler, General Pervez Musharraf.
2. On the other hand, in a heartening sign that democracy is taking firmer root, the May 2013
elections were widely considered fair and represented the first time that Pakistan has seen a
civilian transfer of power after successful completion of a full term in office of a
democratically elected government.
3. Military involvement as the backer of a caretaker government in Bangladesh in 2007 and
2008 was widely viewed as relatively benign, and the country returned to elected civilian rule
in 2009, but political polarisation and violence escalated dangerously in late 2013 and early
2014.
4. in 2017 Corruption Perceptions Index, Transparency International gave poor scores to both
countries, with 32 for Pakistan and an even worse 28 for Bangladesh (out of a possible 100).

Civil Society
1. Bangladesh has one of the most vibrant NGO sectors in the world, the most highly developed
in Asia (Grameen Bank).
2. An indicator of how far Bangladesh has come—both its economy and civil society—is the way it
handled the Rohingya refugee crisis after 750,000 Muslims fled from atrocities and persecution
in Myanmar (Burma) by 2018.
3. If a larger NGO sector could be developed in Pakistan, perhaps led by the many educated
Pakistanis living in the United Kingdom, the United States, and Canada, it might play a similar
catalysing role.
4. Ishrat Husain proposed that Pakistan has experienced an “elitist growth model,” which he
identified as combining a powerful leader or succession of leaders operating without checks
and balances, a bureaucratic class that unquestioningly implements the wishes of the leader,
and a passive and subservient population.
5. The dominance of large landowners over tenants in the social, political, and economic spheres
is all too apparent in rural Pakistan.

Concluding Remarks
• The differences in social development in Bangladesh and Pakistan are not as overwhelming as
would be found in a comparison with Sri Lanka, which has had favourable human
development statistics for its low-income level despite enduring civil conflict, or even as
dramatic as found between low-income states in India, such as the relatively high human
development state of Kerala and the low-development state of Bihar.
• The current development levels of these two countries are not dramatically different. But this
itself is the dramatic finding, given the wide disparity when the countries separated in 1971.

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