DEVELOPMENT ECONOMY

PLAN
0. Introduction.
Chap. I: Poverty.
Chap. II: The history and key concepts of development economics.
Chapter III: The Major Families of Development Economic Theories.
Chap. IV: Economic development and growth in context of
globalization

BIBLIOGRAPHY

1. BUR GENMEIER, B., Economic Development, Ed. De Boeck, Brussels, 2004.

2. BODSON, P., and ROY, P.-M., Surviving in Developing Countries. Sector Approaches
informal, L'Harmattan, Paris, 2003.
3. DIOUF, M., Debt then adjustment, L'Harmattan, Paris, 2002.
4. GILLIS, M.,Economie du développement, Ed. De Boeck, Bruxelles, 1990.
5. HUGON, P., Development Economics, Ed. Dalloz, Paris, 1989.
6. FRANCESCHETTI, G., FUSETTI, G., SHAMUANA MABENGA, J., For a development
sustainable in Africa of the Third Millennium, Cleup, Padua, 2003.
7. KEITH, G., Development Strategies, Ed. Economica, Paris, 1989.
9. MASHALA BITWAKAMABA, G., Strategies for Reducing Poverty. Dynamics
participatory from the Church and grassroots organizations in the Democratic Republic of Congo, Aleph Edizioni, Florence,
2008.
10. SEN, A., A new economic model. Development, justice, freedom, Odile Jacob, Paris,
2003.
11. STIGLITZ, J. E., WALSH, C. E., LAFAY, J.-D., Principles of Modern Economics, 3rd ed., De
Boeck, Brussels, 2007.
12. TODARO, M.,Introduzione alla economia dello sviluppo,Loescher Editore, Torino, 1993.
13. CASTRO Josué de Castro - "Geopolitics of Hunger" Paris, Social Editions, 1951
"Geography of Hunger", Le Seuil, Paris, 1964.
14. FRANTZ FANON "Black Skin, White Masks" Seuil, Paris, 1952, "The Wretched of the Earth"
land, Editions La découverte. Paris, 1962.
15. DUMONT, R., « Black Africa is off to a bad start.>, Seuil, Paris, 1962.
16. PERKINS D.H, RADELET S. et LINDAUER D. L., Development Economics, 3eOf
Boeck, Brussels, 2008.
0. Introduction

Development economics is both one of the oldest and one of the most
recent branches of economic science. One of the oldest because most of the
the questions it raises were at the heart of the emerging political economy of the late 18th century
century.
One of the most recent because it is only in the 1950s that a field emerges
disciplinary whose practitioners assert its uniqueness: the term
"development economics" does not appear in books and scientific articles as well as in
the course titles, which emerged after the Second World War. It particularly concerns countries in
development (or LDC) that includes three quarters of the world's population. If the
Statistics only imperfectly convey what it means to live in a country in
development, they nonetheless provide some indications. In the United States, life expectancy
at birth is about 78 years. In Peru, it is 70 years, in India 63 years and in Ethiopia
42 years old. In the United States, infant mortality is 7 per 1000 births; in Brazil, it is 31.
for 1000; in Pakistan of 84 per 1000; and in Ethiopia of 116 per 1000. An American does in
average of 12 years of education, while an African does not stay in school for more than 5 years. India, whose
the population is three and a half times higher than that of the United States, has a GDP equal to about 5%
that of the United States. This means that the income per capita in India represents
approximately 1% of American per capita income.
The facts revealed by these statistics, by acting on each other, are at the origin of a
vicious circle. The lack or total absence of education, malnutrition, and insufficient care
medical issues reduce productivity and thus income. Given their weakness
revenues, the populations of developing countries do not have the means to access a better system
of education, to have a better diet or to benefit from better medical care
quality. Life is tough in developing countries. In many African countries, where the standard of living
were already low, the population grew faster than national income, so that income per
tête a baissé. Les conditions de vie ne s’améliorent pas, elles empirent. Dans des pays comme la
In Zambia, life expectancy has decreased by ten years in a decade. In South Africa, more than one
a quarter of the population is infected with the AIDS virus.
The United Nations and the World Bank (bank founded at the initiative of
major industrialized countries after World War II that grant loans to developing countries
group countries into three categories: Low-income countries, where the GNI per capita was below
or equal to $735 in 2002, the high-income countries, whose GNP per capita was above $9076 and the
middle-income countries, where the GNI per capita falls between the two. Low-income countries
are the developing countries (LDCs). Those with high income are classified as developed countries.
As the high value of their income level is linked to their level of industrialization, they are
also qualifies as industrialized countries. In the Western Hemisphere, the United States is present.
one of the richest countries in the world, with a per capita income of $35,060 in 2002, and one of the countries
the poorest in the world, Haiti, whose income per capita was $440 that same year.
The income gap between the various high-income countries (Western European countries, United States
Unis, Canada, Japan, Australia, and New Zealand) has significantly tightened in recent years
in recent years, unlike the gap between the group of high-income countries on one hand and
that of low-income countries on the other hand. However, some signs suggest that a
Change is possible. Some countries have made notable progress in recent years.
years.
First, several countries have left the circle of developing countries to join the new countries.
industrialized, or NPI. This list must include the 'band of four' (South Korea,
Taiwan, Singapore, and Hong Kong). In Korea, barely thirty years after the disaster caused by the war,
South Korea has moved from the category of less developed countries to that of industrial power.
producing not only basic products like textiles, but also automobiles
(Hyundai) or computers, that is to say products that require technological expertise
of quite a high level. The example of Japan is even more impressive, as this country has changed
from middle-income country to that of a very wealthy country. But the success stories
exceptional are not limited to East Asia. Botswana, although it is particularly
touched today by the AIDS epidemic, has managed to maintain a growth rate of over 8%
for thirty years, an extremely impressive world record. India, which has set several
decades to find the path of growth after its independence, has experienced during the ten
In recent years, sustained growth of more than 5%.
Secondly, within developing countries, certain areas have achieved
undeniable progress. From the beginning of the 1960s, around the world, centers of
research in agronomy largely funded by the Rockefeller Foundation) have developed
new species of seeds that, under certain conditions, allow for increased growth
considerably the yields per hectare. The introduction and dissemination of these new seeds,
as well as a significant improvement in agricultural practices, better known as the revolution
changes have led to a significant increase in production. India, for example, has managed to produce
enough food supplies to feed an increasingly large population. It needs
even manages to export to other countries.

Thirdly, even though the statistics regarding life expectancy (62 years old at
Bangladesh at 46 years in sub-Saharan Africa versus 78 years in the United States seems little.
encouraging, they represent a progress for many countries. But these improvements have
also sometimes negative aspects, causing an explosion of the population that is not without
recall the catastrophic scenario described by Malthus

The income and life expectancy in most developing countries are low. A large part of the
The population lives in rural areas and engages in agricultural activities. The lack of equipment
modern equipment like tractors allows farmers to cultivate small plots, of one hectare to
maximum, against more than 50 hectares in the United States. Very often they do not have the means.
to purchase products that are likely to improve productivity, such as fertilizers or pesticides.
On average, we use less fertilizer per hectare than in developed countries. In many
in the country, most farmers do not own land. They cultivate that of an owner in the
framework of a sharecropping contract, under which the owner receives half of the harvest.
In several states, agrarian reforms have allowed for the redistribution of land to peasants.
reforms have been the basis of the remarkable growth of countries like Taiwan or Japan. In
In other cases, in the Philippines and Peru for example, they had more questionable results.
Over the last fifty years, most developing countries have experienced urbanization.
Progressive. The standard of living for city dwellers is higher, mainly due to better access.
to education and healthcare. Due to this contrast between cities and rural areas,
some qualify this type of economy as a dual economy. If there are income gaps
important differences between the urban sector and the rural sector, there are also significant disparities observed.
the interior of the urban sector, where officials and the small number of those who are lucky enough to
working in the industrial sector earn several times the average salary. These high salaries
attract the residents of rural areas, which often results in a high unemployment rate in
urban areas.
Poverty in developing countries partly stems from the lack of resources. These countries experience
of high illiteracy rates and the average duration of schooling is low. Due to the high rates
of population growth, it is necessary to save a lot just to be able to stay
at the same level. The high population growth rate has another effect. It leads to a
considerable increase in the percentage of young people, that is to say, a category of the population that
depends on the income of other people. This makes it even more difficult to improve levels
education. This creates a vicious circle. In general, the less education women have received,
the more children they have. On the one hand, they are undoubtedly less informed about the methods
Family planning and, on the other hand, having children represents an opportunity cost for them.
lower. The more educated women are, the fewer children they have. The growth rate of the
the population is therefore weaker.
Low levels of education and lack of capital often hinder economies.
to equip itself with the most advanced technologies. With a few important exceptions, they
specialize in labor-intensive sectors (requiring a lot of work relative to
the equipment used) and that require unskilled labor, textiles for example. All of these
problems are exacerbated by various institutional failures. The lack of institutions
Solid finances mean that the available capital is unlikely to be invested.
efficient way. The absence of financial markets means that companies are unable to
to procure part of the means they need. The lack of a legal system
quality makes it difficult for creditors to compel their debtors when they refuse to
repay their debts. As a result, capital holders are only willing to lend at rates
high interest rates to account for the risks taken. All these failures create barriers, to
the entry for new businesses that would like to establish themselves and for expansion for the
established companies.
Many developing countries are also characterized by high degrees of inequality. Income, in
despite their low amount, are distributed even more unequally than in the most
riches, thus creating high levels of poverty. Across developing countries, the number of
the poor, i.e. people living on less than 2 dollars a day, was 2.8 billion at the end
the 20th century. The number of people living in extreme poverty - with less than 1 dollar
per day was 1.2 billion.
Some of the inequalities simply result from the law of supply and demand. There exists
an abundance of skilled labor and entrepreneurs: the salaries of non-
qualified workers are therefore weak while skilled labor receives high remuneration.
Some ancient theories were favorable to economic growth. Sir Arthur Lewis, laureate
the Nobel Prize for his work on development economics, believed that what he called the
An excess of labor supply had the effect of keeping wages at a low level and causing
appear to have high profits. Workers, who were paid around the salary of
subsistence, could not save. In contrast, capitalists had this possibility. A
the rise in profits contributed to increasing savings rates. According to Lewis, it was necessary to
proceed with a trade-off between growth and equality. Today, opinions vary:
many economists believe that growth and equality are in fact complementary, like
the Asian 'miracle'.
In this course, we will first address the different aspects of poverty. Then the
historical context and the major families of development theories and finally development
in the context of globalization.
 Chap.1. Poverty

1. Concept, approaches, and definitions of poverty

The concept of poverty is not univocal. Poverty is a vast, complex phenomenon.

partially subjective, which varies over time and depends on abilities and well-being and is in
relating part, as far as it is linked to standards, to comparisons and expectations. The
poverty is felt differently by individuals. "The relativism of the situation of poverty
emanates from the references observed among the different reference groups of individuals, between
the communities, between the countries. This inevitably makes a definition difficult and risky.
unequivocal of poverty.
Poverty has been perceived differently over the ages, according to places or various contexts.
in which we find ourselves. Whether it is absolute poverty or relative poverty, perceptions
that the actors have of their living conditions are essential to understanding the experience of poverty,
its manifestations, as well as its consequences. The focus is therefore on the stakes of the space-
time and the social, economic, and political practices of social actors.
The description of the living conditions of poor populations must be linked to an analysis of
representations of actors. This is why special attention must be given to perceptions
related to poverty and well-being by the various actors, particularly the poorest.
Perception analyses of poverty are either quantitative or qualitative. They are
quantitative when their purpose is to measure, to quantify indicators according to processes
simple or complex statistics. Qualitative ones question the representations and experiences of
populations. The qualitative perception of poverty seeks to define its concrete content in
through certain notions of well-being, prioritization by the poor, risk, security and
material deprivation: not enough money, no job, not enough food, clothes and
housing, insufficient access to health services and drinking water; but they also provide
often considerable importance to aspects such as security, peace, and power
to influence the decisions that affect their lives.
In simple terms, the Encarta encyclopedia defines poverty as 'the situation in which one
find a person who does not have sufficient resources to maintain a normal standard of living
you access it" and the Larousse dictionary defines it in these terms: "Lack of money, of
resources; state of a poor person. Aspect of what denotes a lack of resources.
Many authors, and in particular Irma Adelman, consider poverty to be a state of absolute indigence.
It is relative, and it includes both material aspects and non-material dimensions.
Material poverty consists of a level of income too low to allow for the satisfaction of
fundamental needs in terms of market. However, poverty is not just a state of
material deprivation, but it consists of an inadequate availability of goods and services of an order
social, political and cultural. Stefaan MARYSSE, in accordance with WRESINSKI, defines the
poverty distinguishing it from precariousness which for him is the absence of one or several securities
notably that of employment, allowing individuals and families to meet their obligations
professional, family and social, and to enjoy their fundamental rights. Quoting GILLIS
and others, Stefaan MARYSSE defines the poor as those who consider themselves deprived of advantages
no one can enjoy anything in a society where they judge themselves as an integral part according to their
reference group, in psychological terms, emphasizing the relative and subjective nature
from poverty.
The UN defines poverty based on three criteria:
a low income criterion (based on an average estimate of gross product per capita, less than $1
per day), a criterion for delay in human capital development based on a quality index
of physical life including indicators of calorie intake, health, schooling and
adult literacy and an economic vulnerability criterion including indicators
of agricultural production instability, of the exports of goods and services, of the importance
economics of non-traditional activities, concentration of merchandise exports and
disabilities created by small economic size.

1.1. Poverty as a shortage of means of livelihood

However, from the literature surrounding this concept of poverty, the idea of a situation emerges.
shortage of livelihoods understood as synonymous with lack, absence, insufficiency,
deficiency, deprivation, and misery. The phenomenon thus appears to be of a multidimensional nature and
relative.
Majid Rahnema considers four perceptions of poverty:
a) poverty perceived from the lack of material things: these material things can
being the various forms of indigence, deprivation, hunger, malnutrition, lack of shelter,
disease, access to education, etc. In this dimension, the State has the responsibility to intervene in
through the mechanisms of economic policy, cyclical economics, and social economics.
b) the perception that the person has of herself starting from the deprivation situation in which
it is located: this perception pertains to the subject and their own place in society. The subject tends to
justifying one's situation of poverty, positive or negative, by relying on conditions
independent of his will and situations that are beyond his control, whether they are
metaphysical or dependent on the society in which he lives.
c) the perception that other people have of those considered poor: in this respect
The poverty of a person can be seen by others as a virtue when it represents a choice.
free from living conditions. But, generally speaking, poverty is perceived as something
an abnormality that needs a remedy, a fact of life that should be avoided and can generate
feelings of contempt towards those who are poor.
d) the socio-cultural context: poverty is here linked to lifestyles,
fundamental knowledge that people hold as traditions, mindsets, and
beliefs.

Poverty as a material and psychological state

Starting from the literature on the concept of poverty, we realize that poverty is a state.
material and psychological and some important elements synthesize the understanding of
phénomène : vulnérabilité, inégalité,incapacité de satisfaire les besoins, privation des capacité.
The first element distinguishes between the concept of poverty and that of precariousness which is a
state of vulnerability; vulnerability is an insecurity that becomes 'poverty' when it affects
several areas of existence, when it becomes persistent and compromises, for a
individual, the chances of reassuming his responsibilities and reclaiming his rights by himself,
in the foreseeable future. Vulnerability thus refers to two realities: in relation to the outside, it
represents the means of defense against shocks, tensions, and risks and, internally, it
represents fragility, that is to say, in the case of poverty, the absence of opportunities to cope
to aggression without devastating damage. This situation leads individuals to lose their sense of
the perspective or hope of change. In this context, literature distinguishes: - the poor
Chronicles affected in their capital of endowments in human terms
physical, - the temporary poor who need help to get through a difficult period, and -
the disabled or very elderly people who may slip into poverty. This distinction
emphasizes both the chronic nature and the multidimensional aspect of poverty.
The second element defines the poor as those who feel deprived of the advantages of which
enjoy others in the society where they see themselves as an integral part according to their reference group, in
psychological terms. These definitions considered less strict highlight the relative nature and
subjective poverty: the individual compares their situation to that of their fellow citizens.
The third element defines poverty based on an absolute criterion, this is the case for organizations.
like the World Bank that describes poverty as the inability for an individual, for
a family or a community to meet certain minimum needs: it is about having, of
income, the level of consumption of which the most commonly used indicator is the absolute poverty threshold
1 $ per day per person
The fourth element defines poverty as a state of deprivation of capacities.
basic elements that allow individuals to accomplish a number of things and enjoy the
freedom to lead the life they have the right to wish for and not just a simple weakness of income even
if the absence of these constitutes the main source of deprivation of an individual's abilities.
it emerges that poverty is no longer described solely in instrumental terms of income level and
of human capital.

1. Poverty as inadequacy or deprivation of capabilities

We owe this important innovation to the Nobel Prize in Economics Amartya Sen who makes a
distinction between poverty as income weakness and poverty as inadequacy or
deprivation of abilities. It also highlights the close relationship that exists between the two realities:
For an individual, income is an essential means to develop their capabilities, and the fact
to improve the abilities he has to lead his life, tends to facilitate his possibilities
to increase its productivity and revenue. Not only does access to education and healthcare have
positive consequences on the quality of earning a living, but it increases a person's ability to
earning a living and escaping poverty through income or monetary poverty. This approach to
SEN has contributed to the evolution of the concept of development towards that of human development.
The latter allows us to define poverty today not just as a state of scarcity.
material and distress but also taking into account the complex dimension and
multidimensional nature of individuals' existence through which the phenomenon of poverty or
misery manifests.

1. 1.4. Absolute poverty and relative poverty

In general, in the socio-economic literature related to poverty, a distinction is made between the
absolute poverty of relative poverty. Absolute poverty refers to a pronounced state of deprivation.
both material, intellectual, and symbolic. This approach associates poverty with
strong deficiencies in access to resources, structural shortcomings that manifest as forms
of alienation, exclusion and marginalization of socio-economic groups.
Relative poverty, on the other hand, emphasizes the representations and perceptions that the actors
of their own living conditions. In this context, the criteria for defining poverty are
variables according to the social context, the power relations between actors, social practices and
values that underpin their representations.
Recent work by Amartya SEN tends to view poverty as 'a loss of...
capabilities" and development as a "process of expanding human freedoms". The
liberties are in his opinion "consubstantial to the process of development and its enrichment".
From this perspective, freedom is the "essential goal of development". This approach explains the
concepts of vulnerability, social exclusion, social cohesion, conflict, etc. Thus
as Sawadogo notes: "It is culture that shapes the different perceptions that
can have individuals of such an apparently objective situation. It results that each
social formation, each culture may have a conception of poverty that requires actions
different to eradicate the latter.

1. 1.5. Poverty in the social doctrine of the Church

One of the principles that is at the heart of the Church's social teaching is the preferential option.
for the poor. In Catholic social teaching, the poor and the defenseless have the
first "rights" to guide our conscience and our actions. If this language is new-coming
From Latin America, it has been adopted by the entire Church as an updated expression of
Matthew 25: 'we will be judged by the way we have responded to the 'least of these (the
the poor and the defenseless)".
The expression 'the preferential option for the poor', which John Paul II coined in
his encyclical of 1987, Sollicitudo rei socialis (no. 42), summarizes the specific obligation that individuals have
Christians are called to help the poor and to judge the social systems in place that society has imposed on them.
give. In other words, this means that the Christian tradition, in its social message, is
I am especially concerned about the poor and the way they are regarded in society.
priority, in terms of charity both individual and social, is to improve their lot: the obligation to
giving special attention to the poor applies not only to charitable activities in
which we can be personally committed to; it also applies to the way our
companies are organized; it finally applies to the way we use our own assets
materials. This teaching should guide us in our choices: when we would be tempted
to accumulate wealth for ourselves without caring about our obligation to charity then
that others have neither roof nor food, it reminds us that we have the duty to be charitable.
This teaching is not new: it is an integral part of the message of the Gospel reaffirmed.
constantly and insistently by Christian morality, and strikingly illustrated in
the episode of the meeting between Jesus and the rich man (Mark 10:17-27). The social teaching that
clearly emerges from the entire message of Scripture and Tradition is therefore that 'the exercise of the
Christian charity" necessarily goes through the consideration given to the poor in
the organization of society.
It is wrongly assumed that the preferential option for the poor implies a program.
specific policy, sometimes even a program with a somewhat Marxist twist. It is a
is an artifice to oppose the poor and the rich in a sort of class struggle. In reality, it
one might think that the obligation of charity that Christians recognize towards
To help the poor is a way to prevent the emergence of class conflicts that arise from disparities in wealth.
in society (disparities that are inevitable in any social organization) can sometimes
create. The teaching that the preferential option for the poor gives us does not derive its
foundation of the existence of a radical conflict between the rich and the poor (and even less of a
Marxist conflict between labor and capital). It is rather a means to reduce risk.
the emergence of a conflict that would ultimately threaten the security and material well-being of everyone
members of the society.
 1. 1.6. Poverty, a matter of equity

The concept of poverty originates in social ethics, which can be seen as a part
central to political philosophy, which is a field of philosophical thought that seeks to
formulate a theory of social arrangement.
Essentially, reflecting on poverty means identifying situations considered as
unacceptable, that is to say unfair, in a given society.
Thus, the concept of poverty fundamentally arises from considerations
normatives, in terms of equity. The quest for a just society is actually a quest for a
certain form of equity among the members of this society, an equitable position being defined by
the equality of all members in relation to goods and services of their society. One cannot
analyze poverty, which corresponds to an unacceptable degree of inequality, without referring to equality
desired in the social arrangement. The different schools have been able to influence the perception of the
poverty in relation to equity and suggested by the very fact the strategies suitable for its reduction
highlighting a concept of development related to the multidimensionality of man
which can no longer be reduced to the arbitrariness of solely economic criteria.

1.2. The Causes of Poverty

The causes of poverty among individuals and countries in the world can be examined at
through immediate and distant factors. The 2000 UNDP report talks about 'global ills'
that no State alone is capable of controlling. In general, the causes of the
poverty can be described in these terms:
The causes of a political nature: Poverty is explained by political causes and not by
natural: mismanagement, corruption of leaders, lack of organizational capabilities
elementary allowing the individual to lead the kind of life they wish, the different
adjustment programs, privatization, the lack of substantial improvement in aid
international
The economic causes: the liberalization of economies, the plundering by companies
multinationals that repatriate their profits to the wealthy countries from which they are generally from
issues, the unequal exchange (low cost of raw materials produced in poor countries, purchases of
manufactured products at high costs by poor countries), external debt service, lack
fair and equitable trade rules.
The causes at the individual level: unemployment, loss of income source or reduction of
purchasing power, the effects of natural disasters, looting, civil wars, lack of
coverage of needs in social protection.
In short, it is about macroeconomic causes and political order, economic causes.
national and international, causes at the cultural level and at the level of individuals.

1.3. The Measures of Poverty

Measuring poverty means producing numbers, by which we can assess the degree of
poverty in a given society and identify the members of the society who should be considered
poor. To decide on the numbers to produce, it is necessary to start from a theory about the object to
measure. But, the concept of poverty reflects the basic structure of the social contract, and more
specifically the conception of justice that prevails in society.
The literature on the concept of poverty is extremely abundant and characterized by a level
of very high ambiguity in its relation to economic theory. It provides several ways to
define poverty, which obviously leads to a different identification of the poor. The three
the main schools considered are: the welfarist school, the basic needs school and that of
capabilities
Although these three approaches differ in many ways, they all involve the fact
that a certain 'thing', to be defined, does not reach a level considered as a minimum
reasonable. That is to say, a person is considered poor when they lack, in relation to the
reasonable minimum, of the 'thing' in question. The conceptual debate on poverty appears
when addressing the nature of the missing thing.

1.3. 1. The welfarist school

For the welfare school, the 'thing' in question is economic well-being. This school links the
poverty at the income level. This is therefore the monetary approach to poverty.
« "Poverty" can be said to exist in a given society when one or more persons do not attain a level
of economic well-being deemed to constitute a reasonable minimum by the standards of that
society. This welfarist approach is associated with what is called the 'income approach to'
"poverty" (the income approach to poverty) or also "the monetary approach" of
poverty.
Poverty is understood as a deficit in relation to a number of social indicators.
economic well-being, including income, which determines the capacity to consume. The increase
the national wealth that would be reflected in the improvement of income should translate into a
reduction of poverty, a decrease in the number of people living below a certain threshold
monetary. This approach is that of many African governments and their partners
bilateral and multilateral. It has inspired to some extent the analyses of poverty made
by the governments at the Copenhagen Social Development Summit (1995), and
revisions at the Millennium Summit level. The adoption of macroeconomic policies capable of
Generating and sustaining growth is the cornerstone of this approach, which has been widely
defended by the Bretton Woods institutions.
This idea that strong growth would necessarily lead to a reduction
significant poverty has inspired structural adjustment programs. Based on this
The idea is that everything happens as if growth is a necessary and sufficient condition to do.
reduce poverty. Also the structural adjustment programs - particularly those referred to as
first generation–were they initiated without paying much attention to the aspect of redistribution of
fruits of growth, or their impact on poverty. The result is that most countries
having undertaken development programs mainly based on growth, and
reserving a residual treatment for poverty, saw inequalities widen and poverty
worsen.
To mitigate the adverse effects of structural adjustment programs, initiatives
complementary ones could come to light. Thus, taking into account the social dimension of
The adjustment has been the subject of numerous works that have led, in some cases, to the implementation
instead of "social safety nets". A great deal of attention has also been given to the sources of the
growth and the quality of growth. Today, thanks to the attention given to countries
heavily indebted poor countries (HIPC), a new discourse is being held: it is that of the Documents of
poverty reduction strategy papers (PRSP) that are promoted and presented by institutions
Bretton Woods as new instruments likely to address the established shortcomings of
structural adjustment programs.
The vicious circle of poverty according to this school can be represented as follows:

Figure 1: The vicious circle of poverty

 1.3. 2. The school of basic needs

For the school of basic needs, the "thing" missing in the lives of the poor is a little money.
set of goods and services specifically identified and perceived as meeting the goods of
basis of all human beings. They are called 'basic' because their satisfaction is considered as a
a prerequisite for achieving a certain quality of life; they are not perceived as contributing
necessarily to well-being. As Michael Lipton says, one must "be" before "being well."
needs is not primarily a welfare concept. Instead of being about utility, the emphasis is on the
individual needs regarding basic amenities. These include: food,
drinking water, sanitation facilities, housing, health and education services
base, and a public transport service.
This hypothesis supports that the increase in income of poor households is not the
best way to increase the satisfaction of basic needs. Some of the reasons
The following are invoked: basic needs in education, health, water, and hygiene are more
easily satisfied by public services than by increased income; individuals do not use
not always their income increases to improve their nutrition and health; there is
often an unequal distribution of resources within households.

1.3. 3. The school of abilities

For the school of capabilities, the 'thing' that is missing is neither utility nor satisfaction.
basic needs, but human skills or abilities. This approach that originated in
the 1980s and whose main project manager is A. Sen, has not been developed
initially with a view to addressing poverty. Sen's aim was much broader:
develop a new conception of what has value for humans.
Its roots lie in the rejection of the 'welfarist' paradigm in which individual utility is taken to be
the sole metric of welfare, and the sole basis for social choice.
Although he does not deny the role played by utility in a person's life, the latter has several
other components according to Sen.
The capability approach differs from utilitarian evaluation (more generally 'welfarist')
evaluation) in making room for a variety of doing and being as important in themselves (not just
because they may yield utility, nor just to the extent that they yield utility). In this sense, the
perspective of capabilities provides a fuller recognition of the variety of ways in which lives can be
enriched or impoverished.
The value of a person's life actually depends on a set of ways of being and doing.
(doing), which he groups under the general term of 'functionings'.
The school of capabilities thus considers a person who does not have capabilities as poor.
to reach a certain subset of functioning. " The functionings relevant to this
Analysis can vary from such elementary physical ones as being well-nourished, being adequately
clothed and sheltered, avoiding preventable morbidity, etc, to more complex social achievements
such as taking part in the life of the community, being able to appear in public without shame and
so on. These are rather 'general' functionings, but ...the specific form that their fulfillments may
take would tend to vary from society to society
As a result, for this school, what is lacking is not usefulness, but certain seen abilities.
as reasonably minimal. The consideration of capacities and operations rather
that conveniences require taking into account the personal characteristics of individuals.
According to this school, the vicious circle of poverty can be represented according to the diagram below:
Figure 2: The vicious circle of poverty

1.3.4. The socio-political approach

This approach is related to globalization. This process generates inequalities by valuing a
profit that feeds on scarcity. Poverty is thus consubstantial to this system and its struggle requires
to free oneself by valuing the social actors capable of providing themselves with the means
to think, to produce and to live differently by adapting social and economic policies of
their countries. This scarcely defended approach in intergovernmental circles has found broad
echo in research circles. The definition of wealth and poverty is therefore not
according to this approach, neutral or objective. The "bottom-up" approach that favors listening to
disadvantaged groups, of what 'comes from the belly of the village' by relying on their expectations and their
capabilities characterize this approach.

1.3.4. Comparison and critique of various concepts of poverty

The diagram below attempts to synthesize the different approaches.

Figure 3: The diagram of the different approaches

1.3.5. The Poverty Indicators

[Link]. Definition

It is not enough to agree on the meaning of the term 'poverty' to finally be able to identify
the poor. It is not certain that what we wanted to measure is actually measurable. In fact,
neither economic well-being, nor satisfaction of needs, nor the capabilities of an individual are
directly observable. Under these conditions, the use of observable variables that allow
It is necessary to roughly infer the reality to which we refer by the term poverty.
These so-called variables are referred to as indicators. A poverty indicator can be defined as
a measurable 'proxy' variable and as close as possible to a particular dimension
specified in the poverty space.
Desproxys are required because a pure dimension is either not directly
observable, or too costly to measure. More than one indicator may be needed to describe
a dimension of poverty.
Example 1
Dimension of poverty: permanent income of a household.
Indicator: annual total expenses of a household.

Example 2
Dimension of poverty: being adequately fed.
Indicator: daily consumption of staple foods like rice.
In example 1, an indicator is required because permanent income is not directly measurable.
In example 2, the use of an indicator can be justified by the very high cost of carrying out the task.
grande échelle une enquête nutritionnelle détaillée. Un indicateur de pauvreté ne doit pas être
confused with a measure of poverty nor with a poverty index.
The measures and indices of poverty go further than the indicators of poverty by providing a
precise meaning at the critical level called the poverty line. These two concepts are more frequently
used when the indicator is a numerical variable. Either a numerical poverty indicator
measured on a statistical unit U, and let y* be the poverty threshold, any function of (y,y*) is then
a measure of poverty, such as: y<y*, y*-y, etc. It is a number taking its value at
level of the statistical unit. Any function of the set of values for a group of the
Population or for the complete population is a poverty index.
We must not therefore confuse, for example, a household income indicator, y, with the
make this household poor (poverty measure) according to a certain poverty threshold,* or again
with the percentage of poor households in the population (poverty index)

1.3.5. 2. Caractéristiques

To be useful for a conceptual framework centered on measuring poverty, the notion of an indicator must
to be developed around a typology of poverty indicators, which requires the attribution
of a set of characteristics for each indicator. Obviously, several characteristics
can be considered. For operational purposes, we will only retain four:
domain, the level, the frequency, the age group and the gender.

a. The fields

By a domain of a poverty indicator, we mean an area of private or social life.

where poverty is revealed.

b. The levels

By the level of an indicator, we mean the smallest statistical unit for which
the indicator is significantly observed and revealing of the aspect of the
poverty that it represents. The different levels are:
The individual
2. The household
3. The community (village, municipality, etc.)
The region
5. The country

c. Frequency

The frequency of a poverty indicator is called the expected periodicity of its measurement.
account for its variation over time (sensitivity):
Short-term: one year or less
2. Medium-term: from one year to less than five years
3. Long-term: more than five years

d. Sex and age group

From our point of view, several dimensions of poverty are gender- and group-specific.
of age. For the development of poverty alleviation policies, it is essential to measure these
specific dimensions of poverty. Regardless of the level of measurement, an indicator can be
specific to women, children, the elderly, etc.
In addition to the classification by gender, it is important to describe the relevance of the indicators.
regarding age groups.

1.3.5. 3. The preferred indicators by the different schools

The three concepts of poverty related to the three different schools mentioned above, specifying
differently what is missing, necessarily prioritizing certain indicators over others.

The welfare school.

An individual is poor when they lack economic well-being. Consequently, the school of welfare
is based on indicators such as income or expenses.

b. The school of basic needs.

In the case of basic needs, once again, it is difficult and costly to observe directly.
their satisfaction. The preferred indicators are therefore proxies of their satisfaction. One might think
to all indicators in the field of nutrition, education, health, housing and
clothing, by favoring achievement indicators over access indicators. By
for example, an indicator like the number of cases of certain diseases (tuberculosis, etc.) per 100
000 inhabitants would be preferred to the number of doctors per 100,000 inhabitants.

c. The school of capacities

She mainly favors access indicators. Mr. Desai, who attempted to make the approach
operational, also suggests using the mortality rate and life expectancy, disaggregated by
sex and age group, to assess individuals' ability to prevent mortality and morbidity
inevitable, as well as all the indicators of satisfaction of basic needs. In terms of
capabilities, It suggests using social mobility indicators as well as indicators of
rights to associate with others

1.3.5. 4. The indicators related to poverty approaches

We distinguish:

monetary poverty: the use of a single indicator such as income or consumption;

the poverty of living conditions: the combination of several indicators to build a
poverty index, several poverty thresholds are often used, which define different
situations ranging from extreme poverty to moderate poverty;
subjective poverty: the use of various indicators to determine the degree of poverty of
people studied in relation to each of them (e.g., poor in terms of income
but not in terms of health.

[Link]. The Human Development Index (HDI) and the Human Poverty Index
for developing countries (IPH-1) according to the UN.

a. The Human Development Index (HDI)

The United Nations Development Programme uses the HDI as a tool to determine
the average level of development reached by each country based on three important aspects:
Longevity and health based on life expectancy.
Instruction and knowledge considering the adult literacy rate (two-thirds) and the gross rate.
combined schooling (for one third).
Possibility of accessing a decent standard of living based on GDP per capita.

b. The Human Poverty Indicator for developing countries (HPI-1).

The IPH-1 is an indicator of the deficiencies or shortcomings observed in the aspects that determine
the HDI:
The risk of dying at a relatively young age
Exclusion from the world of reading, calculation, and communications
Inability to access productive economic factors, in the supply of drinking water
and the percentage of children under five years old suffering from underweight.

1.4. The Manifestations of Poverty

Les différentes approches de la pauvreté ainsi que les rapports des différents organismes
International organizations allow for the identification of the common characteristics of the phenomenon of poverty.
specifically includes:

1.4.1. Low levels of living

Low living standards manifest quantitatively and qualitatively in the form of low
income (poverty), lack of adequate housing, poor health, limited education or
absent, high infant mortality rate, lack of employment.
The indicators used are: Gross National Product (GNP) which is the value of the whole
goods and services produced, during the year, by nationals both inside and outside their
countries and the GDP per capita which is the measure of the average production of each inhabitant. The GDP
pro capite est souvent utilisé comme indicateur du bien-être économique relatif des peuples de
different nations. It then indicates relative poverty. That is to say, the fact that a country is less
later than another. But we have established an international poverty line defined as the equivalent
minimum constant dollars necessary to meet basic physical needs.

1.4. 2. The distribution of income.

To assess the extent and intensity of poverty in a given country, it is also necessary
to consider the inequalities in the distribution of income between the rich and the poor within
countries considered less developed.
The economy of development cannot be measured only in terms of levels and
growth of total or per capita income; it is also necessary to take into account how this income
is distributed among the population - that is to say, to see who benefits from the development.
Thus for each given level of national income per capita, the greater the gap in
distribution du revenu, plus grande est l’extension de la pauvreté.
Among the sources of income inequality, one can mention not only the differences in
earnings gained from employment, but especially the use and control of resources
productive like capital, land, human resources, technology. These inequalities
often lead to underemployment and unemployment.
As many holders of power appropriate and distribute resources to their advantage.
Productive, we can conclude that one of the fundamental causes of income inequality
resides in the unequal distribution of power, control over these resources, and even in the lack
of training.

1.4. 3. Health

The majority of the populations of poor countries, in addition to low income levels, continue to struggle.
against malnutrition, diseases, and poor health conditions. Medical assistance
reveals insufficient in these poor countries. The insufficient number of agents and structures
sanitaires acquires an obvious impression.
The indicators used to measure the health of a population are as follows:
Infant mortality
This indicator tells us how many children die before the age of one out of every thousand live births.
during the indicated year. It is more commonly used to characterize sanitary and social conditions,
économiques et culturelles d’un pays. Il y a un rapport presque parfait entre la mortalité infantile et
the wealth of a country's population. The richer a country is, the lower the mortality rate
infant mortality and the poorer a country is, the higher the infant mortality rate. The distribution of
agents de services de santé ainsi que les dépenses de l’État dans ce secteur jouent aussi un grand
role in determining this indicator.
Life expectancy at birth.
This indicator refers to the number of years a newborn would live if subjected to the risks of
mortality prevailing in its population at the time of its birth. Poor countries are those that
have the lowest life expectancy.

1.4. 4. L’éducation

Poor countries are characterized in the field of education by significant rates of students.
who drop out of school every year, very low levels of literacy, and structures
school and curriculum unsuitable for the needs of these countries. Women, an important human factor of
development, benefit less from education and literacy programs. The expenses
public spending on education is, if not nonexistent, the lowest compared to spending on
prestige and defense.

1.4. 5. Low levels of productivity

In addition to low living standards, poverty is characterized by low levels of productivity of

Work. Productivity is the ratio between the quantity of goods and services produced and the number.
units of resources (labor, capital or land) used to produce this quantity. In the countries
Poor, we observe low levels of productivity due not only to unsuitable technology,
but also to human factors: poor management, low skills, lack of experience,
lack of professional motivation, low income, lack of discipline, lack of willpower
of innovation, lack of appropriate institutional and structural reforms, the state of health
physical condition and especially malnutrition.
Low levels of living and productivity are socio-economic phenomena that
strengthening each other in the poor and which are at the same time the manifestations and the
main causes of poverty and underdevelopment.

1.4. 6. High rates of population growth and dependent population

Poor countries show very high rates of population growth compared to

developed countries. On a global population of about 6,301 million individuals in 2001, more
Three quarters live in developing countries and less than a quarter in developed countries.
The birth rates in poor countries are very high, ranging from 30 to 40 per 1000 while
in wealthy countries, they are less than half of these figures. Even the mortality rates (the
the number of people who die per 1000 inhabitants per year is higher in poor countries
in relation to the number of people who die in wealthy countries.
The high birth rate in poor countries results in nearly half of their
the population is aged under 15. Young people under 15 and the elderly over 64
represent the dependent population and are considered an 'economic burden'
"taking charge" because their survival depends on the working population, that is, the elderly.
from 15 years to 64 years. Poor countries are therefore characterized not only by high rates of
growth of their population, but also by a considerable percentage of the population
dependent. This means that active members in these countries have more mouths to feed than
their colleagues from developed countries.

1.4. 7. The strong dependence on agricultural production and the export of products from the sector
primary

The majority of the population in poor countries lives in rural areas: over 65% compared to
27% in economically developed countries. The labor forces involved in agriculture.
are around 62% in poor countries compared to barely 7% in developed countries This
the situation can be explained by the fact that the populations of poor countries still have concerns
priority food, clothing and housing. That is why they remain focused on
l’agriculture et la production des produits [Link], malgré cette grande concentration dans
In agriculture, the farmers of poor countries exhibit very low agricultural productivity, do they not?
only because of the large number of people who are connected to the available land, but
especially due to their primitive agricultural techniques, poor organization, tools
rudimentary and the insufficiency of human and physical capital.
La plupart des économiee des pays pauvres sont basées sur la production des produits primaires
that is to say coming from extractive activities: agriculture, fishing, mining, hunting, and this by
opposition to secondary activities that is to say manufactured and tertiary products that are the
The export of primary products accounts for 70% of the foreign currency earnings of these
countries. However, the demand for these products in the foreign market is declining, and poor countries are seeing
their global market share has fallen significantly.

1.4. 8. Dependence and vulnerability in international economic relations

For many developing countries, a significant factor contributing to persistent low levels
living standards, to the increase in unemployment and to the growth of disparities in the distribution of
revenue is the strongly unequal distribution of political-economic power between rich nations
and the poor nations.
The economic dependency of poor countries arises from the fact that they mainly produce
basic products intended for export and that they increasingly rely on the revenues from these
exports while these products are in decreasing demand. Moreover, the value of their
exports decrease. We then observe a deterioration of their terms of trade, that is to say the
the prices at which they import are rising much more than those at which they export.
Il s’est ainsi établi une distribution inégale du pouvoir économique en faveur des pays développés
to the detriment of poor countries. This economic domination is accompanied by a domination
political - cultural. Hence the poor countries, which often lack a national policy to manage.
the resources (for example coltan, copper, gold, diamonds...) and become competitive in front of
of the market, are revealed to be vulnerable in their negotiations and exchanges with their
partners of wealthy countries.

Au terme de ces considérations, nous pouvons conclure que le phénomène de pauvreté s’observe à
through the structural weaknesses that result in a series of problems with which countries
the poor face daily: low productivity, undernutrition and malnutrition, the
rapid demography, illiteracy, low per capita income, strong economic dependence and
financial, lacks suitable and adapted social structures.
Third World countries barely share 1% of global income, while they provide
more than 50% of the raw materials intended for the operation of processing industries and
of manufacturing. The low diversity of marketed products makes national economies of
very vulnerable poor countries and the deterioration of terms of trade is worsening year by year.
This observation leads to giving a high priority to the fight against poverty. This fight is being carried out for
some, in the pursuit of GDP growth.; while for others, it occurs in
a set of transformations of economic, social, and institutional structures that can
training progress. All in all, the persistence of poverty raises concerns about
global level and encourages the search for strategies for its reduction or even eradication.
 Chap. 2. The historical context and key concepts of development economics.

2.1. The historical context of the birth of development economics

L’économie du développement trouve sa naissanceaprès la seconde guerre mondiale qui fut

the first war fought in the name of freedom. The old powers emerge ruined from this
war. There is the birth of new hegemonic powers.(United States,USSRfavorable to the
decolonization. Decolonization occurs in different forms. Colonization had affected
almost all parts of the world. Elites of different natures will preside over these new
pays.
The different forms of decolonization:
- negotiation between nationalist elites and the colonial power - access to independence to the
long and deadly series of warss (Indochina,Algeria,AngolaMozambique
decolonization in chaos, without true nationalist elites (DRC)
transfer of power to charismatic elites
These independences were granted to very different countries considering the
infrastructures, education, etc. Asia is decolonized without major fragmentation. Africa undergoes
a forthe balkanization.
Until the 1970s, development economics theories did not take into account
this diversity. These theories claim to apply the same recipe to all underdeveloped countries.
In this phase, underdeveloped countries are not characterized by their own specificities.
but by what they lack to achieve 'development', namely technology and money.
In 1955,the Bandung conferencebrings together a handful of countries that have gained independence
at that moment. This conference is somewhat the birth certificate of the third world. These countries insist
on what unites them and not on what divides them. We are witnessing the birth of non-alignment.
La notion de développement apparaît à la fin de la seconde guerre mondiale avec le
decolonization movement initiated by India in 1947.
In front of the ONU, Truman(President of the United States) calls on wealthy countries to assist in development
of poor nations. Thus, the notion of developing countries appears.
The first theories of development are defined as an integral part of the sciences.
of the economy.
Starting from the 1950s-1960s, we witnessed the creation of numerous agencies.
development(UNICEF,WFP,etc.) et à la création du PNUD United Nations program for
the development).
All the development theories of the 1950s-1960s are the work of economists.
All these theories aim to explain how underdeveloped countries can catch up.
the developed countries. At that time, the old industrial nations are the model to be achieved.
Development theories have profoundly influenced the strategies put in place to
developing the 'underdeveloped' countries.
All development theories rest on the development paradigm.
economic. The concept of development is not easy to define. In the recent past, the notion
economic development only applied to non-Western peoples. It is a concept
plurielle et floue. Le développement implique la notion de progrès. Depuis la renaissance la notion
de progrès est au centre des sociétés occidentales.
One of the justifications for colonization is precisely the dissemination of progress. This term of
progress was integrated into the economic field because, to produce more goods and services, it
There needed to be economic growth. The idea of economic evolution becomes the paradigm of
progress.

2.2. Key concepts of development economics

2.2.1. Rich countries and poor countries

Each country carries a label. The most popular rankings implicitly place
all countries in a continuum based on the degree of development. Thus, we distinguish the countries
developed countries, developing countries, least developed countries, countries in transition
development... Wealthy countries are frequently referred to as industrialized countries. Those who
countries that experience rapid growth are often referred to as emerging countries. The dichotomy between
Rich countries and poor countries are often based on income levels. It is the work of the
World Bank leading to four parts:
Low-income economies, whose average individual income in 2003 was converted to
at the current exchange rate, was 765 US dollars.
Lower middle income economies, with an income ranging between
765 and 3035 US dollars
- Economies à revenu intermédiaire (tranchesupérieure), dotées d’un revenu compris
between 3035 and 9385 US dollars.
- Economies à revenu élevé, qui font partie, dans leur majorité, de l’Organisation de
cooperation and economic development (OECD), and whose individual income is
greater than $9,385 American.
Some middle-income countries have been described as transition countries.
A trendy term in the years, particularly in international forums, has been that of
third world. This term comes from the consideration of the industrialized countries (OECD) of Europe.
western, of North America and the Pacific (the 'first' world and the industrialized countries
Eastern Europe, whose economies were previously governed by centralized planning.
"Second" world); other countries form the third world. The geographical configuration of
The three worlds led to a parallel distinction that, separating the North (first and second)
South, retains a certain validity.. But the South, or third world, encompasses a large
variety of countries, ranging from rich oil-exporting countries to very low-income, poor countries
in natural resources.
The term 'third world' marks independence from the first two worlds, which are the bloc of
the East and the West bloc. The Third World is also defined by analogy withthe Third Estatefrançais
(majority poor and without rights).
The term Third World thus expressed the elimination of the differences existing between countries.
considered poor to give the image of a united set carrying the demands of a world
set aside from development.
It is important to be aware of these various terminologies and classifications and to
recognize anomalies and inconsistencies. But it would be unreasonable to dwell on it too much. None
the system cannot grasp all the important dimensions of development nor define one
cadre parfaitement rationnel et pratique.

2.2.2. Growth and development

The terms growth and development are often used to describe the process of
development itself. We alternately resort to economic growth and development.
economic although a fundamental distinction separates them.
Economic growth refers to an increase in income per capita as well as that of
production. The country that increases its production of goods and services, by whatever means...
Thus, along with an increase in average income, it has to its credit "growth
economic.
Economic development involves more implications, and in particular,
improvements in health, education, and other aspects of human well-being. The countries that
élèvent leur revenu, mais sans assurer aussi une espérance de vie, une réduction de la mortalité
infantile and an increase in literacy rates fail in important aspects of
development. If the entirety of the increased income concentrates in the hands of a small wealthy elite or
if it is assigned to monuments or military equipment, development in the sense that
we hear it will be minimal.
Two of the main structural developments that usually accompany development
economic are: the increasing share of industry in the national product, alongside the decrease
decline of agriculture, and the increasing percentage of people living in cities rather than in the countryside.
Furthermore, countries that engage in economic development generally go through
phases of acceleration, then of deceleration, of their demographic growth, during which
the age structure of the country is experiencing dramatic changes. Consumption patterns
also evolve, as people are no longer required to allocate their entire income to the purchase of
essential goods, but are oriented towards durable consumer goods and, in the end
count, towards products and services associated with leisure times. The growth that does not
benefits only a small wealthy minority, whether from the country or abroad, does not constitute development.

2.2.3. Measurement of economic growth

The evolution of national income is at the heart of studies on economic growth. It also resorts to
we generally use two fundamental criteria to measure this income. The gross national product
GNP is the total value of finished goods and services produced by a country in a year.
data. It excludes intermediate goods (goods used for the production of other goods. GNP
counts the production of the citizens of the country, including the value of goods and services produced by
those among them who live outside the national territory. It is one of the most terms
currents used in national income accounting. Some multilateral institutions,
like the World Bank, frequently refers to this concept of gross national income (GNI)
Gross Domestic Product (GDP) is similar to GNP. It includes all production carried out on the
territoire d’un pays, dont celle mise à leur actif par les résidents étrangers, mais exclu la valeur de la
production of citizens living abroad.
GNP or GDP, divided by the total population, provides a measure of individual income.
As it is easier to track economic activity within a country's territory, GDP is
become the most widely used measure of national income by the IMF, UNDP, the Bank
mondiale et d’autres organisations internationales, ainsi que par des chercheurs travaillant à
the comparative analysis of data and trends between countries.

Economic Development
Economic growth is a necessary but insufficient condition for raising the
living standards of many residents in countries with low levels of GDP per capita.
It is necessary because, in the absence of growth, individuals can only improve their situation by
through transfers of income and assets from others. Economic growth does not constitute
so not a sufficient condition to generate a massive improvement in living standards. For
at least three reasons, it is wrong to assume that a higher GDP per capita
automatically translated by an increase in the income of all families, or even the majority
among them. Firstly, public authorities promote economic growth, not
only to enhance the well-being of their fellow citizens, but also, and sometimes primarily,
to increase the power and glory of the State and its leaders. Secondly, one can allocate
resources for heavy investments to ensure an increase in growth, by deferring to a
a later date of significant consumption gains. Thirdly, income and the
consumption may see an increase, whose benefits may however go, in
all or mostly, to residents who are already relatively well-off. To borrow an old saying, the rich
the rich get richer, and the poor get poorer.

2.2.5. Millennium Development Goals

In September 2000, 189 countries adopted a document with broad objectives, the declaration of
millennium of the UN, under which they commit "to make the right to development a
reality for everyone and to protect all of humanity from need." The declaration sets out a set of
of eight objectives corresponding to this commitment:
Objective 1. Reduce extreme poverty and hunger.
Objective 2. Ensure primary education for all.
Objective 3. Promote gender equality and empower women.
Objective 4. Reduce infant mortality.
Objective 5. Improve maternal health.
Objective 6. Combat HIV/AIDS, malaria, and other diseases.
Objective 7. Ensure a sustainable environment.
Objective 8. Establish a global partnership for development.
Chap. 3. The Major Families of Economic Development Theories

3.1. The different families.

a. Première famille : « Les théories du rattrapage »

These are the theories that emerged in the 1950s. In these theories, it is about catching up.
the model of the Northern countries. They are also called 'Growth Development Theories'.
At the time when these theories are established, development does not differ from growth.
Between these theories, there are divergences in definition and ideology. We find theories
of liberal inspiration and theories of Marxist inspiration. In this family, we find
particularly :

the theory of Rostow

In 1960Rostowpublished a book "The Stages of Economic Growth"»4and opposes it

théorie du développement au développement de type marxiste. Pour Rostow le développement est
a linear historical process going through defined stages, as opposed to the vision
dialectic of Marxist theories. Each country goes through the same stages to transition from the under
development to development. Thus all countries would be going through the same
path, but they are at different stages. What changes are the engines of growth in
through history. The development of the third world should therefore go very quickly because it can benefit
of the skills and experience from the developed world.
According to him, after a phase of capital accumulation, there is a phase of take-off.
allowing developing countries to "catch up" with developed countries. In this theory the
social development is a natural consequence of development. It is therefore appropriate not to
take care of it.

the theoryLewis structure

This theory proposes a dualistic view of development. It is based on the observation that the
underdeveloped economies are dual economies. There is a juxtaposition of a sector
traditional and a modern sector. These two sectors operate on two completely different modes.
different. In the traditional sector, the needs are social, in the modern sector the needs
are economic. In the traditional sector, having is not an end in itself. In the sector
modern accumulation of goods and merchandise is an end in itself.
According to this theory, the modern capitalist sector will absorb the traditional sector through a
transfer of labor from the traditional sector to the modern sector. This theory is based on
the historical assessment of Europe. But in fact, what Lewis believed did not come true because
the history of developing countries has indeed demonstrated a shift from the traditional sector to a
new sector: the informal sector. The big mistake was to think that historical experience
the singularity of Europe was modelable.

the theory of development through openness

It is a neoclassical theory inspired by DavidRicardo. Cette théorie se repose sur le

principle of costs and comparative advantages. One must specialize in the field in which one has
a great comparative advantage. International trade becomes the factor of growth.
Developing countries must leverage their comparative advantages to
to integrate into the global economy and thus develop. Free trade is therefore essential.
to the development of the third world. To do this, they must develop the export of raw materials
first and basic agricultural products. This theory has been supported and put into practice by the
Bretton Woods institutions: the IMF, the World Bank, and the GATT (which will become the WTO in)
1995).

the Marxist theory and the dependentist theory

In these theories, underdevelopment and development are two sides of the same coin.
There is therefore no linearity in development.
This is about ending the causes of underdevelopment. The main cause is the transfer of
surplus économique des pays du sud vers les pays du nord. Ce transfert s'opère d'abord par la
colonisation (pillage direct des ressources et de la main d'œuvre). Après les indépendances, ce
transfer occurs through the repatriation of investors' profits to the north, but also through the
debt service. Two other channels of this transfer are the deterioration of the terms of trade.
and the flight of capital (local elites placing their money in northern countries).
This theory originated in Latin America in the 1950s.
Raoul Prebishbecomes the president of theECLAC(United Nations Economic Commission for
Latin America). This commission becomes the laboratory for the birth of theories of
independence.
According to this theory, the world comprises a center and a periphery. The countries
developed are at the center and command the entire two circles. The peripheral economies
sont marquées par le dualisme et par une production peu diversifiée. Les économies du centre se
characterized by homogeneous production structures and very diverse production. These
the differences between center and periphery can be explained by the international division of labor. It is because
The economies of the South are heterogeneous and less diversified as they are subject to directives.
from the center. It is therefore external domination that has produced underdevelopment.
Cette théorie a beaucoup marqué les années 1960 et 1970 (Samir Amin,C. FurtadoA.G.
Frank,E. Arghiri).La périphérie a rempli deux grandes fonctions historiques : débouché essentiel
for the industrial products from the north that generated higher profit margins for the
investments.
In the 60s, the periphery generates better profits due to/ because of the
deterioration of the terms of trade.
Terms of traderelationship between raw material prices and the prices of manufactured goods.
These terms of exchange have deteriorated in favor of manufactured goods. These can.
deteriorate in a very brutal manner.
For example,Ivory Coastwas the largest cocoa exporter in the 1960s. In 1982 it
There has been a sharp deterioration in cocoa prices. This has resulted in making it difficult to
repayment of the debt.
It also happens that the terms of trade temporarily appreciate. The modification of the terms
The exchange is fluctuating with a tendency toward deterioration.
In the 1970s, the major demand of the southern countries is to stop the deterioration.
terms of trade.
The deterioration is explained by the weak negotiating power of southern countries. Prices are set
through external financial markets.
Due to the scarcity of raw materials, one wonders if the terms of exchange are in
learn to appreciate oneself.
In dependency theory, Northern countries remain the model to be achieved but the means
is the break of unequal relations between the south and the north.
What characterizes the years 1960-1970 is industrialization. It is considered the way
royal towards development (according to the model of Europe and the United States). The USSR carries this
Conviction. The peasant surplus was collected dictatorially in favor of industrialization. In the USSR
it is not the private sector that industrializes but the planning State. By following the model of
the USSRconsumption is sacrificed in favor of capital accumulation allowing the
necessary investments for industrialization.
This plurality of theories allows for the explanation of the implementation of processes
development. At the end of the 1970s, it became clear that economic growth
does not involve social development.
The peasantry of the southern countries has been neglected in favor of industries that were considered
as the only way capable of leading to development (according to the development model of
the West and the USSR.

b. Second family: Bottom-up development theories.

These are the theories of the 1970s, based on the notion of poverty. In the 1950s
poverty is perceived as a consequence of economic underdevelopment. In the
In the 70s, it was observed that economic development does not necessarily eradicate poverty.
poverty becomes an autonomous notion separate from the economic sphere. It is the birth of theories of
bottom-up development. The populations then become the actors and not just the
beneficiaries.

c. Third family: Structural adjustments / adjustments through trade

From the early 1980s, theories arise aboutstructural adjustmentand of

the adjustment through trade. These are the neoclassical theories. It's a return toon monetarism.

d. Fourth family: Theories of human development

These theories emerged in the mid-1990s. They occupy the center of the sphere.
economic. The main theorist isAmartya [Link] that time, the UNDP definedthe HDI
(Human Development Index). We can place in this family:
Welfarism theory

A dominant theory for two centuries, in the industrialized Western world, is a theory
welfare better known as utilitarianism. It has developed as a view
strictly economic of the best social arrangement, dominated by two concepts: growth and
efficiency. Equity is a byproduct of maximizing aggregate utility and consists of
the equality of individual marginal utilities. Marginalist analysis transposes considerations
d’équité dans l’espace du revenu en tant qu’espace de ressource: le revenu détermine le niveau
of utility. Poverty is then defined as a level of income that is socially unacceptable and the
poverty reduction policies will mainly seek to increase the productivity of the poor.

The theory of the social contract

In contrast to utilitarianism or welfarism, there is the theory of social contract.

John Rawls, with his theory of justice, is the most influential modern philosopher who has explored and
systematize this approach to ethics. Equity (or justice) is considered directly and
explicitly as what should be the foundation of the social arrangement and always takes precedence
in relation to growth and efficiency considerations. In this regard, A. Sen proposes his approach to
abilities concerning the issue of equity. Poverty is then defined in reference to a subset of
identified as "core capabilities", and by unacceptable deficiencies in these
basic capabilities. Poverty reduction policies will then be focused on
the empowerment of the poor.

The school of basic needs.

The school of basic needs shifts the debate on equity in social theory to the realm of
policies and directly addresses the issue of poverty. Certain types of poverty must be
identified and eliminated. Without dismissing the productivity approach favored by welfarists, this
school identifies a small set of achievements corresponding to the satisfaction of certain
basic needs for everyone to achieve these basic satisfactions. The objectives of this school are
essentially humanitarian.

e. Fifth family: Theories of sustainable development

Sustainable development theories are linked to environmental threats. These

theories emerged in the 1990s, but the identification of environmental threats is a
a little older: 1972: first conference of theUNon the environment in Stockholm and
1992Rio [Link] notion of " appears [Link] public goods».

f. Sixième famille : Les théories du post-développement

These theories criticize the concept of development and challenge the notion of
progress. The theorists of this movement areto Herbert Marcuse,Ivan IllichFrançois [Link] pose
The following question: Is development a Western concept?
In this category, we find the theories of degrowth which state that there is only
maldevelopment in the current world: a North that is too developed and a South that is not developed enough.

g. Seventh family: The theories of alter-globalization

All these theories are based on social experiments.

3.2. Development methods

a. The methods of industrialization

In all these theories, the industrialization of developing countries is a necessary step.

on the path of development.

b. Industrialization by import substitution

This strategy, advocated by the dependency school, has been mainly recommended byMr. Gérard
Destanne de Bernisbased on the analyses ofFrançois Perrouxand from the experience of the countries of
the East. According to this method, it is necessary to develop some"industrializing" industries,that is to say of
heavy industries using existing raw materials for the manufacturing of products
intermediaries, then industries that will in turn enable the production of increasingly
manufactured.
For example, the presence of iron ore and coal promotes the establishment of a
steelworks, which will subsequently allow the development of an automotive industry, etc.
Algeriafollowed this strategy more than other countries, but it was a failure, particularly due to
the limitations of the local workforce's capabilities and the high amount of investments
necessary.
 c. Industrialization through the development of light export industries

Some countries did not follow this model driven by the creation of heavy industries. These
countries have developed industries manufacturing mass-produced products, requiring little capital and
using the existing, abundant, low-skilled, and low-paid workforce, which allows for production
at a reduced price for both local consumption and for export. In this method,
Industrialization is done by going up the supply chain. For example, one starts by establishing a
t-shirt factory, then a weaving industry, then cotton spinning mills, ... This method is
rather advocated by liberal schools. The People's Republic of China, which initially bet on
The development of heavy industries has successfully turned towards the promotion of industries.
Lightweight exports. But other countries have faced competition that has limited their capacity.
of export.

d. The financing of the transition from poor countries to rich countries

In the 1960s, underdevelopment appears as a consequence of the

weakness of local savings. Under these conditions, the question of where to find money to
finance the transition towards development?

e. External aid

Rostoff believed that external aid was a necessity. However, this aid had to stop.
after the developing countries have achieved development. Development aid is
arrival very early, sometimes even before independence (Constantine plan for Algeria, fund
central overseas France). At the creation ofthe EECIn 1957, there is the creationof the FEDOM
European Development Fund for Overseas Territorieswho will later becomethe Fed (European Fund
of Development).During this period, theorists are optimistic and believe that the
development will take place over 10 or 15 years. Today, external aid has become essential and
the suppression is not feasible.

f. Internal financing

One can also find money internally, as in Lewis's theories (economics)

dual). This can be done by the degradation of the terms of trade within the country itself.
The state buys agricultural production from farmers at a lower price, and sells it at a higher price.
on international markets. The state thus collects a profit used to finance
industrialization. In Marxist theories of primary capital accumulation, the extraction of
peasant surplus is a central point.
In capitalist theories, surplus is taken by the private sector. In Marxist theories,
the surplus is collected by the State.

g. Nationalization of foreign enterprises

Examples:
nationalization of the mining sector in Zaire in the 1970s
nationalization of Algerian oil in 1975
nationalization of Suez in 1956

h. Loan

In the 1970s, borrowing became widespread and countries in the South went into debt.
 i. Development through the fight against poverty

In the 1970s, it became clear that catch-up theories have a very limited impact.
on the reduction of poverty. It is the failure of the theory that relies on growth to access
in development. This awareness marks the birth of reduction theory.
poverty. The question of poverty began to arise in 1949. That year, the republic
China's popular uprising is declared. This event is a direct consequence of poverty.
extreme in which the Chinese were.
The western bloc is starting to fear a dominant effect leading down the path of
communism in many poor countries, and therefore decides to fight against poverty (reform
agrarian inKoreaand toTaiwanfor example, or green revolution inIndiaand to thePhilippines.
However, producing is one thing, having the money to be able to buy the food thus produced is another.
is another. This aspect of consumption is not addressed at that time.
The issue of poverty in itself thus comes to the forefront in the
1970s. Many theorists say that the great famines inEthiopiaare not there
consequence of solely drought but also a consequence of human factor.
In order to fight against poverty, it is necessary to be able to measure it. For this, the indicatorPNB/hab
is not relevant because it does not take into account redistribution, the non-market economy, the
inequalities and the satisfaction of basic needs.
This questioning of relevancefrom the PNBis part of a general context: growth
Is it the only way to access development? Development issues
therefore freeing themselves from the economic sector.

j. Theory of the satisfaction of basic needs

We are focusing here on prioritizing the satisfaction of essential needs which are: - the
santé - l'éducation - l'alimentation - l'assainissement - l'accès à l'eau
Poverty must be measured by considering purchasing power parity calculations.
In the 1990sUNDPcreate theHDI(Human Development Index). The HDI is
a composite indicator allowing for a measurement of poverty taking into account the parities
of purchasing power and inequalities.
The satisfaction of these basic needs meets two objectives of Northern countries: - Security through the
Stabilization of Southern countries - Poverty reduction is beneficial for Northern countries
In the 1970s, NGOs began to emerge. These organizations began to raise
questions to the States: - development cannot be reduced to macro problems
economy - the State cannot be the only actor in development - the population must be
associated with development - the industry is not the royal road to development.

k. Structural adjustments / adjustments through trade

The issue of poverty experienced a real eclipse in the 1980s with a return
in the force of the liberal paradigm until the early 1990s.
The 1980s are a turning point. Followingoil shocksthe world is entering a recession and everyone
raw material prices are collapsing (excluding oil).
Highly indebted Southern countries can no longer afford to pay the loan.
Under the authorityof the IMF,the Southern countries are engaged instructural [Link] is about sanitizing
the finances of indebted states to make them solvent.
A reassessment of the states' way of life was necessary, but the adjustment policies have been
actions to the detriment of the population and the fight against poverty.
We are witnessing the return of monetary theories in force: - priority given toexports-
merchandising of non-marketable products.
 Chap. 4. Development strategies

4.1. In East Asia

It is in East Asia that the development efforts made over the decades that have
the Second World War saw their most remarkable successes. The maintenance of a
strong and steady growth over forty years has allowed income to multiply by eight or more
per inhabitant. This unprecedented historical or geographical success was the result of several
ingrédients, notamment des facteurs suivants :

 Macroeconomic stability Most of the time, it has helped to avoid both inflation
and excessively high levels of unemployment. Without macroeconomic stability, the private sector does not
cannot function properly. This strategy involves governments showing
of sufficient responsibility in budgetary matters, particularly by avoiding deficits
significant characteristics that define many developing countries.
 High savings rates With rates of over 25%, a country can invest effectively
massive.
 High investments in education, particularly for women's education. This
allows for eventually having a highly skilled workforce, capable of assimilating the
nouvelles technologies.
 Massive investments in technology. This is what makes the difference between the
developed countries and less developed countries, it is not just the lack of capital but
another "gap" in knowledge. East Asian countries have established
policies in the field of technology to bridge it. They succeeded in this way
remarkable. During the 1990s, students from Singapore and a few other countries of
East Asian students have regularly achieved better results than students
Americans in mathematics and science during standardized tests. Some countries like
Singapore has encouraged foreign companies to make direct investments, which
allowed them to access foreign markets and new technologies. Other countries like
South Korea has mainly focused on obtaining licenses for new technologies coming from
more advanced countries.
 Political and social stability. It provides a conducive environment for investment.
Public policies have had the explicit objective of promoting this type of stability. Through the
For example, states have exerted pressure on economic leaders to limit
salary differences.
The results obtained in East Asia have been so impressive that they are often referred to.
Speaking of the miracle of East Asia. However, some believe that this growth is nothing of
Miraculous. High savings rates, significant investment, both in fixed capital and in
Education and a significant level of knowledge are part of the typical recipes.
At the origin of the success of Asian countries, there are good public policies, such as
those that have helped restore macroeconomic stability and strong institutions
(notably financial institutions that allow for proper allocation of available capital).
Three characteristics of the development strategy in East Asia deserve a
particular attention: the role of the State, exports, and egalitarian public policies.

The role of the State

What best characterizes the East Asian model is the balance that
The countries of the region have managed to preserve the balance between the role of the state and that of the market. They have conducted some
market-oriented policies that are conducive to private sector development. They have sought to
increase the volume of exchanges and to 'guide' the market, not to replace it. They also took
measures to stimulate savings by discouraging banks from granting home loans and
loans for the purchase of durable consumer goods. This has led to an increase in rates.
private savings and discouraged real estate speculation, which is often a factor of
destabilization of the economy. They also sought to invest in activities focused on the
growth, especially for the purchase of new equipment. Furthermore, governments have
create development banks to promote long-term investments in
sectors such as shipbuilding, steelmaking, and the chemical industry.

Growth driven by exports

A second differentiation between East Asian countries and developing countries lies in
the place given to exports. When a growth strategy relies on exports,
it is said that it is driven by exports, as opposed to the policy of substitution for
imports. Companies are willing to export in several ways, by having
notably a better access to credit, often at subsidized rates.
Dans la stratégie de croissance tirée par les exportations, les entreprises produisent en
based on their long-term comparative advantage. It is not about the current comparative advantage,
based on existing skills and resources, but of a dynamic comparative advantage,
where skill and productivity improvement results from production experience
advantage based on acquired skills, technology, and recognition of the importance of
the learning of the terrain)
Those who support export-led growth
also estimate that export markets are a source of competition that stimulates
strongly efficiency and modernization. For a company, the only way to emerge victorious against
to international competition is to meet consumer demand by putting on the
market of quality products at the lowest possible cost. This intense competition encourages
some companies to specialize in areas where wages are low and where countries are
development has a comparative advantage, particularly for products that require a lot of
labor
Finally, export-driven growth strategies have facilitated the transfer of high
technologies. Producers exporting to developed countries do not only enter into
contact with effective producers in these countries; they also learn to adapt their standards and
their production techniques.

Reduce inequalities.

Another aspect specific to the development strategies of Asian countries

The emphasis has been on equality. Examples of policies in this direction are
relatively numerous:
the property ownership access program of Singapore,
primary and secondary education for all, including women, in almost all
countries,
the land redistribution programs that marked the point of
departure of growth in several countries, including Taiwan and Japan. In most of these countries, the
The government has also sought to reduce excessive wage inequalities and consumption.
ostentatious of the wealthy classes. Their experience has proven that one can have savings rates
élevés sans devoir recourir à des gouvernements autoritaires de type soviétique ni souffrir
of inequalities too glaring. The measures intended to strengthen equality have in fact favored the
economic growth. Land reforms have increased agricultural production and
The rise in education levels has directly increased productivity and facilitated the transfer and
the adoption of more advanced technologies. And the broader access of women to education has also been
related to a decrease in population growth rates.

4.2. In other countries

The development strategies applied in East Asia have been very different from those
followed in most other countries. Many economists attribute at least in part the
performance differences to differences in strategies. When developing countries
have become independent, many of them have been influenced by socialist ideas
assigning a central role to the State in development planning. After having undergone the
domination de gouvernements étrangers, ces pays craignaient qu’ouvrir leur économie aux
external investments do not lead to a new form of domination, that of the large ones
multinational companies. Some countries, concerned about reducing their dependence on
Imports then turned towards import substitution policies.
This policy has experienced a brief period of success at times, notably in Brazil, but of
Generally, it has led to stagnation or very slow growth. Even before the end
the Cold War clearly demonstrated the erroneous nature of the socialist planning system,
the flaws of this model had already manifested in developing countries. The work of
government planning was of poor quality, including in terms of management and
effective allocation of resources.
The economic landscape was filled with 'white elephants', such as steelworks.
gigantic and inefficient. Protectionist barriers had been erected, officially to
support national industries but often also to allow government friends
to benefit from high profits due to the isolation from external competition that protection brings
provided them. In some cases, the inefficiencies were such that the value of the factors of
Imported protection exceeded the value of what was produced based on international prices.
Protection was granted based on emerging industries, according to which the new
industries should be protected until they are strong enough to cope with
the competition. But, in many developing countries, these emerging industries
seemed to never grow up: the protection had become permanent.
In the early 1980s, a new strategy emerged. Recognizing the limits of a
state-dominated economy, many countries have shifted from one extreme to the other, granting to
government a minimal role. The states were urged to privatize and liberalize, to sell
their public companies and to eliminate any intervention. These policies, combined with a
macroeconomic stability policy has often been referred to as the consensus of
Washington, insofar as they were promoted by the U.S. Treasury and two institutions
International located in Washington, the International Monetary Fund (IMF) and the Bank
Worldwide.
In many cases, these policies have produced no better results than the previous ones.
as instruments for promoting sustainable growth. The reduction of customs barriers has
causes job losses and developing economies have not been able to create the
new businesses. Workers have moved from low-productivity jobs to absence
jobs. Similarly, the policies aimed at establishing macroeconomic stability have been too
often accompanied by very high interest rates - so high that they have discouraged any investment
susceptible of creating new jobs.
In the mid-1990s, it became increasingly clear that one of two solutions
extremes, nor the Washington consensus, nor state-dominated planning, was one of a
great utility. The success of East Asian countries, even considering the decline due to the
The financial crisis of 1997-1998 remained inexplicable in the face of the woes of the countries that had chosen.
one or the other of these extreme bad recipes. East Asian countries owe their success
both to their growth and to how they managed to reduce poverty.
 Certainly, the markets were the center of development but the State retained a vital role.
as a catalyst for change and as a tool to (1) improve the functioning of the
market, (2) to transform the economy and society through education and technological progress and
to regulate the economy so that it behaves in a more satisfactory manner.

Chap. 5. Development and economic growth in the context of globalization

5.1 Globalization

In the sixty years that followed the Second World War, efforts were redoubled.
to lower trade barriers. But, from the perspective of developing countries, the
The trade liberalization program was mainly guided by the desire to satisfy interests.
developed industrial countries, which continue to subsidize their agriculture and protect their
textile industry. For the least industrialized countries, this has rarely facilitated the sale of
products for which they had a comparative advantage. These concerns are just one aspect
of a broader dissatisfaction with globalization and economic institutions
internationales censées contribuer à sa gestion.
The term demondialization (globalization) is the name given to economic integration.
growing countries of the world, particularly through the increase in trade
commercial activities and capital movements due to the decrease in transportation costs and
communication. There are three important international economic institutions that provide support.
and support for the process of globalization: (1) the World Trade Organization
(WTO), a place where agreements on international trade are concluded and where disputes are resolved.
conflicts in this area, (2) the International Monetary Fund (IMF), created to assist in maintaining
global financial stability (by providing funds to countries in times of crisis) and which has
expanded its activities to assist developing and transitioning economies, and (3) the Bank
global, whose role is to promote development and the elimination of poverty in the
poor or middle-income countries.

5.2. Trade exchanges

International trade often creates 'winners' and 'losers'. But

international exchanges between the USA and developing countries based on a 'winners-' policy
winners." American consumers are winners because they have a greater choice of
goods at very low prices. The developing countries benefit because they have access to a considerable market
for their products. This explains the USA's system of preferential treatment for countries.
the poor, called the General System of Preferences (General System of Preferences-GSP) although
the USA do not often adopt a stance of full reciprocity in areas such as
Agriculture and textiles, sectors particularly important for developing countries.
The European Union has not done better than the United States but, thanks to a strong initiative, it has
to reach an agreement to eliminate, for the lowest income countries, all the
trade barriers on all goods except weapons.

5.3. Outsourcing and Offshoring

One of the reasons for the opposition to globalization comes from the fact that national jobs
were relocated abroad as a result of what is called outsourcing.
Outsourcing is a process by which companies purchase goods and services from others.
companies rather than producing them themselves.
5.4. Transition economies

During the 20th century, we witnessed two major economic experiments. The first was the
the transition from the market to communism. It began in Russia in 1917 and proved to be
completely disastrous. The second experience was the transition from communism to an economy
of the market; it began in Eastern Europe around the year 1990 and in China at the end of the
1990s. This second major experiment also yielded sometimes disappointing results in
part of the countries concerned.

a. The communist economic system

Communism represented an alternative way to the market for allocating resources. Good
that there have been variations in the way the system operates from one country to another, it is in
Russia where the basic system was developed. Under communism, the state held the means of
production: the factories, the land, and almost everything that existed in the country except for this
what individuals could own. The State has established a vast bureaucracy to
determine what needed to be produced and how. This bureaucracy decided for example on the number
of automobiles to be manufactured, of the number of those that would have two doors, four doors, etc.
The State could know the amount of steel needed by calculating how much was required for
to produce automobiles, tractors and all other goods using this metal. Calculations
complexes of this type allowed for the determination of the quantities to be produced for each good or
factor of production. By working through 'backward induction', one deduced the number of
factories that needed to be built in the country. Production quotas were assigned to the directors.
factories. The latter were to produce a given number of tons of steel, a given amount
of nails, etc.
They attributed to the company leaders the necessary factors to produce what was.
fixed. This system was called centralized planning.
Central planners also decided on the levels of wages and prices. Consumers
were free to choose what they bought but there was rationing for a multitude of
goods. One could only buy, for example, a fixed number of kilos of sugar per month.
Unfortunately, not everything went as planned. He often faced shortages,
especially for consumer goods. The population had to wait in line for hours.
to obtain the food goods she wants. The queues are part of everyday life.
They were measured in months for durable goods or automobiles. The
usines devaient aussi faire face à des pénuries: elles étaient souvent dans l’incapacités d’obtenir les
factors of production that they needed. Deliveries do not arrive on time and this
what was received was often of poor quality. The factories that had been asked to
producing nails produced nails but they cared little about whether they were too much
either too demanding or too soft for those who were going to use them. They were encouraged to meet the quotas.
fixed by central planners but they had no incentive to produce this
what users wanted.
Methods to circumvent the system had been developed. If, to fulfill
the quotas, a company needed an additional quantity of steel, it was looking for a
a company that received more steel than necessary and was proceeding with an exchange.
business leaders also exchanged favors among themselves - resorting to an entire system
of barter. In this way, an underground market had developed.
The shortage of consumer goods was partly attributed to the focus on development.
In 1917, at the time of the October Revolution, Russia was a relatively backward country.
the 1930s, Stalin wanted to make a quick good for him. For him, the key to success lay in
heavy industrialization, the construction of steelworks for example. The hostility of the rest of the world towards
The regard for the communist strategy led the Soviet Union to adopt an economic policy.
self-centered. Communist countries mainly exchanged among themselves. They wanted to be
self-sufficient. For a time, these strategies worked well. The Soviet Union experienced
a rapid growth, to the point that, after World War II, it had become one of the
two superpowers. It possessed missiles and nuclear weapons and even launched the
first man in space.
In 1956, Nikita Khrushchev, the leader of the Soviet Union at that time, could proclaim
that country, thanks to communism, was going to bury the West and its capitalism. The textbooks
Western economists were then talking about the necessity of making a trade-off between growth and
freedom; they recognized that the Soviet Union might be capable of rapid growth,
but they also wondered if the price paid, in terms of sacrificed freedom, was worth it.
However, the successes achieved by the Soviet Union mainly masked the growing problems.
what his economy was facing: an agricultural sector in stagnation and an industrial sector unable
innovations in the Western world, the military sector aside.
The gap between living standards then increased. Michael Gorbachev, who became the leader of the Union
Soviet in 1985, launched a process of political and economic reforms called perestroika.
Despite this, the course of events was impossible to control. In 1991, protests
popular forces thwarted an attempt at a military coup, shortly followed by
the breakup of the Soviet Union. Each of the 'republics' that were members of the former Union
Soviet. Each member "republic" of the former Union has become a state.
independent.

b. The march towards a market economy

Russia and several of the new republics of the former Soviet Union have transitioned
quickly to a market economy, thinking they could solve their economic woes in this way.
Markets and the price system were supposed to replace inefficient central planners.
Private property was supposed to provide the necessary incentives. The freedom of trade was supposed to
stimulate competition, create an offer of production factors to Russian companies,
to give birth to a consumer goods offer for Russian consumers, who had
private for so long, and bring a turnkey market for everything that Russia
produced.
This strategy was based on privatization and liberalization - which were
supposed to eliminate all constraints that hindered the Soviet system. In this way, the
Replacing the old ineffective system could only increase living standards. But at
In the ten years that followed, in most of the concerned countries, growth since the beginning of
the transition was lower than that achieved during the ten years that preceded it. The situation
from the former superpower has deteriorated in such a way that life expectancy has decreased and the
Divorce rates have increased. While 2% of the population was considered to be in a situation
from poverty at the beginning of the transition, this same figure approached 40% ten years later. There is
exceptions to this bleak picture: Poland, whose GDP is currently 50% higher than this
than it was ten years ago and China, another country in transition from a planning system
centralized to a market economy. This country has seen its income quadruple over the
last twenty years.
How can we explain these successes and failures of the transition process? It is certain that at
At the beginning of the transition, the environment was not the same in every country. This had the effect of
give advantages to some and handicaps to others. Poland and other countries in Europe
from the East had a higher standard of living than Russia before the transition to communism. The
China had a much lower income than that of Eastern European countries. These
last could access Western markets more easily and the hope of entering
The European Union helped them to accelerate the necessary reforms to be admitted.
c. Gradualism or shock therapy

At the beginning of the transition, many countries had to face extremely high inflation.
high. During the communist period, prices were set at levels that were too low and goods
were rationed (measured, calculated). As soon as the restrictions were lifted, prices soared.
Arrow. Controlling inflation has been the challenging price that formerly communist countries had to face.
recover. Many have adopted a policy called shock therapy - with
very strong cuts in public spending and a very strict monetary policy. This
politics has caused deep recessions but has managed to keep inflation under
control.
Two schools of thought then opposed each other.
The first recommended privatization and liberalization. With privatization, the new
asset owners would be encouraged to manage them efficiently. The liberalization of trade,
by allowing the acquisition of competitive products available abroad, was expected to encourage
effectiveness.
The second school of thought proposed a more gradual change. The proponents of gradualism
noted that we must first establish the institutional infrastructures
necessary for the proper functioning of a market economy because without them, economies of
markets cannot function. Proponents of gradualism also said that some
Changes were necessary not only in the economy but throughout society.
These changes should not be imposed from above, especially in a democracy. Do
sustainable democratic reforms required time to change the
mindsets of the population that had been indoctrinated throughout its existence by statements
officials on the evils of capitalism and to establish the legal structures on which it
it was possible to rely on in order for the markets to function satisfactorily. The thesis of the
shock therapy ultimately prevailed in political circles, especially in the West. The
The US Treasury and the IMF have advocated for privatization and liberalization.
quickly. These organizations have expressed themselves not only for the elimination of barriers
customs but also for the opening of capital markets.

d. Comparison between transition strategies.

The main differences between the transition strategies adopted by Russia and by the
China is as follows:
China has placed more emphasis on job creation and business development than
on the restructuring of existing enterprises. In China, local authorities - in the municipalities
and the villages pooled their savings to create millions of businesses. These new
forms of institutions were not really private but they were very different from the
public enterprises of the former communist regime managed directly by the state.

China has prioritized competition over privatization.

In a sense, the new businesses owned by towns and villages constituted a
a certain form of public property, with the difference that there was competition among the
companies of different local authorities, competition whose effects have been favorable to
efficiency. Local control and competition have helped to address the governance issue.
In the case of former state-owned enterprises, this problem stemmed from their low transparency regarding...
seen from the outside. The bureaucrats of Moscow or Beijing were simply unable to
monitor the economic activities in the most remote provinces. Conversely, the
people living in the towns and villages could see what was happening, if there were jobs
had been created, if wages were on the rise and how their companies were behaving by
in relation to their competitors from neighboring communities. This transparency has exerted pressure
huge on the concerned leaders.
The gradualist approach was based on existing institutions, the
local authorities (of municipalities and villages) that were previously responsible for
agriculture. However, at the very beginning of the reforms, China introduced what was called the
individual responsibility system: the land was transferred to the farmers and they
they received the benefits of their own work. This was a standard application of the theory
incentives. The interest of municipalities then shifted from agriculture to industry. Install
the new businesses in the municipalities and villages have resulted in much fewer disruptions
in the social fabric only if industrialization had been concentrated in large urban areas.
The privatization of the main sources of income of Russia to
totally sacrificial prices have not only cast a hint of injustice on the entire
transition process. It has also revealed a situation of permanent revenue shortage
for the state, insofar as an effective tax collection system had not yet been established
set up.

5. Development prospects

Overall, the distance between those who have (the haves) and those who do not have.
(the have-nots) has not diminished over the past century. There have been successes - cases where
the gap has reduced –and failures– cases where it has amplified. It seems that policy choices
economic policies have made a difference. Some countries have adopted policies that are favorable to a
strong growth and a reduction in poverty. Others have adopted policies that have provided
some growth but which had only a slight impact on poverty (and which sometimes
Others still seem to have stagnated, if not regressed. China and India are expected to benefit.
part of the new economy based on the Internet and information technologies and reduce
still the gap that separates them from the most industrialized countries. On the other hand, African countries are
having acquired the necessary potential to be able to do the same. Particularly since the
current living standards in Africa, which are already low, are threatened by the AIDS epidemic and
through repeated civil wars. Under these conditions, it is difficult to attract capital.
foreigners, or even national capital. The gap between the African continent and the rest of the world
risk therefore of increasing even more.