Development
“To achieve economic development”—this has
always been the goal of every government, every
nation. Throughout history, we have seen how
countries struggle to succeed in providing their
citizens a prosperous and sustainable economy.
We have also witnessed how, despite massive
efforts and policy reforms, many countries remain
poor and “developing”. But what does economic
development really mean? What does it take for a
country to be developed? Is economic growth the
same as economic development? What factors
promote or hinder development? These are among
the pertinent questions we wish to answer
throughout this course.
The primary concern of Economics is scarcity--how
everyone satisfies the unlimited wants and needs
in a world of limited resources. Scarcity is a
circumstance in which the amount of something
available is insufficient to satisfy the desire for it. It
is also a condition where the number people
desired to consume is greater than their capacity
to spend or pay for. The problem of scarcity occurs
because people and societies, in general, are
unable to satisfy their unlimited wants and needs
given the available resources.
Since the central concern in Economics is the
scarcity of resources, there is a need for a
systematic and logical way of allocating them. For
instance, households have limited income to
allocate goods and services. Moreover, the firm's
production is limited by costs of production and the
government agencies' budget is limited, so goals
must be carefully chosen. This is where the study
of economics comes in handy. Economists study
the decisions made by households, firms, and
governments. They also explain how our economic
systems operate, make predictions for the future
and recommend ways to realize favorable
predictions.
Photo by Kaique RochaLinks to an external site. from PexelsLinks to
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Thus, to understand the concept of development
requires a deep understanding of how the economy
works and how the problem of scarcity is
addressed by societies. To achieve development is
to overcome, to a large extent, economic problems
of production, consumption and allocation of
resources, as determined by the choices made by
the population, whether individually or collectively.
But what is development?
Todaro and Smith (2015) define development as
“the process of improving the quality of all human
lives and capabilities by raising people’s levels of
living, self-esteem, and freedom.” This means that
aside from having increased income, development
also means having improved quality of life by
having more capabilities and opportunities to
realize one’s goals and aspirations in life. It also
means more freedom to make choices, with the
confidence to pursue them given one’s abilities and
resources.
Traditional Measures
- The emphasis is to increase production, as measured
by GDP, and the problems of poverty, discrimination,
unemployment and income distribution are not of
primary focus.
Business Cycles (economic fluctuations)
- The rise and fall of economic activity relative to the
long term growth trend of economy
Expansion
- A period where real GDP is growing
Recession/Contaction
- A fall in the level of real GDP for at least six months,
or two quarters of the year.
Depression
- A very severe recession
Lowest point – trough
New economic view of development
What is happening to
- Poverty
- Unemployment
- Inequality
Economic Growth is necessary (sustained) but insufficient
to Economic Development
Amartya Sen’s “Capability” Approach
“functionings” as an achievement
Functionigs (Achievement – statement of doing) : what
people do or can do with the commodities of given
characteristic that they come to possessor or control.
Capabilities (Options/Freedom):
Capabilities as freedoms enjoyed in terms f functinings;
the freedoms that people have, given their personal
features and their command over commodities.
Development and happiness.
Well being in terms of being well and having freedoms of
choice.
“Beings and Doings”
- Being able to live long
- Being well-nourished
- Being healthy
- Being literate
- Being well-clothed
- Being mobile
3 core values of development
Sustenancy:
- The ability to meet basic needs
Self-Esteem
- To be a persom
Freedom from Servitude
- To be able to choose
3 Objectives of Development
- Increase availability of life-sustaining goods
- Raise levels of living
- Expand range of economic and social chocies