❑ It is not easy to define clearly an underdeveloped or developing economy.
❑ So to find the characteristics of developing countries will not be precise.
❑ Different economists have defined an underdeveloped (developing) economy in different ways.
❑ The U.N. experts have defined an underdeveloped (developing) country as “one in which per
capita income is low when compared with the per capita income of U.S.A, Canada, Australia
and Western Europe”.
❑ Characteristics of a developing country: A country in which the capital is low in relation to its
population and natural resources is called an underdeveloped (developing) country. The
characteristics of developing countries are stated in the following:
Low per capita income:
Per capita income is very low in developing countries. As per capita
income is low, the people are Poor and their standard of living is low in
these countries.
For example, in India the per capita income is only about 1581 dollars
(2015).
This is very low when compared with the per capita income of developed
countries like Canada.
Importance of Agriculture:
In developing countries agriculture is the main occupation. In these
countries majority of people depend on agriculture for their living.
About 70% of population is employed in agriculture in these countries.
Similarly, about 33% of national income comes from agriculture.
Although agriculture is the main occupation, the productivity per hectare
is very low in these countries. Small holdings, old methods of production
and lack of water facilities etc. are responsible for low productivity in
agriculture in these countries.
Low industrialization:
Developing countries are industrially poor countries. Industrialization is very low in
these countries.
A very small percentage of people is engaged in industries. Large scale industries
are not developed.
Most of the industries are consumer goods industries. In these countries only 20% of
the people are engaged in industries.
Shortage of capital and lack of technology are responsible for poor
industrialization in these countries.
Over Population:
In these countries the growth rate of population is very high. Due to increase in
medical facilities; the death rate has fallen but birth rate remained constant.
Therefore, there is a rapid growth in population. It is greater than the growth rate of
National income.
Therefore it is not possible to increase per capital income unemployment will
increase.
Unemployment:
Unemployment is another feature of the developing countries. The developing
countries are not in a position to absorb the growing population due to shortage
of capital.
In addition to educated unemployment, there is disguised unemployment in
agriculture. Too many people depend on land. This situation is called disguised
unemployment.
According to a U.N O report in developing countries, disguised unemployment is
to the tune of 20 to 25%,
Shortage of capital:
The stock of capital is low.
The rate of capital growth also is very low in these countries it forms only 5% to 10%
of the National income when compared to 25% to 30% of investment in national
income of developed countries.
This low rate of capital growth is not sufficient even to meet the needs of growing
population.
Shortage of capital is both a cause and effect of low productivity. The main
reason for the shortage of capital is low ravines.
Low level of technology:
Developing countries are technologically backward. The methods of
production are old and this results in low productivity.
These countries lack the capital required to improve science and
technology.
They cannot also import technology from foreign countries due to the
shortage of foreign exchange.
Un-utilization of resources:
The natural resources in developing countries are either under-utilized or
unutilized.
These countries are not in a position to exploit the natural resources due to
the shortage of capital and lack of technology.
The natural resources in India have not been fully utilized.
For example India has still about 9 crore acres of cultivable waste land.
The water power potential of the country is exploited only up to 25%.
Human capital:
In developing countries most of the people are uneducated and illiterate. Efficiency of
laborers is very low.
People are religious and caste minded. Their attitudes do not encourage economic
changes. Entrepreneurial ability is also very low.
Human resources in these countries are not conducive for economic development.
Foreign trade:
Another Characteristics Of Developing Countries is its foreign trade position. In
developing countries foreign trade occupies an important place. These countries export
their minerals and raw materials and import consumer goods.
They get less foreign exchange from their exports and pay more for their finished
products. Any drastic change in the demand for their products in the international market
will affect the economy of these countries.
Any decrease in foreign demand would affect the domestic market. This reduces the
income and employment opportunities for the people.
As India possess several features o f the developing countries, our country is also cited as
an example of developing countries. These are the characteristics of developing
countries.
I stand before you today with great enthusiasm and eagerness to embark on a
journey into the fascinating realm of development economics. As we gather here
to explore the intricacies of this dynamic field, we are not merely delving into
theories and equations; rather, we are embarking on a quest to understand the
very essence of progress and prosperity for societies around the world.
Development economics, at its core, seeks to unravel the complex tapestry of
factors that influence the well-being of nations. It goes beyond traditional
economic theories by addressing issues that are at the heart of human progress –
poverty, inequality, education, healthcare, and sustainable growth. In this course,
we will explore the interplay of economic, social, and political forces that shape
the destiny of nations and communities.
As we navigate through the principles and concepts of development economics,
we will grapple with questions that touch the lives of billions: How can we lift
people out of poverty? What policies foster inclusive growth? How do we ensure
that economic progress is sustainable and doesn't compromise the well-being of
future generations? These are academic inquiries and challenges that
policymakers, economists, and global citizens wrestle with daily.
Our journey in this class will take us across continents, examining case studies,
success stories, failures, and lessons learned. We will scrutinize the role of
institutions, globalization's impact, and innovation's importance in driving
economic development. Moreover, we will critically evaluate the effectiveness of
various policy interventions, from poverty alleviation programs to infrastructure
development initiatives.
As we dive into the world of development economics, let us approach it with open
minds and a sense of curiosity. Let us engage in thoughtful discussions, challenge
assumptions, and cultivate a deeper understanding of the complexities that shape
the economic destinies of nations. Through this course, we aim to acquire
knowledge and develop a nuanced perspective that empowers us to contribute
meaningfully to the ongoing dialogue on global development.
So, without further ado, let us embark on this intellectual voyage together,
exploring the theories, debates, and real-world applications that constitute the
fascinating landscape of development economics. By the end of this journey, I am
confident that we will emerge as well-informed students and as critical thinkers
ready to contribute to the ongoing pursuit of a more equitable and prosperous
world.
Thank you, and let the exploration begin!
What is development economics?
Development economics is a branch of economics that focuses on studying
economic development and improving living standards in developing countries. It
seeks to understand the economic, social, and political factors that contribute to
the progress or stagnation of nations, with a particular emphasis on addressing
issues such as poverty, inequality, unemployment, and sustainable development.
Key themes and topics within development economics include:
Poverty Alleviation: Understanding the causes and consequences of poverty and
designing policies and interventions to reduce and eliminate it.
Inequality: Examining the distribution of income and wealth within a society and
exploring ways to reduce economic disparities.
Human Capital: Analyzing the role of education, healthcare, and skills
development in fostering economic growth and improving the overall well-being
of a population.
Health and Nutrition: Investigating the impact of health and nutritional factors on
productivity, economic development, and the quality of life.
Infrastructure and Institutions: Exploring the importance of robust infrastructure
(such as transportation, communication, and energy systems) and effective
institutions in promoting economic development.
Trade and Globalization: Assessing the Role of International Trade, Foreign Aid,
and globalization in shaping the Economic Fortunes of Nations.
Sustainable Development: Addressing environmental concerns and promoting
sustainable practices to ensure that economic development does not compromise
the well-being of future generations.
Macroeconomic Policies: Analyzing the effectiveness of fiscal and monetary
policies in promoting economic stability and growth.
Development economists use a variety of analytical tools, models, and empirical
methods to examine these issues. The field also involves a multidisciplinary
approach, incorporating insights from sociology, political science, and other
disciplines to comprehensively understand the challenges and opportunities
associated with economic development.
In summary, development economics seeks to identify strategies and policies that
can lead to improved living standards, reduced poverty, and sustainable
development in less developed regions of the world.
Why do we need to learn development economics?
Learning development economics is crucial for several reasons, as it provides
valuable insights into the challenges and opportunities facing less developed
countries and contributes to a more comprehensive understanding of the global
economy. Here are some key reasons why studying development economics is
important:
Addressing Global Inequality: Development economics focuses on understanding
and addressing economic disparities and poverty. Policymakers and practitioners
can design targeted interventions to reduce inequality within and among nations
by studying the factors contributing to underdevelopment.
Promoting Sustainable Growth: Development economics emphasizes sustainable
development, considering the long-term consequences of economic activities on
the environment and future generations. This perspective is crucial for creating
economic systems that balance growth with environmental conservation and
social well-being.
Informed Policy Decisions: Policymakers in both developed and developing
countries benefit from a solid understanding of development economics.
Informed policies can better address issues such as poverty reduction,
infrastructure development, education, and healthcare, contributing to more
effective and equitable governance.
Global Interconnectedness: The world is increasingly interconnected, and events
in one part of the globe can have profound effects elsewhere. Understanding the
economic development challenges in various regions helps individuals
comprehend the global economic landscape and fosters cooperation on
international issues.
Humanitarian Considerations: Development economics addresses social and
humanitarian concerns beyond economic factors. It explores strategies for
improving healthcare, education, and overall living standards, contributing to a
more just and compassionate world.
Effective Aid and Assistance: Many developed nations and international
organizations provide aid and assistance to developing countries. A thorough
understanding of development economics is essential for designing effective aid
programs that address recipient nations' specific needs and challenges.
Career Opportunities: For individuals pursuing careers in international relations,
policy analysis, or humanitarian work, a background in development economics is
highly valuable. It equips professionals with the knowledge and skills needed to
contribute meaningfully to the global development agenda.
Global Citizenship: In an era of increasing globalization, being an informed global
citizen is important. Development economics provides the tools to critically
analyze and engage with the complex issues facing the world, fostering a sense of
responsibility and awareness among individuals.
In essence, learning development economics helps individuals make sense of the
complexities of economic development, equipping them to contribute to positive
change in the world. Whether as policymakers, analysts, or concerned citizens, a
solid understanding of development economics is essential for addressing the
pressing challenges of our time.
How can we measure economic development?
Economic development is a multidimensional concept that encompasses various
aspects of a nation's well-being, including income levels, poverty rates, education,
healthcare, infrastructure, and environmental sustainability. As such, measuring
economic development involves a combination of quantitative and qualitative
indicators. Here are some commonly used methods and indicators:
Gross Domestic Product (GDP): GDP is one of the most widely used indicators to
measure a country's economic performance. It represents the total value of all
goods and services produced within a nation's borders over a specific period.
While GDP provides an overall measure of economic activity, it doesn't capture
distributional aspects or non-market activities.
Gross National Income (GNI): GNI is similar to GDP but includes net income
abroad. It considers the earnings of a country's residents and businesses from
overseas investments and subtracts payments made to foreign entities.
Per Capita Income: Per capita income is calculated by dividing a country's total
income (GDP or GNI) by its population. This measure provides an average income
per person and gives a sense of the overall standard of living.
Human Development Index (HDI): Developed by the United Nations Development
Programme (UNDP), the HDI combines indicators of life expectancy, education
(average years of schooling and expected years of schooling), and income. It
provides a more comprehensive measure of development by considering social
and economic factors.
Poverty Rates: Measures such as the poverty headcount ratio or the percentage
of the population living below the national poverty line are important indicators of
economic development. Lower poverty rates are generally associated with higher
levels of development.
Education Indicators: Educational attainment, literacy rates, and enrollment ratios
are crucial for assessing human capital development. Higher levels of education
are often linked to increased productivity and economic growth.
Health Indicators: Life expectancy at birth, infant mortality rates, and access to
healthcare services are important health-related indicators that reflect the overall
well-being of a population.
Infrastructure Development: Assessing the quality and availability of
infrastructure, such as transportation, communication, and energy systems, is
essential for understanding a country's capacity for economic development.
Environmental Sustainability Indicators: Measures like carbon emissions,
deforestation rates, and access to clean energy contribute to evaluating a
country's commitment to sustainable development.
Income Distribution and Inequality Measures: Gini coefficient and other
inequality indices help gauge the distribution of income and wealth within a
population. Lower inequality is often associated with more inclusive and
sustainable development.
It's important to note that no single indicator can fully capture the complexity of
economic development. Using a combination of these measures provides a more
comprehensive understanding of a nation's progress and challenges. Qualitative
assessments, case studies, and contextual analysis are often essential for a
nuanced understanding of economic development.
The Validation of Development Indicators; Development Indicators and
Statistical Systems; Indicators and the Definition of Development;
The validation of development indicators is critical to ensuring the reliability,
accuracy, and relevance of the information they provide. Here are some
considerations regarding the validation of development indicators, their
relationship with statistical systems, and their role in defining development:
Validation of Development Indicators:
Reliability and Accuracy: Indicators should be based on reliable and accurate
data. The methodologies used to collect and analyze data must be robust and
transparent.
Validity: Indicators should measure what they are intended to measure. Validity
ensures that the chosen indicators effectively capture the dimensions of
development they are meant to represent.
Consistency: Development indicators should be consistent over time and
comparable across different regions or populations. Changes in measurement
methods or definitions can affect the comparability of data.
Development Indicators and Statistical Systems:
Data Collection and Reporting Systems: A strong statistical system is essential
for collecting, processing, and disseminating development indicators. Countries
with well-established statistical systems are better equipped to provide accurate
and timely data.
Capacity Building: Developing countries may face challenges in building and
maintaining robust statistical systems. International cooperation and support
for capacity-building initiatives can enhance the capabilities of national
statistical offices.
Indicators and the Definition of Development:
Subjectivity in Indicator Selection: The choice of development indicators is not
neutral and can be influenced by subjective judgments about what constitutes
development. Different stakeholders may prioritize different indicators based on
their perspectives and values.
Multidimensional Nature: Development is multidimensional, and no single
indicator can capture its complexity. Composite indicators, such as the Human
Development Index (HDI), attempt to integrate multiple dimensions, but the
selection of components and weights is a subjective process.
Participatory Approaches: In defining development indicators, it is important to
include the perspectives of various stakeholders, including local communities.
Participatory approaches ensure that indicators align with the priorities and
aspirations of the people affected by development policies.
Dynamic Nature of Development:
Evolution of Indicators: The definition of development and the indicators used to
measure it can evolve over time. As societies change, new challenges and
opportunities emerge, requiring the adaptation of indicators to reflect current
realities.
Global vs. Local Perspectives: Development indicators should consider both
global benchmarks and local contexts. While global indicators provide a basis for
comparison, local indicators can address specific needs and nuances.
In summary, the validation of development indicators involves ensuring their
reliability, validity, and consistency. The relationship between development
indicators and statistical systems underscores the importance of strong data
collection and reporting mechanisms. The definition of development is
influenced by the subjective selection of indicators, and it is crucial to consider
the multidimensional nature of development and involve diverse perspectives in
the process. The dynamic nature of development requires ongoing reflection and
adaptation of indicators to remain relevant in a changing world.
Nature of Development and Underdevelopment: Methodological Issues;
Concepts and Measurement; The Semantics of Indicators
The nature of development and underdevelopment is a complex and multifaceted
topic that encompasses various methodological issues, concepts, and
measurements. Scholars and researchers in the fields of economics, sociology,
political science, and development studies have grappled with defining,
measuring, and understanding these concepts. Here are some key
methodological issues, concepts, and considerations related to the nature of
development and underdevelopment:
Methodological Issues:
Interdisciplinary Approach: Development is a multidimensional concept that
cannot be adequately understood through a single disciplinary lens.
Interdisciplinary approaches, combining insights from economics, sociology,
political science, and other fields, are often necessary.
Context Sensitivity: Development outcomes are context-dependent, and
methodologies should be sensitive to the historical, cultural, and institutional
contexts of different societies.
Participatory Research: Including the perspectives and experiences of local
communities in the research process is essential for a more comprehensive
understanding of development.
Concepts and Measurement:
Economic Development: Traditionally, economic development has been a key
focus, measured by indicators such as Gross Domestic Product (GDP), income per
capita, and industrialization. However, there is a growing recognition of the
limitations of relying solely on economic indicators.
Human Development: The Human Development Index (HDI), introduced by the
United Nations Development Programme (UNDP), considers factors beyond
income, including education and life expectancy, providing a more holistic
measure of development.
Social Development: Beyond economic and human dimensions, social
development includes aspects such as social justice, gender equality, and the
quality of social institutions.
The Semantics of Indicators:
Indicator Limitations: Indicators used to measure development may have
limitations and may not capture the full complexity of development. For
example, GDP does not account for income distribution or environmental
sustainability.
Composite Indicators: Many development indices are composite, combining
multiple indicators into a single measure. While these can provide a more
comprehensive view, the choice of indicators and their weights can be subjective
and may influence results.
Global vs. Local Perspectives:
Global North vs. Global South: The terms "developed" and "underdeveloped"
often reflect a global perspective, with the Global North considered developed
and the Global South considered underdeveloped. However, this binary
classification oversimplifies the diverse realities within regions and countries.
Local Perspectives: Development should also be assessed from local
perspectives, considering the priorities, values, and aspirations of communities
within a specific context.
In summary, the nature of development and underdevelopment involves
navigating methodological challenges, considering multiple dimensions beyond
economic factors, and recognizing the importance of local context and
perspectives. The choice of indicators, the measurement approach, and the
interpretation of results all play crucial roles in understanding and addressing
the complexities of development.
Global North and Global South
Economic classification of the world's countries by the UNCTAD: the
Global North (i.e., developed countries) is highlighted in blue and the
Global South (i.e., developing countries and least developed
countries) is highlighted in red.
Global North and Global South are terms that denote a method of
grouping countries based on their defining characteristics with
regard to socioeconomics and politics. According to the United
Nations Conference on Trade and Development (UNCTAD), the Global
South broadly comprises Africa, Latin America and the Caribbean,
Asia (excluding Israel, Japan, and South Korea),
and Oceania (excluding Australia and New Zealand).Most of the
Global South's countries are commonly identified as lacking in
their standard of living, including having lower incomes, high
poverty levels, dense populations, limited educational opportunities,
and deficient health systems, among other issues. Additionally, these
countries' cities are characterized by their poor
infrastructure. Opposite to the Global South is the Global North,
which the UNCTAD describes as broadly comprising Northern
America and Europe, Israel, Japan, South Korea, Australia, and New
Zealand. As such, the two terms do not refer to the Northern
Hemisphere or the Southern Hemisphere, as many of the Global
South's countries are geographically located in the former and,
similarly, a number of the Global North's countries are geographically
located in the latter.
More specifically, the Global North consists of the world's developed
countries, whereas the Global South consists of the
world's developing countries and least developed countries. The
Global South classification, as used by governmental and
developmental organizations, was first introduced as a more open
and value-free alternative to "Third World" and, likewise, potentially
"valuing" terms, such as developed and developing. Countries of the
Global South have also been described as being
newly industrialized or in the process of industrializing; many of
them are current or former subjects of colonialism.
Generally, the Global North and the Global South correlate with
the Western world and the Eastern world, respectively. The two
groups are often defined in terms of their differing levels of wealth,
economic development, income inequality, and strength
of democracy, as well as by their political freedom and economic
freedom, as defined by a variety of freedom indices. Countries of the
Global North tend to be wealthier, less unequal, more democratic, and
capable of exporting technologically advanced manufactured
products, among other characteristics. In contrast, countries of the
Global South tend to be poorer, more unequal, less democratic, and
heavily dependent on their largely agrarian-based economic primary
sectors. Some scholars have suggested that the gap of inequality
between the Global North and the Global South has been narrowing
due to the effects of globalization. Other scholars have disputed this
position, suggesting that the Global South has instead become poorer
vis-à-vis the Global North in this same timeframe.
Since World War II, the phenomenon of "South–South cooperation"
(SSC) to "challenge the political and economic dominance of the
North" has become more prominent among the Global South's
countries. It has become a popular political and economic concept in
light of the geographical migration of manufacturing and production
activity from the Global North to the Global South, and is therefore
also a theme that has influenced the diplomatic policies of the Global
South's more powerful countries, such as China. Thus,
these contemporary economic trends have "enhanced the historical
potential of economic growth and industrialization in the Global
South" amidst renewed targeted efforts by the SSC to "loosen the
strictures imposed during the colonial era and transcend the
boundaries of postwar political and economic geography" as a
desirable aspect of decolonization.
