What is Development?

year, plus income earned by its citizens, minus

income of non-residents located in the country.
 GNP per capita
 Achieving sustainable rates of growth
- The increase in the per capita real
per capita to enable the nation to income of the economy over the long period
which indicates that the rate of increase in real
expand its output faster than the
per capita income should be higher than the
population (Todaro and Smith, 2011) growth rate of population.

 Refers to industrialization, economic  Welfare

growth and the living standards’ - A sustained improvement in material

well-being which is reflected in an increasing
 Increased life expectancy, health care, flow of goods and services.
free education, etc.  Social Indicators

 Means improving the individual factors that - The basic needs of development
- Inputs and outputs
make the quality of life

 Social dev’t – better health care, access to

clean water What is Underdevelopment?

 Economic dev’t – better technology, more  There is a Low Human Development

job opportunities Index which means that people have less
income and lower life expectancy.
 Environmental dev’t – reducing pollution
 In Economics, it is when resources
are not used to their full socio-economic
potential as a result of slower development.
Economic Growth vs Economic Development
 Lack of access to job opportunities,
ECONOMIC GROWTH health care, drinkable water, food, education
The increase in the value of goods and services
and housing.
produced by every sector of the economy. Three key questions to see development
ECONOMIC DEVELOPMENT  What has been happening to poverty?
Sustainable boost in the standards of living of
 What has been happening to
the people
unemployment?
 What has been happening to inequality?
Measurement of Economic Development
- Todaro and Smith, 2011
 Gross National Product (GNP)
- The total value of all final goods and
services produced within a nation in particular
Characteristics of Developing Countries
 Low standard of living  Political and social institutions start to
develop
 Low levels of productivity
 Savings and investment grow (15% of
 High rates of population growth and
GDP)
dependency burdens
 Dual economy
 High and rising levels of unemployment
and underemployment 4. Drive to maturity
 Substantial dependence on agricultural  Industry becomes more diverse.
production and primary market exports
 Growth spread to different parts of the
 Prevalence of imperfect market and country as the state of technology improves
limited information
5. The age of mass production
 Dominance, dependence, and
 Output levels grow, enabling increased
vulnerability in international relations
consumer expenditure.
 A shift towards tertiary sector activity
Rostow’s five stages of Economic Growth
and the growth is sustained by the expansion
Model
of a middle class of consumers.
 This model talks about the transition
from underdevelopment to development
Developed vs. Developing Countries
1. Traditional Society
Developed Developing
 An agricultural economy mainly
subsistence farming, little of which is traded Less population large population
 Limited size of capital stock resulted to High wealth Low wealth
very low labor productivity and little surplus
High standard of living Low standard of living
output left to sell.
High industrial dvmn’t Low industrial dvmn’t
2. Preconditions for take-off
Industry Agriculture
 Agriculture becomes more mechanized
and more output is traded.
 Savings and investment grow  Development has resulted in serious
inequities between states, whereby large
 Some external funding is required numbers of the world’s inhabitants are mired in
poverty, especially in Africa, while inhabitants
3. Take off of the world’s richest countries live in both
 Manufacturing industry assumes greater relative and absolute luxury.
importance
 Development encompasses the need and the
means by which to provide better lives for
people in poor countries

Causes of Underdevelopment & Development

 Modernization Theory
- To transfer technological innovations
from development agencies to their clients, and
to create an appetite for change through raising a
climate for modernization among the members
of the public.
 Dependency Theory
- Adapting to modern technologies made
the Third World countries ever more dependent
on the First World.
 World System Theory
- Core countries take advantage of the
cheap labor and raw materials found in semi-
periphery countries and periphery countries.