Growth versus Development

Economic growth may be one aspect of economic development but is not the same
Economic growth:
A measure of the value of output of goods and services within a time period
Economic Development:
A measure of the welfare of humans in a society

Economic Growth
Using measures of economic growth can give distorted pictures of the level of income in a
country the income distribution is not taken into account.
A small proportion of the population can own a large amount of the wealth in a country. The
level of human welfare for the majority could therefore be very limited.
Using measures of economic performance in terms of the value of income, expenditure and
output.

GDP Gross Domestic Product

o The value of output produced within a country during a time period
GNP Gross National Product
o The value of output produced within a country plus net property income from
abroad
GDP/GNP per head/per capita
o Takes account of the size of the population
Real GDP/GNP
o Accounts for differences in price levels in different countries

High economic growth fuelled through capital spending can hide a number of underlying
economic problems how is the income and wealth distributed? Who is doing the spending
and will it trickle down to the poor?
National Income Problems with using GDP/GNP
Reliability of data?
How accurate is the data that is collected?
Distribution of income?
How is the income distributed does a small proportion of the population earn a high
percentage of the income or is income more evenly spread?

Quality of life?
Can changes in economic growth measure changes in the quality of life?
Does additional earnings power bring with it additional stress, increases in working hours,
increased health and family problems?
Impact of exchange rate?
Difference in exchange rates can distort the comparisons need to express in one currency, but
which one and at what value?

Black/informal economy
Some economic activity not recorded subsistence farming and barter activity, for
example
Some economic activity is carried out illegally building work cash in hand, drug
dealing, etc.
Work of the non-paid may not be considered but may contribute to welfare charity
work, housework, etc

Development
Development incorporates the notion of a measure/measures of human welfare
As such it is a normative concept open to interpretation and subjectivity
What should it include?
Levels of poverty
Absolute poverty
Relative poverty
Inequality
Progress
What constitutes progress?
Other considerations of human welfare:
Political freedoms?
Sustenance?
Sustainable development?
Self-esteem?
HDI A socio-economic measure
Focus on three dimensions of human welfare:
Longevity Life expectancy
Knowledge Access to education, literacy rates
Standard of living GDP per capita: Purchasing Power Parity (PPP)

Proportion of activity in different sectors of the economy:

o Primary
o Secondary
o Tertiary

Terminology
Write definitions for the following terms
First/Second/Third (Fourth?) World

Developed/Less Developed (LDC)/Developing

Industrialised/Newly Industrialised (NIC)/Agricultural/Subsistence (Post Industrial?)

West/East

North/South
Characteristics of Developing Economies
Low income & living standards
Low life expectancy
High levels of inequality
Absolute poverty
Poor health care & malnutrition
High population growth
Low Growth (volatile)
Low Productivity
Poor education facilities
High unemployment and underemployment
Poor infrastructure
Subsistence agriculture
Commodity Export Dependence
Dualism (agriculture/industry, rural/urban)

Measuring Development
Introduction to development measures
Traditional economics uses GDP as the indicator of economic growth- and hence development.
This traditional perspective is too narrow because development is more than just growth and
GDP is purely an economic indicator
The UN has four human development indices:
(1) Human Development Index
(2) Gender-related Development Index,
(3) Gender Empowerment Measure
(4) Human Poverty Index
Human Development Index
The Human Development Index (HDI) is the average of three indicators
Standard of living, as measured by real GNP per capita (PPP$)
Life expectancy at birth, in years
Educational attainment, as measured by a weighted average of adult literacy (two-thirds
weight) and enrolment ratio (one-third weight)
The closer the HDI is to 1, the closer the country is to achieving the maximum values defined for
each of the three indicators.
Human Poverty Index
The Human Poverty Index (HPI) measures the proportion of people not expected to meet
specified target levels for given economic and quality of life indicators:
P1 Percentage of people not expected to survive to age 40
P2 Percentage of adults who are illiterate
P3 Percentage of people who fail to attain a 'decent living standard'
P3 is subdivided into three (equally weighted) separate items:
(a) Percentage of people without access to safe water
(b) Percentage of people without access to health services
(c) Percentage of people with underweight children.
Gender-related development index
The Gender-related development index (GDI) is simply the HDI adjusted downward for gender
inequality
Gender Empowerment Measure
(GEM) measures how women take active part in economic and political life. Differing from the
GDI, it exposes inequality in opportunities in selected areas

If the World were 100 PEOPLE:

50 would be female
50 would be male
26 would be children
There would be 74 adults,
8 of whom would be 65 and older
There would be:
60 Asians
15 Africans
14 people from the Americas
11 Europeans
33 Christians
22 Muslims
14 Hindus
7 Buddhists
12 people who practice other religions
12 people who would not be aligned with a religion
12 would speak Chinese
5 would speak Spanish
5 would speak English
3 would speak Arabic
3 would speak Hindi
3 would speak Bengali
3 would speak Portuguese
2 would speak Russian
2 would speak Japanese
62 would speak other languages
83 would be able to read and write; 17 would not
7 would have a college degree
22 would own or share a computer
77 people would have a place to shelter them
from the wind and the rain, but 23 would not
1 would be dying of starvation
15 would be undernourished
21 would be overweight
87 would have access to safe drinking water
13 people would have no clean, safe water to drink