1.Chapter I The Basic Concepts of Development Theories and Politics of Development Ambo University College of Business and Economics Department of Public Administration and Development Management BA program By: Henok G.T April, 20131

2. Chapter outline: Topics covered: Definitions and Meaning of Development Measures of Development Core values of Development Objectives of Development Levels of Development CHAPTER I: BASIC CONCEPTS OF DEVELOPMENT 2 3. Meaning of Development Development/Economic Development/ is a concept tied to the demise of feudalism and the evolution of capitalism. TRADITIONAL ECONOMIC MEANING: - There is a stress on the industrialization often at the expense of agriculture and rural development. - DEVELOPMENT is seen as an economic phenomena in which rapid gains in overall growth would either trickle down to the masses in the form of jobs and other economic opportunities. - Development: is the CAPACITY of the national economy, whose initial economic condition has been more or less static for a long time, to GENERATE and SUSTAIN an annual increase in its GROSS NATIONAL PRODUCT at rates of 5% to 7% - DEVELOPMENT is the reduction or elimination of poverty, inequality and unemployment within the context of a growing economy. - The development of PEOPLE rather than development of things. NEW ECONOMIC VIEW: - The Challenge of Devt is Improved quality of life. - Development (QOL) means less poverty, cleaner environment, more equal opportunity, greater individual freedom and a richer cultural life. 3 4. Meaning CNTD - Therefore, Development is a multi dimensional process involving changes in social structures, popular attitudes, and national institutions, as well as the acceleration of economic growth, the reduction of inequality, and the eradication of poverty. (Todaro and Smith) - Development is both a physical reality and a state of mind for attaining a better life. Sens Capabilities Approach: 1985 Economic growth is not an end in itself and has to enhance the lives people lead and the freedoms that they enjoy Capability to function is what matters for status as a poor/non-poor person and it goes beyond availability of commodities Capabilities: freedom that a person has in terms of the choice of his functionings, Functioning is what a person does with commodities of 4 5. How is Development measured? Growth versus Development Economic growth: the value of output of goods and services within a year. GDP The value of output produced within a country during a time period GNP The value of output produced within a country plus net property income from abroad GDP/GNP per head/per capital: Takes account of the size of the population Real GDP/GNP: Accounts for differences in price levels in different countries PPP Measure: the number of units of a countrys currency required to purchase the same basket of goods and services in the local market that a US $1 would buy in the USA. Economic growth may be one aspect of economic Dev't but is 5 6. Development: incorporates the notion of a measure of the welfare of humans in a society. As such it is a normative concept open to interpretation and subjectivity It may also incorporate measures such as (other than listed above): National Product per person, Occupational Structure of the Labor Force, Consumption of Energy per Person, Productivity per Worker, Transportation & Communication per person, Consumption of Manufactured Metal per Person, Other Rates- Literacy, Caloric intake, % of income spent on food, Amount of savings per person Longevity Life expectancy Knowledge Access to Education, literacy rates Standard of living GDP per capita: Purchasing Power Parity (PPP) HDI Measures/indicators of Development CNTD 6 7. In short, development can be measure through three general variables: Economic indicators of development--GNP/GDP, Per capita income, value added, employment structure etc. Social indicators of development--education, literacy, health, welfare Demographic indicators of development--life expectancy, infant mortality, rate of natural increase, birth rate, doubling time Measurement CNTD Other measures 7 8. Core Values of Development Three basic core values as a practical guideline for understanding development SUSTENANCE: The Ability to meet basic needs - When life sustaining basic human needs like food, shelter, health and protection are absent UNDERDEVELOPMENT exists. Purpose of Development is to create an environment in which all people can expand their capabilities and opportunities can be enlarged for both the present and future generations SELF-ESTEEM: To be a Person - Self-Esteem is having a sense of worth and self-respect, of not being used as a tool by others for their own ends. DEVELOPMENT is legitimized as a goal because it is an important perhaps even indispensable, way of GAINING ESTEEM. FREEDOM FROM SERVITUDE: To be able to choose FREEDOM is to be understood in the sense of EMANCIPATION from alienating material conditions of life and from social servitude to nature, ignorance, other people, misery, institutions and dogmatic beliefs. 8 9. Objectives of Development Three Objectives of Development: 1. To increase the availability and widen the distribution of basic life-sustaining goods such as food, shelter, health and protection. 2. To raise levels of living including in addition to higher incomes, the provision of more jobs, better education and greater attention to cultural and humanistic values , all of which will serve not only to enhance material well-being but also to generate greater individual and national self-esteem. 3. To expand the range of economic and social choices available to individuals and nations by freeing them from servitude and dependence not only in relation to other people and nation states but also to the forces of ignorance and human misery.9 10. The level of Development - Terms to explain the level of development Developed/Developing or Underdeveloped LDC/MDC/NIC North/South (vs. East/West) First/Second/Third/Fourth World Transition economies Emerging economies (The Brandt Line) The distribution of MDC and LDC 10 11. North-South Gap-most countries in the Core are above 30 degrees latitude Viewed from a Polar Projection-more countries are clustered in an inner core, while less developed countries are relegated to a periphery or outer ring. 20% of the Worlds population controls 85% of the wealth Poorest 20% lives in the Southern Hemisphere Levels of Development CNTD 11 12. Immanuel Wallersteins Core-periphery model - It is a new approach to developed and developing or underdeveloped idea Core-the nations with a high level of prosperity with dominant economies globally - High level of education, salary and technology. It generate more wealth in the world economy. Periphery-poor nations that are dependent on the core as markets for raw materials and sources of technology - Low level of education, salary and technology. It generate less wealth in the world economy Semi-Periphery-better off than periphery, but still dominated by the core to some degree - Exploited by Core but then exploit the Periphery. serve as a buffer between core and periphery. 12 13. Conditions in LDCs High birth rates, moderate death rates and low life expectancy, High infant mortality rates-large population under age 15 yrs. Poor health care & shortage of doctors, Poor sanitation, lack of fresh and clean water, Poor nutrition and protein deficiency are common. Low per capita income with many women & children doing hard manual labor High illiteracy rate with low levels of education, Great disparity between rich & poor, small middle class, Urban areas overcrowded, lack of services, rapid urban migration. Subsistence farming on small landholdings Poverty cycle page 16 Political instability and corruption Exploitation of natural resources and workers regardless of consequences Dependence of agricultural products or primary products such as mineral resources Misuse of foreign assistance Misguided priorities Cultural resistance to modernization Conditions That Hamper Development 13 14. Global Economic Disparities Roots: Much of the disparity existed as Colonialism was established by European nations. - The Industrial Revolution increased the need for raw materials and markets for finished goods. - Neo-colonialism refers to the economic dominance of the core over the former colonial nations-economic rather than political control. A changing world Till 1980s there were 3 blocs First World-The Capitalist West-the most advanced nations-democratic & capitalist Second World-The Communist East of the Soviet Union & its Eastern European Satellites, Red China, N. Korea & Vietnam Third World-non aligned nations with mixed economies and state control-now an obsolete term Now a days, More Developed Countries-(MDCs) have high levels of industrialization, urbanization & standard of living Underdeveloped (UDCs or LDCs) or Developing Countries are moving toward developed status-not as highly industrialized or urbanized with a lower standard of living World Bank- classification by income level High Income-(US, Canada, Western Europe, Japan, Australia) Upper Middle Income-(Mexico, Brazil, Chile, Argentina, Poland) 14 15. Countries HDI HDI Rank GDP rank-HDI rank High HD Norway Australia US 0.943, 0.929, 0.910 1, 2, 4 6 16 6 Medium HD China Egypt 0.687 0.644 101 113 -7 -6 Low HD Congo DR Ethiopia 0. 286 0.363 187 174 -1 0 Global HDI report; Discuss on the implications of the report Ranks of 175 countries into 3 groups Low human development = 0.510 Medium human development = 0.522-0.698 High human development = 0.698 2011 HDI index HDI= 1/3(Income index)+1/3(Life expectancy index)+1/3(education index) Ethiopia: Life expectancy (years)=59.3, Mean years of schooling(years) =1.5, Expected years of schooling (years) =8.5 , Gross national income (GNI) per capita (constant 2005 PPP $) 971 15 16. 16 Vicious circle 17. 17 The End Henok Gebremedhin Teka Lecturer at Ambo University, Ethiopia Lecture Note for students of Development Management-Year I. Pobox 19, henokteka87@yahoo.com