Recto, Princess Joy T.

BSA 2-1

CHAPTER 1 QUESTIONS FOR DISCUSSION

1. Why is economics central to an understanding of the problems of development?

Economics is considered as central to an understanding of the problems of development

because the development of a country depends upon economic factors and so you can only
understand how a country is developing if you know about how the economic factors are and how
the factors change. Many problems of development are brought by the lack of money and
economics is all about money, therefore the two areas of development and economics are related.
Problems of development include financial issues, too much poverty and high unemployment rates
These aspects of the problems are central issues in economics that would be able to teach us about
problems in development so we can better understand these problems principally by looking at
economic factors that define the problems. We can’t understand unemployment well as an
economist understands unemployment because economists look at unemployment all the time and
pay very close attention to it so economists are very good at understanding economic development
problems for this reason and probably other reasons. Furthermore, economics is a social science
and is concerned with people and economic development problems also stem from people so these
fields are related and understanding the one helps you better understand the other because you can
build up a bigger picture. Without economics, it is impossible to understand deeply the problems
regarding development.

3. What do you hope to gain from this course on development economics?

I am expecting to gain more knowledge of the resources available from our region, as well
as the state, for improving our communities through job growth. I also look forward to networking
with local professionals who are working toward the same goal of promoting our region. I am
excited about this leadership program and appreciate the opportunity. In addition, I hope I can
understand how economic factors affect the development of humans, and the development of a
country as a whole.

5. Why is an understanding of development crucial to policy formulation in developing nations?

Do you think it is possible for a nation to agree on a rough definition of development and orient
its strategies accordingly?

Understanding development is a stepping stone towards formulation of different policies.

Development constitutes a number of meanings. Depending on which meaning one adopts, there
are a number of policy issues which could be adopted to achieve the goal. First, one must ask
development for whom. If a country only wishes to secure development for the wealthiest members
of its society, then it may spend a great deal for nothing more than law enforcement and projects
in politically connected parts of the country. If a state wants to gain broad based development, then
it should pursue programs of public health, education, microfinance, etc. As for the last question,
it is impossible for a nation to agree as a whole regarding development. Nevertheless, the state or
the government must come up with the strategies concerning the welfare of its people and ensuring
the success and benefits of the policies so that even if not all citizens will agree, at the end of the
day, it must benefit all of them.

7. How does the concept of “capabilities to function” help us gain insight into development goals
and achievements? Is money enough? Why or why not?

Capabilities to function is the determinant of one’s development because it’s not about
what we have but what we can do on the things we have. Suppose that a person has a bike and
does not know how to drive it, its means his functions abilities are very low. Amartiya Sen wants
to tell us that we should use the commodities by knowing all the functions related to it. As Amartya
Sen said, "Economic growth cannot be sensibly treated as an end in itself.” Development has to be
more concerned with enhancing the lives we lead and the freedom we enjoy. In the next question,
money is really not enough. Freedom and self-esteem and equality to lead life and enjoy life and
use the life in the best way is also a part of development. Money is enough only to enhance the
freedom of choice but not the development. In development, your function abilities should be
increasing as much as possible. Therefore, we must start realizing our function capabilities to be
able to contribute to the development.

9. What critical issues are raised from the examination of development problems and prospects
facing Brazil?

Brazil, being considered as one of the developing countries, though declaring economic
growth, faces variety of societal issues such as extreme poverty, high level of inequality, unequal
distribution of land, lack of sustainability, racial discrimination, and problems with social inclusion.
It might be most accurate to say that Brazil has experienced some economic growth without as
much social development as could be expected from its income level. It is indeed a growth without
development.
CHAPTER 2 QUESTIONS FOR DISCUSSION

1. For all of their diversity, many less developed countries are linked by a range of common
problems. What are these problems? Which do you think are the most important? Why?

Common problems of less developed countries include lower levels of living and
productivity, lower levels of human capital, higher levels of inequality and absolute poverty,
higher population growth rates, greater social fractionalization, larger rural populations but rapid
rural-to-urban migration, lower levels of industrialization, adverse geography, underdeveloped
financial and other markets, lingering colonial impacts such as poor institutions and often external
dependence. Among these common problems, I think the most important, or the most problem
should be focused on is the higher levels of inequality and absolute poverty. I know that total
equality will never exist but in my opinion, if we couldn’t totally remove inequality, we must at
least lessen it. I strongly believe that poverty root from unequal distribution of nation's income.
Rich people are getting richer, and poor people are getting poorer. This is due to the unequal
privileges between rich and poor. Poverty can become the most challenging occurrence in one's
life. It can either push people to work hard and move forward, or dismay people and become
pessimistic about life. When people settled on the idea of becoming poor, that's where other
economic problem starts to arise. Therefore, poverty should be solved by both government and its
people especially by those developing countries in order to solve other economic problems.

3. Can you think of other common (not necessarily universal but widespread) characteristics of
less developed countries not mentioned in the text? See if you can list four or five and briefly justify
them.

 Predominance of agriculture. An underdeveloped economy is predomi-nantly an agrarian

economy. Predominance of agriculture is viewed from two angles—first is the contribution
of this sector towards national income. In LDCs, agriculture contributes roughly 30-50 p.c.
towards national income. On the other hand, in the developed countries, agriculture
occupies a secondary position since 2-8 % of national income comes from this sector.
Secondly, LDCs mainly depend upon agriculture and extractive industries like mining,
fisheries and forests. This means that the bulk of the population is engaged in agriculture
and allied pursuits. About 55-75 % of the people are engaged in agriculture. Only 10 % are
employed in the secondary sector, and the rest in the tertiary sector. In advanced countries,
agriculture provides employment to a small fraction of the people. All these explain the
predominance of agriculture in LDCs. Though agriculture occupies a predominant position
in LDCs, it is always in a backward condition leading to low productivity.
5. What is meant by the statement that many developing nations are subject to “dominance,
dependence, and vulnerability” in their relations with rich nations? Can you give some examples?

Developing nations are subject to “dominance, dependence, and vulnerability” in their

relations with rich nations. These three words were already possessed or proven by rich or
developed countries, that's why developing nations should aim to achieve these characteristics in
order for them to relate to other countries, specifically the developed ones.

7. What are some additional strengths and weaknesses of the Human Development Index as a
comparative measure of human welfare? If you were designing the HDI, what might you do
differently, and why?

Human Development Index as described by the book, measures the socio-economic

development of a country based on the parameters like health, education, and per capita income.
There are several strengths of using HDI. First, it does not rank the countries based on their income
alone. It takes into account the measures like education, health status, poverty, life expectancy and
more that would combine to reflect the true status of the economy. Next, the HDI indicators are
accepted worldwide at the country level provided appropriate statistical data are available while
its estimation. In addition, the result of HDI enables the government of a nation to devise
appropriate policy measures that will help the development of areas that need urgent attention. It
also enables the government in allocation of funds or asking for international financial aid in
underdeveloped areas. Meanwhile, the weaknesses of HDI may include the difficulty to confirm
data from some developing countries. Also, the measures chosen may seem very arbitrary to some
because there are other ways of measuring relative qualities in health and education. Furthermore,
just like GDP, it does not measure equal distribution within the country. Regarding the education,
no indication in the education index about access to education for all groups such as continuation
of wealthy students through education can hide the fact that it is difficult for children of poorer
families to enter primary education.

If I were to design HDI, I might focus on the weaknesses I mentioned above to better
enhance it as a measurement index that will take into consideration all the possible factors that
would affect a reliable measurement.
9. Why do many economists expect income convergence between developed and developing
countries, and what factors would you look to for an explanation of why this has occurred for only
a limited number of countries and in such a limited degree so far?

The term convergence is a hypothesis in economics that believes that there would be a time
when developing nations will grow faster than the developed ones in terms of per capita income.
This can happen because of mainly two reasons: First, the developing nations only need to replicate
the development process that was invented by the developed nations in terms of technology,
production methods and other institutions. Second, there is a lot of scope in developing nations to
utilize the resources at its disposal. This means that the stage of diminishing returns is still far for
the developing nations.

11. Which measure shows more equality among countries around the world—GNI calculated at
exchange rates or GNI calculated at purchasing power parity? Explain.

As defined by the book, GNI is the total domestic and foreign output claimed by residents
of a country, consisting of gross domestic product (GDP) plus factor incomes earned by foreign
residents, minus income earned in the domestic economy by non-residents. Per capita GNI
comparisons between developed and less developed countries are exaggerated by the use of official
foreign-exchange rates to convert national currency figures into U.S. dollars. This conversion does
not measure the relative domestic purchasing power of different currencies.

Compared to GNI calculated at exchange rates, GNI calculated at purchasing power parity
(PPP) is more just to use by different countries among the world. PPP is calculated using a common
set of international prices for all goods and services. In a simple version, purchasing power parity
is defined as the number of units of a foreign country’s currency required to purchase the identical
quantity of goods and services in the local developing country market as $1 would buy in the
United States. In practice, adjustments are made for differing relative prices across countries so
that living standards may be measured more accurately. Generally, prices of nontraded services
are much lower in developing countries because wages are so much lower. Clearly, if domestic
prices are lower, PPP measures of GNI per capita will be higher than estimates using foreign-
exchange rates as the conversion factor.

13. What is the meaning of a “colonial legacy”? Discuss any disadvantages and possible
advantages.

Colonial legacy is the heritage passed on from colonizers to the colonized countries, that
can be continuously seen at the present date. Most developing countries were once colonies of
Europe or otherwise dominated by European or other foreign powers, and institutions created
during the colonial period often had pernicious effects on development that in many cases have
persisted to the present day.

The disadvantages it made includes the bad practices of colonizers that have been
continued by the other people of colonized country. For example, stealing and exploitation.
Stealing of resources by the colonizers becomes now a corruption by the officials of the country.
Regarding exploitation, colonial powers favored extractive institutions at the expense of ones that
encouraged productive effort. Also, when settlers came in large numbers to live permanently,
incomes ultimately were relatively high, but the indigenous populations were largely annihilated
by disease or conflict, and descendants of those who survived were exploited and blocked from
advancement. A growing body of evidence demonstrates that practices such as forced labor had
pernicious effects on human development even centuries after they were discontinued.

In a related point of great importance, European colonization often created or reinforced

differing degrees of inequality, often correlated with ethnicity, which have also proved remarkably
stable over the centuries. In some respects, postcolonial elites in many developing countries largely
took over the exploitative role formerly played by the colonial powers. High inequality sometimes
emerged as a result of slavery in regions.

15. Discuss the differences between the traditional HDI (examined in Appendix 2.1) in comparison
to the New NHDI formulation. In what ways do you think either one is a better measure of human
development? In your answer, consider the significance of computing with a geometric mean,
instead of an arithmetic mean.

The traditional HDI uses Gross Domestic Product (GDP) per capita while the New HDI
formulation uses Gross National Income (GNI) per capita. In the new HDI, the education index
has two more additional components namely “the average actual educational attainment” and
“expected attainment of today’s children” while the two previous components, literacy and
enrollment, have been dropped. The upper limit in each of the dimensions has been increased to
the observed maximum rather than given a predefined value. The traditional HDI uses common
logarithm in measuring the standard living while in the New HDI, the use of natural log (ln) has
been put into practice.
CHAPTER 3 QUESTIONS FOR DISCUSSION

1. Explain the essential distinctions among the stages-of-growth theory of development, the
structural-change models of Lewis and Chenery, and the theory of international dependence in
both its neo-Marxist and false-paradigm conceptualizations. Which model do you think provides
the best explanation of the situation in most developing nations? Explain your answer.

Stages of growth theory development says that a developing country passes through five
stages of development namely traditional society, the pre-conditions for takeoff into self -
sustaining growth, the take-off, the drive to maturity and the age of high mass consumption.
According to it, the developed nations have passed through the takeoff stages whereas the under
developed nations are still in the stage of being a traditional society. Thus, it is important for
underdeveloped nation to save a portion of their national income plus mobilize their savings
towards generation of sufficient investments, if it wants to achieve development at a faster pace.

The structural change theory of Lewis and Chenery is based on the hypothesis that
underdevelopment is due to underutilization of resources. In this theory, an underdeveloped
economy consists of two sectors namely; agricultural sector and a manufacturing sector. There is
surplus labor seen in the traditional agricultural sector whose productivity is zero. If this surplus
labor is transferred to the manufacturing sector, it will absorb this labor and will utilize this labor
for the production of commodities needed by the society. This way the productivity will give
increasing returns to the labor and the producer, the problem of unemployment and poverty would
be solved and the industrialization would take place at a faster pace. Thus, we will see development
in these nations. Neo Marxist theory of international dependence believes that underdevelopment
is seen in various nations because of the perpetuation of highly unequal international capitalist
system. The developing nations were once ruled by the colonialist. These people divided the
population into rich and poor class through mass exploitation of labor and enslavement and giving
access to education to little elite class of people during that time. This process continues even today
and thus development has not been made possible in these nations. The false paradigm model says
that nations are underdeveloped because they have blindly accepted the path of development as
suggested by the developed nations without considering the needs of their nation.

Each of these theories has some information about the causes of under development in the
nations. These reasons if reconciled would provide better solutions for accelerating development
process in various nations.

3. Some people claim that international dualism and domestic dualism are merely different
manifestations of the same phenomenon. What do you think they mean by this, and is it a valid
conceptualization? Explain your answer.

It is the international-structuralism model which highlighted the concept of dual societies.

This means that there exist rich nations and poor nations at world level; and a few rich
accompanied with a majority of poor people in the developing countries. Thus, dualism is a
concept which represents the existence and persistence of increasing divergences between rich and
poor both at world level and at country levels. If by dualism we mean unequal divisions of wealth
and economic power, it’s a crude concept because wealth follows something roughly like a
continuum or power-law distribution. However, having accepted this concept of two categories,
the have’s and the have not’s, it’s evident that the rich use their capital to get richer, while the poor
lack that resource, and the global movement of capital means that this process becomes
international as well as domestic (within a specific nation). Meanwhile the middle-class get
emptied out, contradicting a smooth distribution and creating a rough dualism.

5. Given the diversity of developing countries, do you think that there could ever be a single, unified
theory of development? Explain your answer.

Each developing nation is different in its own kind and thought. Their process and efficacy
of development is also different. The diversity exists among the nations on certain parameters that
are: different level of standard of living and the labor productivity, different level of economic
inequality and absolute poverty, different size of population, different geography, different level
of industrialization, common history of colonial exploitation and a lot of dependence of foreign
aid and markets. Given these differences, in my own opinion, it is impossible to have a single,
unified theory of development that will cover all these diversities.

7. In what ways do developing countries depend on rich countries? In what ways is the opposite
true?

Interdependence among nations via trade and investment over the period of time has
inevitably increased overtime. This has led to the evolution of International-Dependence
Revolution. The theory of Dependence articulates the reliance of developing countries on
developed nations’ economic policies to stimulate their own economic growth. Developing
countries depend on developed countries for various reasons to a large extent. Certain groups in
the former (landlords, entrepreneurs, merchants) with high income and social status constitute a
very small elite ruling class. They are dominated and are dependent on international specialist
power groups including MNCs, World Bank, IMF etc. which are tied by funding to wealthy
capitalist countries. This in a way shows that they are dependent indirectly on developed countries.
However, developed countries also depend on developing countries in some ways. Rich countries
need developing for production of consumer products. The most typical example of it could
be clothes. Developing countries have much lower costs of production except some very
special types such as some types of sport clothes all these stuff is produced in Asia. Developing
countries have often natural resources too and developed countries are the biggest consumers.
Therefore, both group of countries need each other and dependency should be a vice-versa
relationship.