M1: Lecture Notes

INTRODUCTION
You most likely help fund ECONOMIC DEVELOPMENT every
time you purchase something at the store and pay local or state sales
tax. That cup of coffee, a cup of milk tea, those new shoes or bags or
watches you bought, or the real estate taxes you may pay, all usually
have a percentage of the sales going towards economic development
projects or initiatives. In the economic study of the public sector,
economic and social development is the process by which the
economic well-being and quality of life of a nation, region, or local
community are improved according to targeted goals and objectives
[of our government].
Generally, ECONOMIC DEVELOPMENT is usually the focus of
federal state, and local governments to IMPROVE our STANDARD
OF LIVING through the creation of jobs, the support of the innovation
and new ideas, the creation of higher wealth, and the creation of
overall better quality of life.
How do we know if economic development is working? There
are hundreds of ways to measure things for the hundreds of different
economic development objectives that communities may have. We
can measure many of the above things through improvements in
average income of families, local unemployment rates, standardized
testing and literacy results in children, leisure time and changes in life
expectancy, or hospital stays.

1
 INEQUALITY BETWEEN
THE WORLD’S RICH
AND POOR
Development economics focuses primarily on the poorest two-
thirds of the world’s population. These POOR are the vast majority,
but not all, of the population of developing countries, which comprise
82% of the world’s population. Many of them are inadequately fed and
housed, in poor health, and illiterate. Calculations based on national
accounts and income distribution indicate that about 700–
1,000M(10%-15%) of the world’s 6.5B people (5.3B in developing
countries) are poor or living on no more than $1 a day. Most
Americans, Canadians, and Britons have never seen poverty like that,
the overwhelming majority of which is in sub-Saharan Africa, South
Asia, and East Asia.
If you have an average income in the United States and Canada,
you are among the richest 5% of the world’s population. The economic
concerns of this 5% are in stark contrast (very different from –
something else) to those of the majority of people on this planet.
Income inequality is even greater for the world as a whole than
for countries having high-income concentration, such as South Africa
and Brazil. To see these contrasts more clearly, let us briefly compare
living conditions in North America to those in India, a low-income
country, one that is not as poor as the poorest region of the world,
sub-Saharan Africa.

2
 A NORTH AMERICAN FAMILY
An average intact family in the United States and Canada, the
Smiths, a family of four, has an annual income of $US55,000 to
$US60,000. They live in a comfortable apartment or suburban home
with three bedrooms, a living room, a kitchen, and numerous electrical
appliances and consumer goods. Their three meals a day include
coffee from Brazil, tinned fruit from the Philippines, and bananas from
Ecuador. The Smith children are in good health and have an average
life expectancy of 77 years. Both parents received a secondary
education, and the children can be expected to finish high school and
possibly go to a university. Modern machinery and technology, even
where these require physical work, will probably relieve their jobs. But
although the Smiths seem to have a reasonably good life, they may
experience stress, frustration, boredom, insecurity, and a lack of
meaning and control over their lives. Their air may be dirty, their water
polluted, and their roads congested. Some of these problems may
even result from economic progress. Nevertheless, millions of less
fortunate people throughout the world would be happy with even a
portion of the Smiths’ material affluence.

3
 INDIAN FARM FAMILIES
The family of Balayya, a farm laborer in India, has a life far
different from the Smiths’. Although work, family structure, food,
housing, clothing, and recreational patterns vary widely in the
developing world, Balayya’s family illustrates the low income of the
majority of the world’s population in Asia, Africa, and Latin America
relative to North America.
Balayya Lakshman, his wife, Kamani, and their 4 children,
ranging in age from 3-12 years, have a combined annual income of
$US900 to $US1,200 (but several times that in purchasing power),
most of which consists of goods produced rather than money earned.
Under a complex division of labor, the family receives consumption
shares from the patron (or landlord) in return for agricultural work –
plowing, transplanting, threshing, stacking, and so on, the rice-based
daily meal, the one-room mud house thatched with palm leaves, and
the crudely stitched clothing are produced locally. The house has no
electricity, clean water, or latrine. Games, visiting, gossip, storytelling,
music, dancing, plays, worship, religious fairs and festivals, weddings,
and funerals provide respite from the daily struggle for survival.
The common stereotype is that peasant, agricultural societies
have populations with roughly uniform poverty, a generally false view.
Although many third-world villagers are poor, a number are better off.

4
 CONGESTION, POVERTY, AND
AFFLUENCE IN INDIA’S CITIES
In the large Indian cities, there are few proper footpaths for
pedestrians or separation of fast-moving vehicles from slower ones;
the flow of traffic consists of the juxtaposition of buses, automobiles,
taxis, trucks, jeeps, motorcycles, motor scooters, powered cycles,
bicycles, human-drawn and motorized rickshaws, oxcarts, handcarts,
cattle, dogs, and pedestrians walking or carrying head loads.
Congestion, squalor, destitution, and insecurity characterize the
lives of the unemployed, underemployed, and marginally employed in
cities such as Kolkata (Calcutta), Mumbai (Bombay), and Delhi,
people literally live in the street, where they eat, wash, defecate, and
sleep on or near the pavement (see Jagannathan and Halder
1988:1175–78). During the monsoon season, they huddle under the
overhanging roofs of nearby commercial establishments. Others with
menial jobs live in crowded, blighted huts and tenement houses that
make up urban shantytowns.
In contrast, the family whose major income earner is steadily
employed as an assembly line worker in a large company or as a
government clerk may live in a small house or apartment. Upper-
income professionals, civil servants, and business people usually live
in large houses of five to six rooms. Although they have fewer
electrical appliances than the Smiths do, they achieve some of the
same material comforts by hiring servants. Social institutions and
lifestyles vary greatly among third-world countries. Nevertheless, most
low-income countries have income inequality and poverty rates at
least as high as India’s. Even the poorest Americans and Canadians
are better off than most of the people in India and other low-income
countries.

5
6
 Globalization, Outsourcing, and
Information Technology
Both Indians and North Americans are living in worlds affected
by domestic economic change and greater integration into the global
economy. In the United States, household income distribution is
shaped more like an hourglass, with a slender middle, so that families
such as the Smiths are falling from the middle class from job loss or
rising to higher incomes. In India, the gains from economic growth and
reform – although these gains bypass some – mean rising commercial
farm income for the families of Sridhar and Balayya and increased
business and employment opportunities in the cities. Furthermore, as
Anthony P. D’Costa (2003:212) notes, India’s incomes are uneven so
that “You have fiber optic lines running parallel with bullock carts.”
With GLOBALIZATION, the worlds of India and the United States
increasingly are intersecting, much beyond the expanding Indian-
American representation in electronics, academics, business,
medicine, and journalism in the United States. Some U.S.
corporations (or state or local governmental units) OUTSOURCE
service jobs to India, where an entry salary for a university graduate is
$US300–500 monthly, a good salary and career opportunity by local
standards. The corporation may have an Indian subsidiary or may
subcontract work to an Indian firm. In India, two million English-
speaking college students graduate yearly, and most work for one-
tenth to one-fifteenth the salary that a U.S. worker of comparable skill
receives.

7
 Low-cost high-quality TELECOMMUNICATION means that U.S.
companies can open a call center almost as easily in Kolkata, Delhi,
Dakha, Johannesburg, and Manila (Hookway 2003:A1) as in Omaha,
Austin, or Tallahassee. Indian employees spend several weeks of
training to Americanize their accents and take a crash course in
Americana – “holidays, regional speech patterns, weather patterns,
and the meaning of terms such as ‘frat party’” – to disguise the callers’
location (Bengali 2003:A1).

INDIA’S and ASIA’S GOLDEN AGE OF DEVELOPMENT

India’s recent growth is a part of a golden age of development for
Asia (Bhalla 2002:195), during years of globalization (expansion of
trade and capital movements), 1980–2000. From 1980 to 2000, the
absolute incomes of the industrialized countries’ middle class “slowed
down to a crawl – only 1.2 percent a year, a third of that experienced
by their parents – [while] that of Asian elites slowed down only
marginally – to 2.9 percent” (ibid., p. 195). The impact of this has been
most substantial among the world’s middle class (income range of
$US10–$US40 a day or annual purchasing-power equivalent income,
at 1993 prices, between $US3,650 and $US14,600).
The relative income of Asian elites (top 10 percent of income
earners) increased from 43% in 1980 to 60% in 2000 of the middle 50
percent of industrialized countries’ income earners, a group with
comparable education and skills.