Economic Development

Defines:
Ray (1998)
Economic development as the means of improving social welfare, reducing poverty, and
fostering equitable growth, driven by both economic and social policies.

Sen, Amartya (1999)

Economic development as a means to expand individuals' freedoms and opportunities,
including improved living standards, access to healthcare, and education. He emphasizes
that development goes beyond economic growth, focusing instead on enhancing
individuals' capabilities to lead fulfilling lives.

Todaro and Smith (2015)

Economic development as not only an increase in per capita income but also an
improvement in living standards, health, education, and social equality.

HISTORICAL ASPECTS OF ECONOMIC DEVELOPMENT

1. Ancient Economies

 Agricultural Revolution: Explore how early farming societies marked the

beginning of economic development, allowing for the rise of settlements and
trade.
 Trade and Barter Systems: Highlight how early civilizations (like Mesopotamia
and Ancient Egypt) developed trade networks, leading to wealth accumulation
and specialization.

2. Medieval and Early Modern Periods

 Feudalism: Explain how land ownership structured economies in medieval

Europe.
 Silk Road and Maritime Trade: Discuss how these trade routes connected
different regions, spurring economic growth and cultural exchange.
 Mercantilism: Cover the colonial period’s economic policies that focused on
accumulating wealth through trade surpluses and monopolies.
3. The Industrial Revolution

 This era marked a significant turning point with mechanization, urbanization, and
the factory system, starting in the late 18th century in Britain.
 Innovations like the steam engine transformed production, which boosted
productivity and economic output worldwide.

4. Modern Economic Theories and Policies

 Classical Economics: Touch on Adam Smith’s "Wealth of Nations" and the birth of
classical economics, advocating free markets.
 Keynesian Economics: Introduce John Maynard Keynes' ideas, focusing on
government intervention during economic downturns, which influenced
economic policies post-Great Depression.
 Post-War Development Models: Highlight how, after WWII, theories like the
Marshall Plan and modernization theory aimed at rebuilding economies and
assisting developing nations.

5. Globalization and Digital Economy

 Globalization: Address the increased interconnectedness of economies since the

late 20th century, with trade liberalization, multinational corporations, and global
supply chains.
 Digital Revolution: Explore how advancements in technology and the internet
transformed industries, financial systems, and communication, leading to new
sectors like e-commerce and fintech.

Suggested Readings and Resources

 "The Wealth of Nations" by Adam Smith - A foundational text on classical

economics.
 "Capital in the Twenty-First Century" by Thomas Piketty - For a modern take on
economic inequality and its historical roots.
 "Why Nations Fail" by Daron Acemoglu and James A. Robinson - Discusses the
role of political and economic institutions in economic development.
 E-resources:
o World Bank's History of Economic Development series.
o Khan Academy's free lectures on economic history.
 TRANSFORMATION OF ECONOMIC SYSTEM
1. Primitive and Subsistence Economies
Early societies focused on survival through hunting, gathering, and minimal
surplus production.
2. Agricultural and Feudal Economies
With farming, communities grew, leading to land-based wealth and feudal
systems where peasants worked for landowners.
3. Mercantilism and Early Capitalism
European colonialism spurred mercantilism, focusing on wealth accumulation
through trade control. Capitalism began with private ventures in trade.
4. Industrial Economy
The Industrial Revolution introduced factories, urban labor, and mass production,
reshaping economies and sparking early labor rights movements.
5. Mixed Economies and Welfare States
After the Great Depression, mixed economies emerged, balancing capitalism with
government intervention and social welfare policies.
6. Socialism and Command Economies
Socialism, especially in the Soviet Union, used state control of resources,
contrasting with capitalist economies.
7. Globalization and Digital Economy
The late 20th century saw globalization and neoliberal policies favoring
deregulation. The digital economy later focused on technology and innovation.

TRANSFORMATION OF MEDIUM EXCHANGE

1. Barter System
In early societies, goods and services were traded directly (barter), which worked
only in small, simple economies but was limited by the need for a "double
coincidence of wants."
2. Commodity Money
Societies moved to commodity money, using items like livestock, grains, and
metals that held intrinsic value and were widely accepted, making trade easier.
3. Metal Coins
Around 600 BCE, standardized metal coins were introduced, with governments
stamping metals like gold, silver, and bronze. This provided a universally
recognized store of value.
 4. Paper Money
By the 7th century in China, paper money emerged. It spread globally over time,
as it was lighter and more practical than metal coins, backed initially by valuable
resources like gold.
5. Fiat Money
In the 20th century, most countries moved to fiat money, currency not backed by
a physical commodity but by government decree, enabling greater flexibility in
money supply.
6. Digital and Electronic Money
With the digital age, electronic payments became common, using credit/debit
cards, online banking, and payment systems like PayPal, reducing reliance on
physical cash.
7. Cryptocurrencies
In recent years, cryptocurrencies like Bitcoin introduced a decentralized digital
currency system, operating on blockchain technology, which allows for secure,
transparent, and non-centralized transactions.

These shifts in the medium of exchange have helped economies scale and adapt to
growing trade, technology, and the need for secure, efficient transactions.

Types of Economic Development

 Traditional Economy
 Command Economy
 Market Economy
 Mixed Economy
1. Traditional Economic Development:
Characteristics:
 Based on customs, traditions, and beliefs.
 Economic decisions are often influenced by social hierarchy and cultural
practices.
 Relies heavily on agriculture, fishing, hunting, and gathering.
 Limited use of technology and innovation.
 Communities are usually self-sufficient and barter is common.
Examples:
 Rural communities in developing countries.
 Indigenous tribes and cultures that maintain traditional ways of living.
2. Command Economic Development:
 Characteristics:
 The government or central authority makes all economic decisions.
 The state controls all major resources and industries.
 Production, prices, and distribution of goods are centrally planned.
 Limited consumer choice and private enterprise.
 Aimed at achieving specific political or social goals, such as equality or
state control over resources.
Examples:
 Former Soviet Union.
 North Korea.
 Cuba.
3. Market Economic Development:
Characteristics:
 Economic decisions are driven by the interactions of citizens and
businesses in the marketplace.
 Prices are determined by supply and demand.
 Private ownership and free enterprise are encouraged.
 Competition drives innovation and efficiency.
 Minimal government intervention in the economy.
Examples:
 United States.
 United Kingdom.
 Australia.
4. Mixed Economic Development:
Characteristics:
 Combines elements of both market and command economies.
 The government and private sector jointly make economic decisions.
 Government intervenes to regulate industries, provide public goods, and
correct market failures.
 Balances the benefits of a free market with the need for social welfare.
 Ensures both economic efficiency and social equity.
Examples:
 France.
 Sweden.
 Canada.

CHARACTERISTICS OF ECONOMIC DEVELOPMENT

The main characteristics of modern economic development are a high per capita
growth rate, a high increase in the rate of productivity, quick changes in the
economic structure, economically more developed nations reaching out to less
developed nations, and that it does not automatically spread to other developing
countries.
 1.Increased GDP and Per Capita Income
Economic development is characterized by a sustained increase in GDP and per
capita income, indicating improved living standards.
 Industrialization and Diversification
Economic development involves a shift from agriculture-based to industrialized
economies, with diversification of industries and sectors.
 Infrastructure Development
Economic development is driven by technological innovation, entrepreneurship,
and adoption of new technologies.
 Trade and Global Integration
Economic development involves increasing trade and global integration,
facilitating the exchange of goods, services, and ideas.
 Reduced Poverty and Inequality
Economic development aims to reduce poverty and inequality, ensuring broader
access to opportunities and resources.
 Technological Progress
Economic development is driven by technological innovation, entrepreneurship,
and adoption of new technologies.
 Human Capital Development
Economic development depends on investments in education, healthcare, and
skills development to enhance human capital.

Economic Development Goals

Development is more than just talking about increasing income or increasing the
economy’s number of goods and services. It’s not only about growing the economy but
also how that growth benefits citizens. Development takes into account inclusive
welfare, meaning a rising tide that lifts all boats and better standards of living for all
citizens, not just a privileged few.
In today’s rapidly changing world, economic development also focuses on
building capacity and resilience. This means equipping countries and their people with
the tools and resources they need to adapt to challenges and seize opportunities in an
unpredictable global landscape.
Here are some of the key goals of economic development:
  Increase the availability of goods and services:
This goes beyond simply producing more goods. It also involves expanding the
distribution of essential life-sustaining goods such as food, drink, shelter,
education, healthcare, and social protection, ensuring everyone has access to a
decent standard of living.
 Increase per capita income:
While income is a key indicator of prosperity, economic development recognizes
the importance of a multifaceted approach. This includes goals like better
education to create a skilled workforce and the provision of more jobs to offer
opportunities for everyone to contribute and share in the economic gains.
The development also acknowledges the importance of cultural and human values,
aiming for prosperity that enriches not just material well-being but also the lives and
communities citizens build.

 Promote the freedom to make responsible economic and social choices:

Economic development strives to empower individuals and nations. This includes
freedom from exploitation, such as slavery, and the ability to make informed
choices about their economic and social well-being.
An increase in average life expectancy is just one example of the positive outcomes of
economic development. Other outcomes include improved literacy rates, better access
to quality education and healthcare, and a more robust infrastructure that supports
economic activity and improves the quality of life for all citizens.