OUTLINE

1. Economic growth vs. economic development

2. Short history of economic development

ECONOMIC DEVELOPMENT
3. Principles of sustainable development

Course: Global Development 4. Indexes of development and development goals

Prof.: Elena Rotarou
- Human Development Index

- Millennium Development Goals (MDGs)

- Sustainable Development Goals (SDGs)

July 21st, 2016 2

Introduction Economic growth vs. economic development

Global Development
Economic growth = Increase in total value of goods and services
produced

Economic development = Improvements in health, education,

other aspects of human welfare

Development (Economic) Development is accompanied by

Economics Globalisation
✓ shifts in the structure of the economy
✓ urbanisation

Branch of economics which deals with Integration of national economies

economic aspects of development through trade, capital flows, migration,
in low-income countries and production process

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 Economic growth vs. economic development Economic growth vs. economic development

Development is “comprehensive”

Development also includes: Economic growth may be achieved alongside:

In addition to economic development:
✓ Broadening of literacy and education, medical care facilities
✓
✓
Developed systems of commerce, finance, transport
Systems for providing for poor, social insurance, etc.
- Greater inequality è Ruthless growth
✓ Improvement in status and rights of women
✓ Diffusion of technology to meet human needs
- Higher unemployment è Jobless growth
Broader concept of standard of living other than per capita income:
✓ Expansion of individual’s opportunity (capabilities set), e.g., access to security,
property rights, opportunity, education, health care - Weakened democracy è Voiceless growth
✓ Ability to have control over life. e.g., political freedom, civil and human rights,
leisure and family time, risk alleviation
- Loss of cultural identity è Rootless growth
Institutional context:
✓ Evolution of stable political and legal institutions (rule of law), e.g., democracy,
contract enforceability, markets, secure property rights, basic civil rights,
trade and other interaction within region and world
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Economic growth vs. economic development The world by income

Economic growth vs. economic development
Classified according to
Low ($1,045 or less) Upper middle ($4,126–$12,745)

World Bank country classification, 2013

World Bank estimates of
Lower middle ($1,046–$4,125) High ($12,746 or more) No data 2013 GNI per capita

Indicators measuring economic development: Greenland

(Den)

Iceland Norway

Risk of extreme poverty - % of the population living on less than $1.25 per day
Faeroe
Islands
(Den) Sweden Finland
Russian Federation
The Netherlands Estonia
Isle of Man (UK) Russian Latvia
Canada Denmark
Fed. Lithuania
United

Percentage of adult male and female labour in agriculture

Ireland Kingdom Germany Poland Belarus
Channel Islands (UK) Belgium
Ukraine
Luxembourg Moldova Kazakhstan
Mongolia
Liechtenstein France Italy Romania
Switzerland

Combined primary / secondary school enrolment figures

Bulgaria Georgia Uzbekistan Kyrgyz
Andorra
Armenia Azer- Rep. Dem.People’s
United States Spain baijan Turkmenistan Rep.of Korea
Portugal Turkey Tajikistan
Monaco Greece Japan
Cyprus Syrian Rep.of
Gibraltar (UK) Arab Islamic Rep. Korea
Bermuda Malta Lebanon China
Tunisia Rep. of Iran Afghanistan
(UK) Iraq

Access to clean water / improved sanitation facilities

Morocco Israel Kuwait
West Bank and Gaza Jordan
Algeria Bahrain Pakistan Bhutan
Libya Arab Rep. Qatar Nepal
The Bahamas Western of Egypt Saudi
Sahara Arabia Bangladesh
Cayman Is.(UK) United Arab
India

Energy consumption per capita

Turks and Caicos Is. (UK) Emirates
Mexico Cuba Myanmar
Mauritania Oman Lao
Haiti Cabo Verde P.D.R.
Belize Jamaica Mali Niger N. Mariana Islands (US)
Chad Eritrea Rep. of Yemen Thailand
Guatemala Honduras Senegal Sudan
The Gambia Vietnam Guam (US)
El Salvador Nicaragua Burkina Cambodia Philippines

Depth of hunger, incidence of malnutrition

Guinea-Bissau Faso Djibouti Federated States of Micronesia
Guinea Benin Marshall Islands
Costa Rica Panama Nigeria Ethiopia Sri
R.B. de Guyana Sierra Leone Côte Ghana Central
d’Ivoire African South Lanka
Venezuela Suriname Sudan Brunei Darussalam
Liberia Republic Palau
French Guiana (Fr) Cameroon Malaysia
Colombia Togo Somalia
Equatorial Guinea Maldives
Uganda

Fertility rates, natural rate of growth of population

São Tomé and Príncipe Kenya Nauru Kiribati
Congo Singapore
Ecuador Gabon Rwanda
Kiribati Dem.Rep.of Burundi Seychelles
Congo Solomon
Tanzania Papua New Guinea Islands
Comoros Indonesia

Prevalence of HIV, average life expectancy at birth, child mortality

Tuvalu
Peru Brazil Timor-Leste
Samoa
French Polynesia (Fr) Angola
Malawi
Zambia Mayotte
American (Fr) Vanuatu Fiji
Samoa (US) Bolivia
Mozambique

Access to mobile cellular phone services, access to bank accounts, insurance

Fiji Zimbabwe Madagascar
Tonga Mauritius
Namibia
Botswana New
Paraguay Réunion (Fr)
Caledonia
Australia (Fr)
Swaziland
Dominican Germany

Dependence of a country on foreign aid / levels of external debt

St. Martin (Fr) Poland South
Republic Puerto Lesotho
Rico (US) St. Maarten (Neth) Africa
Czech Republic Ukraine
Uruguay Slovak Republic
Antigua and Barbuda Chile
U.S. Virgin Argentina
Islands (US)
Guadeloupe (Fr) Austria
St. Kitts Hungary New

Availability of / scope of social support programmes through welfare programmes

and Nevis Zealand
Dominica Slovenia Romania
Croatia
Martinique (Fr)
Bosnia and
St. Lucia Herzegovina Serbia
Aruba (Neth)
St. Vincent and San
Barbados

Unemployment rates and vulnerable employment rates

Curaçao (Neth) the Grenadines Marino Kosovo Bulgaria
Grenada Italy Montenegro FYR
Macedonia
Trinidad Vatican Albania
and Tobago City Greece
R.B. de Venezuela

Changes in value of Human Development Index

Progress in achieving Millennium Development Goals Antarctica

IBRD 41312 NOVEMBER 2014

The world by income

Low ($1,045 or less) Upper middle ($4,126–$12,745)

7 Source: World Bank Lower middle ($1,046–$4,125) High ($12,746 or more)

8 No data

Greenland
(Den)

Iceland Faeroe Norway

Islands
(Den) Sweden Finland
 Economic growth vs. economic development Economic growth vs. economic development

Development indicators, 2014 (or nearest year)

GNI per Life Mortality Literacy Literacy
Urban Fertility Agriculture Industry Services
capita, expectancy rate, rate, adult rate, adult
population rate (% of (% of (% of
US$, at birth under-5 female male
(%) (%) GDP) GDP) GDP)
PPP (years) (%) (%) (%)

Low income 1,593 59 76.3 29.61 4.83 32.30 21.54 46.16 54 68

Lower-middle
6,073 67 59.0 38.58 2.83 16.68 31.14 52.18 62 79
income

Upper-middle
14,184 74 19.6 61.81 1.88 7.31 36.04 56.66 92 96
income

High income 40,842 79 6.3 80.64 1.72 1.58 24.59 73.84 n/a n/a

World 15,032 71 45.6 53.47 2.46 3.08 26.42 70.49 80 89

Source: UNCTAD 9 Source: World Development Indicators, World Bank 10

Economic growth vs. economic development Economic growth vs. economic development

Common characteristics of developing countries However, no two developing countries are the same!
❖ Low levels of income
❖ Low levels of productivity Many key structural differences between nations:
❖ High rates of population growth and dependency burdens
❖ Low saving rates Size of economy (i.e. population size, basic geography, annual
❖ Low investment rates level of national income)
❖ Substantial dependence on agricultural production and primary- Historical background including years since independence
product exports from colonial rule
❖ Large percentage of population living in rural areas
❖ Low demand (small market size) Natural resource endowment, such as access to mineral
deposits and favourable climate
❖ Prevalence of imperfect markets
❖ Dependence and vulnerability Age structure of population
❖ Weakness in infrastructure: ports, roads, telecommunications, water Ethnic and religious composition
❖ Weakness in institutions, such as stable government

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 Economic growth vs. economic development A brief history of economic development

Relative size / importance of public and private sectors of Before the start of Industrial Revolution (1750):
economy world fairly equal

Structure of national output (e.g. primary, secondary, tertiary

and quaternary sectors)

Political stability, strength of democratic institutions,

transparency of government, level of corruption and ease of
doing business

Ethnic and gender equality, opportunity and tolerance Story of today’s inequality is story of era of
modern economic growth
Ease with which new businesses can be created and
sustained

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A brief history of economic development A brief history of economic development

Global GDP over time, 1-2014

90
Our civilisation is 10,000 years old
80

70
GDP (trillions, US$)
60

50

40

30
Economic change was very gradual, life seemed unchanged 20
(only difference wars, famines, illnesses)
10

0
1 1000 1500 1600 1700 1820 1870 1900 1940 1950 1960 1970 1980 1990 2000 2008 2014

15 Source: Maddison Project 16

 A brief history of economic development A brief history of economic development

Global population over time, 1-2015

8

7
Total global output = GDP per person x world population
6

Population (billions)
5

4
Was the world economy’s takeoff around 1750 due to rising
output per person, or was it due to a rise in the number of people? 3

1
Both! 0
1 1000 1500 1600 1700 1820 1870 1900 1920 1940 1950 1960 1970 1980 1990 2000 2010 2015

17 Source: Maddison Project 18

A brief history of economic development A brief history of economic development

Global GDP per capita over time, 1-2013

John M. Keynes
12,000
“Economic possibilities for our grandchildren” (1930)
10,000
GDP per capita (US$, PPP)

8,000 From the earliest times of which we have the record, back say to 2000 years
before Christ, down to the beginning of the 18th century there was no very great
change in the standard of life of the average man living in the civilised centers of
6,000 the earth…
The absence of important technical inventions between the
4,000 prehistoric age and the comparatively modern times is truly remarkable. Almost
everything which really matters and which the world possessed at the
commencement of the modern age was already known to man at the dawn of
2,000 history. Language, fire, the same domestic animals which we have today. Wheat,
barley, the vine and the olive, the plow, the wheel, the oar, the sail, leather, linens
and cloth, bricks and pots, gold and silver, copper, tin.
0
1 1000 1500 1600 1700 1820 1870 1900 1940 1950 1960 1970 1980 1990 2000 2010 2013

Source: Maddison Project

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 A brief history of economic development A brief history of economic development

Modern economic growth began in England End of 19th century: era of modern economic growth

Two kinds of growth: endogenous and catch-up

In the 1600s and 1700s, social and technical innovations
ü Agricultural productivity started to rise Endogenous growth: economic progress that emerges from the internal
ü More urbanisation workings of a economy, based on continuing innovation
ü More trade
ü More sophisticated market economy
ü Property rights deepened in complexity and flexibility
ü Rule of law deepened Catch-up growth: growth of a “laggard” country that through technology
ü Invention of steam engine (1712) import from abroad, manages to “catch-up” to leaders (e.g. China), closing
a gap by adopting (and adapting) technologies of those countries already
ahead
Topography, river ways, canals, ports, and
mineral deposits, market incentives, rule of No technological leader has ever sustained rapid growth rates,
law, scientific outlook fostered by great
universities
and no laggard country has sustained them after point of
catching up with the leading countries
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A brief history of economic development A brief history of economic development

Kondratieff’s waves

When did each economy in the world first escape from

extreme poverty?

Extreme poverty threshold: $2,000 GDP per capita (PPP)

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 A brief history of economic development A brief history of economic development

Year (or projected year) of passing $2,000 income

By end of 19th century:

• India, much of Asia, and virtually all of Africa was under European
colonial rule
• Most of colonised regions did not experience modern economic
growth until decolonisation in 1940s-1960s

• World War I (1914-1918): mass deaths

• After 1914: economic chaos in 1920s
• Great Depression in the 1930s
• World War II (1938-1945)

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25

A brief history of economic development A brief history of economic development

End of World War II: United States world’s leading economy • First World recovered from World War II during 1950s (through
By mid-20th century: world economy divided in three parts endogenous technology-driven economic growth)

• Second World started with industrialisation

• By 1960s, economic stagnation
• In 1970s, several countries started reforms (e.g. China)
• Soviet Union refused to make reforms until M. Gorbachev (1985)
• Revolutions of Eastern Europe in 1989
• End of Soviet Union (end of 1991)
• Second World became part of the world economy

• Third World: dozens of countries, with own economic history, politics,

and strategies

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 A brief history of economic development

Flying geese model

This is how economic development in Asia proceeded:

1) Industrialisation of Japan (with endogenous technological change)

2) South Korea, Taiwan, Hong Kong, and Singapore
3) Indonesia, Malaysia, and Thailand
4) China and Vietnam
5) Cambodia, Laos, and Myanmar

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Human development Human development

Amartya Sen “The possibility of social choice” (1999)

n Human development: process of enlarging people’s choices
“The goal of development is to expand the capabilities of
n Two sides: people to live the lives they choose to lead”
ü formation of human capabilities (improved health,
knowledge, skills) Factors:
ü use people make of acquired capabilities (for leisure,
productive purposes, or being active in cultural, social, or 1) Personal heterogeneities
political affairs) 2) Environmental diversities
3) Variations in social climate
Imbalance between the two leads to human frustration
4) Differences in relative deprivation

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 Human development Human development

Human Development Index, 2015 Human Development Index, 2015

Human Life Mean Expected Gross national Human Life Mean Expected Gross national
Development expectancy years of years of income (GNI) HDI Development expectancy years of years of income (GNI)
HDI rank Index (HDI) at birth schooling schooling per capita rank Index (HDI) at birth schooling schooling per capita
Very high human development
Low human development
1 Norway 0.944 81.5 12.6 17.6 63,909
2 Australia 0.933 82.5 12.8 19.9 41,524 170 Djibouti 0.467 61.8 3.8 6.4 3,109
171 Côte d'Ivoire 0.452 50.7 4.3 8.9 2,774
3 Switzerland 0.917 82.6 12.2 15.7 53,762 172 Gambia 0.441 58.8 2.8 9.1 1,557
4 Netherlands 0.915 81.0 11.9 17.9 42,397 173 Ethiopia 0.435 63.6 2.4 8.5 1,303
5 United States 0.914 78.9 12.9 16.5 52,308 174 Malawi 0.414 55.3 4.2 10.8 715
6 Germany 0.911 80.7 12.9 16.3 43,049 175 Liberia 0.412 60.6 3.9 8.5 752
7 New Zealand 0.910 81.1 12.5 19.4 32,569 176 Mali 0.407 55.0 2.0 8.6 1,499
8 Canada 0.902 81.5 12.3 15.9 41,887 177 Guinea-Bissau 0.396 54.3 2.3 9.0 1,090
9 Singapore 0.901 82.3 10.2 15.4 72,371 178 Mozambique 0.393 50.3 3.2 9.5 1,011
10 Denmark 0.900 79.4 12.1 16.9 42,880 179 Guinea 0.392 56.1 1.6 8.7 1,142
11 Ireland 0.899 80.7 11.6 18.6 33,414 180 Burundi 0.389 54.1 2.7 10.1 749
12 Sweden 0.898 81.8 11.7 15.8 43,201 181 Burkina Faso 0.388 56.3 1.3 7.5 1,602
13 Iceland 0.895 82.1 10.4 18.7 35,116 182 Eritrea 0.381 62.9 3.4 4.1 1,147
14 United Kingdom 0.892 80.5 12.3 16.2 35,002 183 Sierra Leone 0.374 45.6 2.9 7.5 1,815
15 Hong Kong, China 0.891 83.4 10.0 15.6 52,383 184 Chad 0.372 51.2 1.5 7.4 1,622
185 Central African 0.341 50.2 3.5 7.2 588
15 Korea (Republic of) 0.891 81.5 11.8 17.0 30,345 186 Congo (D.R.) 0.338 50.0 3.1 9.7 444
41 Chile 0.822 80.0 9.8 15.1 20,804 187 Niger 0.337 58.4 1.4 5.4 873
UNDP, 2015 33 UNDP, 2015 34

Human development Human development

Human Development Index, 2015
Human Life Mean Expected Gross Limitations of HDI
Development expectancy years of years of national
HDI rank Index (HDI) at birth schooling schooling income (GNI)
Very high human development (0.944-0.808)
31 Qatar 0.851 78.4 9.1 13.8 119,029
32 Cyprus 0.845 79.8 11.6 14.0 26,771 ❖ Limiting index to only three dimensions: since 2010, new
35 Lithuania 0.834 72.1 12.4 16.7 23,740 Inequality-adjusted HDI, Gender Inequality Index, and a
37 Andorra 0.830 81.2 10.4 11.7 40,597
High human development (0.790-0.700) Multidimensional Poverty Index
50 Uruguay 0.790 77.2 8.5 15.5 18,108
53 Belarus 0.786 69.9 11.5 15.7 16,403 ❖ Equal weight given to life expectancy, education, and income
69 Turkey 0.759 75.3 7.6 14.4 18,391
70 Kazakhstan 0.757 66.5 10.4 15.0 19,441
Medium human development (0.698-0.556)
103 Maldives 0.698 77.9 5.8 12.7 10,074 ❖ Environmental indicators are not included
103 Turkmenistan 0.698 65.5 9.9 12.6 11,533
142 Bangladesh 0.558 70.7 5.1 10.0 2,713
144 Equatorial Guinea 0.556 53.1 5.4 8.5 21,972
Low human development (0.540-0.337)
166 Sudan 0.473 62.1 3.1 7.3 3,428
166 Togo 0.473 56.5 5.3 12.2 1,129
186 Congo (D.R.) 0.338 50.0 3.1 9.7 444
187 Niger 0.337 58.4 1.4 5.4 873
UNDP, 2015 35 36
 Millennium Development Goals Millennium Development Goals

Millennium Development Goals (MDGs) 2000-2015

37 38

Millennium Development Goals Millennium Development Goals

39 40
Millennium Development Goals Millennium Development Goals

41 42

Millennium Development Goals Millennium Development Goals

43 44
 Millennium Development Goals Millennium Development Goals

Limitations of MDGs

❖ It has too many targets: 18 in total, overambitious and unrealistic,

which cannot be fulfilled simultaneously. Precedence?

❖ Many differences among regions, esp. sub-Saharan Africa

❖ Goals do not place much emphasis on sustainable development

❖ Omit crucial issues such as peace and security

❖ Formulation of MDGs: triad of “United States, Europe and Japan”

and co-sponsored by World Bank, IMF, and OECD

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Sustainable development Sustainable development

Thus, we reach the notion of sustainable development Four pillars of sustainable development

Brutland report (1987):

“…development that meets the needs of the present without Economic
compromising the ability of future generations to meet their own needs” prosperity

Three dimensions of sustainable development

Good Sustainable Social inclusion

governance development and cohesion

Environmental
sustainability

International Union for the Conservation of Nature 47 48

 Sustainable development Sustainable development

Sustainable Development Goals, 2016-2030

Post-2015 Sustainable Agenda n Goal 1: End poverty in all its forms everywhere
n Goal 2: End hunger, achieve food security and improved nutrition and promote sustainable
agriculture
n Rio+20 Summit in June 2012: final outcome document, The n Goal 3: Ensure healthy lives and promote well-being for all at all ages
Future We Want, calls for new Sustainable Development Goals n Goal 4: Ensure inclusive and quality education for all and promote lifelong learning
n Goal 5: Achieve gender equality and empower all women and girls
(SDGs) n Goal 6: Ensure access to water and sanitation for all
n Goal 7: Ensure access to affordable, reliable, sustainable and modern energy for all
n Goal 8: Promote inclusive and sustainable economic growth, employment and decent work
n United Nations summit in New York (25-27 September 2015) for all
to discuss and adopt the Sustainable Development Goals n Goal 9: Build resilient infrastructure, promote sustainable industrialisation and foster
innovation
(SDGs): will guide policy and funding for next 15 years n Goal 10: Reduce inequality within and among countries
n Goal 11: Make cities inclusive, safe, resilient and sustainable
n Goal 12: Ensure sustainable consumption and production patterns
n SDGs build on MDGs, with a pledge to end poverty n Goal 13: Take urgent action to combat climate change and its impacts
n Goal 14: Conserve and sustainably use the oceans, seas and marine resources
n Goal 15: Sustainably manage forests, combat desertification, halt and reverse land
degradation, halt biodiversity loss
n Goal 16: Promote just, peaceful and inclusive societies
n Goal 17: Revitalise the global partnership for sustainable development
49 50

Sustainable development Sustainable development

Is economic development sustainable?

Thomas Malthus: growing population will exceed earth’s capacity to produce

Human societies have been able to avoid Malthusian trap in 3 ways:
food, until rising death rates and falling birth rates would harshly keep
population in check 1) Science and technology move fast enough to increase productivity of
land and natural resources
Demand for natural resources is based on exponential growth of population
and income, supply of resources is absolutely limited or can increase only 2) When resources became scarce, substitutes were found
linearly
3) People choose to reduce family size and thus, population growth

Can these processes continue indefinitely

to avoid Malthusian scarcity?

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 Conclusion

Sustainable development

Much will depend on:

ü government policy design,

implementation, and reinforcement
ü individual choices How not to be ignorant about the world?
ü research and scientific observations and
breakthroughs Hans and Ola Rosling

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