dimensions of Economic Development

1
dimensions ofEconomic Development
2
Lecture layout

• Defining Development
• Understanding the issues of Development
• Measurement of Development
• Development history of Bangladesh
• Contemporary issues of Development

3
Common Perception about Economic Development
More money in the pocket!!!!
But this is just one dimension of development
Economists call it ECONOMIC GROWTH. not
ECONOMIC DEVELOPMENT
4
Economic Growth

• Using measures of economic growth can give
  distorted pictures of the level of income in a
  country the income distribution is not taken
  into account.
• A small proportion of the population can own a
  large amount of the wealth in a country. The
  level of human welfare for the majority could
  therefore be very limited.

But this could be just around the corner!
This might be a common picture
5
Economic Growth

• Using measures of economic performance in terms
  of the value of income, expenditure and output
• GDP Gross Domestic Product
• The value of output produced within a country
  during a time period
• GNP Gross National Product
• The value of output produced within a country
  plus net property income from abroad
• GDP/GNP per head/per capita
• Takes account of the size of the population
• Real GDP/GNP
• Accounts for differences in price levels in
  different countries

6
Growth vs. Development

• Economic growth
• A measure of the value of output of goods and
  services within a time period
• Economic Development
• A measure of the welfare of humans in a society

7
What is Welfare about?

• Quality education
• Strong social safety
• High living standard
• Good medical service
• Technological advancement etc

All of these require improvement of the concerned
institutions
8
Therefore

• Economic development means
• Economic growth
• institutional improvements

9
How do we understand the level of economic
development?
10
Development

• Level of poverty
• Absolute poverty
• Relative poverty
• Inequality
• Progress what constitutes progress?

11
What is Poverty?
Romanian gypsies is this man living in poverty?
Or is this villager in rural China?

• Poverty has both relative and absolute
  meanings.

12
Poverty definitions

• Absolute poverty is a situation where one is
  unable to attain minimum needs.
• The World Bank defines absolute poor as the
  number of people who earn 1.25 or less per day.
• Relative poverty is defined as being below some
  relative poverty threshold.

13
Poverty in terms of income

• UN classifies countries with income less than
  750 as LDCs
• WB classifies-
• - countries with income less than 975 as low
  income countries
• - countries with income 976 - 3,855 as lower
  middle income countries
• - countries with income 3,856 - 11,905 as
  upper middle income countries
• - countries with income 11,906 or more as
  high income countries

14
Inequality

• Inequality indicates the gap between the rich and
  the poor.
• If the gap is very small in a society, the wealth
  distribution in that society is considered
  equitable.
• Large gap increases social vulnerability.

15
Lorenz Curve, Max Lorenz (1905)
16
Kuznets Curve, Simon Kuznets (1955)
The inverted-U
Inequality
Per capita income
17
Measurement of Progress

• Human Development Index (HDI)
• Millennium Development Goals (MDG)

18
Human Development Index

• A measure to capture the extent of development.
• Dimensions are- life expectancy, educational
  attainment and GDP per capita.
• Index range 0 1
• Close to 1 indicates developed and close to zero
  indicates underdeveloped.

19
HDI Map

• According to HDR 2008
• Bangladesh ranks 147th with a score of 0.524
• India ranks 132nd with a score of 0.609
• Pakistan ranks 139th with a score of 0.562

20
Millennium Development Goal (MDG)

• Goals set by the United Nations
• For attaining global development standards,
  broadly, by the year 2015

21
Millennium Development Goals (MDG) have 8
dimensions

• End poverty and hunger
• Universal education
• Gender equality
• Child health
• Maternal health
• Fighting HIV and other diseases
• Environmental sustainability
• Global partnership

22
MDG Target 1 Poverty and Hunger

• Target 1a Reduce by half the proportion of
  people living on less than a dollar a day
• Target 1b Achieve full and productive employment
  and decent work for all, including women and
  young people
• Target 1c Reduce by half the proportion of
  people who suffer from hunger

23
MGD Target 2Achieve Universal Education

• Target 2a Ensure that all boys and girls
  complete a full course of primary schooling

• 2.1 Net enrolment ratio in primary education
• 2.2 Proportion of pupils starting grade 1 who
  reach last grade of primary
• 2.3 Literacy rate of 15-24 year-olds, women and
  men

24
MDG Target 3Promote gender equality and empower
women
Target 3a Eliminate gender disparity in primary and secondary education preferably by 2005, and at all levels by 2015
3.1- Ratios of girls to boys in primary, secondary and tertiary education 3.2- Share of women in wage employment in the non-agricultural sector 3.3- Proportion of seats held by women in national parliament
25
MDG Target 4Reduce child mortality
Target 4a Reduce by two thirds the mortality rate among children under five
4.1 Under-five mortality rate 4.2 Infant mortality rate 4.3 Proportion of 1 year-old children immunized against measles
26
MDG Target 5Improve maternal health

• Target 5a Reduce by three quarters the maternal
  mortality ratio
• - maternal mortality ratio
• - proportion of birth attended by skilled
  health personnel
• Target 5b Achieve, by 2015, universal access to
  reproductive health
• - contraceptive prevalence rate
• - adolescent birth rate
• - unmet need for family planning
• - antenatal care coverage

27
MDG Target 6Combat HIV/AIDS, malaria and other
diseases

• Target 6a Halt and begin to reverse the spread
  of HIV/AIDS
• Target 6b Achieve, by 2010, universal access to
  treatment for HIV/AIDS for all those who need it
• Target 6c Halt and begin to reverse the
  incidence of malaria and other major diseases

28
MDG Target 7Ensure environmental sustainability

• Target 7a Integrate the principles of
  sustainable development into country policies and
  programs reverse loss of environmental resources
  
• Target 7b Reduce biodiversity loss, achieving,
  by 2010, a significant reduction in the rate of
  loss
• Target 7c Reduce by half the proportion of
  people without sustainable access to safe
  drinking water and basic sanitation
• Target 7d Achieve significant improvement in
  lives of at least 100 million slum dwellers, by
  2020

29
MDG Target 8Global partnership for development

• Target 8a Develop further an open, rule-based,
  predictable, non-discriminatory trading and
  financial system
• Target 8b Address the special needs of the least
  developed countries
• Target 8c Address the special needs of
  landlocked developing countries and small island
  developing States
• Target 8d Deal comprehensively with the debt
  problems of developing countries through national
  and international measures in order to make debt
  sustainable in the long term

30
MDG is no doubt a good set of targets but misses
important issues for developing countries

• Political freedom
• Self esteem
• Attitude

31
We have serious issues like low income, poor
health sanitation, inequality, diseases, lack
of good governance

• What should be the path of development?
• Where to start??

32
Historical debate on the path of Economic
Development
Balanced growth? (Nurske) Or Unbalanced growth?
(Hirschman)
33
Debate continued

• Capitalism? (Marcantilists, Physiocrats)
• Or
• Socialism? (Marx)

34
Debate continued

• Trickle down?
• (latest example tax cut during the financial
  crisis)
• Or
• Big push? (Rosenstein-Rodan)

35
Debate Continued

• Industrialized?
• Or
• Agro-based?

36
Where do we need to look at to understand the
level of development?

• Per capita income
• Per capita fuel consumption
• Literacy rate
• Unemployment rate
• Life expectancy
• Social safety net
• Balance of payment
• Investment
• Fiscal scenario
• Inflation
• Interest rate

37
Development level compared
Issue Bangladesh USA
Per capita income (PPP) 1500 47,000
Electricity consumption 21.37 billion kwh 3.89 trillion kwh
Unemployment rate 2.5 7.2
Inflation 9.4 4.2
Investment 24.3 of GDP 14.2 of GDP
Budget expenditure 12.54 billion 2.97 trillion
Interest rate 16 3.25
Life expectancy 66.70 years 78.11 years
Literacy rate 49.10 99
38
Where do we need to look atMajor Sectors of the
Economy
Real Sector
Fiscal Sector
Monetary Sector
External Sector
39
Components of the four sectors

• Real Sector
• Inflation
• Real GDP
• Price Level
• Wage Rate
• Exchange Rate

• Fiscal Sector
• Revenue
• Expenditure
• Govt. debt

• External Sector
• Import
• Export
• Capital Flow

• Monetary Sector
• Interest rate
• Money supply
• Reserve

40
Economic Development of Bangladesh challenges
and opportunities

• Challenges
• - Huge population
• - Natural calamities
• - Lac of capital
• Opportunities
• - Geographical location
• - Huge supply of unskilled manpower
• - Room for improving productivity
• - Growing industrial base

41
History of Economic Development Strategy of
Bangladesh

• Five year plans until 2002
• - first FYP 1973 1978
• - second FYP 1980 1985
• - third FYP 1986 1990
• - fourth FYP 1990 1995
• - fifth FYP 1997 2002
• PRSP

42
History of Strategy Priorities

• High growth rate
• Low poverty
• Improved health care
• Better education
• Housing for all
• Increased power consumption
• Better communication and transport
• Low unemployment

43
History of Actions Taken
44
Government Expenditure
45
ADP allocation
46
Credit for Agriculture
47
Measures for Human Development

• More than 15 of budget for education for the
  last several FYs
• Income support for the teachers
• Free education for women
• School feeding program for reducing drop-outs
• Free tools for education

48
How has been the economic development of
Bangladesh?
49
Growth Rate
50
Sectoral contribution to GDP
51
Poverty
52
Inequality
Gini Coefficient 2005 0.467 2000 0.451
53
Role of the State in Economic Development of
Bangladesh

• Until mid 80s State played major role.
• Mid 80s to mid 90s Reforms towards
  liberalization and reduction of state role.
• Mid 90s to till date Reforms continues towards
  increasing role of private sector.
• Latest Private sector is entering in the sectors
  where projects are not viable (PPP).

54
Contemporary Focus of Development
55
Sustainability

• Environmental degradation

One generation plants a tree the next
generation gets the shade. Chinese Proverb
56
The 21st CenturyClimate Challenge

• The world has less than a decade to avoid
  dangerous climate change that could bring
  unprecedented human development reversals
• Climate change is a threat to humanity as a
  whole. But it is the poor, a constituency with no
  responsibility for the ecological debt we are
  running up, who face the most immediate and most
  severe human costs
• The Human Development Report 2007/2008 calls for
  a twin track approach that combines stringent
  mitigation to limit 21st Century warming to less
  than 2 degree centigrade, with strengthened
  international cooperation on adaptation

57
Charting a course away dangerous climate change

• The sustainable emissions pathway is as follows
• The world cuts of 50 percent by 2050 with a
  peak by 2020
• Developed countries cuts of 80 percent by 2050
• Developing countries cuts of 20 percent by 2050
• with respect to 1990

58
BUT.

• Reduction of carbon emission means reduction in
  productive activities.
• Are we ready to reduce our productive activities?
• Reduction in productive capacity means slow
  economic development. Unless we shift towards
  other carbon free fuel sources
• BUT those sources are costly.
• Can we afford them?

59
Whom the climate shocks will affect the most
The countries most vulnerable are least able to
protect themselves. They also contribute least to
the global emissions of greenhouse gases. Without
action they will pay a high price for the actions
of others. Kofi Annan
60
In Sum

• Development is desirable
• However, not in expense of our future generations
• Therefore, we need prudent policies
• Prudent policies are easy to implement when the
  size of population is small and the population is
  healthy

61
Thank you