Economic Development

ECV3001 Engineers and Society

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 Content
1. Introduction

2. Objectives of Development

3. Economics of Development

4. Indicators of Development

5. Economic Indicators

6. Social Indicators

7. Science and Technology Indicators

8. Developing Countries
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 Introduction
The key aim of development is to enable people to lead a better
life. The 3 key aspects of a better life are:
Freedom from
Sustenance Self-Esteem
servitude

The ability to To be a person To be able to

meet basic •A sense of worth and choose
needs self- respect •Free from
•Food, health, shelter, •Dignity, respect, ignorance, misery,
protection honor, recognition other people,
institutions
•Basic economy •Not being used as a
activity is to provide as tool by others for their •Wealth increases
many people with own needs human choice
these

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 Objectives of Development

• The objectives are:

– To increase the availability and widen the
distribution of life-sustaining goods.
– To raise standard of living. This include
economic needs: higher incomes, more jobs,
material needs, and non-economic needs:
better education, knowledge, spiritual
fulfillment.
– To expand the range of economic and
social choices.
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 Economics of Development
Classified into 3 types and affect development
different ways

Traditional Political Development

Economics Economics Economics

-primarily concern with the
efficient, least cost
allocation of scarce
productive resources with
optimal growth of these
resources over time so as
to produce an ever-
expanding range of goods
and services.
-Key characteristics:
-Perfect markets
-Consumer sovereignty
-Economic rationality
-Purely materialistic
-individualistic
-self-interest decision
-Have social and
institutional processes
where groups of
economic and political
elite influence the
allocation of scarce
productive resources
-the power of economic
decision making is invested
in a small group of people.
Political economics deals
with relationship between
politics and economic
-Deals with economic, social,
political and institutional
mechanisms (public and private)
to bring about rapid and large-
scale improvements in levels
of living for masses.
-Social effects of change to the
population needs to be
considered. The objective is to
bring the fruits of economic
progress to broadest segment
of the population. This requires
a larger government role and
some degree of coordinated
economic decision-making to
transform economy. 5
 Indicators of Development
To quantify and track the course of development.

Indicators
Economic GNP GDP PPP
Indicators
Social Indicators Literacy Health Services
Science and Patents Trademarks Copyrights
Technology Level

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 Indicators of Development

Economic
Indicators

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 Economic Indicators

• Gross National Product

– Sum of all goods and services produced by the
factors of production owned by citizens of a nation
– GNP=GDP-(part of GDP attributable to non-
residents)+(residents contribution to GDP of other
countries)
– “income actually earned by national”
– Summary: GNP=value of all final goods and services
produced in a country in one year + income earn by
citizens abroad-income earned by foreigners in the
country

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 Economic Indicators

• Gross Domestic Product (GDP)

– Sum of all goods and services produced in
the territory of the nation, regardless by who
owns the means of the production that
generate the goods or services.
– Income within defined geographical
boundaries.
– Summary: GDP=value of all final goods and
services produced in a country in one year

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 Economic Indicators

• When is GDP > GNP?

– When substantial portions of the local
economy are foreign owned
– Income earned within a country goes to
foreigners
– GDP may look healthy but GNP may well
anemic
– This is undesirable since control is ceded to
foreigners

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 Economic Indicators
• A comparison of GNP per capita
– GNP per capita =mean value of the output produced per person (mean
income)
– Exaggerated by the use of official foreign exchange rate.
– Does not reflect the relative domestic purchasing power of different
currencies.
Country GNP per capita rank GNP per capita (USD)

Japan 2 37850
United Kingdom 15 20710
Malaysia 35 4680
China 81 860

Income disparity (difference):

(Japan: Ethiopia=344, in 1994 it was 266.)
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 Economic Indicators
• Purchasing Power Parity (Similarity)

– A measure of the relative purchasing power of

a country’s currency
– 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 market as $1 would buy in the
United States
– E.g. machinery, food, tobacco, rent, fuel,
education
– PPP exchange rate is used instead to calculate
GDP/GNP
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 Indicators of Development

Social
Indicators

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 Social Indicators
• Indicators
– Literacy-level of adult literacy, student
enrollment
– Health-life expectancy, infant mortality rate,
density (no.) of doctors
– Services-telephone lines

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 Science and Technology Indicators

• Indicators
– Patents
– Trademarks
– Copyrights

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 Developing Countries
• Low standards of living
• Low levels of productivity
• High rates of population growth and dependency
burdens
• High levels of unemployment
• Imperfect markets and incomplete information
• Dependence on agricultural production and
commodity exports
• Dominance, dependence and vulnerable
international relations
• Weak science and technology development
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• End of slides

• Learning outcomes ….

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