Basics of Development Economics

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The community which has neither poverty nor riches
will always have the noblest principles.” – Plato

• About 40% of the world’s population lives on less than $2

per day, part of a condition of absolute poverty.

• Absolute poverty is a situation of being unable to meet

the minimum levels of income, food, clothing, health care,

shelter, and other essentials.

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 How the Other Half Live
• When one is poor, she has no say in public, she feels inferior.
She has no food, so there is famine in her house; no clothing,
and no progress in her family.(A poor woman from Uganda)
• For a poor person everything is terrible—illness, humiliation,
shame. We are cripples; we are afraid of everything; we
depend on everyone. No one needs us. We are like garbage
that everyone wants to get rid of.(A blind woman from
Tiraspol, Moldova)
• Life in the area is so insecure that the youth and every able
person have to migrate to the towns or join the army at the
war front in order to escape the hazards of hunger escalating
over here.(Participant in a discussion group in rural
Ethiopia)

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• When food was in abundance, relatives used to share it. These
days of hunger, however not even relatives would help you by
giving you some food.(Young man in Nichimishi, Zambia)

• We have to line up for hours before it is our turn to draw

water.(Participant in a discussion group from Mbwadzulu
Village (Mangochi), Malawi)
• Don’t ask me what poverty is because you have met it outside
my house. Look at the house and count the number of holes.
Look at the utensils and the clothes I am wearing. Look at
everything and write what you see. What you see is
poverty.(Poor man in Kenya)
A universal theme reflected in these six quotes is that
poverty is more than lack of income – it is inherently
multidimensional, as is economic development.
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 The Nature of Development Economics

• Traditional economics is concerned primarily with the

efficient, least-cost allocation of scarce productive resources

and with the optimal growth of these resources over time so

as to produce an ever-expanding range of goods and services.

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• Political economy is concerned with the relationship

between politics and economics, with a special emphasis on

the role of power in economic decision making

• Development economics studies how economies are

transformed from stagnation to growth and from low-income

to high-income status, and overcome problems of absolute

poverty.

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Why do we study development economics?
• Development economics tries to cover the political, social,

economic and institutional mechanism with the aim to bring

large improvements in the living standards of poor in the

under-developed countries.

• Development economics mainly identifies the economic problems,

causes and their consequences in the developing countries

and also provide solution to overcome these problems.

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Example: Pakistan is facing multiple economic problems like

poverty, unemployment, unequal distribution of wealth,

limited resources, corruption etc.

• Therefore, economic development is concerned with these

issues and develops strategies that will enable people to

break the vicious circle of poverty and backwardness.

• So that every individual of the developing country will

enjoy a quality life.

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Economic Growth and Development
 Economic growth refers to the percentage change in GDP
or per capita income
 Economic development refers to an increase in peoples’
quality of life.
 Quality of life is often measured using the Human
Development Index, that considers intrinsic personal
factors not considered in economic growth, such as
literacy rates, life expectancy and poverty rates.

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 Economic Growth vs. Economic Development
BASIS FOR COMPARISON ECONOMIC GROWTH ECO. DEVELOPMENT
Meaning Economic Growth is the positive Economic Development involves
percentage change in GDP. rise in the level of production in an
economy along with the
advancement of technology,
improvement in living standards
and so on.

Concept Narrow Broad

Scope Increase in the indicators like GDP, Improvement in life expectancy
per capita income etc. rate, infant mortality rate, literacy
rate and poverty rates.

Term Short term process Long term process

Applicable to Developed Economies Developing Economies
How it can be measured? Upward movement in national Upward movement in living
income. standard of the people
Which kind of changes are Quantitative changes Qualitative and quantitative
expected? changes
When it arises? In a certain period of time. Continuous process.

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 Pakistan Poverty Facts
• Nearly 39 percent of Pakistanis live in multidimensional
poverty.
• Highest rates of poverty in FATA and Baluchistan.
• Pakistan’s MPI showed a strong decline, with national
poverty rates falling from 55% to 39% from 2004 to 2015.
• However progress across different regions of Pakistan is
uneven. Poverty in urban areas is 9.3 percent as compared to
54.6 percent in rural areas. Disparities also exist across
provinces.
• Two-thirds of people in FATA (73 percent) and Baluchistan
(71 percent) live in multidimensional poverty.
• Poverty in Khyber Pakhtunkhwa stands at 49 percent, Gilgit-
Baltistan and Sindh at 43 percent, Punjab at 31 percent and
Azad Jammu and Kashmir at 25 percent
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Happiness and Development
Factors affecting happiness:

 Family relationships
 Financial conditions
 Work satisfaction
 Community and friends
 Health and health-care services
 Personal freedom
 Personal values

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Three Core Values of Development
 Sustenance: The ability to meet basic human needs
including shelter, food, health, education, safety etc.
 Self-Esteem: To be a person with a sense of self-
respect and self-worth. To live with dignity, respect,
and honor
 Freedom from Servitude: To be able to choose the
path to prosperity and have the opportunity to
improve

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Objectives of Development
 To increase the availability and distribution of basic
human necessities

 To improve the standard of living for the majority of

the people

 To expand the range of economic and social choices

and opportunities

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Millennium Development: Goals and Targets for 2015

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Millennium Development: Goals and Targets for 2015

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Economic Development
 Inclusion of non-economic variables in designing
development strategies

 Achieving the Millennium Development Goals

 “…One future-or none at all”

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