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dimensions of Economic Development. Lecture layout. Defining Development Understanding the issues of Development Measurement of Development Development history of Bangladesh Contemporary issues of Development. Common Perception about Economic Development. More money in the pocket!!!!.
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Lecture layout • Defining Development • Understanding the issues of Development • Measurement of Development • Development history of Bangladesh • Contemporary issues of Development
Common Perception about Economic Development More money in the pocket!!!! But this is just one dimension of development Economists call it ECONOMIC GROWTH…. notECONOMIC DEVELOPMENT
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. This might be a common picture…… But this could be just around the corner!
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
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
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
Therefore… Economic development means: Economic growth + institutional improvements
Development • Level of poverty • Absolute poverty • Relative poverty • Inequality • Progress – what constitutes progress?
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.
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.
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
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.
Kuznets Curve, Simon Kuznets (1955) The inverted-U Inequality Per capita income
Measurement of Progress • Human Development Index (HDI) • Millennium Development Goals (MDG)
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.
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
Millennium Development Goal (MDG) • Goals set by the United Nations • For attaining global development standards, broadly, by the year 2015
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
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
MGD Target 2:Achieve 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
MDG Target 5:Improve 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
MDG Target 6:Combat 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
MDG Target 7:Ensure 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
MDG Target 8:Global 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
MDG is no doubt a good set of targets but misses important issues for developing countries… • Political freedom • Self esteem • Attitude
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??
Historical debate on the path of Economic Development Balanced growth? (Nurske) Or Unbalanced growth? (Hirschman)
Debate continued… Capitalism?(Marcantilists, Physiocrats) Or Socialism? (Marx)
Debate continued… Trickle down? (latest example: tax cut during the financial crisis) Or Big push? (Rosenstein-Rodan)
Debate Continued… Industrialized? Or Agro-based?
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
Where do we need to look at…Major Sectors of the Economy Real Sector Fiscal Sector Monetary Sector External Sector
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
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
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
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
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
