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multidimensional nature of economic development, Economic Growth Defintion…
multidimensional nature of economic development
reducing widespread poverty
Poverty cyle:
living off an income that only covers the necessities to surive
no recources to invest into the physical, human and natural capital needed for improved productivity, and when productive is constantly static --> income stays low
passed down to next generation
Breaking the cycle through foreing investment that inject money and capital into the circular flow of income --> but through future leakage very hard
Higher income --> higher taxes --> increased tax revenues --> improve infraastrucutre. schools, healthcare --> reducing poverty
Theory of comparative advantage → countries should produce the goods and services which make the lowest opportunity costs
This type of production might not yield enduring or extensive economic benefits and its not certain that it will keep countries competitive
Sometimes even an abundance of resources can be a “curse” because “exchange rates are driven up by demand for the resource, crowding out other exports and also because govs that rely on the easy money tend to be inefficient and corrupt”
most poor countries even lack the capital recources and infrastrucutre to extract recources
often MNCs settle in LDC profit of their recources and leave whilst the LDC stays in poverty
rasing living standards
living standards can be raised by government expenditure
High correlation between high income and high levels of development BUT eocnomic growth is a necessary, but not sufficient, condition for true development, it is expected to improve stadnard of living if gov spends money on merti good and services
"If growth is managed effectively → it can yield expected positive outcome of longer lives, more education and an overall better standard of living”
BUT
If managed poorly “environmental damage, high inequality of income, inattention to the basic necessities and corruption” occurs damaging development
in terms of higher incomes, better housing, better education, better health care, decreased inequality)
Economic development with growth:
Economic development without growth:
Data shows that it works; some countres may overachieve taking thier per capita GDP as they put a lot of focus on instutional factors (e.g court system, banking , educatio, prenatal caren etc)
There are also a lot of underachievers - who have large inflows of foreign exchange but misspend their money; uneconomic growth : economic growth that actually reduces the standard of living rather than enriching it
reducing income inequalties
“Those earning the most money are seeing their income rise the fastest, while those earning lesser incomes are seeing their share of national income decrease”
measured by Ginii coefficient
What the levels mean in terms of economic growth:
extreme levels --> retard growth (due to disruption of social cohesion + encouragement of social unrest
High levels: slow growth
Gini coefficient between 25-40 - growth rates self sustaining (e.g Germany)
How to reduce?
The idea to resdistribute income by using a tax policy --> however this is seen as anti-capitalistic and contrary to free market principles
What does this mean in the terms of development?
Development is harder for a country that does not actively redistribute their income
increasing employment opportunities
Problem in LDC countries
: Their exports are decreasing in price, so they have to produce excessively to buy the relatively more expensive import good from global markets
Benefit: this high level of production increases employment opportunites
Contra: Pressure to produce contributes to: Deforastation, Land degradation, water pollution, overfishing, air pollution, climate change ALSO this type of work is often labour intensvie = not very great employment benefits
High unemployment reveals that the economy is operating below full capacity and is inefficient; results in lower output and incomes. Additionaly the unemployed will not be able to purchase --> contributes to lower spending and lower demand thus output ( this immensly hinders the development of the country!)
increase employment opporunity: promoting innovation, strengthen labour market institutions, address macro-economic constraints, technical training & vocational guidance
Economic Development Definition:
The sustainbale increase in living standards for country Measureed by the increase of life span, education levels, income.
Can also be defined as a broad measure of economic well-being, one that takes into account factors beyond mentary income to include health, education and social indicators.
"The increase in production of economic good and services compared from one period of time to another (measured by GDP & per capita GDP) "
Economic Growth Defintion
