LECTURE:09

Development versus Growth

M. A. Kamal, Ph.DDirector General

National Academy for Planning and Development

Outline:1. Introduction2. Development means3. Development Includes4. Growth5. Economic Growth6. Types of Economic Growth7. Measures of Economic Growth8. National Income Accounting 9. Growth versus Development10. Conditions for Development11. Core values of Development:12. Where Should be Developed?13. Human Development14. Other Measures of HD15. Population growth & natural resources16. Population impact on natural resource17. Urbanization & sustainable development18. Urban Growth19. Urban Problems20. Impact of Urbanization on Environment21. Conclusion

1. Introduction

1.1 Growth and development has traditionally been subject of economics since Adam Smith and it is still focused by theoretical, methodological practical experts as well.

1.2 Mainstream theories of the 20th century often do not distinguish ‘growth’ (the increase of the GDP) and ‘development’: the two words are used as synonyms.

1.3 According to other authors (e.g. THIRLWALL (2000)), economic development is more complex than mere growth.

2. Development means:2.1 Generally Development is the gradual

growth of a situation that becomes more advanced and strong than previous one.

2.2 Development more likely related with economic growth

2.3 Development is a process where by the entire social system of a country more upward.

2.4 Development incorporates the notion of a measure/ measures of human welfare

2.5 Development is a unfolding of human potentials for meaningful participation in economic, social, political and cultural process and institutions, so that people can improve their conditions.

2. Development:

3. Development Includes

4. Growth4.1 Generally growth refers to an increase in some quantity

over time. The quantity can be:

•Physical (e.g., growth in height, growth in an amount of money)

•Abstract (e.g., a system becoming more complex, an organism becoming more mature).

4.2 Growth

5. Economic Growth

5.1 Economic growth is an increase (or decrease) in the value of goods and services that a geographic area produces and sells compared to an earlier time.

6. Types of Economic Growth

6.1 Positive growth: If the value of an area's goods and services is higher in one year than the year before, it experiences positive growth, usually simply called "economic growth."

6.2 Negative economic growth: In a year when less value than the year before is produced and sold, it experiences "negative economic growth," also called "recession" or "depression."

7. Measures of Economic Growth

7.1 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

7.2 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.

7.3 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!Copyright: chinagrove, http://www.sxc.hu

This might be a common picture……Copyright: unseenob, http://www.sxc.hu

Economic Growth

High economic growth fuelled through capital spending can hide a number of underlying economic problems – how is the income and wealth distributed? Who is doing the spending and will it ‘trickle down’ to the poor?

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Dubai SkylineCopyright: zchizzerz, http://www.sxc.hu

8. National Income Accounting – Problems with using GDP/GNP

8.1 Reliability of data? How accurate is the data that is collected?

8.2 Distribution of income? How is the income distributed – does a small

proportion of the population earn a high percentage of the income or is income more evenly spread?

8. National Income Accounting – Problems with using GDP/GNP

8.3 Black/informal economy?

Some economic activity not recorded – subsistence farming and barter activity, for example

Some economic activity is carried out illegally – building work ‘cash in hand’, drug dealing, etc.

Work of the non-paid may not be considered but may contribute to welfare – charity work, housework, etc.

It might not be pleasant, but what he finds among the refuse could be all he has.

Title: Sierra Leone Liberia. Copyright: Photolibrary Group

9. Growth versus Development

9.1 Economic growth may be one aspect of economic development but is not the same

9.2 Economic growth: A measure of the value of output of goods

and services within a time period

9.3 Development: A measure of the welfare of humans in a

society

10. Conditions for Development:“ The concepts of freedom, participation in

decision making towards fulfilling one’s potentials and rights to organize are all essential conditions for development process.

---A. Sen (Development as freedom:1998)

11. Core values of Development:

11.1 There are three core values of Development

Sustenance- The Ability to meet basic needs Self-esteem-To be a Person Freedom of choice- To be able to Chose

12. Where Should be Developed?

12.1 The development process has multiple interface and these are between following issues:

a) Population and developmentb) Poverty and developmentc) Environment and developmentd) Cultural values and developmente) Natural resources and development

etc.

13. Human Development:13.1 The concept of HD first introduced publicly

in 1990 by the UNDP’s global Human Development Report (HDR).

13.2 HD is a process of enlarging peoples choice.13.3 Wide ranging choice are—

a. to live a long and healthy life.b. to be educated

13.4 To have access to resources needed for a decent standard living.

13.5 Political freedom13.6 Guaranteed human rights and13.7 Personal self respect

Human Development Index

DevelopmentIraqis have

supposedly been given their freedom following the American led ‘Operation freedom’ but has it improved welfare?

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14. Other Measures

15. Population growth & natural resources

15.1 In demography, population growth is used informally for the more specific term population growth rate, and is often used to refer specifically to the growth of the human population of the world.

15.2 There are about 6.6 billion people in the world and over 95 million babies are born per year – that is an average of three babies per second!

16. Population impact on natural resourceHow does human activity affect the environment?

Reduce Reduce the land the land available available for plants for plants

and and animalsanimals

Raw Raw materials materials (inc. non-(inc. non-renewablrenewabl

e) e) resources resources are being are being used upused up

More waste is More waste is produced produced

which (if not which (if not handled handled

properly) may properly) may pollute air, pollute air,

water & landwater & land

17. Urbanization & sustainable development

17.1 “Urban” varies widely from country to country. Some countries distinguish between rural and urban based on:

Size or density of localities Administrative considerations (only major cities are

classed as urban) The percentage of persons not dependent on

agriculture Some nations define all of their population as

living in urban areas (e.g. Singapore). Some nations define none of their population as urban (e.g. Polynesia (South Pacific Islands))

17.2 An urban (or metropolitan) area = a town or a city plus its adjacent suburbs with a population of >2,500 people

17.2 A rural area = an area with < 2,500 people

18. Urban Growth18.1 Urban areas grow in 2 ways:

1. Natural increase of its population (births)2. Immigration (mostly from rural areas)

18.2 Proportion of the global population living in urban areas: 2% (pre-industrial period) 46% (2001) (~160,000 people added to world’s urban areas each day)

18.3 UN projections: by 2050, ~63% of world’s people will be living in urban areas, with 90% of this urban growth in developing countries

18.4 Number of large cities (>1 million people) increasing rapidly throughout the 20th century. In 1900: 19 cities had >1 million people (95% of the population then were rural) and in 2001:

more than 400 cities have >1 million people. 18.5 Urban growth is much slower in

developed countries than in developing countries (still, projection: 79% (current) 84% (2025) in developed countries)

19. Urban Problems19.1 Urban area suffers from:

Very high unemployment A soaring crime rate (robbery, assault,

murder) Severe noise pollution Bad traffic congestion Inadequate housing (>1/3 of the people

living in slums with no running water or electricity)

Inadequate sanitation ( widespread infectious diseases such as hepatitis)

20. Impact of Urbanization on Environment

20.1 Survive only by importing food, water, energy, minerals, and other resources from somewhere else

20.2 Produce vast quantities of wastes

20.3 Affect the health of their inhabitants but also the environmental health of rural areas and the health of the planet

20.4 Often, agriculture and cities develop in similar areas expanding urban areas = using up agricultural land

Water

Fuel

Food

Daily Inputs

U.S. city of 1

million people

Daily Outputs

Air pollutants

Rubbish

Sewage

Urbanization

21. Conclusion

21.1 Population control is fundamental and essential as to avoid long term damage to the environment as a consequence of acid rain, green house effect and possible Global Warming, and the threat to the ozone layer.

21.2 ‘Development is not purely an economic phenomenon but rather a multi – dimensional process involving reorganization and re orientation of the entire economic and social system.