Understanding Development Among Developing Countries

UNDERSTANDING
DEVELOPMENT AMONG
DEVELOPING COUNTRIES
MODULE 2
CHAPTER 2
COMPARATIVE DEVELOPMENT
PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 1

UNDERSTANDING DEVELOPMENT
 The range of human development in the world is vast and

uneven, with astounding progress in some areas amidst and
simal decline in others
 United Nations Development Program, Human Development
Report , 2003

 Rates of growth or real per capita GNP are diverse, even over
sustained periods…… Is there some action a government of India
could take that would lead the Indian economy to grow like
Indonesia? If so what exactly? The consequences for human welfare
involved in questions like these are simply staggering: Once one
starts to think about them , it is ahrd to think about anything else
 Robert Lucas, Nobel Laurete in Economics

 The growth position of the less developed countries today is

significantly different in many respects from that of the
presently developed countries on the eve of their entry into
modern economic growth
 Simon Kusnets, Nobel Laurete in Economics

o It is hazardous to try and generalize too much about that 160 member
countries of the United Nations (UN) that constitute the developing
world
o The gaps between the poorest and richest developing countries are
greater that those between the rich economies and upper-middle-
income developing nations

o And because of almost all these countries are relatively poor in

money terms, they are diverse in culture, economic conditions,
social and political structures

o Example :
o Developing countries include India with over 1 billion people and 26
states as well as Grenada with less than 100,000 people , fewer than
most cities in the United States

o Example :
o Large countries entails complex problems of national cohesion and
administration while offering the benefits of relatively large markets ,
w aide range of resources and the potential for self-sufficiency and
economic diversity

o Example :
o In small countries the situations is reversed, with problems including
limited markets, shortage of skills, scarce physical resources, weak
bargaining power and little prospect of significant economic self-
reliance but strong incentives for exports of manufactured products

DEFINING A DEVELOPING WORLD
o The most common way to define the developing world is determining

its per capita income
o Several international agencies , including the Organization for
Economic Cooperation and Development (OECD) and the United
Nations, offer classifications of countries by their economic status
but the best known system is that of the International Bank for
Reconstruction and Development (IBRD) more commonly known as
World Bank

o The World Banks’ classification system, 208 economies with a

population of at least 30,000 are ranked by their levels of gross
national income (GNI) per capita
o These economies are classified as low-income countries (LICs) ,
lower-middle countries (LMCs), upper-middle income countries
(UMCs), high income OECD countries and other high-income
countries

o The World Banks’ classification system, 208 economies with a

population of at least 30,000 are ranked by their levels of gross
national income (GNI) per capita
o These economies are classified as low-income countries (LICs) ,
lower-middle countries (LMCs), upper-middle income countries
(UMCs), high income OECD countries and other high-income
countries

o Developing countries are those with low, lower-middle or upper-

middle incomes
o Low-income countries are defined by World Bank as having per
capita gross national income in 2003 of $765 or less;
o Lower-middle-income countries have income between $766 and
$3,035;
o Upper-middle-income countries have incomes between $3,036 and
$9,385

o High income countries have incomes of $9,386 or more

o Special distinction is made among upper-middle-income economies.
Designating some that have achieved relatively advanced manufacturing
sectors as newly industrializing countries (NICs)
o Another way to classify the nations of the developing worl is through their
degree of international indebtedness;
o The World Bank classifies countries as severely indebted, moderately
indebted and less indebted

o The United Nations Development Program (UNDP) classifies countries

according to their level of human development, including health and
educational attainments

o The United Nations Development Program (UNDP) classifies countries

according to their level of human development, including health and
educational attainments

o Nevertheless, despite the obvious diversity of these countries, most

developing nations share a set of common and well-defined goals
o These include a reduction in poverty, inequality and unemployment
o The provision of minimum levels of education, health, housing and food to
every citizen;

o The broadening of economic and social opportunities and the forging of a

cohesive nation state
o Related to these economic, social and political goals are the common
problems shared in varying degrees by most developing countries,
widespread and chronic absolute poverty, high levels of unemployment
and underemployment, wide and growing disparities in the distribution of
income, low levels of agricultural productivity, sizeable and growing
imbalances between urban and rural levels of living and economic
opportunities, serious and worsening environmental decay

o Antiquated and inappropriate educational and health systems

o It is therefore possible and useful to talk about the similarities of crticial
development problems and to analyze these problems in a broad world
perspective

STRUCTURAL DIVERSITIES OF DEVELOPING
ECONOMIES
 EIGHT CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

o The size of the country (geographic area, population and income)
o The sheer physical size of a country, the size of its population and its
level of national income per capita are important determinants of its
economic potential and major factors differentiating one developing
nation from another

ECONOMIES

o Of the 160 developing countries that were full members of the United
Nations in 2000, 87 had fewer than 5 million people, 58 had fewer
than 2.5 million and 38 had fewer than 500,000

ECONOMIES

o Large and populated nations like Brazil, India, Egypt and Nigeria exists
side by side with small countries like Paraguay, Nepal, Jordan and Chad

ECONOMIES

o Large size usually presents advantages of diverse resource endowment,
large potential markets and more local source of materials and products
o It also creates problems of administrative control, national cohersion and
regional imbalances

ECONOMIES

o Historical Background
o Most African and Asian nations were at one time or another colonies of
Western European countries, primarily Britain and France but also
Belgium, the Netherlands. Germany, Portugal and Spain
o The economic structures of these nations , as well as their educational
and social institutions have typically been modeled on those of their former
colonial rulers

ECONOMIES

o Countries like those in Africa that more recently gained their independence
are therefore likely to be more concerned with consolidating and evolving
their own national economic and political structures than with simply
promoting repid economic development

ECONOMIES

o Countries like those in Africa that more recently gained their independence
are therefore likely to be more concerned with consolidating and evolving
their own national economic and political structures than with simply
promoting rapid economic development

ECONOMIES

o The European colonial powers had a dramatic and long-lasting impact on
the economies and political and institutional structures of their African and
Asian colonies by their introduction of three powerful and tradition-
shattering ideas; private property, personal taxation and the requirement
that taxes be paid in money rather than in kind

ECONOMIES

o These ideas combined to erode the autonomy of local communities and to
expose their people to new forms of potential exploitation
o The worst impact of colonization was probably felt in Africa, especially if
one also considers the earlier slave trade

ECONOMIES

o In former colonies such as India local people played a role in colonial
governance , in Africa most governance was administered by expatriates

ECONOMIES

o Physical and Human Resources
o A country’s potential economic growth is greatly influenced by its
endowments of physical resources (land, minerals and other raw
materials) and human resources (number of people and their level of
skills)

ECONOMIES

o The extreme case of favorable physical resource endowment is the
Persian Gulf oil estates
o Extreme countries like Chad, Yemen, Haiti and Bangladesh where
endowments of raw materials and even fertile land are relatively minimal

ECONOMIES

o As the case of Congo shows vividly , high mineral wealth is no guarantee
of development success
o Conflict over the profits from these industries odten leads to a focus on the
distribution of wealth rather than its creation and to social strife,
undemocratic governance and high inequality in what is called the “curse
of natural resources”

ECONOMIES

o Ethnic and Religious Composition
o One of the direct benefits at the end of the 45 year cold war between the
United States and the former Soviet Union has been substantial decline in
foreign military and political presence in the developing world

ECONOMIES

o An indirect cost of thiw withstanding , however, has been the acceleration
of ethnic, tribal and religious conflict such as in the violent disintegration in
Yugoslavia
o Although ethnic and religious tensions and occasional violence have
always existed in LDCs , the wanning of superpower influence triggered a
revival of these internal conflicts and may have even accelerated the
incidence of political and economic discrimination

ECONOMIES

o Ethnicity and religion often play a major role in the success or failure of
development efforts
o The greater the ethnic and religious diversity of a country , the more likely
it is that there will be internal strife and political instability

ECONOMIES
 EIGTH CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

o Ethinic and Religious Composition
o More than 40% of the world’s nations have more than five significant
ethnic populations
o One or more of these groups face serious problems of discrimination

ECONOMIES

o In 1990’s ethnic and religious conflicts leading to widespread death and
destruction took place in Afghanistan, Rwanda, Mozambique, Sri Lanka,
Iraq, India , Somalia, Ethiopia , Liberia, Angiola, Myanmar, Sudan,
Yugoslavie, Haiti, Indonesia and the Democratic Republic of Congo

ECONOMIES

o Descendants of African slaves brought forcefully to the western
hemisphere continue to suffer discrimination in countries like Brazil

ECONOMIES

o Relative Importance of the Public and Private Sectors and Civil
Society
o Most developing countries have mixed economic systems, featuring
both public and private ownership of resources

ECONOMIES

Society
o The divisions between two and their relative importance are mostly a
function of historical and political circumstances

ECONOMIES

Society
o In general , Latin American and Southeast Asian nations have larger
private sectors than South Asian and African nations
o The degree of foreign ownership in the private sector is another important
variable to consider when differentiating among LDCs

ECONOMIES

Society
o A large foreign-owned private sector usually creates economic and political
opportunities as well as potential problems not found in countries where
foreign investors are less prevalent

ECONOMIES

Society
o Often countries like those in Africa with severe shortages of skilled human
resources have tended to put greater emphasis on public sector activities
and state run enterprises on the assumption that skilled manpower can be
best used by coordinating rather than fragmenting administrative and
entrepreneurial activities

ECONOMIES

Society
o The widespread economic failures and financial difficulties of many of
these public concersn in countries such as Ghana, Senegal, Kenya and
Tanzania raise questions, however about the validity of this assumption

ECONOMIES

Society
o Economic policies such as those designed to promote more employment
will naturally be different for countries with large public sectors and ones
with sizeable private sectors

ECONOMIES

Society
o In recent years, there has been an increasing appreciation of the role
played by the citizen sector or “civil society” – voluntary action , including
that of non governmental organizations (NGOs) outside of government
and for profit activities of the private sector

ECONOMIES

Society
o Developed societies have vibrant civil societies and NGOs and other
nonprofit organizations play key and unique roles in social innovation and
development through their capacities in social problem solving and
program flexibility , specialized knowledge , targeted public goods
provision, common property management, trust and credibility and
advocacy activities

ECONOMIES

Society
o Developing nations that have strong NGO sectors have often been able to
make better progress in addressing problems of development such as
poverty alleviation and expanding social inclusion

ECONOMIES

o Industrial Structure
o Those rapidly urbanizing , the majority of developing countries are
agrarian in economic, social and cultural outlook
o Agriculture both subsistence and commercial is a principal economic
activity in terms of the occupational distribution of the labor force if not in
terms of proportionate contributions to national income

ECONOMIES
 EIGHT CRTIICAL COMPONENTS OF STRUCTURAL DIVERSITIES

o Those rapidly urbanizing , the majority of developing countries are
agrarian in economic, social and cultural outlook
o Agriculture both subsistence and commercial is a principal economic
activity in trems of the occupational distribution of the labor force

ECONOMIES

o There are great differences between the structure of agrarian systems and
patetrns of land ownership in Latin America and Africa
o Asian agrarian systems are somewhat closer to Latin America in terms of
patters of land ownership but the similariites are lessened by substatntial
cultural differences

ECONOMIES

o It is relative importance of the agricultural, manufacturing and service
sectors that we find the widest variation among developing nations
o Most Latin American countries having a longer history of independence
and generally higher levels of national income than African or South Asian
nations , possess more advanced industrial sectors

ECONOMIES

o In 1970’s and 1980s economies like Taiwan, South Korea and Singapore
greatly accelerated the growth of their manufacturing output, and by 2002
these countries were classified as industrial states
o India is one of the largest manufacturing sectors in the developing world

ECONOMIES

o External Dependence : Economic, Political and Cultural
o The degree to which a country is dependent on foreign economic, social
and political forces is related to its size, resources endowment and political
history
o For most developing countries this dependence is substantial

ECONOMIES

o Almost all small nations are dependent on the importation of foreign and
often excessively capital-intensive technologies of production
o This fact alone exerts an extraordinary influence on the character of thew
growth process in these dependent nations

ECONOMIES

o Beyond the strictly economic manifestations of dependence in the form of
the international transfer of goods and technologies is the international
transmission of systems of education and governance values, patterns of
consumption, attitudes toward life, work and self

ECONOMIES
 EIGTH CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

o A country’s ability to chart its own economic and social destiny is
significantly affected by its degree of dependence on these and other
external factors

ECONOMIES

o Political Structure , Power and Interest Groups
o Final analysis, it is often not the correctness of economic policies alone
that determines the outcome of national approaches to critical develpmnet
problems
o The political structure and the vested interests and allegiances of ruling
elites (e.g. Large landowners, urban industrialists, bankers, foreign
manufacturers, the military, trade unionists) will typically determine what
strategies are possible and where the main roadblocks to effective

ECONOMIES

o Economic and social change may lie
o The constellation of interests and power among different segments of the
populations of most developing countries is itself the result of their
economic, social and political histories and is likely to differ from one
country to the next

ECONOMIES

o The specific distribution of power among the military, the industrialists and
the large landowners in Latin America ; the politicians and high level civil
servants in Africa; the oil sheiks and financial moguls in the Middle East; or
the landlords , moneylenders and wealthy industrialists of Aisa and most
developing countries are ruled directly or indirectly by small and powerful
elites to a greater extent than the developed nations are

ECONOMIES

o Effective social and economic change thus requires either that the support
of elite groups be enlisted or that the power of the elites be offset by mor
powerful democratic forces

ECONOMIES

o Economic and social development will often be impossible without
corresponding changes in the social, political, legal and economic
institutions of nation (e.g. land tenure systems, forms of governance,
educational structures, labor market relationships, property rights, contract
law, civil freedoms, the distribution and control of physical and financial
assets , laws of taxation and inheritance and provision of credit)

Understanding Development Among Developing Countries

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UNDERSTANDING

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 1

 The range of human development in the world is vast and

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 2

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 3

 The growth position of the less developed countries today is

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 4

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 5

o And because of almost all these countries are relatively poor in

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 6

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 7

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 8

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 9

o The most common way to define the developing world is determining

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 10

o The World Banks’ classification system, 208 economies with a

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 11

o The World Banks’ classification system, 208 economies with a

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 12

o Developing countries are those with low, lower-middle or upper-

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 13

o High income countries have incomes of $9,386 or more

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 14

o The United Nations Development Program (UNDP) classifies countries

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 15

o The United Nations Development Program (UNDP) classifies countries

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 16

o Nevertheless, despite the obvious diversity of these countries, most

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 17

o The broadening of economic and social opportunities and the forging of a

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 18

o Antiquated and inappropriate educational and health systems

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 19

 EIGHT CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 20

 EIGHT CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 21

 EIGHT CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 22

 EIGHT CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 23

 EIGHT CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 24

 EIGHT CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 25

 EIGHT CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 26

 EIGHT CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 27

 EIGHT CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 28

 EIGHT CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 29

 EIGHT CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 30

 EIGHT CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 31

 EIGHT CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 32

 EIGHT CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES

PROF. BERNADETTE K. DIMZON, CPA-MBA 05/01/2023 33

 EIGHT CRITICAL COMPONENTS OF STRUCTURAL DIVERSITIES