ECONOMIC

DEVELOPMENT
DEVELOPING AND DEVELOPED COUNTRIES

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 What is Economic Development
• It is sustained economic growth accompanied by a fundamental change in the
structure of an economy and a rise in the quality of life
The concept of economic development consists of key attributes:
 Sustained economic growth evidenced by rising productive capacity and wealth
 Structural change – shift in sectoral composition of output and employment (i.e. declining
reliance on primary sector production and an increasing share of manufacturing and tertiary
production as a percentage of real GDP)
 Better quality lives – reflected in access to healthcare, nutrition, education, material
consumption, freedom and civil liberties.
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 Elements of development
• Infrastructure, Education, health and wellness, justice, safety, human
rights, consumer protection, fair competition, markets, finance, political
stability, culture, transportation, energy, water, food, information
technology, research, industrial base, service economy, knowledge
economy, experience economy, public space, community and sustainable
and resilience

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 Structural Change
• It is the changes the relative importance of different sectors of production (primary,
secondary and tertiary) over time, measured by their share of output or employment.
• It is the changes in the relative importance of the three sectors to an economies real
output and employment
• The process of development results in decreasing proportion of the primary sector’s
contribution to real GDP and employment and a corresponding rise in those of the
secondary and tertiary sectors.
• The most developed countries depend on the tertiary sector for the greatest share of
real GDP and employment
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 Structural Change in China

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 Developed and Developing Countries

Developed Countries Developing Countries

• Higher income per capita e.g. Norway • Low income per capita e.g. Ethiopia $ 364 per
$84,543 per year year
• Tertiary sector contributes the greatest % if • Primary sector contributes the largest share of
GDP and employment- 5% GDP and employment – 55%

• Lowest percentage of labour force employed • Higher percentage of labour force employed in
in agriculture – USA 0.7% agriculture – Ghana 44.7%
• Primary products contributes the largest source
• Manufactured goods and services contributes of export revenue
theDEmost to export revenue
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 Developed and Developing Countries
Developed Countries
• Low incidence of absolute poverty
USA 12.3%
• Low/negative population growth –
USA 0.81 %
• High life expectancy – Japan 84 years
• Low infant mortality – Belgium 3.4
deaths per 1,000 live births
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Developing Countries
• High incidence of absolute poverty –
24.5% in Ghana
• High rates of population growth –
Sierra Leone 2.38% per annum
• Low life expectancy – Niger 54 years
• High infant mortality – Sierra Leone
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 Developed and Developing Countries
Developed Developing
• Low maternal mortality – Belgium 7 deaths per • Maternal mortality – Sierra Leone 1,360 per 100,000
100,000 live births live births
• Doctor to patient ratio – Belgium 3.01 doctors per • Doctor to patient ratio – Sierra Leone 0.02 doctors
1,000 of population per 1,000 of population
• High literacy rate – Germany 99% • Low literacy rate- Sierra Leone 48.1%
• Access to clean potable water Belgium 100% access • Limited access to clean potable water – Sierra Leone
• Population with access to electricity – Germany 62.3%
100% • Population with access to electricity- Ghana 79.3%
• Population living in urban areas – USA 82.3%
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 Developed and Developing Countries

Developed Countries Developing Countries

• Low birth rate – Germany 8.6 per 1,000
of population
• Low death rate – Japan 9.8 per 1,000 of
the population
• Mother’s mean age at first birth – USA
26.4 years
• Contraceptive prevalence – USA 72.7%
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• High birth rate – Sierra Leone 36.3 per
1,000 of population
• High death rate – South Africa 17.09
per 1,000 of population
• Mother’s mean age at first birth – Sierra
Leone 19.2 years
• Contraceptive prevalence – Ghana 33%
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 Capital accumulation through investment in:
a. Physical capital which includes factory buildings,
machinery, shops etc
b. Social capital e.g. schools, roads, hospitals, housing
etc
c. Human capital ( the accumulated knowledge, skills
and attitudes of the working population
Modernization of agriculture
Industrialization
Export lead economic strategy
Social intervention

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 Millennium Development Goals
• The MDGs were adopted by 189 heads of state at the United Nations in
September 2000.
• The eight goals were set to encourage all countries, rich or poor, to focus on
human development problems. The goals were about basic human rights – the
rights of every woman, man and child to health, education, shelter and security as
pledged in the Universal Declaration of Human Rights and the UN Millennium
Declaration.
• The UN partnered each country to ensure that national priorities were linked with
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 Concept of Sustainable Development
• Sustainable development is development that meets the needs of the present,
without compromising the ability of future generations to meet their own needs.
• Sustainable development seeks to looks to balance different, and often competing,
needs against an awareness of the environmental, social and economic limitations
we face as a society.
• The SDGs were adopted in 2015 and are expected to be achieved by 2030

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 Poverty
• A person is poor if his/her income and resources are so inadequate as to enable
them satisfy the basic necessities of life (food, clothing , shelter, healthcare, etc.)
• Absolute/Extreme poverty
• The UN has defined absolute poverty as ‘a condition characterised by severe deprivation of
basic human needs, including food, safe drinking water, sanitation facilities, health, shelter,
education and information’.
• The world bank considers a person absolutely poor if he/she earns less that $1.25 per day.
• Absolute poverty is a set standard which is the same in all countries .

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 Relative Poverty
• Relative poverty is the condition in which people lack the minimum
amount of income needed in order to maintain the average standard of
living in the society in which they live.
• It is suffered by a household if its income is below a specified proportion
of average income for all households
• It classifies individuals or families as poor by comparing them to others in
the population of study

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 Human Poverty Index(HPI)
• HPI is a composite index which assesses three elements of deprivation in a country -
longevity, knowledge and a decent standard of living
• a long and healthy life: probability at birth of not surviving to the age of 40
• Knowledge: being excluded from the world of reading and communication and is
measured by the percentage of adults who are illiterate
• deprivation of a decent standard of living: percentage of population not using
improved water source and percentage of children who are underweight for their age

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 Reducing the Incidence of Poverty
• Improving access to and the quality of education to children and the youth
• Increased use of progressive taxation with exemptions for lower income earners
and increasing marginal rates for higher income earners
• Increased provision of welfare services and income support for the aged, disabled
• Subsidising essential services like housing, healthcare for the deprived
• Increasing the minimum wage to guarantee decent life for the lowest paid job
• Sound economic management to generate sustained economic growth and
increased investment to increase job opportunities
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 Overseas Aid and Poverty Reduction
• Food aid is helpful during war, famine and other disasters but could create a culture of
dependence and stifle domestic agricultural expansion. The administrative costs of providing
food aid can be very high
• Financial aid like grants for improving domestic agricultural output through the provision of
appropriate farm machinery and implements, better yielding and drought resistant varieties of
seeds and training for agric extension officers provides a sustainable solution to poverty.
• Loans is well invested in roads, railways and electricity generation and irrigation could increase
efficiency of firms and improve a country’s productive capacity. But it may increase the debt
burden of developing countries.
• Debt relief makes available resources that would have been used for debt servicing
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health, education and access to water.
 Arguments for Overseas Aid
• Food aid during war, famine and disasters saves lives
• Helps poor countries invest in education, healthcare to improve living
standards and raise productivity of labour
• Aid for the construction of roads and other infrastructure aids in economic
growth

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 Arguments against Overseas Aid
• Aid budgets are used to employ expensive foreign consultants rather than
being spent locally to benefit the poor
• Poor countries lack the skills to efficiently manage donor resources
• Misapplication of donor funds through by corrupt politicians and public
servants
• Food undermines the growth and expansion of domestic agriculture

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 Data Response Questions
• Nov. 2015 P22

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