Concepts of development African Economic Development Renata Serra – Jan. 23 rd 2007

Early concepts Before WW2, “economic development” entailed notions of progress and evolution Colonies were deemed ‘under-developed’: backward economically, socially, politically, culturally Modernization theories called for a structural change: From primitive into modern societies From rural into urban From agricultural into industrial Goals: Extensive division of labor and specialization Developed formal markets and high productivity Well-functioning and modern state bureaucracy Democratic form of government and equality before the law

We now know that: Development is neither even nor uni- directional process Setbacks, complexities, uneven progress Ex: ‘limits to economic growth due to limited world entropy’ Development may mean different things to different societies Many roads to reach the same end No single goal for development No ‘single theory fits all’ Creativity, participation, bottom-up approaches

1. Development=Economic growth Increase in a country’s production and consumption possibility (shift of the PPF), or narrowly, increase in per-capita GDP The most used development indicator (see p.3 CP)! EG is fundamental for development, however: No account of distributional issues Increases in EG do not automatically improve well being No account for pollution and resource depletion Neglect of valuable goods such as freedom and self-esteem EG measures are also unreliable due to: Poor quality of data in developing countries Failure to capture production for auto-consumption and transactions through non-price systems, e.g. social networks

2. Basic needs and capabilities Basic needs (Paul Streeten, 1980s) Economic growth not as an end but as a means by which satisfying people’s basic needs Sen’s capability approach: Purpose of development is to expand people’s capabilities, and the choices that people have to live full and creative lives. Capabilities are vectors of ‘functionings’ (relating to the basic abilities to ‘be’ and ‘do’). People are both the beneficiaries and agents of development.

3. Human Development Focus on ends, not means: the goal is to promote human welfare in all its components Multi-dimensional: knowledge, nutrition, health, security against crime and physical violence, employment, leisure, political and cultural freedoms, self-respect and dignity, etc. Focus on people as both beneficiaries and agents of development

4. Sustainable development Bruntland Commission’s Report in 1987: ‘SD is defined as a process that fulfils the needs of present generations without compromising the ability of future generations to satisfy their own needs’ SD is ‘equitable and balanced’: Across space: societies and countries Across time: think about one’s children and grandchildren Distinction between basic consumption needs of the poor, and luxury consumption in the rich countries (which is beyond what is ecologically feasible)

Complexities of development Development is more than just increasing quantity of resources: “who gets what” is a crucial issue Quality of life is affected by many dimensions The need for a measure allowing quick comparisons needs to be complemented by the understanding of the complexities of development processes Need for a long-term perspective, including future generations Trade-offs exist, which are for political processes to decide

New Washington consensus Growth with redistribution, pro-poor, or equitable, growth are now mainstream ends of development Shift is visible from 1990 SAPs in the 1980s widely criticized Requests for ‘development with a human face’ WDRs on Poverty, 1990 and 2000 New economic theory and evidence Excessive inequality may harm growth Poverty means internal market is small and efficiency is forgone Asian tigers implemented redistributive reforms Poverty reduction is built into new IFIs lending, PRSPs processes, and HIPC Initiatives World Bank recent chief economists include: Jo Stiglitz and now F Bourguignon

Development indicators by region GNI pcLEBIMR5FertilityImmun.EducatWaterHIV High income OECD Middle income Low income East Asia & Pacific Latin America & Caribbean Middle East & North Africa South Asia Sub-Saharan Africa

Imperfect correlation among development indicators