Department of Geography and Environmental Studies

COLLEGE OF SOCIAL SCIENCES AND HUMANITIES

DEPARTMENT OF GEOGRAPHY AND ENVIRONMENTAL STUDIES

Development Geography (GeES 3011)Module

Written By:
Ashenafi Zewdu (PhD Candidate)
Lecturer, Debre Berhan University

Editor:
Gomeje Amessie (MSc.)
Lecturer, Debre Berhan University

SEPTEMBER, 2021
 TABLE OF CONTENTS
THE GENERAL OVERVIEW OF THE MODULE. ................................................................... ..v

COURSE OBJECTIVES ............................................................................................................. .vii

ASSESSMENT AND EVALUATION ........................................................................................ vii

DISTINGUISHING FEATURES OF PRESENTATION ........................................................... viii

UNIT ONE – INTRODUCTION…………………………………………………………………...1

1.1. Definition of development Geography………………..………………………………………2
1.2. The concept of development…………………………..………….………………………..…2
1.3. Indicators of development…………………………..…………….……………………...…...5
1.4. Growth and development………………………..…..…………….…………………………..7
1.5. Development and Underdevelopment…………………..………….………………………….9
1.6. Classification of countries and their defining characteristics……..….………..……………..10

UNIT TWO – SUSTAINABLE DEVELOPMENT…………………….…………………….....…20

2.1. Meaning of sustainable development……………………………………………………..21

2.2. Principles and values of sustainable development………………………………………..23

2.3. Sustainable development goals………………………………….…………….…………..25

UNIT THREE - DEVELOPMENT PROBLEMS AND FACTORS AFFECTING DEVELOPMENT

3.1. Development Problems……………………….…………………………………….……….40
3.1.1. Pollution…………………………………………………………………….………….40
3.1.2. Inequality……………………………………………………...…………….…………41
3.1.3. Unemployment………………………………………………………………..………..42
3.1.4. Inflation………………………………………………………....……………..……….43
3.2. Factors affecting development……………………………………………………..………..44
3.2.1. Social and Cultural Factors ………..…………………………………………..……….44
3.2.2. Environmental Factors………………………………………..………………..……….45
3.2.3. Economical Factors …………………………………………………………..………..46
3.2.4. Non-Economical Factors…………………………………………...………..…………48
3.2.5. Political Factors ……………………………………………...……………..………….49

UNIT FOUR – THEORY OF DEVELOPMENT……………….……………………..………….53

4.1.Rostow‗s Growth model……………..………………………………………..…………..54

4.2.Core-periphery model………………………………………………………..……………57

4.3.Modernization theory………………………………………………………..…………….60

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 4.4.Dependency theory……………………………………………………………………..65

4.5.Theory of Post Modernism……………………………………………………………..70

4.6.New (endogenous) Growth…………………….………………………………………74

4.7.Balanced vs unbalanced growth…………………..……………………………………75

4.7.1. Balanced Growth Doctrine …….………………………………………………..75

4.7.2. Unbalaced Growth Doctrine ……...……………………………………………..76

4.8.Coordination Failure: The O-Ring Theory of Economic Development……..…………78

UNIT FIVE - DEVELOPMENT POLICY AND STRATEGIES……………...……………….83

5.1.Development planning and policy making…………………….…………………………..84

5.1.1. Meaning of development planning………………………...…………………………84

5.1.2. Development planning process………………….……………………………………85

5.1.3. Types of development planning……………………..……………………………….89

5.2.Development strategies …………………………..……………………………………….90

5.2.1. Agricultural Led Development ……………….……………………………………..90

5.2.2. Import Substitution ……………….…………………………………………………90

5.2.3. Export Oriented Industrialization ………………...…………………………………93

5.2.4. Inclusive Growth ………………...………………………………………………….94

UNIT SIX - DEVELOPMENT OF ETHIOPIA………………..…………………………….100

6.1. Regional Development Inequalities in Ethiopia …………..…………………………..101
6.2. Challenges and Constraints of Development in Ethiopia…...…………………………102
6.3. Development potentials of Ethiopia …………………...……………………………..103
6.4. Development policies and strategies of Ethiopia ………………..……………………104
UNIT SEXEN – MEASURES OF GROWTH AND DEVELOPMENT….......……………..111
7.1.Gross Domestic Product (GDP) ……………………………………….……………..112
7.2.GNP per capita……………………………………...………………….……………..112
7.3.Gini Coefficient ……………………………………………………….………...…..113
7.4.Human Development Index …………………………………….……..……….…….115
7.5.Multidimensional Poverty Index …………..……………………………..………….117

REFERENCES……………………………………………………………………………….122

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 THE GENERAL OVERVIEW OF THE MODULE
Dear learner! Well Come to the Course of Development Geography!

Dear learner! Welcome to the course Development Geography (GeES 3011). This course is designed to
introduce students of Geography and Environmental Studies (GeES) about the concepts of
development, underdevelopment, development geography, and space and development. The course also
developed to acquaint students about indicators, regional variation in development, development
problems and factors affecting development, theories of development, development policy and
strategies, development in Ethiopia, and measures of growth and development.

This is one of the basic courses in the new harmonized curriculum of Geography and Environmental
Sciences. The course deals with the various aspects of development and sustainable development.
Development is a difficult concept to define. The term development means different things to different
people. Therefore, possible definitions include a wide range of elements. Despite the complexity of the
issue, we have some definitions that can go well with the term development.

Development is a process by which members of a society increase their personal and institutional
capacities to mobilize and manage resources to produce sustainable improvements in their quality of
life. In addition, in order to ensure sustainable development attention must be given to the environment.
According to the World Commission of Environment and Development (1987), ―Sustainable
development is development that meets the needs of the present without compromising the ability of
future generations to meet their own needs‖.

In other words, sustainability implies that future growth and overall quality of life are critically
dependent on the quality of the environment. To destroy the environment in the pursuit of short-term
economic goals jeopardizes present and especially future generations. This is the level of extraction that
could be maintained without lessening future levels. That is why sustainability is a current paradigm for
thinking about a future in which environmental, societal and economic considerations are balanced in
the pursuit of development and improved quality of life. Such issues in geography are important and
must be dealt with adequately because they have several implications to the various activities of
mankind.

Generally, this course is a three credit hour course and one of the disciplines within contemporary
human geography. The module is organized in the form of chapters and sub-chapters. It has a total of
seven chapters and each chapter begins with brief introduction, objectives and then it goes to the sub
chapters. Several self exercises are added at the beginning of each sub-chapter to provoke your prior
knowledge and self-assessment purposes.

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At the end of each chapter, the module also consists of short summary, review questions and checklists.
Hence, you are kindly requested to deal each chapter and sub units thoroughly. Do not forget to
accomplish the questions and self-test activities given in the module. Activities are designed to provoke
discussion and generation of varieties of ideas. This will help you to evaluate yourself whether or not
you have achieved the objectives indicated at the beginning of the chapter and for the development and
understanding of the next chapters. Again, while reading each part; please relate the situation with the
reality in your locality and country level at large.

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 COURSE OBJECTIVES

The general objective of this course is to acquaint students with basic concepts about development
Geography. At the end of the course, students will be able to:
 Understand the concept of development and development geography.
 Identify indicators of development and under development.
 Differentiate growth and development as well as developed and developing countries.
 Understand sustainable development and sustainable development goals.
 Identify development problems and factors affecting development.
 Explain classical and neoclassical theories of development.
 Apply any development theory in solving different problems of the society.
 Explain the existing development policy and development strategies in the world.
 Understand the development problems of Ethiopia.
 Compute different measures of growth and development.

ASSESSMENT AND EVALUATION

Individual Assignment...……………..……30%

Final exam …………...…………….……..70%

Total ………...……………...…………….100%

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 DISTINGUISHING FEATURES OF PRESENTATION

Dear learner, I have employed several features of organization and design in order to make the
presentation interesting to you. The keys below are used throughout the material and will make your
learning faster and easier.


 This tells there is an introduction of the unit or an overview of a section and what the
unit or section is about.

Refers to In-text Question(s). These are questions that are interspersed within the
text of the lecture to help you review and master small chunks of knowledge, skills
and values.

Refers to Take Note. It helps to highlight significant points that you need to keep
 in mind. When making your study notes, take down these points as well.



Refers to Activity. The activities are also interspersed throughout the lectures to
encourage group discussions, open-ended learning, project work, et cetera. Please
endeavor to carry out all the suggested activities individually and in groups, as
required. This will help you to master what you are learning.

Refers to Checklist. These are questions given at the end of the unit, in order to
 check whether you have mastered the whole content of the unit or not.

Refers to Self-Test Question(s). These are tasks set to cover work done in the
 entire lecture. The set tasks provide summative evaluation of what you have
learned in the lecture.

Refers to Further Reading. It is vital for you to study the additional materials
cited in the Further Reading section. This will broaden and deepen your
understanding of the subject under discussion.

This is the key to the activities and self-check exercises.

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 Department of Geography and Environmental Studies
UNIT ONE

INTRODUCTION
CONTENTS

1.1. DEFINITION OF DEVELOPMENT GEOGRAPHY

1.2. THE CONCEPT OF DEVELOPMENT
1.3. INDICATORS OF DEVELOPMENT
1.4. GROWTH AND DEVELOPMENT
1.5. DEVELOPMENT AND UNDERDEVELOPMENT
1.6. CLASSIFICATION OF COUNTRIES & THEIR DEFINING CHARACTERISTICS

SUMMARY
SELF TEST

 INTRODUCTION

Dear learner, in this unit you are equipped first with the basic concept development geography.
Next you will familiar with sustainable development and indicators of development. You will
also provide some points about the notion of growth and development. Lastly, you are expected
to deal with classification of countries and their characteristics.

Unit Objectives

At the end of this unit, you are expected to:-

 Define development geography

 State the concept of development
 Identify indicators of development
 Explain the basic difference between growth and development
 Explain the fundamental concept of development and underdevelopment
 Identify the classification of countries and their defining characteristics

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1.1. DEFINITION OF DEVELOPMENT GEOGRAPHY

Dear learner, can you define development geography?

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Geographical residence is essential in determining the productivity, income, and well-being of

the population. A person‘s location, however, is neither a permanent characteristic nor a fully
free choice. Once we have a basic understanding of the role of geography in development, we
can address the complex relationship between geography and economic development. We
investigate the ways in which geography may matter directly for development, controlling for
economic policies and institutions, as well as the effects of geography on development policy
choices and institutions. We find that location and climate have large effects on income levels
and income growth, through their effects on transport costs, disease burdens, and agricultural
productivity, among other channels. Furthermore, geography seems to be a factor in the choice
of economic policy itself.

Of course, geography is not everything. While geography has been much neglected in the past
decade of formal econometric studies of cross-country performance, economists have long noted
the crucial role of geographical factors. Indeed, though Adam Smith (1996) is most remembered
for his stress on economic institutions, Smith also gave deep attention to the geographic
correlates of growth. Smith saw geography as the crucial accompaniment of economic
institutions in determining the division of labor. Smith‘s logic, of course, started with the notion
that productivity depends on specialization, and that specialization depends on the extent of the
market.

Generally, Development Geography is a branch of human geography that emphasized on the

concept and indicators of development, regional variation of development, development
problems and factors affecting development, theories of development, development policy and
strategies as well as measures of growth and development.
1.2. THE CONCEPT OF DEVELOPMENT
Development is a difficult concept to define. The term development means different things to
different people. Therefore, possible definitions include a wide range of elements. Despite the
complexity of the issue, we have some definitions that can go well with the term development.

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Development is a process by which members of a society increase their personal and institutional
capacities to mobilize and manage resources to produce sustainable improvements in their
quality of life.

Prior to the second half of the twentieth century, the idea of development as we know it today
barely existed. The structures of imperial and colonial power which dominated the world in the
nineteenth and early twentieth centuries made little provision for economic and social advance in
what we now call the developing world. Colonial regions functioned primarily to supply
imperial powers with raw materials and cheap labor – including slave labor as late as the mid-
nineteenth century. Within the richer countries of Europe, North America, and Japan, economic
growth was of course central to the generally accepted goals of ―progress‖ and ―modernization‖,
but there was relatively little concern for issues of equity and social justice. The desperate
poverty and weak or non-existent social safety nets in Europe and the United States during the
Great Depression showed how even in these countries, policy was not driven by the needs of the
majority of people.

By the end of the Second World War, perceptions and policy had changed drastically. Economic
and social improvement for the majority had become a major preoccupation of governments, and
with the crumbling of colonial power relations this goal was extended to the poorer nations of the
world. Economic development, with its social and institutional correlates, came to occupy an
essential place in theory and policy, as well as in the Cold War competition between capitalism
and communism. As the historian of economic thought Roger Backhouse puts it:

According to Burkey (1993), development is also a process by which an individual develops

self-respect, and becomes more self-confident, self-reliant, cooperative and tolerant to others
through becoming aware of his/her shortcomings as well as his/her potential for positive change.
This takes place through working with others, acquiring new knowledge, and active participation
in the economic, social and political development of their communities. Development is ―both a
physical reality and a state of mind in which society have secured the means for obtaining a
better life‖ (Todaro and Smith 2006). Through this process the society ensures growth in wealth
acquisition and mental enrichment and the betterment of the quality living conditions of all the
people.

Development is briefly defined by United Nations Development Programme /UNDP (1990) as ―a

process of enlarging people‘s choice which encompasses, among others, opportunities for being
creative and productive as well as to acquire self-actualization and self-respect. To understand
the concept of ―enlarging the people‘s choice‖ one needs to bear in mind that ―human beings are
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borne with certain potential capabilities and functioning. Sen cited by Todaro and Smith (2006)
explains these functioning as what one can do such as participation, relative to the freedom of
choice and control of one‘s own life on the one hand, and capabilities as the freedom of choice of
functioning relative to one‘s personal characteristics on the other. In other words, development is
about activating people‘s born abilities into action for change in their lives.

The most recent definition of development: Development represents the whole

 package of change by which an entire social system moves away from a condition
of life perceived as unsatisfactory towards a situation or condition of life that is
materially and spiritually better (Todaro and Smith, 2009).

Generally, economic development strategies should give due attention to increasing the
productive capacities of human wealth and the health of the environment. This is done by
concentrating on the following:
I. Making sure that the nation has a labor force that is ready to work, hardworking and
energetic.
II. Improving the skill and the ability of the working force.
III. Ensuring the human labor force has adequate medical care (in order to maintain its
productiveness).
IV. Improving the supply, multiplication and distribution of modern and environmentally
friendly technology and other inputs.
V. In addition, in order to ensure sustainable development attention must be given to the
environment.

Figure: 1.1: The Dimension of Development

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Globally, most countries have made significant advances both in GDP and in Human
Development Index measures. But overall, the record of development on a world scale is open
to two major criticisms:
 The benefits of development have been distributed unevenly, with income inequalities
remaining persistent and sometimes increasing over time. The global numbers of
extremely poor and malnourished people have remained high, and in some areas have
increased, even as a global middle class has achieved relative affluence.
 There have been major negative impacts of development on the environment and on
existing social structures. Many traditional societies have been devastated by development
of forests, water systems, and intensive fisheries. Urban areas in developing countries
commonly suffer from extreme pollution and inadequate transportation, water, and sewer
infrastructure. Environmental damage, if unchecked, may undermine the achievements
of development and even lead to collapse of essential ecosystems.

Objectives of Development
From the different definitions of development, we can learn that development has the following
three major objectives:
a) To increase the availability and distribution of basic goods needed for human life-
sustenance. Such basic goods include food, shelter, health and security.
b) To improve the level of living in respect of social aspects such as household and national
income, education, and human cultural values, for the enhancement of individual and
national material well-being and self-esteem.
c) To expand the range of the available individual and national economic and social choices
by freeing them from servitude by forces of ignorance and human misery on the one
hand, and dependence from other people and national states on the other.

1.3. INDICATORS OF DEVELOPMENT

Dear learne, do you think that development is a measurable concept?

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______________________________________________________________________________
In fact the answer is yes, it can be measured by using different indices that are called indicators
of development. The component parts of the set of indicators indicate the level of development
that a given society achieves. However, before rushing to these indicators, let us take up the

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following activity. The level at which a certain economy is said to be developed is directly linked
with three most important conditions that are considered as major indicators of development.

 Activity 1.1

1. What are the major indicators of development?

2. What is GDP (Gross Domestic Product?

3. What is the difference between GDP and GNN?


Indicators of development are measures, to a certain level, of development in
a given country. The main indicators of development in the world include:
Gross domestic product (GDP), Per-capita income and Standard of living.

Gross Domestic Product (GDP)

GDP refers to the total value of goods and services produced in a country over a period of time.
It can be calculated by either adding up the value of all goods and services produced, or the
expenditure on goods and services at the time of sale, or producers‘ incomes from the sale of
goods or services. However, measuring GDP precisely is quite cumbersome. This is partly
because every country has an unofficial economy that is often called a black economy that
includes businesses that are not reported to government. Furthermore, GDP measures a country‘s
economic activity regardless of who owns the productive assets in that country. For example, the
output of Holland-owned companies based in Ethiopia is considered part of Ethiopia‘s GDP
rather than part of the Holland GDP.

Per-Capita Income
This one refers to the average amount of money that an individual is expected to have as a result
of the state‘s GNP. It is computed by dividing the GNP of a country by the total number of its
people. As it is a crude measure, per capita income does not tell who exactly gets how much.
However, it indicates how much each individual in a state can potentially get if the total GNP of
the state is evenly distributed among all people. Though not an actual income of an individual,
we can generally deduce that the higher the per capita income of a nation is the higher standard
of living and vice-versa.

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Standard of Living

Dear learner, why living standard is considered as the best indicator of development?
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______________________________________________________________________________

This is the threshold of material security measured by the availability of resources for an
individual, family, or society. It is perhaps the best measurement of the quality of life of people
in a given society. The standard of living that people have in a state is directly related to both
GDP and per capita income. Hence, in economies we say that where we have higher GDP and
per capita income, people have better standard of living. Contrary to this, people in countries
with low GDP and per capita income have low standard of living.

Developed countries have high and constantly growing living standards, while people of the
developing world are characterized by low living standards. Based on the above and other
indicators of development, countries of the world can be classified and named in different ways
such as rich/poor, developed/ developing, north/south, first/second world, and more
developed/less developed. Also, using current development status as criteria, they can be
grouped as developed, less developed and least developed.

These three factors are strictly interrelated to one another. Thus, a higher GDP means higher per
capita income. Likewise, a higher per capita income means better living condition. In well
developed economies, there is high GDP, per capita income and standard of living.
Consequently, the things that are essential to satisfy the needs of the population are readily
available. The following chart shows you how each of these concepts influence the other.

1.4. GROWTH AND DEVELOPMENT

Economic growth and development are terms that we use to refer to the state of economic
conditions in a certain society. Even if both are used to describe existing economic conditions,
they still differ from each other in the ways they are employed. The term economic growth is
used to describe the increase in the total amount of production and wealth of a given economy.
As it is related to wealth, it focuses on explaining how fast the production and wealth of a
country increases. Economic growth is usually quantitative and show vertical growth as it is
related to increasing production of goods and services, thereby allowing a state conceive how
much income it has generated.
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On the other hand, economic development refers to growth in structural and technological
change. Because of this, development is both quantitative and qualitative in that it involves
increment in production, service provision and income implies improvements in the overall
living conditions of the population. That is why most agree to the idea that a growing economy
can definitely promote development.

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

 same. Economic growth is a measure of the value of output of goods and services
within a certain period of time. Whereas, Economic Development: is a measure of the
welfare of human beings in a certain state.

With the advent of growth, the manufacturing and service sectors become dominant.
Consequently, diversified economic conditions with higher division of labor develop. Hence, we
can say that development is the promotion of more intensive and more advanced economic
activity with such inputs as education, improved tools and techniques of production, more
available financing, better transportation facilities, and other booming businesses. Economic
development is characterized by the following:

 The increased utilization of the natural resources of a state in order to raise people‘s
standard of living and to improve the quality of life.

 The production of more and more goods and services that enter into markets for sale. For
example, we know that people always eat, but as they have meals away from home and
pay for restaurant services, the restaurant sector grows up.

 The growth in GDP (for instance, the sector listed earlier on in turn, is measured as part
of the gross domestic product (GDP)

 Division of Labor: the process of development includes specialization in specific area of

labor, which consequently leads to ―division of labor.‖ As people take on specialized
economic functions, the scale of production increases and the output of each person rise.
This type of organizational change is an important part of development as technological
progress and mechanical invention or scientific discovery.

 Significant changes in the technical and institutional arrangements by means of which

output is produced and distributed.

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In general, development is understood as a complex and continuous process that involves people
on one hand, and the factors of production and organization on the other. In other words,
development is a process by way of which members of a society increase their personal and
institutional capacities to mobilize and manage resources and to produce sustainable goods and
services for their improved life.

Economic growth may not necessarily mean economic development. However, a growing
economy paves the way for development. As we know countries of the world are categorized
into two as developed and developing. But the question is how do we determine whether a
certain economy is developed or not? What are the factors that determine the level of the
economic development of a certain society? There are indicators of economic development that
can help us answer these questions which we shall see them later.

 The commonly used social indicators of development are: Female Literacy Rate, Male
Literacy Rate, Enrolment ratio of girls in school, Enrolment ratio of boys in school,
Percentage of population living below poverty line, Percentage of population with
access to sanitation.
Health and other demographic indicators are: Life expectancy at birth, Infant mortality
rate, Child mortality rate, maternal mortality ratio, Proportion of births attended by
1.5. The Origin of the Solar System
skilled birth attendant, Percentage of children who are under weight

1.5. DEVELOPMENT AND UNDERDEVELOPMENT

Development implies change and this is one sense in which the term development is used to
describe the process of economic and social transformation within countries. This process often
follows a well-ordered sequence and exhibits common characteristics across countries. But if
development becomes an objective of policy, the important question arises of development for
what? Not so long ago, the concept of development defined in the sense of an objective or a
desired state of affairs was conceived of almost exclusively in terms of growth targets with very
little regard to the beneficiaries of growth or to the composition of output. Societies are not
indifferent, however, to the distributional consequences of economic policy; to the type of output
that is produced, or to the economic environment in which it is produced. A concept of
development is required which embraces the major economic and social objectives and values
that societies strive for. This is not easy. Perhaps the best attempt to date is that by Goulet (1971)

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who distinguishes three basic components or core values in this wider meaning of development,
which he calls life-sustenance, self-esteem and freedom.

Life-sustenance is concerned with the provision of basic needs, which we discuss later in the
chapter. The basic needs approach to development was initiated by the World Bank in the 1970s.
No country can be regarded as fully developed if it cannot provide its entire people with such
basic needs as housing, clothing, food and minimal education. A major objective of development
must be to raise people out of primary poverty and to provide basic needs simultaneously.

Self-esteem is concerned with the feeling of self-respect and independence. No country can be
regarded as fully developed if it is exploited by others and does not have the power and influence
to conduct relations on equal terms. Developing countries seek development for self-esteem; to
eradicate the feeling of dominance and dependence which is associated with inferior economic
status.

Freedom refers to freedom from the three evils of 'want, ignorance and squalor' so that people
are more able to determine their own destiny. No man is free if he cannot choose; if he is
imprisoned by living on the margin of subsistence with no education and no skills. The
advantage of material development is that it expands the range of human choice open to
individuals and societies at large.

All three of these core components are interrelated. Lack of self-esteem and freedom result from
low levels of life sustenance, and both a lack of self-esteem and economic imprisonment become
links in a circular, self-perpetuating chain of poverty by producing a sense of fatalism and
acceptance of the established order.

Accordingly, any inability to fulfill the above major components of development is known as
underdevelopment. It can also be described as having a relatively low economic level of
industrial production and standard of living.

1.6. CLASSIFICATION OF COUNTRIES AND THEIR DEFINING

CHARACTERISTICS
For analytical purposes, world economic situation and prospects (WESP) classifies all countries
of the world into three broad categories developed economies, economies in transition and
developing economies. Within each broad category, some subgroups are defined based either on
geographical location or on ad hoc criteria, such as the subgroup of ―major developed
economies‖, which is based on the membership of the Group of Seven. Geographical regions for

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developing economies are as follows: Africa, East Asia, South Asia, Western Asia, and Latin
America and the Caribbean.

In parts of the analysis, a distinction is made between fuel exporters and fuel importers from
among the economies in transition and the developing countries. An economy is classified as a
fuel exporter if the share of fuel exports in its total merchandise exports is greater than 20 per
cent and the level of fuel exports is at least 20 per cent higher than that of the country‘s fuel
imports. This criterion is drawn from the share of fuel exports in the total value of world
merchandise trade. Fuels include coal, oil and natural gas.

For other parts of the analysis, countries have been classified by their level of development as
measured by per capita gross national income (GNI). Accordingly, countries have been grouped
as high-income, upper middle income, lower middle income and low-income countries. To
maintain compatibility with similar classifications used elsewhere, the threshold levels of GNI
per capita are those established by the World Bank. Accordingly;
 Countries with less than $1,035 GNI per capita are classified as low-income countries,
 Countries with between $1,036 and $4,085 as lower middle income countries,
 Countries with between $4,086 and $12,615 as upper middle income countries, and
 Countries with incomes of more than $12,615 as high-income countries.

The Development Gap

Turning now to the consideration of the distribution of world income in relation to the
population, and using the three-fold classification of low income, middle-income and industrial
countries, we find that the low-income countries contain approximately 60 per cent of the world's
population and receive only 6 per cent of the world's income; the middle-income countries
contain 15 per cent of the world's population and receive 17 per cent of world income, and other
rich industrialized countries contain 25 per cent of the world's population yet receive 77 per cent
of world income.

The statement that 'the rich countries get richer and the poor countries get poorer' has become a
popular cliché in the literature on world poverty. Indeed, the statement itself is not unambiguous.
Since living standards in all countries tend to rise absolutely over time, it obviously refers to the
comparative position of poor countries, but is the comparative position being measured taking
absolute or relative differences in per capita income? How should the 'development gap' be
assessed? Unfortunately there is no easy answer to this question, yet the answer given has a
profound bearing on the growth of per capita income that poor countries must achieve either to
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prevent deterioration of their present comparative position or for an improvement to be
registered.

 Activity 1.3


1. Given the recent growth experience of the poor countries, how long would it take
for them to reach the current average level of per capita income in the industrialise
countries?
2. Given the recent growth experience of the poor countries relative to the
industrialised countries, how many years would it take for the per capita income gap to
be eliminated?
3. Given the rate of growth of the industrialised countries from now until the year
2010 (say), how fast would the poor countries have to grow for per capita incomes to
be equalised by that date?
4. Given the rate of growth of the industrialised countries, how fast would the poor
countries have to grow merely to prevent the absolute per capita income gap between
rich and poor ountries from being any wider in the year 2010 than now?

By asking the first two questions some idea can be obtained of the time scale of the catching up
process by the poor countries given their recent growth performance. The answers to the latter
two questions give some idea of the growth task facing the poor countries in their struggle not
only for parity of living standards, but also in simply preventing the absolute gap from widening.
Given the basic data, the answers to the questions posed involve little more than simple
manipulation of the formula for compound interest:

s = p (1 + r) n
Where P is the principal sum and S is the sum to which the principal grows at an annual rate of
growth, r, over n years. For illustration:

Let YDt be the current level of per capita income in the industrialized countries = $20 000;

YDct be the current level of per capita income in the poor countries = $1200;

rD be the per capita income growth rate in the industrialized countries from 1990 to the year
2010 = 3 per cent (say);

rDc be the actual per capita income growth rate in the poor countries = 2 per cent;

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*
Y D be the assumed level of per capita income in the industrialised countries in the year 2010 =

$36 000 at today's prices (assuming 3 per cent growth);

*
r Dc be the required per capita growth rate of the poor countries. The solution to the first question

is then obtained from the formula:

In other words, at a growth rate of 2 per cent, it would take the average poor country, with a per
capita income of $1200, 95 years to reach the current living standards enjoyed in the
industrialized countries.

The solution to the second question is obtained from the expression:

From which we can find how long it would take (n) for the per capita income gap to be
eliminated between rich and poor countries, as long as the rate of per capita income growth in
poor countries is greater than in the industrialized countries otherwise, of course, the absolute
gap would widen forever.

A calculation can be made for any individual country whose average per capita income growth
was in excess of that of the industrialized countries. Korea, for example, has a per capita income
of approximately $5000 and per capita income has been growing at approximately 7 per cent per
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annum. How long would it take Korea at this rate to catch up the present industrialized countries
growing at 3 per cent? The answer is:

This is a relatively short space of time, but clearly the lower the initial level of per capita income
and the smaller the excess of growth above 3 per cent, the longer the time it would take to catch
up. For a country starting with an average level of per capita income of $1000 and growing at 4
per cent, it would take 309 years!

The solution to the third question is obtained from the expression:

*
Where Y Dis the assumed level of per capita income in the industrialized countries in the year

2010. We can then solve for the required growth rate of the poor countries between the base
period (1990) and the year 2010(n = 20) to equalize per capita incomes.

The required growth rate is 18 per cent per annum and hardly feasible. The magnitude of the
development task is clearly colossal if defined in terms of achieving roughly comparable living
standards throughout the world by the beginning of the next century. For most of the poor
countries per capita income growth would have to increase six-fold, necessitating a ratio of
investment to national income of 50 per cent or more. Investment ratios of this order are simply
not feasible, and in any case the countries themselves could not absorb such investment. The
solution to the fourth question is obtained from the expression:

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Where the left-hand side represents the base level per capita income gap and n is 20 years.
Solving for the growth rate that would have to be achieved to prevent the present gap from
widening gives:

This again is a growth rate not feasible, with the implication that the per capita income gap
between rich and poor countries will almost certainly be wider in the year 2010 than now, given
the assumed 3 per cent average growth rate of the industrialized countries.

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SUMMARY

The complex interaction between geography and economic development is at the core of a wide
variety of important economic phenomena. From the contemporary analysis we can understand
the fact that the world is interconnected through trade, technology diffusion, and migration.
Development Geography is a branch of human geography that emphasized on the concept and
indicators of development, regional variation of development, development problems and factors
affecting development, theories of development, development policy and strategies as well as
measures of growth and development.
Development is a difficult concept to define. Despite the complexity of the issue, we have some
definitions that can go well with the term development. Development is a process by which
members of a society increase their personal and institutional capacities to mobilize and manage
resources to produce sustainable improvements in their quality of life. Development has the
following three major objectives: the first objective is to increase the availability and distribution
of basic goods needed for human life-sustenance. Such basic goods include food, shelter, health
and security, the second objective is to improve the level of living in respect of social aspects
such as household and national income, education, and human cultural values, for the
enhancement of individual and national material well-being and self-esteem, and the third
objective is to expand the range of the available individual and national economic and social
choices by freeing them from servitude by forces of ignorance and human misery on the one
hand, and dependence from other people and national states on the other.

There are three major indicators of development. These are, Gross Domestic Product, Percapita
Income and Standard of living. These three factors are strictly interrelated to one another. Thus, a
higher GDP means higher per capita income. Likewise, a higher per capita income means better
living condition. In well developed economies, there is high GDP, per capita income and
standard of living. Consequently, the things that are essential to satisfy the needs of the
population are readily available.
There is significance difference between Economic growth and economic development. But they
are two sides of the same coin. Economic growth may be one aspect of economic development
but is not the same. Economic growth is a measure of the value of output of goods and services
within a certain period of time. It indicates only quantitative changes in economy. Whereas,
Economic Development: is a measure of the welfare of human beings in a certain state. It is both
the quantitative and qualitative change in economy.

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 CHECKLIST

You put tick mark under ‗Yes‘ if you can answer for the question or under ‗No‘ if you cannot
answer the question.
No. Questions Yes No

1 Can you define development?

2 Can you identify the major indicators of development?

3 Can you differentiate growth and development?

4 Can you describe the difference between development and

underdevelopment?

5 Can you identify the classification of countries based on

development?

6 Can you identify the importance of learning development

geography?

7 Can you describe the characteristics of economic development?

8 Can you calculate per capita income?

9 Can you mention the three objectives of development?

10 Can you describe the difference between GDP and GNP?

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
SELF TEST 1

DIRECTION I: MATCH THE ITEMS UNDER COLUMN A WITH THEIR

APPROPRIATE MATCH UNDER COLUMN B.

A B
____1) Development A. The monetary value of all goods and
services produced within a country.
____2) Growth B. The total value of goods and services
produced by a country in a year, including
____3) GDP incomes secured from abroad
C. Quantitative change in economy
____4) GNP D. Quantitative and qualitative change in
economy

DIRECTION II: GIVE SHORT ANSWER FOR THE FOLLOWING QUESTIONS

5) Describe the three major objectives of development.

i) ____________________________________________________________
ii) ____________________________________________________________
iii) ___________________________________________________________
6) Write at least three characteristics of economic growth.
i) __________________________________________________________________
ii) _________________________________________________________________
iii) __________________________________________________________________
7) Briefly explain the basic difference between economic growth and economic development.
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
_____________________________________________

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UNIT TWO
SUSTAINABLE DEVELOPMENT

CONTENTS

2.1. MEANING OF SUSTAINABLE DEVELOPMENT

2.2. PRINCIPLES OF SUSTAINABLE DEVELOPMENT

2.3. SUSTAINABLE DEVELOPMENT GOALS

SUMMARY
SELF-TEST

 INTRODUCTION

Dear learners, in the first unit you are grasp important knowledge about concept of development,
indicators of development, the meaning of development and underdevelopment, and also the
difference between economic growth and development. You have also seen the classification of
countries and their characteristics based on their level of development. In this unit you deal with
the meaning of sustainable development, principles of development, indicators of sustainable
development, and the goals of sustainable development.

UNIT OBJECTIVES

At the end of this unit, you are expected to:-

 Define sustainable development

 Identify the principles of sustainable development
 Describe the major indicators of sustainable development.
 Mention the most important goals of sustainable development.

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2.1. MEANING OF SUSTAINABLE DEVELOPMENT

Dear learner, can you differentaite sustainable developmet and development?

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
According to the World Commission of Environment and Development (1987), ―Sustainable
development is development that meets the needs of the present without compromising the
ability of future generations to meet their own needs‖. In other words, sustainability implies that
future growth and overall quality of life are critically dependent on the quality of the
environment. To destroy the environment in the pursuit of short-term economic goals jeopardizes
present and especially future generations. This is the level of extraction that could be maintained
without lessening future levels. In the extensive discussion and use of the concept since then,
there has generally been recognition of three aspects of sustainable development.
 Economic: An economically sustainable system must be able to produce goods and
services on a continuing basis, to maintain manageable levels of government and
external debt, and to avoid extreme sectorial imbalances which damage agricultural or
industrial production.
 Environmental: An environmentally sustainable system must maintain a stable
resource base, avoiding over-exploitation of renewable resource systems or
environmental sink functions, and depleting non-renewable resources only to the extent
that investment is made in adequate substitutes. This includes maintenance of
biodiversity, atmospheric stability, and other ecosystem functions not ordinarily classed
as economic resources.
 Social: A socially sustainable system must achieve distributional equity, adequate
provision of social services including health and education, gender equity, and political
accountability and participation.

A
S
S
S
D S

B C

Figure 2.1: Componens of Sustainable Development

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Generally, sustainability is a current paradigm for thinking about a future in which
environmental, societal and economic considerations are balanced in the pursuit of development
and improve quality of life. As shown Figure 2.1 above, sustainable development has three
components. In the given figure, letter A, letter B, letter C, and letter D represents environment,
society, economy and human wellbeing respectively. (i.e. the area of overlap or the intersection
of the three circles at the centre represents human wellbeing). As the environment, society and
economy become more aligned, the area of overlap increases, and so does human wellbeing.

Figure 2.2: Environmental and Socio-economic Perspectives of Sustainable Development

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2.2. PRINCIPLES AND VALUES OF SUSTAINABLE DEVELOPMENT

The key principle of sustainable development underlying all others is the integration of
environmental, social, and economic concerns into all aspects of decision making. All other
principles in the sustainable development framework have integrated decision making at their
core (Dernbach J. C., 2003 and Stoddart, 2011). It is this deeply fixed concept of integration that
distinguishes sustainability from other forms of policy.

Institutionally, government organizations are typically organized into sectorial ministries and
departments. In practice, sustainable -development requires the integration of economic,
environmental, and social objectives across sectors, territories, and generations. Therefore,
sustainable development requires the elimination of fragmentation; that is, environmental, social,
and economic concerns must be integrated throughout decision making processes in order to
move towards development that is truly sustainable.

 Activity 2.1


1. What are the basic principles of sustainable development?
2. How do you relate the values of sustainable development with the principles of
development?

The statements that came to be known as the major principles of sustainable development were
made at the 1992 Rio de Janeiro Declaration on the Environment and Development. These
principles were reproduced by Mindjov (1999) as follows:
 Everyone has the right to healthy and productive life in harmony with nature.
 Present and future generations are equally entitled to this right.
 Environmental protection must be seen as an integral part of any developmental process.
 Each country has the right to utilise its own resources, without affecting the environment
beyond its borders.
 The polluter must compensate the damage caused to the environment – ―polluter pays‖
principle.
 Economic activities are combined with the principle of acquiring preventive measures for
environmental protection.
 States must cooperate for environmental protection.
 The alleviation of poverty and living standards, inequity in the different parts of the
world are an integral part of sustainable development.

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 States must limit and extinguish the unsustainable modes of production and consumption,
and enhance the appropriate demographic policy.
 The most efficient way of solving environmental problems is the involvement of all
interested parties.
 States must develop and encourage the informed participation of the population in
decision-making process (participatory democracy).
 States must develop and implement effective legislation for environmental protection.
 Environmental protection must involve all social groups.
 Peace, development, and environmental protection are inter dependent and indivisible

Sustainable development has also its own values. The core set of values of sustainable
development are:
 Freedom: Men and women have the right to live their lives and raise their children in
dignity, free from hunger and from the fear of violence, oppression or injustice.
Democratic and participatory governance based on the will of the people best assures
these rights.
 Equality: No individual and no nation must be denied the opportunity to benefit from
development. The equal rights and opportunities of women and men must be assured.
 Solidarity: Global challenges must be managed in a way that distributes the costs and
burdens fairly in accordance with basic principles of equity and social justice. Those who
suffer or who benefit least deserve help from those who benefit most.
 Tolerance: Human beings must respect one other, in all their diversity of belief, culture
and language. Differences within and between societies should be neither feared nor
repressed, but cherished as a precious asset of humanity. A culture of peace and dialogue
among all civilizations should be actively promoted.
 Respect for nature: Prudence must be shown in the management of all living species
and natural resources, in accordance with the precepts of sustainable development. Only
in this way can the immeasurable riches provided to us by nature be preserved and passed
on to our descendants. The current unsustainable patterns of production and consumption
must be changed in the interest of our future welfare and that of our descendants.
 Shared responsibility: Responsibility for managing worldwide economic and social
development, as well as threats to international peace and security, must be shared among
the nations of the world and should be exercised multi-laterally. As the most universal
and most representative organization in the world, the United Nations must play the
central role.

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2.3. SUSTAINABLE DEVELOPMENT GOALS

Sustainable development has its own fundamental goals. In the year 2015 leaders from 193
countries of the world came together to deal about the future and what they saw was daunting
like famines, drought, wars, plagues and poverty. Not just in some faraway place, but in their
own village, towns and cities.

They knew things didn‘t have to be this way. They knew we had enough food to feed the world,
but that it wasn‘t getting shared. They knew there were medicines for diseases, but they cost a
lot. They knew that earthquakes and floods were inevitable, but that the high death tolls were
not. They also knew that billions of people worldwide shared their hope for a better future. So
leaders from these countries created a plan called the Sustainable Development Goals (SDGs).
This set of 17 goals imagines a future just 15 years off that would be rid of poverty and hunger,
and safe from the worst effects of climate change. It‘s an ambitious plan. But there‘s ample
evidence that we can succeed. In the past 15 years, the international community cut extreme
poverty in half.

END EXTREME POVERTY IN ALL FORMS BY 2030.

Yes, it‘s an ambitious goal, but we believe it can be done. In 2000, the world committed to
halving the number of people living in extreme poverty by the year 2015 and we met this goal.
However, more than 800 million people around the world still live on less than $1.25 a day that‘s
about the equivalent of the entire population of Europe living in extreme poverty. Now it‘s time
to build on what we learned and end poverty altogether.
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END HUNGER, ACHIEVE FOOD SECURITY AND IMPROVED NUTRITION AND

PROMOTE SUSTAINABLE AGRICULTURE
In the past 20 years, hunger has dropped by almost half. Many countries that used to suffer from
famine and hunger can now meet the nutritional needs of their most vulnerable people. It‘s an
incredible accomplishment. Now we can go further and end hunger and malnutrition once and
for all. That means doing things such as promoting sustainable agriculture and supporting small
farmers. It‘s a tall order. But for the sake of the nearly 1 out of every 9 people on earth who go to
bed hungry every night, we‘ve got to try. Imagine a world where everyone has access to
sufficient and nutritious food all year round. Together, we can make that a reality by 2030.

ENSURE HEALTHY LIVES AND PROMOTE WELL-BEING FOR ALL AT ALL AGES
We all know how important it is to be in good health. Our health affects everything from how
much we enjoy life to what work we can perform. That‘s why there‘s a Goal to make sure
everyone has health coverage and access to safe and effective medicines and vaccines. In the 25
years before the SDGs, we made big strides preventable child deaths dropped by more than half,
and maternal mortality went down by almost as much. And yet some other numbers remain
tragically high, like the fact that 6 million children die every year before their fifth birthday, or
that AIDS is the leading cause of death for adolescents in sub-Saharan Africa. We have the
means to turn that around and make good health more than just a wish.

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ENSURE INCLUSIVE AND EQUITABLE QUALITY EDUCATION AND PROMOTE

LIFELONG LEARNING OPPORTUNITIES FOR ALL
Firstly we have the bad news on education. Poverty, armed conflict and other emergencies keep
many kids around the world out of school. In fact, kids from the poorest households are four
times more likely to be out of school than those of the richest households. However, we have
also some good news. Since 2000, there has been enormous progress on the goal to provide
primary education to all children worldwide, the total enrolment rate in developing regions has
reached 91%. By measures in any school, that‘s a good grade. Now, let‘s get an even better
grade for all kids, and achieve the goal of universal primary and secondary education, affordable
vocational training, access to higher education and more.

ACHIEVE GENDER EQUALITY AND EMPOWER ALL WOMEN AND GIRLS

We can celebrate the great progress the world has made in becoming more prosperous and fair.
But there‘s a shadow to the celebration. In just about every way, women and girls lag behind.
There are still gross inequalities in work and wages, lots of unpaid ―women‘s work‖ such as
child care and domestic work, and discrimination in public decision-making. But there are
grounds for hope. More girls are in school now compared to in 2000. Most regions have reached
gender parity in primary education. The percentage of women getting paid for their work is on
the rise. The Sustainable Development Goals aim to build on these achievements to ensure that
there is an end to discrimination against women and girls everywhere.

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ENSURE AVAILABILITY AND SUSTAINABLE MANAGEMENT OF WATER AND

SANITATION FOR ALL
Everyone on earth should have access to safe and affordable drinking water. That‘s the goal for
2030. While many people take clean drinking water and sanitation for granted, many others
don‘t. Water scarcity affects more than 40 percent of people around the world, and that number
is projected to go even higher as a result of climate change. If we continue the path we‘re on, by
2050 at least one in four people are likely to be affected by recurring water shortages. But we can
take a new path—more international cooperation, protecting wetlands and rivers, sharing water-
treatment technologies—that leads to accomplishing this Goal.

ENSURE ACCESS TO AFFORDABLE, RELIABLE, SUSTAINABLE AND MODERN

ENERGY FOR ALL
Between 1990 and 2010, the number of people with access to electricity increased by 1.7 billion.
That‘s progress to be proud of. And yet as the world‘s population continues to rise, still more
people will need cheap energy to light their homes and streets, use phones and computers, and do
their everyday business. How we get that energy is at issue; fossil fuels and greenhouse gas
emissions are making drastic changes in the climate, leading to big problems on every continent.
Instead, we can become more energy-efficient and invest in clean energy sources such as solar
and wind. That way we‘ll meet electricity needs and protect the environment.

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PROMOTE SUSTAINED, INCLUSIVE AND SUSTAINABLE ECONOMIC GROWTH,

FULL AND PRODUCTIVE EMPLOYMENT AND DECENT WORK FOR ALL
An important part of economic growth is that people have jobs that pay enough to support
themselves and their families. The good news is that the middle class is growing worldwide—
almost tripling in size in developing countries in the last 25 years, to more than a third of the
population. But today, job growth is not keeping pace with the growing labour force. Things
don‘t have to be that way. We can promote policies that encourage entrepreneurship and job
creation. We can eradicate forced labour, slavery and human trafficking. And in the end we can
achieve the goal of decent work for all women and men by 2030.

BUILD RESILIENT INFRASTRUCTURE, PROMOTE INCLUSIVE AND

SUSTAINABLE INDUSTRIALIZATION AND FOSTER INNOVATION Technological
progress helps us address big global challenges such as creating jobs and becoming more energy
efficient. For example, the world is becoming ever more interconnected and prosperous thanks to
the internet. The more connected we are, the more we can all benefit from the wisdom and
contributions of people everywhere on earth. And yet four billion people have no way of getting
online, the vast majority of them in developing countries. The more we invest in innovation and
infrastructure, the better off we‘ll all be. Bridging the digital divide, promoting sustainable
industries, and investing in scientific research and innovation are all important ways to facilitate
sustainable development.

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REDUCE INEQUALITY WITHIN AND AMONG COUNTRIES

It‘s an old story: the rich get richer, and the poor get poorer. The divide has never been starker.
We can and must adopt policies that create opportunity for everyone, regardless of who they are
or where they come from. Income inequality is a global problem that requires global solutions.
That means improving the regulation of financial markets and institutions, sending development
aid where it is most needed and helping people migrate safely so they can pursue opportunities.
Together, we can now change the direction of the old story of inequality.

MAKE CITIES AND HUMAN SETTLEMENTS INCLUSIVE, SAFE, RESILIENT AND

SUSTAINABLE
If you‘re like most people, you live in a city. More than half the world‘s population now lives in
cities, and that figure will go to about two-thirds of humanity by the year 2050. Cities are getting
bigger. In 1990 there were ten ―mega-cities‖ with 10 million inhabitants or more. In 2014, there
were 28 mega-cities, home to 453 million people. A lot of people love cities; they‘re centers of
culture and business and life. The thing is, they‘re also often centers of extreme poverty. To
make cities sustainable for all, we can create good, affordable public housing. We can upgrade
slum settlements. We can invest in public transport, create green spaces, and get a broader range
of people involved in urban planning decisions. That way, we can keep the things we love about
cities, and change the things we don‘t.

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ENSURE SUSTAINABLE CONSUMPTION AND PRODUCTION PATTERNS

Some people use a lot of stuff, and some people use very little—in fact, a big share of the world
population is consuming too little to meet even their basic needs. Instead, we can have a world
where everybody gets what they need to survive and thrive. And we can consume in a way that
preserves our natural resources so that our children can enjoy them, and their children and their
children after that. The hard part is how to achieve that goal. We can manage our natural
resources more efficiently and dispose of toxic waste better. Cut per capita food waste in half
globally. Get businesses and consumers to reduce and recycle waste. And help countries that
have typically not consumed a lot to move towards more responsible consumption patterns.

TAKE URGENT ACTION TO COMBAT CLIMATE CHANGE AND ITS IMPACTS

Every country in the world is seeing the drastic effects of climate change, some more than others.
On average, the annual losses just from earthquakes, tsunamis, tropical cyclones and flooding
count in the hundreds of billions of dollars. We can reduce the loss of life and property by
helping more vulnerable regions—such as land-locked countries and island states—become more
resilient. It is still possible, with the political will and technological measures, to limit the
increase in global mean temperature to two degrees Celsius above pre-industrial levels— and
thus avoid the worst effects of climate change. The Sustainable Development Goals lay out a
way for countries to work together to meet this urgent challenge.
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CONSERVE AND SUSTAINABLY USE THE OCEANS, SEAS AND MARINE

RESOURCES FOR SUSTAINABLE DEVELOPMENT
The oceans make human life possible. For one thing, more than 3 billion people depend on
marine and coastal diversity for their livelihoods. But today we are seeing nearly a third of the
world‘s fish stocks overexploited. That‘s not a sustainable way of life. Even people who live
nowhere near the ocean can‘t live without it. Oceans absorb about 30 percent of the carbon
dioxide that humans produce; but we‘re producing more carbon dioxide than ever before and that
makes the oceans more acidic—26% more, since the start of the industrial revolution. Our trash
doesn‘t help either—13,000 pieces of plastic litter on every square kilometre of ocean. Sounds
bad, right? Don‘t despair! The Sustainable Development Goals indicate targets for managing and
protecting life below water.

PROTECT, RESTORE AND PROMOTE SUSTAINABLE USE OF TERRESTRIAL

ECOSYSTEMS, SUSTAINABLY MANAGE FORESTS, COMBAT DESERTIFICATION,
AND HALT AND REVERSE LAND DEGRADATION AND HALT BIODIVERSITY
LOSS
Humans and other animals rely on other forms of life on land for food, clean air, clean water, and
as a means of combatting climate change. Plant life makes up 80% of the human diet. Forests,
which cover 30% of the Earth‘s surface, help, keep the air and water clean and the Earth‘s
climate in balance. That‘s not to mention they‘re home to millions of animal species. But the
land and life on it are in trouble. Arable land is disappearing 30 to 35 times faster than it has
historically. Deserts are spreading. Animal breeds are going extinct. We can turn these trends
around. Fortunately, the Sustainable Development Goals aim to conserve and restore the use of
terrestrial ecosystems such as forests, wetlands, dry lands and mountains by 2030.

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PROMOTE PEACEFUL AND INCLUSIVE SOCIETIES FOR SUSTAINABLE

DEVELOPMENT, PROVIDE ACCESS TO JUSTICE FOR ALL AND BUILD EFFECTIVE,
ACCOUNTABLE AND INCLUSIVE INSTITUTIONS AT ALL LEVELS
How can a country develop—how can people eat and teach and learn and work and raise families—
without peace? And how can a country have peace without justice, without human rights, without
government based on the rule of law? Some parts of the world enjoy relative peace and justice, and may
come to take it for granted. Other parts seem to be plagued by armed conflict, crime, torture and
exploitation, all of which hinders their development. The goal of peace and justice is one for all countries
to strive towards. The Sustainable Development Goals aim to reduce all forms of violence and propose
that governments and communities find lasting solutions to conflict and insecurity. That means
strengthening the rule of law, reducing the flow of illicit arms, and bringing developing countries more
into the center of institutions of global governance.

STRENGTHEN THE MEANS OF IMPLEMENTATION AND REVITALIZE THE

GLOBAL PARTNERSHIP FOR SUSTAINABLE DEVELOPMENT
The Sustainable Development Goals are pretty big to-do list, don‘t you think? In fact, it‘s so big;
you may just want to throw your hands up in the air. ―Forget it! Can‘t be done! Why even try!‖
But we‘ve got a lot going for us. The world is more interconnected today than ever before,
thanks to the internet, travel and global institutions. There‘s a growing consensus about the need
to work together to stop climate change. And the Sustainable Development Goals are no small
matter either. 193 countries agreed on these goals. The final goal lays out a way for nations to
work together to achieve all the other Goals.

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Generally, the UN‘s 17 Sustainable Development Goals are linked to the 4 Areas of Critical
Importance (5P‘s).

SUSTAINABLE DEVELOPMENT GOALS GOAL PRIORITY

No poverty GOAL 1

Zero Hunger GOAL 2

PEOPLE

Good Health and Wellbeing GOAL 3

Quality Education GOAL 4

Gender Equality GOAL 5

Clean Water and Sanitation GOAL 6

Affordable clean energy GOAL 7

Decent work and economic development GOAL 8

PROSPERITY

Industry, innovation and infrastructure GOAL 9

Reduce inequalities GOAL 10

Sustainable cities and communities GOAL 11

Responsible consumption and production GOAL 12

Climate action GOAL 13

PLANET

Life below water GOAL 14

Life on land GOAL 15

GOAL 16
Peace, justice and strong institution
PARTNERSHIP
PEACE &

GOAL 17
Partnership for the goals

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SUMMARY
The concept of sustainable development is different things for different scholars. Sustainability
implies that future growth and overall quality of life are critically dependent on the quality of the
environment. According to the World Commission of Environment and Development (1987),
―Sustainable development is development that meets the needs of the present without
compromising the ability of future generations to meet their own needs‖. There are three aspects
of sustainable development; society, economy and environment.

An economically, sustainable system must be able to produce goods and services on a continuing
basis, to maintain manageable levels of government and external debt, and to avoid extreme
sectorial imbalances which damage agricultural or industrial production. Environmentally,
sustainable system must maintain a stable resource base, avoiding over-exploitation of renewable
resource systems or environmental sink functions, and depleting non-renewable resources only to
the extent that investment is made in adequate substitutes. This includes maintenance of
biodiversity, atmospheric stability, and other ecosystem functions not ordinarily classed as
economic resources. Socially, sustainable system must achieve distributional equity, adequate
provision of social services including health and education, gender equity, and political
accountability and participation.

Sustainable development has also its own values. The core set of values of sustainable
development are: freedom, equality, solidarity, tolerance, respect for nature and shared
responsibility. Sustainable development has its own fundamental goals. In the year 2015 leaders
from 193 countries of the world came together to deal about the future and what they saw was
daunting like famines, drought, wars, plagues and poverty. Not just in some faraway place, but in
their own village, towns and cities. They knew things didn‘t have to be this way. They knew we
had enough food to feed the world, but that it wasn‘t getting shared. They knew there were
medicines for diseases, but they cost a lot. They knew that earthquakes and floods were
inevitable, but that the high death tolls were not. They also knew that billions of people
worldwide shared their hope for a better future.

Therefore, leaders from these countries created a plan called the Sustainable Development Goals
(SDGs). This set of 17 goals imagines a future just 15 years off that would be rid of poverty and
hunger, and safe from the worst effects of climate change. It‘s an ambitious plan. But there‘s
ample evidence that we can succeed. Fore instance, in the past 15 years, the international
community cut extreme poverty in half.

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 CHECKLIST

You put tick mark under ‗Yes‘ if you can answer for the question or under ‗No‘ if you cannot
answer the question.
No. Questions Yes No

1 Can you define development?

2 Can you explain sustainable development?

3 Can you differentiate the meaning of development and

sustainable development?

4 Can you describe the three major aspects or components of

sustainable development?

5 Can you mention the basic principles of sustainable

development?

6 Can you identify the core values of sustainable development?

7 Can you mention the fundamental goals of sustainable

development?

8 Can you indicate the 5P‘s or the 4 critical areas of sustainable

development?

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 SELF-TEST 2

DIRECTION I: MATCH THE ITEMS UNDER COLUMN A WITH THEIR

APPROPRIATE MATCH UNDER COLUMN B.

A B
1. Goal of sustainable development A. Reduce inequality within and among

countries.
2. Component of sustainable development
B. Environmental protection must involve all

3. Principle of sustainable development social groups.

C. The equal rights and opportunities of

4. Value of sustainable development
women and men must be assured.

D. Economic system must be able to produce

goods and services on a continuing basis.

DIRECTION II: GIVE SHORT ANSWER FOR THE FOLLOWING QUESTIONS

5. Define sustainable development by your own words. ______________________________
_________________________________________________________________________
_________________________________________________________________________
_____________________________________________.
6. How development can be sustainable? __________________________________________
_________________________________________________________________________
_________________________________________________________________________
_____________________________________________.
7. What are the three major components of sustainable development?
i) ___________________________________
ii) ___________________________________
iii) ___________________________________
8. What are the core values of sustainable development? _____________________________
_________________________________________________________________________
_________________________________________________________________________
___________________________________________.

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UNIT THREE
DEVELOPMENT PROBLEMS AND FACTORS AFFECTING
DEVELOPMENT

CONTENTS

3.1. DEVELOPMENT PROBLEMS

3.1.1. POLLUTION
3.1.2. INEQUALITY
3.1.3. UNEMPLOYMENT
3.1.4. INFLATION
3.2. FACTORS AFFECTING DEVELOPMENT
3.2.1. SOCIOCULTURAL FACTORS
3.2.2. ENVIRONMENTAL FACTORS
3.2.3. ECONOMICAL FACTORS
3.2.4. NON-ECONOMICAL FACTORS
3.2.5. POLITICAL FACTORS

SUMMARY
SELF TEST

 INTRODUCTION

Dear learner, it is important to assess development problems like pollution, inequality,

unemployment and inflation. Furthermore learning about development challenges is also another
important issue. In fact, several factors do have their own impact on development. For instance,
historical, social, environmental, economical and political factors can affect development. You
will also discuss about determinants of development.

UNIT OBJECTIVES

At the end of this unit, you are expected to:-

 Describe the major development problems.
 Identify the socio-cultural, political and environmental challenges of development.
 Point out the major determinants of development.

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3.1. DEVELOPMENT PROBLEMS

3.1.1. POLLUTION

Dear learner, can you identify the impacts of development on the environment?
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Development has an adverse impact on the natural environment. These impacts include water
quality and sewer issues, air quality and transportation issues, soil conservation and hillsides,
noise pollution and the effect of barriers to protect houses from the noise, solid waste disposal,
and loss of scenic resources, wildlife habitat, trees, and agricultural resources.

The impact of development on water, sewer and storm sewer systems is great. Clean water is
essential for life, and is often taken for granted. Threatened by agricultural runoff and industrial
discharges, water supply must be protected for people and wildlife. Worldwide, agriculture
consumes 73% of off-stream fresh water, followed by industry at 21 % and residential at 6%.
The average U.S. citizen consumes 70 times as much water as the average citizen of Ghana.
Standard home toilets account for 40% of that use with showers and sinks using another 35 %.
The fresh water on earth is only 5 % of the total water on the planet and does not increase despite
the increase in demand by increased development and populations. Development also increases
the demand on the already overburdened sewer and storm sewer systems.

Air pollution affects the health of many residents. It comes from burning gasoline in our cars,
from igniting coal and oil, from burning trash, medical and other hazardous materials, and from
factories. Transportation is the fastest growing source of global air pollution with millions of
new cars on the road each year created in large part by the expansion and development in the
outlying areas. With additional development, there is an increase in solid waste production. More
landfill space is needed which results in requests for landfill expansions and permits for new
landfills. Options that have been suggested include sending to other places waste to landfills is
greatly reducing the amount of waste we create through pollution prevention.

Generally, as an industry and transport have developed, air pollution and the amount of
greenhouse gas emission have significantly increased. Land and water pollution can increased as
a result of rapid urban growth. Around 70% of raw sewage flows untreated in to water bodies
(rivers, streams, lakes and oceans), which have caused considerable environmental damage.

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3.1.2. INEQUALITY

Widening income inequality is the defining challenge of our time. In advanced economies, the
gap between the rich and poor is at its highest level in decades. Inequality trends have been more
mixed in emerging markets and developing countries, with some countries experiencing
declining inequality, but pervasive inequities in access to education, health care, and finance
remain. Not surprisingly then, the extent of inequality, its drivers, and what to do about it have
become some of the most hotly debated issues by policymakers and researchers alike.

Equality, like fairness, is an important value in most societies. Irrespective of ideology, culture,
and religion, people care about inequality. Inequality can be a signal of lack of income mobility
and opportunity―a reflection of persistent disadvantage for particular segments of the society.
Widening inequality also has significant implications for growth and macroeconomic stability; it
can concentrate political and decision making power in the hands of a few, lead to a suboptimal
use of human resources, cause investment-reducing political and economic instability, and raise
crisis risk. The economic and social fallout from the global financial crisis and the resultant
headwinds to global growth and employment have heightened the attention to rising income
inequality.

Some degree of inequality may not be a problem in-sofar as it provides the incentives for people
to excel, compete, save, and invest to move ahead in life. For example, returns to education and
differentiation in labour earnings can spur human capital accumulation and economic growth,
despite being associated with higher income inequality. Inequality can also influence growth
positively by providing incentives for innovation and entrepreneurship (Lazear and Rosen 1981),
and, perhaps especially relevant for developing countries, by allowing at least a few individuals
to accumulate the minimum needed to start businesses and get a good education (Barro 2000).

Generally, inequality is one of the most important issues in development. Not only it is unjust
according to most philosophical perspectives, but evidence indicates that it is deleterious for
wellbeing generally, social stability, economic growth and poverty. In 1950s it was assumed that
more unequal income distribution led to higher growth, via higher savings – and possibly
incentive effects. Inequality may be among individuals, groups or nations. Inequality is more
responsible to widening the gap between the have and have not. The riches can get wider
opportunity to expand their businesses while the poor‘s will be unable to compete with the
market and finally they will be subjected to leave from business activities. Despite its negative
effects, inequality seems to be increasing and policies aimed at reducing it tend to be weak.

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3.1.3. UNEMPLOYMENT

A high and persistent rate of unemployment is one of the most dramatic aspects of the current
economic crisis. According to International Labour Organization estimates, global
unemployment reached 210 million people in 2010. Unemployment can be defined as a state of
workless ness for a person who is fit and willing to work at the current wage rate. It is a
condition of involuntary and not voluntary idleness. Simply stated an unemployed person is the
one who is an active member of the labour force and is seeking work, but is unable to find the
same. In case of voluntary unemployment a person is out of job on his own accord or choice,
doesn‘t work on the prevalent or prescribed wages. Either he wants higher wages or doesn‘t want
to work at all. The involuntary unemployment on the other hand is the situation when a person is
separated from remunerative work and devoid of wages although he is capable of earning his
wages and is also anxious to earn them. It is the involuntary idleness that constitutes
unemployment.

The relationship between unemployment and long-run economic development is unclear. Several
works, such as Zagler (2009), assume that economic development is driven by structural change,
which usually has a cost associated with it in terms of unemployment because labour markets
may not be flexible enough, leading to delays in the adjustment to such changes. Similarly,
several works, e.g. Bassanini et al. (2009), report improvements in productivity associated to
changes in the employment protection legislation. These changes promote higher labour market
flexibility, which eventually encourage countries with initial high levels of unemployment to
promote reforms, which, in turn, will promote higher economic development.

In fact, it is clear that high and persistent unemployment is associated not only with higher
poverty rates, but also with higher inequality, since the unemployed lose proportionally more
than the employed (Nickell, 1990). Thus, for low-urbanized countries, where there is still high
rural-to-urban migration, increasing inequality is associated to rural-urban differentials.
Unemployment may be associated with structural change and subsequent economic growth.
Unemployment not only represents a high social cost for the individual, it also represents a high
economic cost for the society (Sanchis-i-Marco, 2011). In short, the relationship between
economic development and the unemployment rate may be a loose one and very much
controversial. Development can reduce unemployment, but this is not always true. The
developments of robotic and mechanized technologies are more responsible for the existence of
high unemployment rate. This is because; the rapid advancement and expansion technologies can
replace huge labour force.

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3.1.4. INFLATION

Many authors have found a negative correlation between growth and inflation. Achieving
sustainable rapid economic growth is the objective of most countries. It has been a problem to
achieve such objective due to many factors that affects economic growth. Economic growth and
the rate of inflation is central subject of macroeconomics policy. Among many variables that can
be stated as the determinant of economic growth is inflation (Barro, 1995). However there is no a
clear cut decision about the relationship between economic growth and inflation. Researchers
investigated about inflation and economic growth and arrived came up with different views. It
has been a controversial in both theory and empirical findings.

The first controversial issue about economic growth and inflation is the relationship between
them. Theories and previous studies about the relationship between inflation and economic
growth have shown that there might be no relationship (Sidrauski, 1967), negative relationship
(Fisher, 1993) or positive relationship (Mallik and Chowdhury, 2001) between these two
variables. Today the question is not only the simple relationship but also the level of inflation
that can affect economic growth.

The structuralists view that inflation has a positive effect on economic growth, whereas
monetarists see inflation as detrimental to economic growth. Both views have their own
explanation for why inflation has a positive or a negative impact on economic growth. For
instance in neo classical views, inflation increases economic growth by shifting the income
distribution in favour of higher saving capitalists. This increases saving and thus economic
growth. Moreover, Keynesians also said that inflation may increase growth by raising the rate of
profit, thus increasing private investment.

On other hand, theories or empirical studies shows why inflation is negatively related to
economic growth. For example, Barro (1995) said that high inflation reduces the level of
investment and a reduction in investment adversely affects economic growth. Gultekin (1983)
also explained why inflation and economic growth have a negative relationship as growth rate is
depended on rate of return but rate of return is decreased by inflation and hence economic
growth is negatively related to inflation.

In a broad sense, development makes the reaches alone to accumulate wealth. This situation
leads to unfair distribution of resources. Wealth will be accumulated in the hands of the few by
ignoring the majority. Hence, the purchasing power of the poor will be significantly reduced.
Finally, the condition will more aggravates the problem of inflation.

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3.2. FACTORS AFFECTING DEVELOPMENT

What are the major factors that affect development?

______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
There are several factors that can affect development. However for the sake of simplicity, we can

classify the major determinants of development as sociocultural, environmental, economical,

non-economical and political. Let‘s discuss each of the determinants of development here below.

3.2.1. SOCIAL AND CULTURAL FACTORS

Culture is very important to economic and non-economic development; however, it is neither the
only determinant of development nor the only obstacle hindering change. ―The question is not
weather culture has a role but how to understand this role in the context of the broader
determinants of prosperity.‖ Culture matters more in some societies than in others, because some
cultures tend to resists certain ideas more than others, to change faster in some countries than in
others, and to assume a more active role under certain circumstances than under others.

To understand culture and its role in society, we have to think of it as a living creature that
changes as circumstances and life conditions and incentives change. Culture was created by man
in the distant past to meet his communications and socialization needs and to help him deal with
life challenges emanating primarily from the social environment; as life conditions changed over
time, cultures changed as well. To realize the extent of that change, we have to remember that at
one point in our history all of us were hunters-gatherers before becoming farmers and
industrialists, artists and thinkers, doctors and entrepreneurs.

The social and economic formations that industry requires to make progress are not part of
traditional cultures. Therefore, culture needs to be transformed to become hospitable to new
economic ideas, institutions and activities associated with manufacturing and the financial
arrangements that industrial economy requires to function properly. Attitudes toward time and
work and menial work in particular have to change, otherwise industries and services requiring
menial work will suffer and hider development.

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In traditional, largely agricultural societies, participation of women in the labor force is low.
Neither traditional values nor religious beliefs normally accept women as equals to men. This
discrimination against women robs society of a good portion of its human capital and creates a
relationship between the sexes that gives man a dominant role in society, allowing him to often
exploit women and sometimes enslave them. Such discrimination is seen in assigning jobs to
women that most men detest, in paying them much less than men for performing same tasks, and
in the higher illiteracy rates among women. In light of the low productivity of labor in general,
denying women the right to equal work and pay and education represents another obstacle that
hinders change and retards societal development.

Moreover, there are other sociocultural obstacles that are politically sensitive, but need to be
addressed to give development a chance. Such obstacles include a traditional educational system
that gives priority to perpetuating old ideas and bad habits than to promoting critical thinking and
scientific branches of knowledge. Religious teaching that impel believers to be content and
accept whatever happens to them as fate are not compatible with risk taking, wealth generating,
and capital accumulation. Religious teachers in Islamic countries in general tend to see their
major role in society is to prepare believers for the afterlife rather than for life itself. Such a role
needs to be transformed to motivate people to work and enjoy life before death arrives to put an
end to their lives and dreams.

People in Third World countries have today more children and live longer than at any time in
history. And in view of the ever weakening traditional family ties and mutual social obligations
due primarily to cultural globalization and satellite TV, poverty and dependency are becoming
two major obstacles facing efforts to improve the general quality of life. Meanwhile, lack of
adequate social security systems in most states has caused these problems to be aggravated and
become structural. And since labor productivity is low and women participation in the labor
force is modest, the future of the elderly and the poor in most Third World states looks bleak.

Thus, an effective development strategy would have to take into consideration, among other
things, problems related to the low labor productivity, the relationship between men and women,
the role of religion in society, the population growth rates, and addiction to bad habits like
smoking; all of which are products of traditional educational systems and cultural values that do
not nurture the right attitudes in people. There is also a need for new laws and regulations to
address the trust deficit that is growing due to declining traditional trust and increasing life
complexity in urban centers.

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3.2.2. ENVIRONMENTAL FACTORS

Natural Resources, i.e. land (agricultural and forest resources), water resources, minerals, climate
etc. comprise natural resources. Both the quantity and the quality of natural resources are
important for development. What is termed as "resources" can also be improved by the use of
technology. Secondly, it is not necessary that for development, a country has to be rich in all the
resources. The absence of particular natural resources has generally not been a serious
impediment to the development of a country which in other respects has achieved sustainable
development. It can buy those resources by exporting the goods and services in the production of
which it has a relative advantage. In addition, environmental problems like climate change and
natural catastrophe can considerably affect development.
3.2.3. ECONOMICAL FACTOR

The rich and poor in developing courtiers live in two different worlds separated by income,
education, culture, knowledge and often concrete walls. The socioeconomic, sociocultural and
sociopolitical gaps separating the former from the latter represent an incredible obstacle to
development as well as to political stability; they limit the potential size of domestic markets and
create negative feelings among the poor that cause resentment and often apathy. Resentment and
apathy weaken workers desire to work hard and be productive and loyal to the businesses and
public organizations they work for. Moreover, the income and educational gaps separating the
rich from the poor undermine efforts to develop middle classes capable of playing active roles in
the economic life of society; they often make the poor feel that no matter how hard they may try
to improve the quality of their lives, life conditions will not change.

Contrary to the conventional wisdom, no developing nation has or ever had a middle class; and
no nation is capable of producing one at this time. What might appear to ‗experts‘ a middle class
is a collection of small merchants and employees who work for organizations that have different,
often contradictory goals; they include business entities, government agencies, educational
institutions, and the military. People who work for these entities and receive decent incomes that
qualify them for middle class status have no shared interests or causes to tie them together; and
therefore they have no class consciousness to motivate them to feel and act as a social class. As a
consequence, they are unable to engage in economic or political activity to protect a shared
interest or advance a common cause.

Richard Gill argues that nations that are poor are unable to develop, and nations that do not
develop stay poor. He also asserts that traditional cultural values are obstacles that hider
development. ―In reality, many of the deepest and more difficult problems arise in connection

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with society‘s attitudes and institutions.‖i There is no doubt that poverty and ignorance reinforce
one another, and their prevalence among the majority of people in Third World states constitutes
a serious social and economic problem. But despite such assertions, the experience of states like
South Korea and Taiwan and China has proven that poor nations can develop and overcome
poverty and ignorance, and traditional values and attitudes can be transformed and made
conducive to sociopolitical change and economic development.

More than 40 years ago, Robert E. Baldwin saw wide income gaps and low per capita incomes as
major causes of economic underdevelopment. He also saw problems hindering development as
emanating from high birth rates, less education and skills, less technology, and the absence of
entrepreneurship.

i) Natural Resources, i.e. land (agricultural and forest resources), water resources, minerals,
climate etc. comprise natural resources. Both the quantity and the quality of natural
resources are important for development. What is termed as "resources" can also be
improved by the use of technology. Secondly, it is not necessary that for development, a
country has to be rich in all the resources. The absence of particular natural resources has
generally not been a serious impediment to the development of a country which in other
respects has achieved sustainable development. It can buy those resources by exporting
the goods and services in the production of which it has a relative advantage.

ii) Human Resources, i.e. population size, its growth rate, age-sex composition, especially
the size and growth rate of its labor force, indicate the quantitative aspect of human
resources in a country. The health status and educational attainment indicate the quality
of human resources. The magnitude and composition of total production is determined by
the consumers' demand which, to a large extent depends on population. On the other
hand, human beings provide the labor and entrepreneurship for production. Economic
development depends on people's ability to exploit the natural resources. Countries like
England and Japan show that rapid economic development is possible even with a small
population. But there are also examples of developed countries like the U.S.A., which has
a large population. It shows that it is the quality of the population which is very crucial.
Investment in man (i.e. in educational and health facilities) improves the quality of
human resources.

iii) Capital Resources and Technological Progress: The key to higher productivity of human
beings lies in increasing the rate of capital formation; which depends on the saving rate,

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i.e. proportion of savings to national income. The level of production which a country
attains depends on the stock of capital (i.e machinery, tools, factories, etc.), the yearly
addition to the stock and the effective utilization of capital resource, which depends on
technological development.

The pattern of investment will depend on the strategy of development adopted by a country, its
stage of development and resource-constraint and other constraints faced by it. Strategy of
development consists of the priorities decided or choices made from the available options, e.g.
relative importance to be given to capital-intensive versus labor-intensive techniques, capital
goods industries versus consumer goods industries, agricultural sector versus nonagricultural
sector etc.

3.2.4. NON-ECONOMICAL FACTORS

Development does not depend only on the availability of resources. People's desire for
development and the favorable atmosphere for it are equally important. The institutional
structure, attitude of people and value system in society are the important non-economic
determinants. According to Rostow, the following propensities affect the pace of development:

(1) Propensity to develop fundamental sciences.

(2) Propensity to apply science to economic ends.
(3) Propensity to accept innovations.
(4) Propensity to seek material advancement.
(5) Propensity to consume, and
(6) Propensity to have children. Out of these, the first four are always conducive to
higher production and development. The last two are conducive to development up to a
certain limit, after which they can have adverse effect.

Additionally, institutional structure can affect development. Efforts for development made by
any society are conditioned by the framework of social, economic, political, legal, religious
institutions it has. The land tenure system, type of family, inheritance laws, class structures,
educational system, financial institutions, political system, etc. affect the development efforts. In
the modern age of planning, political stability and the type of government also play very
important role. The institutional structure which provides stability without rigidity, and which
provides scope for innovation and experiments is generally conducive to development.

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3.2.5. POLITICAL

Politics in most countries represent the larger context within which the economy and most
other systems function. When politics dominate society, it dominates the economy as well,
enabling politicians to use the economy as an efficient tool to serve their interests. And as
economies grow and their role in societal life expands, the dominant political elite in every
developing society is able to gain a great deal of power and wealth, controlling both politics
and economics to enrich itself at the expense of individual rights, the poor, the environment,
the country, and the future of generations to come.

Theories of economic development in general have failed to seriously consider the role of
politics in societal development; politics can be a force to invigorate economic growth, as well as
an impediment retarding sociocultural transformation. The interaction between the political
process and the economic process is a major factor influencing the wider issues of social peace,
poverty, social justice, security, freedom, economic dynamism, and political stability. Most
developing nations, due primarily to political instability and authoritarian rule, are neither at
peace with themselves nor at ease with the world around them; they seem unable to develop
workable plans to initiate sociocultural change or economic development.

Political stability, social and religious freedoms, and social peace contribute to enhancing
democracy and creating environments conducive to attracting foreign investment; they enable
intellectuals, educators, and social activists to debate issues such as economic restructuring,
educational reform, political corruption, and the institutionalization of knowledge in society.
Political activity is felt in all socio-economic areas. In this context, political activity, along with
social and economic activities, strongly influences the individuals, forcing a certain pace and
particular direction of development.

The influence of politics on the management of public organizations is a current topic and an
ongoing concern of both managers and researchers in various fields, such as political science,
sociology, law and administrative sciences. The collaboration between the political and
administrative powers is essential, because political power is achieved and the necessary
framework for the economic and social development of an entity is configured by the
administration. There are many political functions in the public administration system that help
to coordinate the activity of this system, as there are functions with predominantly technical
nature, complex and integrated, which, even if they seem excluded from political impact, help
the political function in substantiation of decisions.

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SUMMARY

Development has an adverse impact on the natural environment. These impacts include water
quality and sewer issues, air quality and transportation issues, soil conservation and hillsides,
noise pollution and the effect of barriers to protect houses from the noise, solid waste disposal,
and loss of scenic resources, wildlife habitat, trees, and agricultural resources. Generally, as an
industry and transport have developed, air pollution and the amount of greenhouse gas emission
have significantly increased. Land and water pollution can increased as a result of rapid urban
growth. Around 70 percent of raw sewage flows untreated in to water bodies (rivers, streams,
lakes and oceans), which have caused considerable environmental damage.

Inequality is one of the most important issues in development. Not only it is unjust according to
most philosophical perspectives, but evidence indicates that it is deleterious for wellbeing
generally, social stability, economic growth and poverty. Widening income inequality is the
defining challenge of our time. In advanced economies, the gap between the rich and poor is at
its highest level in decades. Inequality trends have been more mixed in emerging markets and
developing countries, with some countries experiencing declining inequality, but pervasive
inequities in access to education, health care, and finance remain. Not surprisingly then, the
extent of inequality, its drivers, and what to do about it have become some of the most hotly
debated issues by policymakers and researchers alike.

A high and persistent rate of unemployment is one of the most dramatic aspects of the current
economic crisis. According to International Labour Organization estimates, global
unemployment reached 210 million people in 2010. Unemployment can be defined as a state of
workless ness for a person who is fit and willing to work at the current wage rate. It is a
condition of involuntary and not voluntary idleness. Simply stated an unemployed person is the
one who is an active member of the labour force and is seeking work, but is unable to find the
same.

Culture is very important to economic and non-economic development; however, it is neither the
only determinant of development nor the only obstacle hindering change. ―The question is not
weather culture has a role but how to understand this role in the context of the broader
determinants of prosperity.‖ Culture matters more in some societies than in others, because some
cultures tend to resists certain ideas more than others, to change faster in some countries than in
others, and to assume a more active role under certain circumstances than under others.

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 CHECKLIST

You put tick mark under ‗Yes‘ if you can answer for the question or under ‗No‘ if you cannot
answer the question.
No. Questions Yes No

1 Can you describe the problem of development on

environmental pollution?

2 Can you identify the problem of development on inequality?

3 Can you describe the impact of development on

unemployment?

4 Can you mention the problem of development on inflation?

5 Can you mention sociocultural factors that affect development?

6 Can you describe environmental challenges of development?

7 Can you identify economical challenges of development?

8 Can you describe the non-economical determinants of

development

9 Can you describe the political challenges of development?

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 SELF-TEST 3

DIRECTION II: GIVE SHORT ANSWER FOR THE FOLLOWING QUESTIONS

1. How development is responsible for the problem of pollution?
___________________________________________________________________________
___________________________________________________________________________
________________________________________.
2. Can you identify the role of development on inequality?
___________________________________________________________________________
___________________________________________________________________________
________________________________________.
3. How development creates unemployment?
___________________________________________________________________________
___________________________________________________________________________
________________________________________.
4. How do you see the contribution of development for inflation?
___________________________________________________________________________
___________________________________________________________________________
________________________________________.
5. Briefly explain the sociocultural factors that can affect development.
___________________________________________________________________________
___________________________________________________________________________
________________________________________.
6. Describe the environmental factors of development.
___________________________________________________________________________
___________________________________________________________________________
________________________________________.
7. Identify the economical and non-economical factors of development.
___________________________________________________________________________
___________________________________________________________________________
________________________________________.
8. Explain the political factors of development.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________.

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CHAPTERE FOUR

THEORIES OF DEVELOPMENT

CONTENTS

4.1. ROSTOW’S GROWTH MODEL

4.2. CORE-PERIPHERY MODEL
4.3. MODERNIZATION THEORY
4.4. DEPENDENCY THEORY
4.5. THEORY OF POST MODERNISM
4.6. NEW (ENDOGENOUS) GROWTH
4.7. BALANCED VERSUS UNBALANCED GROWTH
4.8. COORDINATION FAILURE: THE O-RING THEORY OF ECONOMIC
DEVELOPMENT

SUMMARY
SELF-TEST

 INTRODUCTION

Dear learner, this unit presented the basic theories of development. Hence, you will learn about
Rostow‘s growth model, core-periphery model, modernization theory, dependency theory,
postmodernism theory, endogenous theory, balanced and unbalanced growth as well as
coordination failure theory. In addition, you will also learn about the fundamental criticisms of
each developmental theory.

UNIT OBJECTIVES

At the end of this unit, you are expected to:-

 Identify the foundations of Rostow‘s growth model.

 State the central idea of core-periphery model.
 Describe the main idea of modernization theory.
 Explain the assumption of dependency, post modernism and endogenous theory.
 Appreciate the strengths and clarify the weaknesses of each theory.

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4.1. ROSTOW’S GROWTH MODEL

Rostow's Stages of Economic Growth model is one of the major historical models of economic
growth. It was published by American economist Walt Whitman Rostow in 1960. The model
postulates that economic growth occurs in five basic stages, of varying length:
I. The traditional society
II. The preconditions for take-off
III. The take-off
IV. The drive to maturity
V. The age of high mass-consumption

Figure 4.1: Rostow's five-stage model of development

In addition to the five stages he had proposed in the Stages of Economic Growth in 1960, Rostow
discussed the sixth stage beyond high mass consumption and called it "the search for quality" in
1971. Outlines of Rostow‘s six stages of growth are presented as follows:
1. The traditional society characterized by subsistence agriculture or hunting and gathering;
almost wholly a "primary" sector economy limited technology some advancements and
improvements to processes, but limited ability for economic growth because of the
absence of modern technologies, lack of class or individual economic mobility, with
stability prioritized and change seen negatively. This is where society generally begins
before progressing towards the next stages of growth. No centralized nations or political
systems.

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2. The preconditions for take-off; External demand for raw materials initiate economic
change. Development of more productive, commercial agriculture and cash crops not
consumed by producers and/or largely exported. Widespread and enhanced investment in
changes to the physical environment to expand production (i.e. irrigation, canals, ports).
Increasing spread of technology and advances in existing technologies, changing social
structure, with previous social equilibrium now in flux, individual social mobility begins
development of national identity and shared economic interests.

3. The take-off urbanization increases, industrialization proceeds, technological

breakthroughs occur. "Secondary" (goods-producing) sector expands and ratio of
secondary versus primary sectors in the economy shifts quickly towards secondary.
Textiles and apparel are usually the first "take-off" industry, as happened in Great
Britain's classic "Industrial Revolution" An Example of the Take-off phase is the
Agriculture (Green) Revolution in the 1960s.

4. The drive to maturity diversification of the industrial base; multiple industries expand and
new ones take root quickly. Manufacturing shifts from investment-driven (capital goods)
towards consumer durables and domestic consumption. Rapid development of
transportation infrastructure. Large-scale investment in social infrastructure (schools,
universities, hospitals, etc.)

5. The age of mass-consumption the industrial base dominates the economy; the primary
sector is of greatly diminished weight in the economy and society widespread and
normative consumption of high-value consumer goods (e.g. automobiles) consumers
typically (if not universally), have disposable income, beyond all basic needs, for
additional goods Urban society (a movement away from rural countryside to the cities).

6. Beyond consumption (The search for quality) age of diminishing relative marginal utility
as well as an age for durable consumer goods large families and Americans feel as if they
were born into a society that has high economic security and high consumption a stage
where its merely speculation on whether there is further consumer diffusion or what the
new generation will bring for growth.

Rostow asserts that countries go through each of these stages fairly linearly. Not all of the
conditions were certain to occur at each stage, however, and the stages and transition periods
may occur at varying lengths from country to country, and even from region to region.

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Criticism of the model
Like other development models, several critisims were foreward towards Rostow Growth Model.
Some of the major critisims of the model are described below;

 Rostow is historical in the sense that the end result is known at the outset and is derived
from the historical Criticism of the model geography of a developed, bureaucratic
society.
 Rostow is mechanical in the sense that the underlying motor of change is not disclosed
and therefore the stages become little more than a classificatory system based on data
from developed countries.
 His model is based on American and European history and defines the American norm of
high massconsumption as integral to the economic development process of all
industrialized societies.
 His model assumes the inevitable adoption of Neoliberal trade policies which allow the
manufacturing base of a given advanced polity to be relocated to lower-wage regions.
 Rostow's model does not apply to the Asian and the African countries as events in these
countries are not justified in any stage of his model. The stages are not identifiable
properly as the conditions of the takeoff and pre take-off stage are very similar and also
overlap.
 According to Rostow growth becomes automatic by the time it reaches the maturity stage
but Kuznets asserts that no growth can be automatic there is need for push always. .
There appear to be two parallel theories of 'take-off' one is that 'take off' is a sectoral and
non-linear notion, and the other is that it is highly aggregative.
 Rostow's thesis is biased towards a western model of modernization, but at the time of
Rostow the world's only mature economies were in the west, and no controlled
economies were in the "era of high mass-consumption." The model deemphasizes
differences between sectors in capitalistic vs. communistic societies, but seems to
innately recognize that modernization can be achieved in different ways in different types
of economies.
 Another criticism of Rostow's work is that it considers large countries with a large
population (Japan), with natural resources available at just the right time in its history
(Coal in Northern European countries), or with a large land mass (Argentina). He has
little to say and indeed offers little hope for small countries, such as Rwanda, which do
not have such advantages.

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4.2. CORE-PERIPHERY MODEL

The core-periphery model was also of interest to John Friedmann. He further developed this
concept in 1966 by underlining the role of spatial distances from the core. His approach is
sometimes interpreted and combined with the growth pole theory (focusing on input-output
linkages) of Franęois Perroux (1955) as well as with later works of Albert O. Hirschman (1958)
who, among others, described the ―trickle-down effect‖ in the theory of unbalanced
development. Moreover, it can be noted that Friedmann‘s model combines elements of the
export-based approach presented by Douglass C. North (1955) and parts of Gunnar Myrdal‘s
(1957) theory of cumulative and circular causation with the ―spread effect‖ (whereby
development spreads from city to the suburbs and all adjoining areas) and the ―backwash effect‖
(whereby the development of the city tends to gather resources and labour force away from
surrounding areas and that may degrade these places).

Friedmann‘s version of the core-periphery model includes an explanation of why some inner-city
areas enjoy considerable prosperity, while others show signs of urban deprivation and poverty,
even as urban areas, in general, have some advantage over peripheral rural areas. This model of
regional development thus focuses on spatially diversified development. It recognizes the
tendency by the most competitive entities to locate their manufacturing and service activities in
the most developed regions. Economic centers (cores) dominate over peripheral areas not only in
the economic sphere but also in the political and cultural fields. The core, which is usually a
metropolitan area, contributes to the development of the periphery even as, at the same time, it is
subordinating it in the social and economic dimensions. Centers typically have a high potential
for innovation (improvement) and growth, which shapes the geographic diffusion of innovations
(Rogers 1962, 2003). At the same time, according to Friedmann, peripheral regions experience
lagging growth or even stagnation and may rely on growth driven mainly by the core area‘s
demands for resources.

We should also mention a further division of regions proposed by Friedmann (1966), where core
regions and the periphery are divided into ―upward transition regions‖ (advanced or early),
―downward transition regions,‖ and ―resource frontier regions.‖ Upward transition regions are
areas of growth that spread over small centers rather than at the core. Downward transition
regions are characterized by depleted resources, low agricultural productivity, or out-dated
industry.

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Resource frontier regions are described as the newly ―colonized‖ areas which are brought into
production networks for the first time. For example, less accessible inner-city areas may
experience a backwash effect with limited investment. The effect is especially well visible when
the inner city is close to the newly developing central business district, concentrating a major
poverty wealth gap in relatively tight space. Friedmann‘s theory is sometimes described similarly
to the ―three-sector model‖ (or ―Petty‘s Law‖) proposed in economics by Allan Fisher, Colin
Clark, Jean Fourastie, and Daniel Bell (see review by Ehrig and Staroske 2009). Friedmann‘s
version is called a ―core-periphery four-stage model of regional development‖ that covers the
following stages:

i. pre-industrial stage,

ii. transitional stage,

iii. industrial stage, and

iv. Post-industrial stage.

The pre-industrial stage refers to the primary sector (agricultural) of the economy, which is
characterized by economic activities limited to a small area and a small-scale settlement structure
with small units. Each aspect of pre-industrial society is relatively isolated, small units stay
dispersed, and economic entities such as population and traders have low mobility.

The transitional stage is described by the increasing concentration of the economy in the core
that is fostered by capital accumulation and industrial growth. A dominant center appears within
an urban system and becomes its growth pole. Trade and mobility increase at this stage, but the
labour force‘s space of daily existence is still local because the personal mobility of people stays
limited. The periphery is at this point wholly subordinated to the center of political and economic
dominance.

In the industrial stage, manufacturing (the secondary sector) is growing with increasing
employment of people who are migrating from rural areas to urban areas. This change
subsequently also results in shifting from using the human workforce to the mechanization and
automation of production. Thus, the core-periphery model is also used to describe changes in the
labour markets and in the labour economics literature. The model is thus also referred to as ―dual
labour market theory‖ and as ―insider-outsider theory‖ (Klimczuk and Klimczuk-Kochańska
2016).

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The fourth stage, that is, the post-industrial stage, sees a growing demand for workforce in
services (the tertiary sector). It is assumed that this stage is characterized by the spatial
integration of the economy and the achievement of equilibrium. The urban system becomes fully
integrated, and inequalities are reduced significantly. The distribution of economic activities is
focused on establishing specializations and a division of labour linked with strong flows along
transport corridors. Friedmann believed that the allocation of economic activities should reach
optimum, balance, and stability. That does not mean that the trade and mobility of the population
should decrease. As far as different areas specialize in specific functions, there will be a division
of labor between regions. An integrated model foresees a cyclical movement of the population
caused mostly by the age factor: the youth studying in big cities, families settling in the suburbs,
and older adults searching for competitive and peaceful rural environments.

Core-periphery imbalances and regional disparities figure prominently on the agenda of several
disciplines, which result from their enormous impact on economic and social development
around the world. In sociology, international relations, and economics, this concept is crucial in
explanations of economic exchange. There are few countries that play a dominant role in world
trade (sometimes described as the ―Global North‖), while most countries have a secondary or
even a tertiary position in world trade (the ―Global South‖). Moreover, when we are discussing
global, continental, regional, and national economies, we can present regions and even smaller
territorial units (such as sub regions, provinces, districts, or counties) which have higher wages
than some underdeveloped areas within the same larger area in focus.

Such regional inequalities and injustices are the main themes of the core-periphery model, which
focuses on tendencies of economic activities to concentrate around some pivotal points. It seeks
to explain the spatial inequalities or imbalances observable on all levels or scales by highlighting
the role of horizontal and vertical relations between various entities from the level of towns and
cities to the global scale. The existence of a core-periphery structure implies that in the spatial
dimension (space and place), the socioeconomic development is usually uneven. From such a
geographical perspective, the regions known as the ―core‖ are advanced in various areas, while
other regions described as the ―periphery‖ serve as social, economic, and political back stages,
backyards, and supply sources or - in some cases - are even subject to degradation and decline.

Furthermore, the level of development has a negative correlation with distance from the core.
The economies of the states that have gone through various stages of development at the earliest
and with the fastest pace have become wealthy core regions and growth poles. Those countries
and regions where these processes have been slower become or remain the poor periphery. The

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critical question raised in discussions related to the core-periphery model focuses on the results
and outcomes of the disproportions and asymmetry of the relationship and value of various
indicators related to the level of regional development. The terms ―center‖ and ―core‖ are often
used as synonyms.

Peripherality is perceived negatively, and peripheral areas are regions that may generate
challenges for the core and may even be deemed to require political interventions from time to
time (e.g., regions with a predominantly agricultural structure, regions deprived of natural
resources, regions located far from the main transport routes, depopulated regions, and regions
where large-scale enterprises have been liquidated resulting in mass unemployment and other
social problems). The peripheries are associated with distance, difference, and dependence on
external aid and the unfavourable phenomenon of marginalization and deprivation. At the same
time, however, there are no uniform or standardized development patterns that could allow
solving the issue of the development gap of the underdeveloped and developing countries and
regions.

Thus, there have been numerous attempts to identify the factors contributing to uneven
development around the world. There is an intense focus on the conflicting relations between
centers and peripheries, often reduced to a simple dualism of dominant centers and weak
peripheries. This model is of interest to groups such as geographers, scholars of regional studies,
town planners, economists, sociologists, as well as practitioners and experts in the field of
development studies.

To sum up, according to Friedmann‘s model, the development potential of a given region or
country is determined by the stimulating effect of regional growth centers, the construction of
infrastructure, and the provision of support from central areas to less developed regions. An
advantage of the model is that the assumptions of this theory are also applicable to different
spatial scales, that is, from local and regional through to the national and global scale.
4.3. MODERNIZATION THEORY

In the development literature, the central theory that has been used today to explain the process
of change and growth is the modernization theory. A wide range of intellectuals subsist under
modernization prism to suggest various development models. This ranges from Economist,
Sociologists, Psychologists and Political Scientists, while the economists were interested in
explaining the great change in the economy and industrial revolution in the developed countries,
the sociologists, psychologists and Political Scientists were concerned about the change in the
noneconomic institutions of the society (Nnamani, 2009).

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For the modernization theorists, the problem of the Third world countries is the problem of how
to move these countries from their traditional level of development to the modern stage. The
reason for this is that according to the modernization theorists, every society undergoes stages of
development. They also argue that the other problem of the Third world countries is that most of
them lack: resources, skilled manpower, slow growth; and suffer from high level of corruption,
high level of illiteracy, they are usually very poor, there is high level of nepotism, usually
diseased and above all lack adequate institutional framework. That because of all these problems,
the concern of the modernization theorists is on how to move them out from this their decadent
state of existence to a modernized or developed state.

The major assumptions of the modernization theory of development basically are; Modernization
is a phased process; for example Rostow has 5 phases according to his theory of economic
development for a particular society. Modernization is a homogenizing process, in this sense, we
can say that modernization produces tendencies toward convergence among societies, for
example, Levy (1967) maintains that: ―as time goes on, they and we will increasingly resemble
one another because the patterns of modernization are such that the more highly modernized
societies become, the more they resemble one another‖.

Modernization is an Europeanization or Americanisation process; in the modernization literature,

there is an attitude of complacency toward Western Europe and the United States. These nations
are viewed as having unmatched economic prosperity and democratic stability (Tipps: 1976). In
addition, modernization is an irreversible process, once started modernization cannot be stopped.
In other words, once third world countries come into contact with the West, they will not be able
to resist the impetus toward modernization.

Modernization is a progressive process which in the long run is not only inevitable but desirable.
According to Coleman, modernized political systems have a higher capacity to deal with the
function of national identity, legitimacy, penetration, participation, and distribution than
traditional political systems. Finally, modernization is a lengthy process. It is an evolutionary
change, not a revolutionary one. It will take generations or even centuries to complete, and its
profound impact will be felt only through time. All these assumptions are derived from
European and American evolutionary theory.

There is also another set of classical assumptions based more strictly on the functionalism-
structuralism theory which emphasizes the interdependence of social institutions, the importance

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of structural variables at the cultural level, and the built in process of change through
homeostasis equilibrium. These are ideas derived especially from Parsons‘ sociological theories.
These assumptions are as follows:
i) Modernization is a systematic process. The attribute of modernity forms a consistent
whole, thus appearing in a cluster rather than in isolation;
ii) Modernization is a transformative process; in order for a society to move into modernity
its traditional structures and values must be totally replaced by a set of modern values;
iii) Modernization is an imminent process due to its systematic and transformative nature,
which builds change into the social system.
According to Alvin, there are three main and historical elements which were favourable to the
inception of the modernization theory of development after the Second World War.
 First, there was the rise of the United States as a superpower. While other Western
nations, such as Great Britain, France, and Germany, were weakened by World War II,
the United States emerged from the war strengthened, and became a world leader with
the implementation of the Marshall Plan to reconstruct war-torn Western Europe.
 Second, there was the spread of a united world communist movement. The Former
Soviet Union extended its influence not only to Eastern Europe, but also to China and
Korea. Third, there was the disintegration of European colonial empires in Asia, Africa
and Latin America, giving birth to many new nation states in the Third World. These
nascent nation-states were in search of a model of development to promote their
economy and to enhance their political independence.
 According to the modernization theory, modern societies are more productive, children
are better educated, and the needy receive more welfare. According to Smelser‘s
analysis, modern societies have the particular feature of social structural differentiation,
that is to say a clear definition of functions and political roles from national institutions.
Smelser argues that although structural differentiation has increased the functional
capacity of modern organizations, it has also created the problem of integration, and of
coordinating the activities of the various new institutions. In a political sense, Coleman
stresses three main features of modern societies:
a) Differentiation of political structure;
b) Secularization of political culture -with the ethos of equality
c) Enhances the capacity of a society‘s political system.

One of the principal applications of the modernization theory has been the economic field related
to public policy decisions. From this perspective, it is very well known that the economic theory

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of modernization is based on the five stages of development from Rostow‘s model. The strengths
of modernization theory can be defined in several aspects. First, we can identify the basis of the
research focus. Despite the fact that the main studies of modernization were carried out by a
psychologist, a social psychologist, a sociologist of religion and a political sociologist, other
authors have extended modernization theory into other spheres. A second feature of the
modernization perspective is the analytical framework. Authors assume that Third World
countries are traditional and that Western countries are modern. In order to develop, those poor
nations need to adopt Western values. In third place, the methodology is based on general
studies; for example the expositions regarding the value factors in the Third World, and the
differentiation between unstable democracies, dictatorships and stable dictatorships.

Modernization theory, on the other hand, was popular in the 1950s, but was under heavy attack
at the end of the 60s. Criticisms of the theory include the following:
 First, development is not necessarily unidirectional. This is an example of the
ethnocentricity of Rostow‘s perspective.
 Second, the modernization perspective only shows one possible model of development.
The favoured example is the development pattern in the United States. Nevertheless, in
contrast with this circumstance, we can see that there have been development advances in
other nations, such as Taiwan and South Korea; and we must admit that their current
development levels have been achieved by strong authoritarian regimes.

A second set of critiques of the modernization theory regards the need to eliminate traditional
values. Third World countries do not have a homogeneous set of traditional values; their value
systems are highly heterogeneous. For example Redfield 1965, distinguishes between the great
traditional values (values of the elites), and the little tradition (values of the masses). A second
aspect for criticism here is the fact that traditional and modern values are not necessarily always
mutually exclusive: China, for example, despite advances in economic development continues to
operate on traditional values and this appears to be the same situation in Japan. Moreover, it is
not possible to say that traditional values are always dichotomous from modern status.

The similarities between classical modernization studies and new modernization studies can be
observed in the constancy of the research focus on Third World development; the analysis at a
national level; the use of three main variables: internal factors, cultural values and social
institutions; the key concepts of tradition and modernity; and the policy implications of
modernization in the sense that it is considered to be generally beneficial to society as a whole.

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However, there are also important distinctions between the classical studies and the new studies
of the modernization school.

For example, in the classical approach, tradition is an obstacle to development; in the new
approach, tradition is an additive factor of development. With regard to methodology, the
classical approach applies a theoretical construction with a high-level of abstraction; the new
approach applies concrete case studies given in an historical context. Regarding the direction of
development, the classical perspective uses a unidirectional path which tends toward the United
States and European model, the new perspective prefers a multidirectional path of development.
And finally, concerning external factors and conflict, the classicals demonstrate a relative
neglect of external factors and conflict, in contrast to the greater attention to external factors and
conflicts practiced by the new approach.

Fundamentally, modernization theory studies the process of social evolution and the
development of societies. Modernization is the view of historical progression as a series of
stages, reflecting intellectual, technological, economic and political development. It views
progress in terms of particular path of transition. The theory of modernization is said to be the
current term and the old process, the process of social change where less developed society‘s
acquired characteristic common to more developed society.

For some persons, modernization is a process of structural differentiation, functional

specialization and adaptive upgrading. In the evolutionary perspective modernization refers to
transition from primitive to traditional form of industrialized society to super industrialized form
religious to secular ideology, from particularism to ascription, diffuseness, self-orientation to
universalism etc. A modern society has been identified as a society characterized by the
application of technology and by extensive social interdependence. Modernization implies the
breakdown of traditional society, it refers to the development of a new social order based on
advanced technology and the spirit of science, a rational view of life, a rational approach to
social relations, achieving for justice in public affairs and above all else on the acceptance in the
political realm of the belief that the prime unit of public policy should be the nation state
(Ojukwu, et al., 2016).

Modernization theory like industrial revolution is said to have started in Western Europe and has
spread to other parts of the world. Thus, industrialization, Urbanization, education and media
participation are the various aspects of modernization. It therefore, refers to change in political
culture and political institutions as a result of the process of modernization. The association of

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modernization with a particular Western Model of development has led to the charge of euro
centrism and a denial of a neat dichotomy between the traditional and the modern understanding,
political and socio-economic progress (Mclean and MacMillan, 2009).

4.4. DEPENDENCY THEORY

Dependency theory emerged in the late 1950‘s in response to concerns of the gap between rich
and poor countries and that economic growth in the advanced industrialised countries did not
lead to growth in the poorer countries (Ferraro 2008). Studies carried out by Raúl Prebisch, the
then Director of the United Nations Economic Commission for Latin America (UNECLA) and
his colleagues suggested that economic activity in the advanced countries does not benefit the
poorer countries but often resulted in serious economic challenges in poorer countries (Ferraro
2008). Dependency theory thus became an important tool to analyse development and
underdevelopment in the international political economy (Namkoong 1999).

As succinctly put by Brown (1985), ―…there is no single coherent body of thought that can be
described as ‗dependency‘‖ theory. Instead various theorists stress the key notion that some
countries are conditioned in their development by their dependence on other countries (or
economies)‖. Assessing Brown‘s viewpoint 30 years later it is reasonable to still think that,
despite the rich intellectual ideas, debates and writings from dependency theorists of different
leanings, there is still no single unified theory of dependency.

Despite the intellectual disagreements among dependency theorists there remains some basic
agreements among them, namely the view that the world is divided into two parts, the centre-
industrialised countries and the periphery/the underdeveloped countries, and that this structure
also exists within a state, while they do not all employ the use of the term centre/periphery, their
approach to the structure of the international system remains the same (Namkoong 1999). They
argue that trade between the centre and periphery is characterised by unequal exchange, which
has resulted in underdevelopment of the periphery. They agree that underdevelopment in third
world countries can be linked to the expansion of the world capitalist system. In order to shed
more light on the diversity of ideas that constitute dependency theory, a breakdown of
dependency theory seems appropriate. This will be done by separating the theory into two
strands: the Marxist and non-Marxist frameworks.

Schools of thought on Dependency Theory

Dependency theory has been under debate since the 1960‘s. The main aim of the scholars has
seemed to be to explain the cause and result of the dependent status of the global south in the

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international political and economic systems. Scholars such as Mahbub ul Haq and Raúl Prebisch
have approached the question of dependency from a non-Marxist perspective while the likes of
André Gunder Frank, Theotino dos Santos and Immanuel Wallerstein‘s views on dependency
reflect a Marxist orientation. For example, Mahbub ul Haq (1976) writes, ―A poverty curtain has
descended right across the face of our world, dividing it materially and philosophically into two
different worlds, two separate planets, two unequal humanities, one embarrassingly rich and the
other desperately poor.‖

In the same vein as other dependency scholars, Haq (1976) identifies the roots of the inequality
between developed and developing countries to be their historical past. According to him, the era
of colonialism exacerbated the disparities between the rich and the poor countries by placing the
rich countries of the North in the centre of the world and the poor countries of the South at the
periphery, supplying raw materials to the North. He argues that these exploitative links evident in
the economic dependence and intellectual slavery remains despite decolonisation. This theory
can be used to speculate that rampant exploitation would less likely occur between equal partners
than unequal partners.

In other words, the exploitation reported in North-South economic engagement has its
foundation in historical inequality. Haq (1976) in his writings focused on providing a solution for
altering the existing relationship that serves to benefit both the industrial countries and the global
south. He argues that if the present unjust order continues, then a rebellion in the third world that
can lead to damages to the western world‘s interests is inevitable. Haq further identifies that
poverty is a global problem in the sense that it is not only related to poor nations but also to poor
people within these nations, thus it is a problem that has to be dealt with. To do this he suggests a
two-pronged offensive as the only way to eliminate inequality, where the national governments
in developed and developing countries share this responsibility, developing countries on their
part must ensure an equality of opportunity for developing countries to fully engage in and
benefit from the international system. Also, developing countries on their part should carry out
internal reforms to provide the same for their poor so as to remove domestic structural biases. In
short, Haq sees a shared interest in North-South cooperation as the basis for mutual cooperation,
a point where he differs from the other dependency theorist with Marxist views.

Haq‘s view is similar to that of Prebisch, whose views were outlined in various policy papers.
Prebisch‘s argued that the South‘s dependent status is caused by the historical development of
centre-periphery relations. His views differ from Haq in that while Haq emphasised on the
impact of colonialism, he was more concerned with the impact of western industrialisation on the

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position of the poor states. Prebisch (1968) argued that the rapid industrialisation of the North as
well as export competitiveness created a divide between the global North and South resulting in
declining terms of trade for the South and eventually dependency of the South on the North. As a
solution to the problem of dependency, Prebisch proposes third world countries accelerate
industrialisation by adopting import substitution (O‘Brien 1975).

Import substitution as prescribed by Prebisch (1968) would only be effective if the South have
developed the capacity not only to substitute imports but also to add value to natural resources,
which can then be exported in the form of processed goods. Similarly, the rapid industrialisation
of the North, which created unfavourable terms of trade for the South, was made possible
through the abundance of certain capacities particularly their control of technology (Shrum
2001). Similar to Haq, Prebisch identifies a shared political and economic interest between the
North and the South and argues that it is not just morally imperative for this inequality to be
redressed but that it is in the North‘s self-interest to do so. He maintains that the centre is not
immune to the increasingly obvious economic and social tensions in the periphery and thus
should make deliberate efforts to stimulate development in the right direction in these countries.

Haq and Prebisch share similar views that set them apart from the Marxist school of dependency
theorists. Bokhari (1989) states three major points of views that sets them apart from the Marxist
school. Firstly, their argument that the existing international economic system can be reformed to
accommodate countries of the global South thus creates no need for southern countries to create
a new system or leave the present system in order to overcome dependency. Secondly, Haq and
Prebisch due to the perceived shared interest between the North and South argued that the North
ought to introduce system reforms to safeguard its own interests. Thirdly, their views and
solutions were influenced by their backgrounds and professional experience as top officials at the
World Bank and the United Nations agency respectively. They unlike the Marxist school of
thought recognised that the international economic system has benefits to offer to facilitate the
global South‘s development needs and that the developed world should facilitate these needs as it
is of interest to them if they do.

The Marxist perspective views the system as based on the excesses of capitalism, which is
controlled by the North (Ferraro 2008). Unlike the non-Marxist theorists they argue that the
system cannot be restructured to accommodate the South as the benefits from the prevailing
system is largely accrued by the North. They consider the notion of the existence of a shared
North-South interest as unrealistic given the inability of the South to modify the system
(Hoogvelt, 1984).

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One of the most prominent writers in this viewpoint is André Gunder Frank, a sociologist whose
thesis ‗Development of Underdevelopment‘ gained wide attention in this discourse during the
1960‘s. In line with the non-Marxist scholars of dependency theory, Frank also argued that
underdevelopment is a product of historical, economic and political relationship between the
North and the South. He writes; ‗Historical research demonstrates that contemporary
underdevelopment is in large part the historical product of past and continuing economic and
other relations between the satellite underdeveloped and the now developed metropolitan
countries‘ (Frank 1966).

He further claims that this relation is an integral part of the world capitalist system. According to
him, the capitalist system has put in place a rigid international division of labour, which is
responsible for the underdevelopment of many areas of the world. This division, he claimed
determined the economic, political, social and cultural values in the dependent states in line with
the interest of the dominant states. This division he maintains will remain as it serves the purpose
of absorbing surplus capital from the dependent states to the benefit of the dominant states. He
argues that a similar division also exists within the underdeveloped states.

Frank argues that the most impressive results of development in underdeveloped countries were
recorded at periods when their ties to developed countries were the weakest citing countries like
Argentina, Brazil, Mexico, and Chile during the Napoleonic wars and the two world wars as
examples. Frank in his writings also made a distinction between a state of being ‗undeveloped‘
and being ‗underdeveloped‘. He argued that developed states were in the state of under
development in the past and were free of the structuralist constraints faced by the
underdeveloped states. Thus, stating that the route to development as adopted by the developed
countries is not viable for underdeveloped states. He proposes that loosening of ties of the South
to the North gives the South a greater probability of achieving development. According to Frank,
independence and not interdependence is the way to get out of dependence.

A Marxist analysis of dependency theory can also be found in the works of Immanuel
Wallerstein. Wallerstein argued that a ‗modern world system‘ called the Capitalist World
Economy emerged from the European feudal system in the 16th century. He is classified as a
‗world system theorist‘ due to his analysis. He argues that this system had resulted in divisions of
the world into three, the ‗core, periphery and semi periphery‘ regions creating a new
international division of labour where the economically and politically strong states at the core
achieved their status at the expense of the states at the periphery. He attributes this new division
of labour to the rise of capitalism, which he argues still, exists in the world today and is the

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source of exploitation of the periphery states. Wallerstein argues that dependency can be
overcome only via revolutionary socialism within a unified world system.

Another prominent Marxist analysis of dependency theory is found in the works of Theotonio
dos Santos. His views are quite similar to that of Frank in that he sees dependency as a
‗conditioning situation‘ that causes peripheral countries to be backward and exploited and this
status is caused by the international division of labour perpetuated in the capitalist system which
allows development to occur in some countries while restricting it in others. Dos Santos (1970)
distinguishes between three forms of dependency, which the now underdeveloped nations have
gone through namely, colonial dependency, financial-industry dependency and a new type of
dependency. Dos Santos labelled this new form of dependency as technological industrial
dependency; he asserts that this has further deepened the structure of dependency in the third
world. In a view similar to Frank, dos Santos (1970: 235) considers the reformist ideas of
Prebisch and Haq as ineffective to destroy ‗these terrible chains imposed by dependent
development‘ and proposes a social revolution as the solution to dependency.

The Marxist view of dependency has some historical validity. However, developments in Asia
suggest the North-South economic engagement can lead to positive outcomes in terms of
economic and social development. The rapid industrialisation of South Korea, Singapore,
Thailand, and Malaysia are some examples of this process.

Critiques of Dependency Theory

As no theoretical approach to the study of social science is without critiques, dependency theory
also attracted some criticisms of its own. Proponents of free-market economics criticise
dependency theory for failing to account for the endogenous factors involved in a country‘s
development and attributing blame entirely on external factors (Namkoong 1999). Tony Smith
(1979), one of such liberalists contends that the main misconception of dependency theory is its
insistence that the key causes of underdevelopment of third world countries are not internal
factors but external i.e. the structure of the international system. He asserts that ―dependency
theory represents a historically concrete attempt of Marxism to absorb southern nationalism into
a kind of ideological united front‖ (Smith 1979). This claim is by no means uncommon, giving
the Marxist persuasions within Dependency theory. While any interaction between nations have
the inherent risk of exploitation, at least in the beginning, international economic system was not
set up for the purpose of exploitation. To do that is to negate the concept of a ‗system‘. Actors in
a system must have symbiotic relationship otherwise the system will collapse and destroy the

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actors. Having said that, actors must work hard to determine and correct excesses of the system
by building the capability to detect and correct the excesses.

Sanjaya Lall (1975) also criticises the theory, arguing that the concept of dependency is defined
‗in a circular manner‘ i.e. less developed countries are poor because they are dependent. He
asserts to the impossibility of defining the concept of dependency and thus cannot be proved to
be ‗causally related to continuance of underdevelopment‘ (Lall, 1975). Also, Marxists criticised
the view held by Non-Marxist dependency theorists that international trade (unequal exchange)
is the key cause in the rise of dependency and underdevelopment, they argue that while it may
help to extend underdevelopment it does not create it, that capitalism creates underdevelopment
(Weaver and Berger 1973).

In spite of criticisms of dependency theory, it is impossible to deny that dependency theory gave
a new perspective on the realities of international political economy and put the
underdevelopment status of the global South on the radar. Ideas emanating from dependency
scholars have been the source of motivation for a focus on development needs of the global
South. Their arguments stressed that the under developed South will remain in their
underprivileged state unless drastic measures are taken to provide an equality of participation in
a system which was designed to benefit the North. Also, the Non-Marxist ideas have been
instrumental in defining ways that the countries of the global South can develop while remaining
within the current international system.

Dependency theory has been most influential in discrediting some western ideas about
development in the third world particularly policies and ideas that failed to appreciate the
specific developmental needs of the third world. This has shaped discussions in development
studies today, raising an awareness of the need to examine the patterns of economic development
specific to third world countries and strategies that recognise the specific needs of these countries
(Bohkari 1989).

4.5. THEORY OF POST MODERNISM

Postmodernism is an umbrella term that is used in different ways by different speakers. As a
result, this term defies easy summary. Typically, however, speakers invoking ―postmodernism‖
are committed to exploring the complex relationships of power, knowledge, and discourse
created in the struggle between social groups. Additionally, postmodernism is intertwined with
several other perspectives that challenge the conduct of business as usual. These traditions
include feminism and Post colonialism.

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No doubt, before a concept of the Postmodernism there was another so-called the Modernism. It
came into existence to the modern period combined with industrialisation, market-oriented
capitalist economies, new social classes, democracy, and Enlightenment values- reason and
progress. This controversial philosophy, the philosophy of the Enlightenment, it is possible that
the establishment of objective facts and universal values (Heywood, 2012).

One of the most ambiguous terminology and exciting the period of Postmodernism is the term
‖Postmodernism‖ itself, critics and scholars disagree about it, of postmodernism; Due to the
multiplicity of its concepts and its implications from critic to another. There are a lot of
meanings that made the concept of Postmodernism contradictory with each other and different
and overlapping knew Dictionary.com 2016 the term is: ‖a number of trends or movements in
the arts and literature developing in the 1970s in reaction to or rejection of the dogma, principles,
or practices of established Modernism, especially a movement in architecture and the decorative
arts running counter to the practice and influence of the International Style and encouraging the
use of elements from historical vernacular styles and often playful illusion, decoration, and
complexity.‖(Dic, 2016) , and in Merriam-Webster is: ‖of, relating to, or being any of various
movements in reaction to Modernism that are typically characterized by a return to traditional
materials and forms (as in architecture) or by ironic self-reference and absurdity (as in
literature).‖(web, 2016).

Postmodernism has appeared firstly in the field of painting, architecture and civil engineering,
before moving to philosophy, literature, art, technology, and the rest of the humanities and
knowledge. Postmodernism theory has invaded all the disciplines, such as literature, criticism,
art, philosophy, ethics, education, sociology, anthropology, science and culture, economics,
politics, and architecture.(Carter, 2012).

There is a reflection of the ideas of Postmodernism on the daily life, all humanitarian and
technical fields in the community frame, where a lot of the pioneers are connected
Postmodernism with current intellectual and philosophical shifts, among other changes in social,
economic, political, cultural and even psychological in different societies. The beginning was in
Western societies, where the latter has refused elite control on all sources of power and
influence. As well, a lot of social movements emerged calling for the end of ideologies and exit
all standard measurement, the consolidation of individual affiliation and encourage consumer
culture. And thus creating new sources of power in society, which has been described by many
of the descriptions, so-called the society post-industrial by American Daniel Bilal, who is of the
brightest brains of the neo-conservatives, and it so-called information society.

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In general, the framework of Postmodernism consists of four perspectives toward it.
Philosophical perspective that believes Postmodernism is an evidence of vacuum in the absence
of modernity itself. The historical perspective, that sees the postmodern turn away from the
modernity movement, or of a rejection of some aspects. The political ideological perspective,
that sees the postmodern erosion of the illusions of Western ideology. The Strategic perspective
who believes that the approach to the texts of Postmodernism does not comply with
methodological standards, there is not a single reading, but in open and multiple reading
(Alruwaili, 2002).

Figure 4.2: The Multidimensional Views of Postmodernism

Foundations of Postmodernism
Postmodernism in the Western culture based on a set of plug-intellectual foundations, intellectual
artistic, aesthetic and moral. So it could be identified in the following principles and elements:

 Criticism comprehensive explanatory theories

Postmodernism has sought to destroy the moral an authority of the major intellectual
formats, which usually take the form of ideologies.

 Dual criticism of the analysis in the humanities

In the Western project of Modernism, there meet between the two components of ‖self
and subject‖, while Postmodernism calls for the cancellation of self-modernism.

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 A new vision to concepts of history, Time and Place
Postmodernism formed special new ideas about the history, time and place, regarding
history as an independent discipline, or as an entry point for many of the social sciences,
humanities, and applied sciences. The postmodern aims to minimise the importance of
history, and does not see his role as being only a witness to what is happening and to
record the facts. But these stories are not true; the witness always testifies whoever is
stronger.

 The truth is relative and not absolute

The ideas of Postmodernism are characterised by denying everything that was prevalent
on the Modernism stage and considers that the pursuit of the ultimate truth is the largest
human error committed in the course of scientific and practical goal, and the basic idea of
Postmodernism is that it‘s impossible to reach the truth.

 Rejected the Idea of Representation

Postmodernism rejects all representation operations in any form of representation. The
fundamental problem is the lack of understanding and inability to represent the other,
because of the differences in the political discourse of each party and the different
meanings of terms between cultures and even among members of the same culture,
hampering the process of representation.(Berlin, 1992)

Postmodern Critique
As any theory, the theory of Postmodernism has pros and cons just like any other cultural
phenomena and theories, and the rest of the curriculum of literary criticism. And therefore, we
cannot talk about and imperfect in the humanities at all; The pros Postmodernism, it‘s liberation
movement aimed at freeing man from the world of illusions and myths, and freeing it from the
domination of mythology. Philosophies of Postmodernism are also working to undermine the
central arguments of Western thought, and revisit the constants, and so by undermining,
questioning, dispersion, audit and demolition. And the goal is to build new values.

The most significant cons of the Postmodern is reliance on the idea of disruption and destruction
and chaos, it does not offer a realistic alternative to human cultural and practical, it‘s hard to
apply the perceptions of Postmodernism because of its whimsicality and extremism. So, the
Postmodernism consumed its strategy to effect highlighting the unjust prejudices without having
a moral or political or social position. It is noted that postmodern theory undermines itself;
because of the character of the anarchist, nihilist and absurd. Postmodernism has attracted

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positive and negative criticism both. It could be seen as a positive force editor are destabilising
preconceived ideas about language and its relationship to the world, and undermine all the self-
languages that refer to history and society. Also considers that the era of Postmodernism leads
own assumptions and overrides all the correlated interpretations. For many are ineffective and is
not committed politically.(Carter, 2012) Thus, we find that the philosophy of Postmodernism has
positive and negative values, but what interested to the human being in the practical reality are
the establishment and rooting, not dismantling and disruption, while striving to build meaningful,
rather than indulging in virtual worlds absurd, nihilistic and anarchic.

4.6. NEW (ENDOGENOUS) GROWTH

Endogenous growth theory explains long-run growth as emanating from economic activities that
create new technological knowledge. This article sketches the outlines of the theory, especially
the ‗Schumpeterian‘ variety, and briefly describes how the theory has evolved in response to
empirical discoveries.

Endogenous growth is long-run economic growth at a rate determined by forces that are internal
to the economic system, particularly those forces governing the opportunities and incentives to
create technological knowledge. In the long run the rate of economic growth, as measured by the
growth rate of output per person, depends on the growth rate of total factor productivity (TFP),
which is determined in turn by the rate of technological progress.

The neoclassical growth theory of Solow (1956) and Swan (1956) assumes the rate of
technological progress to be determined by a scientific process that is separate from, and
independent of, economic forces. Neoclassical theory thus implies that economists can take the
long-run growth rate as given exogenously from outside the economic system. Endogenous
growth theory challenges this neoclassical view by proposing channels through which the rate of
technological progress, and hence the long-run rate of economic growth, can be influenced by
economic factors. It starts from the observation that technological progress takes place through
innovations, in the form of new products, processes and markets, many of which are the result of
economic activities. For example, because firms learn from experience how to produce more
efficiently, a higher pace of economic activity can raise the pace of process innovation by giving
firms more production experience.

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4.7. BALANCED VERSUS UNBALANCED GROWTH

4.7.1. Balanced Growth Doctrine

Balanced growth theory argues simultaneous expansion of a large number of industries in all
sectors and regions of the economy. Large number of industries develops simultaneously so that
each generates a market for one another. The benefits of growth are spread over all sectors and
ideally over all regions. The crux of Rosenstein-Rodan‘s (1943) argument for balanced growth
lies in his insight that industrial sectors are complementary to one another. While the expansion
of a single sector (or a small set of sectors) might not be profitable, a simultaneous expansion of
all (or a large number of) sectors might make those non-profitable sectors profitable via
endogenous market creation and economies of scale.
Rosenstein-Rodan‘s argument for balanced growth is rooted in the concept of the positive
externality of demand spill over effects. Thus, according to this theory, a country‘s ability to
grow depends on its ability to mobilize large amounts of resources to undertake large-scale
investments simultaneously in all (or a large number of) complementary industries to ―jump
start‖ the economy—the so-called big push (Rosenstein-Rodan, 1961). Nurske (1953) identifies
domestic market limitations as a major obstacle for the growth of low- income countries,
especially for those countries that cannot significantly expand their exports to the international
market.

In line with Rosenstein-Rodan (1943), Nurske proposes balanced growth with ―an all-around
increase in productivity‖ as a method that developing nations could adopt to overcome such
obstacles. In fact, Nath (1962) has pointed out that the arguments of Nurske (1953) and
Rosenstein-Rodan (1943) appear the same if sectoral complementarity and demand spill over
effects are both seen as effective ways to expand the domestic market. Lewis (1955) supports the
balanced growth hypothesis with an eye on international trade. For him, unbalanced growth
would result in increased instability of relative prices and the deterioration of the terms of trade
for sectors that are expanding rapidly, which in turn would drag down the overall growth of the
country. Thus, only when there is balanced growth would the relative prices and terms of trade of
various industries remain constant as the economy grows.

Lewis (1955) was, however, careful in not arguing in favour of the exclusive dependence of a
country‘s development on international trade because such a growth path also depends on
international terms of trade, which, for small developing nations, are often beyond their control.
Thus, Lewis‘s argument might ultimately need to coincide with Nurske‘s (1953) proposal for
expanding the domestic market via balanced growth. The balanced growth hypothesis was later

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formalized into a macroeconomic model by Murphy, Shleifer, and Vishny (1989). Their model
has an O-ring production function with skill clustering and strong increasing returns mechanism.

The simultaneous industrialization of many sectors generates rapid growth via the cumulative
causation with economies of scale pushing up productivity and wages, and higher wages
resulting in higher demand for goods and services produced in these sectors, which in turn fuels
further growth. The mechanism modelled there is essentially the ―big push‖ in Rosenstein-Rodan
(1961). Basu (1997) sees the balanced growth doctrine from the theoretical angle of the vicious
circle of poverty. He insightfully points out that at the core, Rosenstein-Rodan and Nurske‘s
argument lies in the claim that ―while there exist situations where it is not profitable for any
single producer in an economy to increase production because of market limitations, if all
producers increased production, they would all profit from it‖ (Basu, 1997, p. 21). It is the earlier
situation that traps poor countries in the vicious cycle of poverty.

The theoretical validity of such claim relies on the possibility of making the existence of dual
equilibrium (e.g., one with no industrialization and one with full industrialization) a general case
in a theoretical framework. And this is achieved by either the industrialized production wage-
premium assumption in Murphy et al. (1989) or technological externalities among various
sectors in Paternostro (1997). With the existence of multiplicity of equilibrium, a country might
find itself trapped in the undesirable poverty equilibrium with no individual sector finding it
worthwhile to be industrialized.

A coordinated effort of balanced growth across all sectors will push the country toward the
desirable equilibrium where the vicious circle of economic growth and development is found,
which is again the ―big push.‖ It is also clear from Basu as well as the original proposers of the
balanced growth theory such as Rosenstein-Rodan and Nurske that such coordination does not
come on its own. The big push must come from active intervention by the public sector in the
economy to fix or compensate the lack of individual incentives to industrialize. Therefore, one
can put the balanced growth theory (so is the unbalanced growth theory to be discussed next) in
the category of endogenous growth in modern economics because in this theory growth is
generated endogenously by demand or technological spill over effect across sectors.

4.7.2. Unbalanced Growth Doctrine

Unbalanced growth theorists argue that the government may not have sufficient resources to
promote widespread and coordinated investments in all sectors and regions. Those with the
greatest number of backward and forward links are prioritized. Resources should concentrate on

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strategic industries with significant forward linkages -creating essential inputs for other key firms
in the economy; and backward linkages -firms buy industrial inputs from a large number of
domestic firms.

The two major constructive criticisms of the balanced growth hypothesis are offered by
Hirschman (1958) and Streeten (1959). Hirschman (1958) argues that, first, on a practical level;
the balanced growth doctrine is simply not applicable to developing countries as they lack
resources. In his own words: ―If a country were ready to apply the doctrine of balanced growth,
then it would not be underdeveloped in the first place‖ (Hirschman, 1958). Rather than balanced
growth, he proposes an unbalanced growth strategy with countries allocating their limited
resources into a few strategic sectors: sectors with strong backward and forward linkages.

Backward linkages are a sector‘s ability to generate demand for inputs from the rest of the
economy, while forward linkages are its ability to generate a supply of inputs for the rest of the
economy, with both determined by the economy‘s existing input–output structure. Thus, sectors
with stronger linkages with the rest of the economy should have some sort of developmental
priority because their growth will effectively promote demand- and/ or supply-led growth for the
rest of the economy. The attractiveness of Hirschman‘s argument also lies in its applicability
because policymakers can, in principle, identify those strategic sectors by calculating each
sector‘s linkages based on the country‘s input–output tables.

Streeteen (1959) points to economic imbalance in both consumption and production as necessary
paths toward income and output growth. He does not disagree with Rosenstein-Rodan (1943)
about the existence of complementarities among industries. However, he took a step further by
arguing that despite the undesirable properties of unbalanced growth in a static setting, sectoral
imbalance, in a growing and entrepreneurial society, creates incentives to invest in consumer
goods that are lagging behind and in lines of production that are experiencing bottlenecks. Thus,
his argument for unbalanced growth is an interesting one: he argues that it is the constant effort
of trying to overcome imbalance that fuels the overall growth of the economy, so imbalance is
some kind of ―necessary evil‖ for economic growth.

In other words, it is the process rather than the end of economic imbalance that would result in
growth. Also implicit in it is the view that Hirschman‘s strategy of focusing on specific sectors
could eventually lead—through backward and forward linkages—ex-post to balanced growth.
Such possibility, in fact, makes the distinction between balanced and unbalanced growth
doctrines much thinner on a theoretical level. Nevertheless, the simple question of whether

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sectoral balance or imbalance would be associated with faster aggregate growth is still worth
examining empirically.

4.8. COORDINATION FAILURE: THE O-RING THEORY OF ECONOMIC

DEVELOPMENT
During a depression economic activities are badly coordinated. Firms allow plant and equipment
to fall idle despite increasing numbers of able-bodied people willing to operate it in exchange for
less than the value of their marginal product. Savers continue as before to make provision for
extra future consumption while production of the new capital needed to produce more consumer
goods is reduced. Stocks of consumer goods pile up unsold even though the desire to consume
them is, if anything, intensified by rising poverty. Farmers are forced off their land while others
go hungry.

Many economists therefore think of depression as being a state of coordination failure; a state in
which market forces have failed to coordinate the millions of transactors that interact daily
through a web of interconnected markets. What Smith called the ‗invisible hand,‘ or Mummery
and Hobson (disparagingly) called the ‗automatic machinery of commerce,‘ has not guided them
to a state in which markets clear. Instead, people are somehow led to act at cross purposes,
failing collectively to take full advantage of potential gains from trade. As Keynes put it, the
system is not ‗self-adjusting.

Patinkin (1948) elaborated on Keynes‘s account of coordination failure by portraying the process
of wage and price adjustment as a dynamical system that fails to converge to its
(fullemployment) equilibrium. Clower (1965) pointed out another possible reason for non-
convergence, namely that transactors will respond not just to the price-signals of classical theory
but also to quantity signals they receive when their attempts to trade are frustrated by existing
imbalances between supply and demand. Thus excess supply in one market can lead frustrated
sellers to curtail their demands in other markets, causing the excess supply to spread. As
Leijonhufvud (1968) later elaborated, the cumulative decline in effective demand resulting from
this process will tend to amplify deviations from full employment equilibrium rather than
dampening them.

The contemporary notion of coordination failure as multiple non-Walrasian equilibrium thus

shows the need to go beyond wage and price adjustment if we are to achieve a deeper
understanding of depressions. There are however two important, related problems with this
notion. The first is that although, as explained above, multiple-equilibrium models do illustrate a

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kind of coordination failure they evade the task of analysing the coordination process. By
focusing exclusively on such equilibria, the modern coordination-failure literature thus presumes
that coordination is managed costlessly by some unspecified mechanism.

The second problem is that any model of multiple equilibrium without some mechanism for
describing which if any equilibrium the economy will be led to lacks empirical content. Indeed
the problem is greater than it might seem at first glance, because the model will have not just a
high-level equilibrium and a low-level equilibrium but also a large number of other equilibria, in
which people randomize between the high-level and low-level equilibrium in correlated fashion,
according to the realization of some extraneous random variable. Because of this second
problem, standard comparative-statics analysis applied to the model cannot predict, even
qualitatively, how the economy will respond to variations in exogenous variables or policy
instruments that impinge on the economy.

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SUMMARY

Rostow's Stages of Economic Growth model is one of the major historical models of economic
growth. It was published by American economist Walt Whitman Rostow in 1960. The model
postulates that economic growth occurs in five basic stages, of varying length. These are the
traditional society, the preconditions for take-off, the take-off, the drive to maturity, the age of
high mass-consumption. Rostow asserts that countries go through each of these stages fairly
linearly. Not all of the conditions were certain to occur at each stage, however, and the stages
and transition periods may occur at varying lengths from country to country, and even from
region to region.

The core-periphery model has four stages of regional development. These are pre-industrial
stage, transitional stage, industrial stage, and Post-industrial stage. The pre-industrial stage refers
to the primary sector (agricultural) of the economy, which is characterized by economic activities
limited to a small area and a small-scale settlement structure with small units. The transitional
stage is described by the increasing concentration of the economy in the core that is fostered by
capital accumulation and industrial growth. In the industrial stage, manufacturing (the secondary
sector) is growing with increasing employment of people who are migrating from rural areas to
urban areas. The fourth stage, that is, the post-industrial stage, sees a growing demand for
workforce in services (the tertiary sector).

Modernization theory studies the process of social evolution and the development of societies.
Modernization is the view of historical progression as a series of stages, reflecting intellectual,
technological, economic and political development. It views progress in terms of particular path
of transition. The theory of modernization is said to be the current term and the old process, the
process of social change where less developed society‘s acquired characteristic common to more
developed society. Dependency theory emerged in the late 1950‘s in response to concerns of the
gap between rich and poor countries and that economic growth in the advanced industrialised
countries did not lead to growth in the poorer countries (Ferraro 2008). Dependency theory thus
became an important tool to analyse development and underdevelopment in the international
political economy (Namkoong 1999).

During a depression economic activities are badly coordinated. Firms allow plant and equipment
to fall idle despite increasing numbers of able-bodied people willing to operate it in exchange for
less than the value of their marginal product. Savers continue as before to make provision for
extra future consumption.

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 CHECKLIST

You put tick mark under ‗Yes‘ if you can answer for the question or under ‗No‘ if you cannot
answer the question.

No. Questions Yes No

1 Can you describe the central idea of Rostow‘s growth model?

2 Can you describe the main idea of core-periphery model?

3 Can you identify the idea of modernization theory?

4 Can you list down the idea of dependency theory?

5 Can you describe the idea of postmodernism?

6 Can you identify the idea of new (endogenous) growth?

7 Can you describe balanced vs. unbalanced growth model?

8 Can you identify the idea of coordination failure?

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 SELF-TEST 4

DIRECTION I: MATCH THE ITEMS UNDER COLUMN A WITH THEIR

APPROPRIATE MATCH UNDER COLUMN B.

A B

1. Rostow‘s Growth Model A. Explains long-run growth as emanating

from economic activities that create new
2. Core-Periphery Model technological knowledge.
B. Postulates that economic growth occurs
3. Modernization Theory in five basic stages of varying length
C. Argues simultaneous expansion of a large
4. Dependency Theory number of industries in all sectors and
regions of the economy.
5. Theory of Post Modernism D. The development potential of a given
region or country is determined by the
6. New (Endogenous) Growth stimulating effect of regional growth
E. Emerged in the late 1950‘s in response to
7. Balanced Growth Doctrine concerns of the gap between rich and
poor countries
8. Unbalanced Growth Doctrine F. Argue that the government may not have
sufficient resources to promote
9. Coordination Failure widespread and coordinated investments
in all sectors and regions.
G. Focused on the process of social
evolution and the development of
societies
H. Portraying the process of wage and price
adjustment as a dynamical system that
fails to converge to its equilibrium.
I. Committed to exploring the complex
relationships of power, knowledge, and
discourse created in the struggle between
social groups.

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UNIT FIVE

DEVELOPMENT POLICIES AND STRATEGIES

CONTENTS

5.1. DEVELOPMENT PLANNING AND POLICY MAKING

5.1.1. MEANING OF DEVELOPMENT PLANNING
5.1.2. DEVELOPMENT PLANNING PROCESS
5.1.3. TYPES OF DEVELOPMENT PLANNING
5.2. DEVELOPMENT STRATEGIES
5.2.1. AGRICULTURAL LED DEVELOPMENT
5.2.2. IMPORT SUBSTITUTION
5.2.3. EXPORT ORIENTED INDUSTRIALIZATION
5.2.4. INCLUSIVE GROWTH
SUMMARY
SELF-TEST

 INTRODUCTION

Dear learner, in this unit you will be familiar with important concepts about development
planning, development policy making and development strategies. More specifically, you will
deal about meaning of development planning, processes of development planning, types of
development planning, agricultural led development, industrial led development, import
substitution; export oriented industrialization and the concept of inclusive growth. Students!
Read and memorize the module carefully because it is important to you to develop fundamental
concept related to development planning.

UNIT OBJECTIVES

At the end of this unit, you are expected to:-

 Define development planning
 Describe development planning process.
 Identify types of development planning process.
 Comprehend major development strategies.

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5.1. DEVELOPMENT PLANNING AND POLICY MAKING

5.1.1. MEANING OF DEVELOPMENT PLANNING

Dear learner, can you define development palling? What is the difference between
palnning and development planning? _______________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
_______________________________.
Development planning is the systematic management of resources for the purpose of achieving
definite targets or desirable objectives within a specific period of time. This is a deliberate effort
of the government to influence in the major socio-economic variables like GDP, consumption,
savings, investment, prices and employment etc., of a country for a specific period of time to
achieve its desired objectives.

Development planning happens in many different contexts so to define it succinctly is tricky.

Basically development planning refers to the strategic measurable goals that a person,
organization or community plans to meet within a certain amount of time. Usually the
development plan includes time-based benchmarks. It generally also includes the criteria that
will be used to evaluate whether or not the goals were actually met.

QUESTIONS TO BE ADDRESSED BY PLANNING

There are three most fundamental questions to be addressed by planning. These are briefly
described as follows:
1) Where are we now? – Current socio-economic status of the country. (requires sound data
and information)
2) Where do we want to go? What do we want to achieve? (articulation of medium term
goals/objectives, based on the long term vision of the country)
3) How can we get there? The strategy to achieve the objectives and goals including policies
and programs. (analysis of the options available and choosing the most appropriate and
efficient option, and identification of the policies and programs that best suits to carry out
the strategy)

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THE IMPORTANCE OF DEVELOPMENT PLANNING

How Development Planning could be important? _________________________

______________________________________________________________________________

______________________________________________________________________________

____________________________________________________.

The following points can briefly answer the above fundamental question. Henceforth, some of
the major importances of development planning are:

 Development efforts with a direction  Sustainable and Inclusive development

 State accords priority to the real needs  Efficient resource mobilization
 State knows the best  Foreign aid mobilisation
 Focus and perspective  Best use of resources
 Poverty reduction and building prosperity  Better distribution of resources and outputs
 Reducing Market failure  Private sector development
 Saves time, energy and resources  Market development
 Promote Coordination  Development of remote and deprived areas
 Development in all areas including input management to outputs and impacts feasible

5.1.2. DEVELOPMENT PLANNING PROCESS

Development planning typically follows a set of distinct phases, which are presented as follows:

1. Situation analysis, both internal to the area, and the forces which are shaping the area.
This may involve a range of tools to assess the strengths, weaknesses, threats and
opportunities (SWOT) facing an area;
2. Prioritizing key issues, problems or outcomes;
3. Developing objectives;
4. Developing plans to address the objectives, including strategies, activities and projects;
5. Developing a spatial picture of the situation as well as plans;
6. Developing budgets to achieve the plans.

PLANNING CONTEXT

Planning does not happen in a vacuum, it has its own context. Hence, we need to analyse the
followings important contextual points:
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 Geography: Biophysical diversity; ecology
 Society: Population and its dynamics;
 Economy: Resources, Livelihoods; Growth; Trade
 Politics: Driving force; Political culture; stability
 Bureaucracy: Implementation capacity, ethics
 Political-economy: National, regional and global

Figure 5.1: Steps in the Planning Process

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A National Development Plan is a large scale investment project to develop the infrastructure of
a country. It requires central planning and monitoring on a national level and implementation on
a micro, local level. Adequate funding from government agencies as well as support from
citizens, will allow short, medium and long term goals to be met.

a) Goals

Goals should focus on the micro and macro strategy for national growth. This can include
development of the economic infrastructure, education, social welfare, science, and innovation.
Before setting goals, a government should review the current strengths of each sector and
articulate room for growth (both in the long and short term). The scope of goals will depend
upon whether a country is a developed or developing nation and should be tailored to the
cultural, economic and social needs of a specific country. Goals should avoid being politically
motivated and have sustainability regardless of what is politically popular at the time. Nations
should consider advice from outside consultants to review current national conditions and
proposed strategies to ensure that they are sustainable and not just politically expedient.

b) Monitoring/Overseeing

The scope involved with a national project requires a large scale project manager, like a Central
Monitoring Committee. Depending on the government structure, it will usually be chaired by a
top level official in the office of finance or treasury. Since the funding of a program is integral to
its implementation, the financial perspective will be crucial in setting and meeting goals. The
Monitoring Committee will ultimately report to the executive/cabinet level of the government
and the work of the overseeing committee can be audited by a government
accounting/accountability office.

c) Communication

A communication strategy for a development plan is important so taxpayers and citizens

understand what investments and initiatives are being addressed. Typically the committee
overseeing a national development plan will develop an Information Office that will market and
publicize the plan and also can field questions/suggestions from concerned citizens.

d) Timeline
It's important that a national plan address short, medium and long terms goals. The purpose of
the plan is to prioritize for national immediate needs (food, water, housing, and health-care) that
should be met but also to predict in the medium and long run, what are larger goals that should
be achieved.

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e) Implementation

The key to any national plan is actually accomplishing goals. A central planning body typically
oversees the national plan and acts as a project manager of sorts to oversee the execution of goals
on the micro level. This will involve liaising with government agencies that regulate various
sectors (transportation, education, health & human services, etc.). It will also need to coordinate
with local and municipal governments.

f) Funding

Funding can come from a variety of sources. Depending on qualifications, certain projects of a
national development plan can be financed by foreign donors, international organizations or even
corporate/non-profit partners. It also can liaise with various government agencies responsible for
an area or industry included in a development plan. The funding issue will most likely be the
most politically sensitive and will require support from taxpayers and elected officials to
advocate for funding in the budgeting process. Realistic resource forecasts should be considered
before establishing a project because if funding dries up, cynicism may arise from voters.

g) Publicizing accomplishments

Once development goals have been met, it's appropriate to publicize infrastructure and national
improvements to other foreign countries. Such improvements can encourage foreign direct
investment, international commerce and tourism that will further promote economic productivity.
The buzz and excitement of meeting national goals will also improve morale among citizens
since it demonstrates involvement and action by the national government.

5.1.3. TYPES OF DEVELOPMENT PLANNING

In the general context, development planning can be grouped in to two broad categories. The
first one is short term development planning and the second one is long term development
planning. However, more specifically, there are five most common types of planning. These are
mentioned as follows:
A. Constitution – Articulates the aspirations people

B. Long term vision/goal: set out to achieve in a time period of say 15 to 20 years

C. Periodic: A medium term plan provides medium-term vision of the country

D. Programme/project planning

E. The annual plan: translate the periodic plan into action.

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5.2. DEVELOPMENT STRATEGIES

5.2.1. AGRICULTURAL LED DEVELOPMENT

In this strategy, agriculture is taken as the engine of national economic growth. This strategy is
intended to achieve rapid growth in agricultural production, raise income for rural households,
attain national food self-sufficiency, and produce surpluses which could be marketed to the urban
or industrial sectors, smallholder farms, especially crop producers were initially targeted. The
government‘s emphasize of building the capacities of the small-scale farmer as fundamental
goal in the implementation process will make use of country‘s huge labour force, abundant
agricultural lands, diversified agro-climatic zones and sufficient water resources in the rural
areas (Lulit, 2010). More specifically, the government introduced measures like providing the
smallholder farmers with technology and better farming practices, improved seeds, fertilizers,
irrigation, rural roads, and marketing services to increase agricultural production (GRIPS, 2009).
A rise in agricultural output in turn was expected to stimulate industrial production by providing
food and industrial materials, thus establishing a link between the rural and urban sectors.

In other words, the objective of agricultural led development is to strengthen the linkages
between agriculture and industry by increasing the productivity of small scale farmers and
investing in those industries with most production linkages to rural areas. Because, the strategy
assumes that inter-sectoral linkages will reinforce the growth impetus derived from increasing
productivity in both sectors with the agricultural sector obtaining machinery, chemicals and
consumption goods from industry in exchange of food and raw material ( Moller, 2016). In this
regard, the growth in agriculture was expected to cause overall economic growth through
structural transformation by stimulating demand and supply. On the demand side, expansion in
agricultural activities would increase demand for industrial products (both agricultural inputs and
consumer goods) produced by domestic industries. On the supply side, the agriculture sector can
supply food to domestic market, raw materials to industries and export products.

5.2.2. IMPORT SUBSTITUTION

Chandra (1992) argued that Import-Substitution Industrialization (ISI) led to rapid increases in
industrial production in most developing countries as both local and foreign entrepreneurs took
advantage of government financial incentives and market protection. ISI led to the creation of
high-cost industries because small domestic markets meant full economies of scale could not be
realized. Globalisation has over the years brought about openness, thus creating an inextricable
link among countries through various channels, including trade and investment. Consequently,
there has been a substantial expansion in trade in goods and services and the flow of foreign
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direct investment between developed and developing countries. Even though, both have
benefitted from this global openness, the balance of benefits is mainly tilted to developed
countries, reinforced by the fact that developing countries have been importing more and
exporting less to these countries – a reflection of the under-developed state of their industrial
sector, which is evident in their export of mainly unrefined or primary products, with little or no
value addition taking place. This gives attestation to the presence of an insignificant import
substitution-oriented manufacturing activity in such countries, which have rendered them heavily
reliant on imports for their survival – by extension making them highly susceptible to external
risks and shocks. This brought about the inception of ISI, which originated from as early as in
the 1930s through into the 1960s in Latin America and some parts of Asia and Africa – a notion
that was meant to incorporate three stages, namely:
i. Domestic production of previously imported non-durable consumer goods,
ii. Extension of production to a wide-range of consumer durables and complex
manufactured items and
iii. Finally, exporting of manufactured goods, with the vision of diversifying to multiple
ranges of items.

This was seen as a deliberate attempt by governments in developing and emerging market
economies to adopt some form of protectionist approach, with the aim of ensuring infant and
emergent firms in the industrial sector were encouraged to expand domestic production (Todaro,
1994). Equally, a successful ISI strategy needs adequate planning; one that requires alternative
choices made in terms of diversifying production to accommodate opportunities in the expansion
of sectoral activities connected with energy and transport sectors to support the continuation of
industrialization processes (Williams, 2015).

In other words, proper sequencing should be done as a form of reinforcement to bolster the
elevation to industrialization. This will also create opportunities for the expansion of localized
development ventures in different sectors of the real economy. According to Hirschman (1958),
there was a need for the state to help support the drive for developing a system of national
entrepreneurship, not only through its interventionist or protectionist approach, but also ensuring
localized industries are adequately supported to stand the time of intense competition or
exposure to economies of scale from more established (foreign owned) companies.

Even though questions around critiques of ISI remain a concern, more so about its protectionist
status and the slow pace of growth in terms of promoting export-led activities, it is still perceived
as a way forward for countries to become self-sufficient in sustaining decent living condition for

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citizens. The implementation ISI is a potential means for addressing problems relating to high
dependence on import-led commodities, with surmounting pressures on under-developed
economies‘ capacity to meet high cost of import bills and currency depreciation.

THEORETICAL FOUNDATION OF ISI

From a theoretical perspective, ISI emerged on the backdrop of critiques levied on the
international division of labour strategy, which typically meant that less-developed economies
only engaged in the export of primary products, while at the same time importing high costly
finished manufactured goods, typically produced in Europe and the United States of America.
Strategies used by the industrialized economies around Europe and the USA became more
untenable during the Second World War, when production was switched away from civilian
consumer market goods to military artilleries, notably Tanks and Guns, while at the same time
primary commodity prices were declining, more prominently after the war. In that vein, primary
producing economies had to export more to balance deficits in trade, while at the same time,
prices paid for imported manufactured goods were appreciating in inflationary parlance for these
importing economies – an area considered to be linked with the J-Curve concept in economics,
but still perceived as controversial according to critics (Bahmani-Oskooee and Ratha, 2004;
Magee, 1973).

The success stories of ISI in many of the Latin American and Asian countries is an indication to
affirm its continued implementation in the global community to support sustained development
of weak economies, particularly those in Africa and some parts of Asia that are still struggling to
catch up with the rest of the world in terms of self-sufficiency in the production of basic
consumer items. Theoretically, the process of policy instruments applied to create rent-seeking,
essentially meant for industrial entrepreneurship as utilised by the Asian tigers and Latin
American economies is no different from that implemented in the African economies (Nissanke,
2001). As emphasised by Ogujiuba et al (2011), differences were more in the management of
rent-seeking opportunities created by governments in these African economies to promote and
protect industrial growth and development. The continued growth and profits from rent-seeking
investments devoted by governments in the Asian tiger economies were seen to be more in line
with Schumpeter‘s creative destruction concept, geared towards motivating productive
entrepreneurship (Jackson, 2020a).

Whereas, in Sub-Saharan Africa, profits were seen to be static despite the pleasure of rent-
seeking received from governments. As emphasised from research undertakings (Akyuz, 1998),

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such profits were distributed through patronages - shared amongst minority of elites. This also
supports the ovation of lack of prudence on the part of people to become transparent in their
dealings of effective economic management. Empirical interest on Africa in relation to the
problem associated with failed ISI policies could be attributed to the design of the Structural
Adjustment Program (SAP) in the 1980s, as well as the mounting debt crisis faced by many
economies in the continent (World Bank, 1994). It could be emphasised that the failure of
successive governments to adequately manage rent-seeking from protectionist policies were
ineffectively managed, hence the need to liberalize such economies, with the ultimate goal of
giving way to the creation of a productive private sector, epitomized as a catalyst for economic
development (Ogujiuba, 2011).

In a bid to addressing failures inherent in ISI‘s implementation as witnessed in the case with
majority of African economies and in some parts of Asia and Latin America, there was a need to
focus attention on the neoclassical approach. This suggest that the way forward in narrowing
Sub-Saharan Africa‗s (SSA) development gap with that of its counterpart in Asia is to institute a
policy that favours growth of Small and Medium-Sized Enterprises (SMEs) – a highly favoured
policy in World Bank‘s (1989) publication titled ‗Sub-Saharan Africa: From Crisis to
Sustainable Growth‘. As addressed by Ogujiuba (2011), it appeared that the reality in Africa‘s
failed approach to ISI has to do with unproductive entrepreneurship, which as recent as possible
is manifested in the continent‘s high dependence on the export of primary agricultural and
mineral commodities as the dominant means of participation in the international division of
labour market.

5.2.3. EXPORT ORIENTED INDUSTRIALIZATION

The need to earn foreign exchange, and pressure from international agencies, particularly the
World Bank and the International Monetary Fund, have led to the adoption of export-oriented
industrial policies, particularly since the 1960s. Led by Singapore, Taiwan and South Korea,
most developing countries began to orientate their policies to produce for the world market rather
than for the often small domestic market. Although, countries did not embrace global production
fully, they however modified their policies and encouraged exports.

Export-oriented industrialization of the sort that has occurred in the successful countries of East
Asia is unlikely to be replicated in other developing countries – particularly in Africa and Latin
America - which have much lower ratios of skill to land (or of human to natural resources).
Developing countries may set up its own industrialization direction based on strength and
relative factor endowment through primary processing into consideration. A country with
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extensive natural resources can produce and export processed primary products depends on the
skills of its workforce. If the level of skill per worker is high, the country will have a
comparative advantage in primary processing; if the level of skill is low, its exports will be
concentrated on narrowly defined (unprocessed or less processed) primary products.

For countries with low skill/land ratios, but moderate levels of skill per worker, characterized by
much of Latin America, is thus a positive one. These countries can, through primary processing,
produce and export other sorts of manufactures. For countries which have both low skill/land
ratios and low levels of skill per worker, characterized by much of sub-Saharan Africa. Countries
in this situation have no stronger a comparative advantage in primary processing. They thus have
little chance of exporting large amounts of any sort of manufactures, unless or until they can
raise the skill level of their workers which will require large increases in the coverage and quality
of basic education, and is bound to be a slow process.

5.2.4. INCLUSIVE GROWTH

Dear learner, what is your prior understanding about inclusive growth?

______________________________________________________________________________
______________________________________________________________________________
Inclusive growth refers both to the pace and pattern of growth. As a notion, it encompasses
equity, equality of opportunity, and protection in market and employment transitions and is an
essential ingredient of any successful and sustainable growth strategy (Commission on Growth
and Development, 2008). Moreover, in inclusive growth the emphasis is on improving the
productive capacity of individuals and creating conducive environment for productive
employment, in addition to income redistribution as a means of improving the welfare of
excluded groups. Note that the focus is productive employment opportunities, which entail
decent returns rather than just employment opportunities and it serves as a meaningful
transformation of societies.

African Countries are making many attempts to make their strong growth of the last decade
inclusive. Wealth inequality is a development problem both in rich and poor countries. There is
an increasing pressure on governments across the globe to address inequality concerns and this is
particularly so in Africa given the jobless and non-inclusive nature of its recent growth
experience. This concern is timely and essential because inequality weakens the poverty
reducing capability of growth.

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Contemporary policy emphasis is no longer only on eradicating absolute deprivation of income
but on eradicating deprivation in its multiple dimensions. The multiple dimensions include both
economic and non-economic aspects, which is in appreciation of the UNDP advocacy on
promoting human development. Ever since the UNDP started advocating ‗Inclusive Growth‘,
developing countries in particular have set it as an avowed goal of development policies. Though
the concept is not explicitly defined, there is an implicit belief that the objective is to pursue a
strategy that would provide for the inclusion of the socially and economically marginalized
sections in the mainstream economy and its growth process.

Policy evaluations of ‗inclusive growth strategies‘, however, are carried out largely with
reference to changes in income/consumption based deprivation measures like per capita
income/consumption and incidence of poverty. However, policy pursuit sans explicit goals,
targets and measures would be anybody‘s guess. Hence, it is quite important to define the
concept of ‗Inclusive Growth‘ and its statistical measures before any policy formulation for
‗Inclusive Growth‘, which is economically sustainable.

As already noted, an inclusive process based only on redistribution would not be sustainable
from an economic perspective. To be sustainable, an inclusive growth process should involve
participation in the economic activity (employment), receiving rewards for it (income) and
enjoying it (consumer expenditure). In other words, conceptually, a sustainable inclusive broad
based growth process would be one, which involves an improvement touching upon the three
alternative perspectives of macro economy, viz., production, income generation and income
distribution (expenditure). It is with this perspective that we explore an alternative approach,
framework and measures.

When it comes to measuring inclusion, current approach is to use welfare measures like levels of
living and deprivation in terms of incidence of poverty and food insecurity. This explains the
contemporary emphasis of public activists on programmes like universal public distribution
system. However, the measures of consumption and poverty essentially reflect an economic
scenario after income generation, its distribution, and redistribution through fiscal and non-fiscal
instruments. A moot question is that if such a policy programme for inclusion based only on
redistributive mechanisms would be sustainable in the long run. This is because there are reports
and field studies, which indicate that farmers, small scale ones in particular, are no longer
interested in cultivation when food grains are guaranteed at prices lower than the actual cost of
production.

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SUMMARY
Development planning is the systematic management of resources for the purpose of achieving
definite targets or desirable objectives within a specific period of time. This is a deliberate effort
of the government to influence in the major socio-economic variables like GDP, consumption,
savings, investment, prices and employment etc., of a country for a specific period of time to
achieve its desired objectives. Development planning happens in many different contexts so to
define it succinctly is tricky. Basically development planning refers to the strategic measurable
goals that a person, organization or community plans to meet within a certain amount of time.
Usually the development plan includes time-based benchmarks. It generally also includes the
criteria that will be used to evaluate whether or not the goals were actually met.

In Agricultural Led Development strategy, agriculture is taken as the engine of national

economic growth. This strategy is intended to achieve rapid growth in agricultural production,
raise income for rural households, attain national food self-sufficiency, and produce surpluses
which could be marketed to the urban or industrial sectors, smallholder farms, especially crop
producers were initially targeted. The governments emphasize of building the capacities of the
small-scale farmer as fundamental goal in the implementation process will make use of country‘s
huge labour force, abundant agricultural lands, diversified agro-climatic zones and sufficient
water resources in the rural areas. More specifically, the government introduced measures like
providing the smallholder farmers with technology and better farming practices, improved seeds,
fertilizers, irrigation, rural roads, and marketing services to increase agricultural production.

The need to earn foreign exchange, and pressure from international agencies, particularly the
World Bank and the International Monetary Fund, have led to the adoption of export-oriented
industrial policies, particularly since the 1960s. Led by Singapore, Taiwan and South Korea,
most developing countries began to orientate their policies to produce for the world market rather
than for the often small domestic market. Although, countries did not embrace global production
fully, they however modified their policies and encouraged exports.

Inclusive growth refers both to the pace and pattern of growth. As a notion, it encompasses
equity, equality of opportunity, and protection in market and employment transitions and is an
essential ingredient of any successful and sustainable growth strategy (Commission on Growth
and Development, 2008). Moreover, in inclusive growth the emphasis is on improving the
productive capacity of individuals and creating conducive environment for productive
employment, in addition to income redistribution as a means of improving the welfare of
excluded groups.

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 CHECKLIST

You put tick mark under ‗Yes‘ if you can answer for the question or under ‗No‘ if you cannot
answer the question.

No. Questions Yes No

1 Can you define development planning?

2 Can you identify the processes of development planning?

3 Can you describe the major types of development planning?

4 Can you describe the central idea of Agricultural Led

Development??

5 Can you define import substitution?

6 Can you define export oriented industrialization?

7 Can you define inclusive growth?

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 SELF-TEST 5

DIRECTION I: CHOSE THE CORRECT ANSWER FROM THE GIVEN

ALTERNATIVES

1. ____________ is the systematic management of resources for the purpose of achieving

definite targets or desirable objectives within a specific period of time.
A. Development
B. Development planning
C. Planning process
D. None of the above
2. all of the following statements are correct about the importance of development planning
except:
A. Poverty reduction and building prosperity
B. Sustainable and Inclusive development
C. Better distribution of resources and outputs
D. None of the above
3. Which one of the following is the first in development planning process?
A. Situation analysis
B. Prioritizing key issues
C. Developing objectives
D. Developing budgets

4. In planning context the implementation capacity and ethics is associated with:

A. Geography
B. Society
C. Economy
D. Bureaucracy
5. ____________________ is a strategy that taken agriculture as the engine of national
economic growth.
A. Imports substitution
B. Export oriented industrialization
C. Agricultural led development
D. Inclusive growth

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UNIT SIX

DEVELOPMENT OF ETHIOPIA

CONTENTS

6.1. REGIONAL DEVELOPMENT INEQUALITIES IN ETHIOPIA

6.2. CHALLENGES AND CONSTRAINTS OF DEVELOPMENT IN ETHIOPIA
6.3. DEVELOPMENT POTENTIALS OF ETHIOPIA
6.4. DEVELOPMENT POLICIES AND STRATEGIES OF ETHIOPIA

SUMMARY

SELF-TEST

 INTRODUCTION

Dear learner, in the preceding five units you are well familiar very important points associated
with development, sustainable development, indicators of development, economic growth,
economic development, development planning and development strategies. In this unit you will
be learned regional development inequalities in Ethiopia, challenges and constraints of
development in Ethiopia, development potentials of Ethiopia, development policies and
development strategies of Ethiopia.

UNIT OBJECTIVES

At the end of this unit, you are expected to:-

 Discuss the regional development inequalities in Ethiopia.

 State the challenges and constraints of development in Ethiopia.
 Identify the development potentials of Ethiopia.
 Describe the development policies and development strategies of Ethiopia.

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6.1. REGIONAL DEVELOPMENT INEQUALITIES IN ETHIOPIA

Ethiopia is appears to be paradoxical. Compared to other countries, Ethiopia is an extremely poor

nation with an extremely high economic growth rate and low inequality across the entire
population. However, Ethiopia‘s strides in economic growth and reducing inequality are uneven
across socio-economic, rural/urban, educational, and ethnic lines. It is one of the world‘s poorer
countries but is undergoing simultaneously rapid economic growth and decrease in its inequality.
However, these changes are not being perceived or felt equally across the socioeconomic, among
regions and ethnic groups of Ethiopia. The rural sector, approximately half of Ethiopia‘s
population, remains highly unequal within its own ranks; there are few wealthy and many poor
farmers. Levels of inequality within the urban sector have fallen, but those with education
benefit disproportionately.

There are substantial gaps in economic outcomes between the regional states. Dominantly the
pastoral regions of the country (Afar and Somalia) and semi pastoral region (Gambela and
Benishangul Gumuz) have the lowest economic outcomes and experienced the least change
between 1994 and 2007. Despite the substantial decline in regional inequality of economic
outcomes and opportunities in the post-reform period, tacking the remaining gap poses a big
challenge. There are different policy prescriptions put forward to manage inequality across
groups. There are three distinct approaches within the Ethiopian context namely direct, indirect
and integrationist approaches. The direct approach involves targeting specific groups, for
instance, by allocating quotas for employment or education or credit. This strategy is seldom
recommended or used as it may lead to opposition from other groups. The indirect approach, and
the one closely related to the strategies of the Ethiopian government, involves the
decentralization of power and development policies to regional states. Even though the country
has a decentralized system of governance, various studies question the autonomy of regional
states within the country‘s dominant party system (Kefale, 2013).

There is progress towards addressing horizontal inequality in the country indirectly through
regional development policies. For instance, the government gave special attention to providing
better access to education in pastoral areas in its third Education Sector Development Plan (MoE,
2005) and developed a Pastoralist Education Strategy in 2008 (MoE, 2008). The strategies
include providing alternative basic education, mobile schools and boarding schools among
others. Similarly, Pastoralist Health Promotion and Disease Prevention Directorate were
established under the Federal Ministry of Health (MoH, 2010) to tackle health inequality.
Furthermore, improving the livelihood of pastoral areas is an integral part of the country‘s
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second Growth and Transformation Plan (MoFED, 2015). The impacts of these policy reforms
on reducing regional inequality of economic outcomes and opportunities remain to be seen.

6.2. CHALLENGES AND CONSTRAINTS OF DEVELOPMENT IN ETHIOPIA

For about half a century, successive Ethiopian governments have launched economic
development programs to reduce, if not to end, poverty. However, income poverty is widespread.
Some 31 million people live below the poverty line and between 6 and 13 million people are at
risk of starvation every year. Also many people lack consumption access – which means that
they are unable to purchase basic necessities, often for extended periods of time. Despite
improvements in the past few years, sustainable long-term growth remains a challenge. For
example, the full potential of the most basic sector - agriculture - has not yet been realized. Our
overall growth performance has not yielded the hoped-for reduction in poverty. The different
factors hindering Ethiopia‘s progress (challenges) are interconnected and in combination
constitute a poverty trap that prevents the country from breaking out of poverty.

Generally, the most common challenges that hindered the development of Ethiopian economy
are described below:

 Rapid population growth and the concomitant addition of 2 million persons per year is a
major barrier to poverty reduction. For instance, this growth puts tremendous strains on
Ethiopia‘s resource base and the government‘s ability to deliver services.
 Land-fragmentation: more than 50% of Ethiopia‘s small land holders have less than 2
hectares, which deters the use of modern agricultural input and large-scale farming
techniques.
 Lack of synchronization of investment with resource potentials and development needs
 Poor alignment of federal, regional and district level investment plans with the national
development goals and envisioned settlement patterns
 Poor regional coordination due to low consideration for trans-regional and spatial issues
in development plans of regional states
 Inter-regional and intra-regional disparities in infrastructural development and access to
services
 Environmental degradation has caused frequent droughts.
 Very low productivity
 Low level of income
 Low levels of investment

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 Dependence on unreliable rainfall
 Structural bottlenecks
 Lack of good governance and commitment to accomplishing tasks
 Low infrastructure coverage: although there have been significant improvements during
the past 10 years, the level of infrastructure coverage remains remarkably low when
compared to elsewhere in the world.

6.3. DEVELOPMENT POTENTIALS OF ETHIOPIA

There has been encouraging progress in recent years in improving some basic aspects of life in
Ethiopia. Since 1996, the literacy rate has increased by 50%, the rate of malnutrition has fallen
by 20%, the share of the population with access to clean water has risen to 38% and there has
been a steady decline in the reported incidence of illness. Nonetheless, human development
indicators in Ethiopia still remain at low levels compared with global indicators. For example,
Ethiopia‘s maternal mortality is 673 per 100,000, in 2005/06, which is the highest in the world.
The way to overcome these challenges is to sustain the economic growth achieved in the last few
years. Maintaining the priority of such growth is essential to finally having a lasting impact on
poverty. This growth process is also essential for financing the necessary social investment for
human development.

Estimates show that a growth rate of about 8% per annum would have to be sustained to reach
the Millennium Development Goal (MDG). This rate would require a great deal of revenue.
Existing revenues are insufficient for financing the proposed MDG growth in essential health,
education, infrastructure and other services. Therefore, the government requires a massive
increase in tax revenue (particularly from the unproductive consumption sector) to achieve the
required economic growth of about 6 to 8% per year that is required for meeting the goals of the
Growth and Transformation Programme (GTP) period (2010-2015).

Furthermore, Ethiopia‘s strategy must be based on its most abundant resources: labour and the
country‘s favourable climate (for instance for flowers and other crops). In sum, progress is
needed on every possible front including:
 proper utilization of agricultural potential;
 much more rapid development of the modern sector;
 exploitation of niche markets and opportunities wherever they present themselves;
 promotion of better links between markets and producers to enable business to take place
and to allow people easier access to essential services;

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 expansion of exports: in particular, diversifying exportable items to widen the economic
base, reduce susceptibility to shocks and, in the long term, to reduce the prevailing
dependency on foreign aid;
 Promotion of capacity building regarding the work force‘s education and skills.
 slowing the existing rapid population growth; and
 Proper utilization of the potential of Ethiopia‘s women, who constitute about 48.9 percent
of the population.

6.4. DEVELOPMENT POLICIES AND STRATEGIES OF ETHIOPIA

The life of every single community is changing from time to time because of globalization that
provides new opportunities and challenges, which force the government and other concerned
sectors to address it in order to bring a sustainable economic and social development.
Accordingly, in every country, the government that is the key responsible sector has to respond
to the problems arises and brings socio-economic changes that are base for the growth and
development-wellbeing of the citizens of the country through making policies. But policymaking
itself has been an issue and thus, there have been continues efforts to improve policy making.

Many have been expressing their concerns about how the policies are made and their
effectiveness in solving the problems of the society. This is no exception to Ethiopia consecutive
governments that have been striving to formulate policies to overcome the socioeconomic,
political as well as environmental challenges and problems the country has been facing. Ethiopia
has a long history and experience in medium and long-term planning/policy formulation starting
with the three consecutive 5-year plans of the 1957-1961 period followed by the ten-year plan of
1984/85-1993/94 period.

POLICYMAKING IN ETHIOPIA

The strength of policy making is vital to the governmental strength and the country in general.
Recognizing the importance of policy, as mentioned above the Ethiopia government has been
making efforts to bring a policymaking change. As per the plan of the Ethiopia government,
policymaking in Ethiopia should be a systematic, inclusive and that follow the acceptable policy
making stages and process including identifying the problems, analyzing the problems and
evidences, setting the priorities based on evidences, formulating draft policies, consulting the key
stakeholders to test the draft policy, reviewing, formulating and implementing the policy.
However, it has been reported as the process of policymaking in the country lacks the
fundamental elements of the process.

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The policy making in Ethiopia is not following a systematic and consultative procedure rather it
a less systematic and less consultative as well as ―top down approach‖ while a genuine bottom-
up policy process is possible and preferable. For instance, the Addis Ababa Integrated Regional
Development Plan (Addis, 2010) formation was opposed and criticized by the outside observers,
Oromia regional government officials (Advocacy for Oromia, 2015) some member of
parliament, students, Oromo people and some other stakeholders as it lacked consultation with
these stakeholders and was formulated as per the wish and interests of the elites (Asebe, 2015).

The political roles and ideology of the ruling party shaped the policymaking process, in which its
ideas and interests prevailed and intertwined with the policies and structures of government both
at federal and regional levels. In principle, however, in the process of policymaking the
responsible bodies are not only politicians, but also representatives of the people, experts and
scholars, especially in today's ―administrative state‖ era, with the rapid expansion of government
functions and the extensive use of administrative discretion, administrative authorities are
involved in public policy initiative growing.

Ethiopia‗s development strategy is guided by ADLI and since1991; the government has been
implementing its strategy of ADLI, a long-term agricultural-centered development strategy with
agriculture playing a leading role in the growth of the economy. Its main thrust has been to:
i) improve agricultural extension services;
ii) promote better use of land and water resources;
iii) enhance access to financial services;
iv) improve access to domestic and export markets; and
v) Provide rural infrastructure.
ADLI is geared towards the transformation of the backward economic structure. It is a dual
strategy incorporating on one side the external sector (export-led part) and on the other internal
sector. In the external sector, in addition to agriculture, which constitutes the basis of the foreign
trade of Ethiopia, mining is also expected to play a major role.

The rural centered development program is believed to result in rapid productivity growth in the
peasant agriculture and hence benefit the society at large by boosting the supply side through
sustainable supply of export products, food at reasonable prices, and raw materials for the
manufacturing sector. The program is also expected to create market outlets (effective demand)
for outputs of other sectors particularly the manufacturing sector, i.e. as income of the rural
population rises the need for domestically produced goods like agricultural machinery, tools and

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other inputs increases, and thereby help industrial expansion, rapid development of trade,
transport and other related services.

Sustainable Development and Poverty Reduction Programme (SDPRP), which is rooted in

ADLI, represents a policy framework over a three-year period (FY03-FY05). It acted as the
primary government document to align external financing and internal strategy development in
line with ministries. SDPRP objectives are to ensure sustainable growth and poverty reduction
while maintaining macroeconomic stability within a decentralized democratic setting. The
second strategy the Plan for Accelerated and Sustained Development to End Poverty (PASDEP)
was implemented from 2005-06 to 2009-10. PASDEP has a similar set of priorities focused on
capacity building of smallholder farmers, with quality improvements in frontline extension;
enhanced conservation of natural resources; improved frameworks for the involvement of private
investors; and ensuring that productivity gains are sustainable and that inroads are made against
food insecurity at the individual and national levels.

The Five-Year Growth and Transformation Plan (FYGTP) for 2010/11 to 2014/15 succeed both
PASDEP and the previous SDPRP development plan. This new five year development plan was
launched in late 2010. It is the vehicle for poverty reduction and laying the foundation for
structural transformation. Ethiopia‘s development efforts under GTP will be pursued through
seven strategic pillars.

Table 6.1: The seven pillars of Growth Transformation Plan (GTP)

No Pillars of GTP

1 Sustain rapid and equitable economic growth

2 Preserve agriculture as a major source of economic growth

3 Create favorable condition for industry to play a key role in the economy

4 Infrastructure development

5 Expand provision and quality of social service

6 Build public institutional capacities and deepen good governance

7 Promote women, ensure youth empowerment and broaden social inclusion

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SUMMARY

Ethiopia is appears to be paradoxical. Compared to other countries, Ethiopia is an extremely poor

nation with an extremely high economic growth rate and low inequality across the entire
population. However, Ethiopia‘s strides in economic growth and reducing inequality are uneven
across socio-economic, rural/urban, educational, and ethnic lines. It is one of the world‘s poorer
countries but is undergoing simultaneously rapid economic growth and decrease in its inequality.
However, these changes are not being perceived or felt equally across the socioeconomic, among
regions and ethnic groups of Ethiopia. The rural sector, approximately half of Ethiopia‘s
population, remains highly unequal within its own ranks; there are few wealthy and many poor
farmers. There are substantial gaps in economic outcomes between the regional states. In
Ethiopia, the pastoral and semi pastoral region have the lowest economic outcomes and
experienced the least change.

The most common challenges that hindered the development of Ethiopian economy are rapid
population growth, land-fragmentation, lack of synchronization of investment with resource
potentials and development needs, poor alignment of federal, regional and district level
investment plans with the national development goals and envisioned settlement patterns, poor
regional coordination due to low consideration for trans-regional and spatial issues in
development plans of regional states, inter-regional and intra-regional disparities in
infrastructural development and access to services, environmental degradation has caused
frequent droughts, very low productivity, low level of income, low levels of investment,
dependence on unreliable rainfall, structural bottlenecks, lack of good governance and
commitment to accomplishing tasks are among the primary challenges of Ethiopian economy.

There has been encouraging progress in recent years in improving some basic aspects of life in
Ethiopia. Since 1996, the literacy rate has increased by 50%, the rate of malnutrition has fallen
by 20%, the share of the population with access to clean water has risen to 38% and there has
been a steady decline in the reported incidence of illness. However, human development
indicators in Ethiopia still remain at low levels compared with global indicators. For example,
Ethiopia‘s maternal mortality is 673 per 100,000, in 2005/06, which is the highest in the world.
The way to overcome these challenges is to sustain the economic growth achieved in the last few
years. Maintaining the priority of such growth is essential to finally having a lasting impact on
poverty. This growth process is also essential for financing the necessary social investment for
human development.

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 CHECKLIST

You put tick mark under ‗Yes‘ if you can answer for the question or under ‗No‘ if you cannot
answer the question.

No. Questions Yes No

1 Can you describe the regional development inequalities in

Ethiopia?

2 Can you identify the major challenges and constraints of

development in Ethiopia?

3 Can you list down the development potential or plenty

opportunities of Ethiopia?

4 Can you describe the development policies and strategies of

Ethiopia?

5 Can you describe the DLI development strategy of Ethiopia?

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 SELF-TEST 6

DIRECTION I: CHOSE THE CORRECT ANSWER FROM THE GIVEN

ALTERNATIVES

1. Which one of the following statement is not correct about regional development inequality of
Ethiopia?

A. Pastoral and semi-pastoral regions of Ethiopia are less developed as compared with the
other regions.
B. The majority of country‘s GDP is accumulated in the hands of the few.
C. There is huge income gap between the rich and the poor.
D. None of the above.

2. Which one of the following can be considered as the major challenge for the development of
Ethiopia?
A. Rapid population growth
B. Environmental degradation
C. Low levels of investment
D. All of the above.

3. Which one of the following is not among the seven pillars of Growth and Transformation
Plan of Ethiopia?
A. Make the service sector as a major source of economic growth
B. Build public institutional capacities and deepen good governance
C. Create favorable condition for industry to play a key role in the economy
D. Promote women, ensure youth empowerment and broaden social inclusion

4. Which one of the following can be considered as development potential for Ethiopian
economy?
A. Proper utilization of agricultural potential
B. Much more rapid development of the modern sector
C. Expansion of exports: in particular, diversifying exportable items
D. Promoting the existing rapid population growth

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UNIT SEVEN

MEASURES OF GROWTH AND DEVELOPMENT

CONTENTS

7.1. GROSS DOMESTIC PRODUCT (GDP)

7.2. GNP PER CAPITA

7.3. GINI COEFFICIENT

7.4. HUMAN DEVELOPMENT INDEX

7.5. MULTIDIMENSIONAL POVERTY INDEX

SUMMARY

SELF-TEST

 INTRODUCTION

Dear learners, in this unit you will be learn more about measures of growth and development.
More specifically, you will discuss about the most common measures of growth like Gross
Domestic Product, PNP per capita, Gini coefficient, human development index and
multidimensional poverty index.

UNIT OBJECTIVES

At the end of this unit, you are expected to:-

 Compute Gross Domestic Product
 Calculate GNP Per Capita
 Compute Gini Coefficient
 Calculate human development index
 Analyse multidimensional poverty index

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7.1. GROSS DOMESTIC PRODUCT

Dear learner! You have learned about GDP in the first chapter of this module. Do
you remember what GDP mean? ___________________________________________________
______________________________________________________________________________
______________________________________________________________________________

As you have learnt earlier, GDP is one of the major indicators of development. We can calculate
GDP by adding up the value of all goods and services produced within a country. However,
calculating GDP is not simple task. It is just quite difficult. The first reason is because every
country has an unofficial economy that is often called a black economy that includes businesses
that are not reported to government. The second reason is GDP measures a country‘s economic
activity regardless of who owns the productive assets in that country.

7.2. GNP PER CAPITA (GNP)

The Gross National Product (GNP) is the total value of goods and services produced by a
country in a year, including incomes secured from abroad, through varied activities. You can
calculate per-capita income, using the following formula:

Per-capita income =

Where:
GDP= Gross Domestic Product
ISB= Income Secured from a broad
ITF= Income taken away by foreigner

 Activity 7.1

Suppose gross domestic product (GDP) of a country for a given year is $100 billion, total
population is 50 million, income earned by foreigners from the domestic economy is $200
million, and income earned by nationals from abroad is $500 million. What is the per capita
income for the country?

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In the same way as the GDP, per-capita income for developed countries is very high and
growing. This is the result of ever-increasing GDPs that are based on diversified urban industrial
and commercial economies. Developing countries, on the other hand, have low per-capita
incomes, whose bases are primary economy that lack diversification.

7.3. GINI COEFFICIENT

The Gini coefficient is a measure of inequality of income distribution. It is defined as a ratio
with values between 0 and 1: the numerator is the area between the Lorenz curve of the
distribution and the uniform distribution line; the denominator is the area under the uniform
distribution line. It was developed by the Italian statistician Corrado Gini and published in his
1912 paper "Variabilità e mutabilità" (Variability and Mutability). The Gini index is the Gini
coefficient expressed as a percentage, and is equal to the Gini coefficient multiplied by 100. (The
Gini coefficient is equal to half of the relative mean difference).

The Gini coefficient is often used to measure income inequality. Here, 0 corresponds to perfect
income equality (i.e. everyone has the same income) and 1 corresponds to perfect income
inequality (i.e. one person has all the income, while everyone else has zero income). The Gini
coefficient can also be used to measure wealth inequality. This use requires that no one has a
negative net wealth. It is also commonly used for the measurement of discriminatory power of
rating systems in the credit risk management. Generally, the lower Gini coefficient tends to
indicate the higher level of social and economic equality.
Table 7.1: China’s Gini Coefficient

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Advantages of Gini Coefficient as a Measure of Inequality

 The Gini coefficient's main advantage is that it is a measure of inequality by means of a

ratio analysis, rather than a variable unrepresentative of most of the population, such as
per capita income or gross domestic product.
 It can be used to compare income distributions across different population sectors as well
as countries, for example the Gini coefficient for urban areas differs from that of rural
areas in many countries (though the United States' urban and rural Gini coefficients are
nearly identical).
 It is sufficiently simple that it can be compared across countries and be easily interpreted.
GDP statistics are often criticised as they do not represent changes for the whole
population; the Gini coefficient demonstrates how income has changed for poor and rich.
If the Gini coefficient is rising as well as GDP, poverty may not be improving for the
majority of the population.
 The Gini coefficient can be used to indicate how the distribution of income has changed
within a country over a period of time, thus it is possible to see if inequality is increasing
or decreasing.
 The Gini coefficient satisfies four important principles:
 Anonymity: it does not matter who the high and low earners are.
 Scale independence: the Gini coefficient does not consider the size of the
economy, the way it is measured, or whether it is a rich or poor country on
average.
 Population independence: it does not matter how large the population of the
country is.
 Transfer principle: if income (less than the difference), is transferred from a rich
person to a poor person the resulting distribution is more equal.
Disadvantages of Gini Coefficient as a Measure of Inequality
 The Gini coefficient measured for a large economically diverse country will generally
result in a much higher coefficient than each of its regions has individually. For this
reason the scores calculated for individual countries within the EU are difficult to
compare with the score of the entire US.
 Comparing income distributions among countries may be difficult because benefits
systems may differ. For example, some countries give benefits in the form of money
while others give food stamps, which may not be counted as income in the Lorenz curve
and therefore not taken into account in the Gini coefficient.

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 The measure will give different results when applied to individuals instead of households.
When different populations are not measured with consistent definitions, comparison is
not meaningful.
 The Lorenz curve may understate the actual amount of inequality if richer households are
able to use income more efficiently than lower income households. From another point of
view, measured inequality may be the result of more or less efficient use of household
incomes.
 As for all statistics, there will be systematic and random errors in the data. The meaning
of the Gini coefficient decreases as the data become less accurate. Also, countries may
collect data differently, making it difficult to compare statistics between countries.
 Economies with similar incomes and Gini coefficients can still have very different
income distributions. This is because the Lorenz curves can have different shapes and yet
still yield the same Gini coefficient. As an extreme example, an economy where half the
households have no income and the other half share income equally has a Gini coefficient
of ½; but an economy with complete income equality, except for one wealthy household
that has half the total income, also has a Gini coefficient of ½.
 Too often only the Gini coefficient is quoted without describing the proportions of the
quantiles used for measurement. As with other inequality coefficients, the Gini
coefficient is influenced by the granularity of the measurements. For example, five 20%
quantiles (low granularity) will yield a lower Gini coefficient than twenty 5% quantiles
(high granularity) taken from the same distribution.
7.4. HUMAN DEVELOPMENT INDEX

Human Development Index is developed by the UNDP to analyze systematically and

comprehensively the comparative of status of socioeconomic development in different countries.
The Human Development Index was created to emphasize that people and their capabilities
should be the ultimate criteria for assessing the development of a country, not economic growth
alone. It includes longevity, literacy and material living standard (income). The HDI can also be
used to question national policy choices, asking how two countries with the same level of GNI
per capita can end up with different human development outcomes. These contrasts can stimulate
debate about government policy priorities.

The Human Development Index (HDI) is a summary measure of average achievement in key
dimensions of human development: a long and healthy life, being knowledgeable and have a
decent standard of living. The HDI is the geometric mean of normalized indices for each of the
three dimensions.

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Life expectance refers to a year a newly born baby expected to live in that country. Mean years
of schooling is years that a 25-year-old person or older has spent in schools. An expected year of
schooling refers to years that a 5-year-old child will spend in education in his whole life.

Table 7.2: Goal posts for the human development index in 2013 report
Dimensions of index Observed value
Maximum Minimum
Health 83.6 (Japan, 2012) 20
Mean years of schooling 13.2 (USA, 2010) 0
Expected years of schooling 18 (capped at) 0
Combined education index 0.971 (New zealand, 2010) 0
Percapita income 87,478 (Qatar, 2012) 100

The steps for calculating HDI are as follows;

Education
 Mean years of schooling = Actual value - minimum value
Maximum value - minimum value
 Expected years of schooling = Actual value - minimum value
Maximum value - minimum value

 Education index= (Adult literacy index) + (Gross enrolment index)

Health
 Life expectance = Actual value - minimum value
Maximum value - minimum value
Income

 Income index=

HDI= (Income Index) + (Life Expectancy Index) + (Educational Index)

Dimension index always falls between 0 and 1. A value approaching to 1 indicates a higher
human development where as a value close to 0 indicates the contrary. Generally the
HDI ranks countries into three groups:
 Low human development (0.0 to 0.499),
 Medium human development (0.50 to 0.799), and
 High human development (0.80 to 1.0).

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7.5. MULTIDIMENSIONAL POVERTY INDEX
The multi-dimensional poverty index (MPI) is an index designed to measure acute poverty.
Acute poverty refers to two main characteristics. First, it includes people living under conditions
where they do not reach the minimum internationally agreed standards in indicators of basic
functioning, such as being well nourished, being educated or drinking clean water. Second, it
refers to people living under conditions where they do not reach the minimum standards in
several aspects at the same time. In other words, the MPI measures those experiencing multiple
deprivations, people who, for example, are both undernourished and do not have clean drinking
water, adequate sanitation or clean fuel. The MPI combines two key pieces of information to
measure acute poverty: the incidence of poverty, or the proportion of people (within a given
population) who experience multiple deprivations, and the intensity of their deprivation - the
average proportion of (weighted) deprivations they experience.

Figure 7.1: Distribution of the world’s multidimensional poor living in developing countries

Like development, poverty is multidimensional — but this is traditionally ignored by headline

money metric measures of poverty. The Multidimensional Poverty Index (MPI), published for
the first time in the 2010 Report, complements monetary measures of poverty by considering
overlapping deprivations suffered by people at the same time. The index identifies deprivations
across the same three dimensions as the HDI and shows the number of people who are multi-
dimensionally poor (suffering deprivations in 33% of weighted indicators) and the number of
deprivations with which poor households typically contend with. It can be deconstructed by
region, ethnicity and other groupings as well as by dimension, making it an apt tool for
policymakers.
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Figure 7.2: Compositions of Multi Dimentional Poverty Index

The MPI has ten indicators: two for health, two for education and six for living standards. The
indicators of the MPI were selected after a thorough consultation process involving experts in all
three dimensions. During this process, the ideal choices of indicators had to be reconciled with
what was actually possible in terms of data availability and cross-country comparison. The ten
indicators finally selected are almost the only set of indicators that could be used to compare
around 100 countries.

Almost 1.5 billion people in the 91 countries covered by the MPI—more than a third of their
population multidimensional — live in poverty — that is, with at least 33 percent of the
indicators reflecting acute deprivation in health, education and standard of living. This exceeds
the estimated 1.2 billion people in those countries who live on $1.25 a day or less. And close to
800 million people are vulnerable to fall into poverty if setbacks occur – financial, natural or
otherwise.

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Figure 7.3: Dimensions and Indicators of MPI

The MPI can help the effective allocation of resources by making possible the targeting of those
with the greatest intensity of poverty; it can help addressing MDGs strategically and monitoring
of impacts of policy intervention.

The MPI can be adapted to the national level using indicators and weights that make sense for
the region or the country, it can be adopted for national poverty eradication programs, and it can
be used to study changes over time.

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SUMMARY

GDP is one of the major indicators of development. We can calculate GDP by adding up the
value of all goods and services produced within a country. However, calculating GDP is not
simple task. It is just quite difficult. The first reason is because every country has an unofficial
economy that is often called a black economy that includes businesses that are not reported to
government. The second reason is GDP measures a country‘s economic activity regardless of
who owns the productive assets in that country. The Gross National Product (GNP) is the total
value of goods and services produced by a country in a year, including incomes secured from
abroad, through varied activities.

The Gini coefficient is a measure of inequality of income distribution. It is defined as a ratio with
values between 0 and 1. Here, 0 corresponds to perfect income equality (i.e. everyone has the
same income) and 1 corresponds to perfect income inequality (i.e. one person has all the income,
while everyone else has zero income). The Gini coefficient can also be used to measure wealth
inequality. This use requires that no one has a negative net wealth. It is also commonly used for
the measurement of discriminatory power of rating systems in the credit risk management.
Generally, the lower Gini coefficient tends to indicate the higher level of social and economic
equality.

Human Development Index is developed by the UNDP to analyze systematically and

comprehensively the comparative of status of socioeconomic development in different countries.
The Human Development Index was created to emphasize that people and their capabilities
should be the ultimate criteria for assessing the development of a country, not economic growth
alone. It includes longevity, literacy and material living standard (income). The HDI can also be
used to question national policy choices, asking how two countries with the same level of GNI
per capita can end up with different human development outcomes. These contrasts can stimulate
debate about government policy priorities.

The multi-dimensional poverty index (MPI) is an index designed to measure acute poverty.
Acute poverty refers to two main characteristics. First, it includes people living under conditions
where they do not reach the minimum internationally agreed standards in indicators of basic
functioning, such as being well nourished, being educated or drinking clean water. Second, it
refers to people living under conditions where they do not reach the minimum standards in
several aspects at the same time. In other words, the MPI measures those experiencing multiple
deprivations, people who, for example, are both undernourished and do not have clean drinking
water, adequate sanitation or clean fuel.
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 SELF-TEST 7

DIRECTION I: GIVE SHORT ANSWER FOR THE FOLLOWING QUESTIONS

1. What is Human Development Index (HDI)? How it can measure development?

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
____________________________________.

2. How can we compute GDP and GNP Per Capita? What is the difference between them?
Which one is the best to measure development?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
____________________________________.

3. What is Gini Coefficient? What are its advantages and disadvanges?

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
______________________________________.

4. What is Multi-Dimensional poverty Index (MPI)? How it can be used as a measure of

development?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________.

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