Lecture Notes. Political Economy and Development.doc

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International Development Studies
Ryan Isakson

LECTURE 2: THE CONCEPT OF DEVELOPMENT: MEAN AND MEASUREMENT OF ECONOMIC PROGRESS Measuring Development: can be done in (2) ways  Income Measures & Human Development Index o Economists like to quantify development: Both have different visions of what development is # 1: INCOME MEASURES: “HOW MUCH STUFF /GOODS AND SERVICES PEOPLE HAVE” o GDP: Market value of all final goods and services produced in a country o Ex. Mexico: Produces cars in Mexico, the $ from those sales goes to Mexico’s GDP o GNI: Total income accruing to the residents of a country o Ex. Peter Monk: has mining operations worldwide sales account to the hosts countries GNI, but to Canada’s GDP(because he’s Canadian) *Big GNI = a lot of foreign investment Income Measures Q. Why use income as a measure of development? o Measures whether or not people can support themselves o Possible indicator of whether forms of development are taking place in a country (Infrastructure, gov’t) Adjustments to GDP & GNI A. Population Size o Per Capita GNI = (GNI ÷ Population) = GNI per person  Brazil = high GNI, Belgium = lower GNI  Belgium GNI per capita = shows they earn more $ o Easier to compare development across countries B. Price Changes over Time o Economists tend to look at GDP and adjust for changes in prices o Convert to ‘real’ income using prices from a base year o Allows us to measure progress C. Purchasing Power Parity (PPP) o Convert to PPP income, using prices from a base country o Prices will vary across different countries  Ex. Tanzania: Avr. person earns $500yr – their money will go a lot further in Tanzania than in Can o “baskets of goods can be skewed – Canada vs USA:  Our GNI per capita is less valuable here than in the US” 2012 GNI Per Capita o A lot of economics takes places outside the market o doesn’t get measured formally leaving areas with very low income statistics o Ex. DRC: $310/year  formal data may not capture the goods and services taking place outside market Q. Do these statistics account for what people need? o No, just shows how much $ they have to spend on needs o This measurement has been criticized because it’s a materialistic measure of development Limitations of Income Measures? 1. Does not account for non-market activity o Volunteer work, economic provision in households or communities 2. Very Materialistic measurements 3. Skewed distribution of Income (Measures the typical persons income) o Inequalities in income shows in these measures o Ex. A billionaires income vs. farmers income 4. Does not account for informal sectors o “black-market” activity  which occurs in much “underdeveloped countries” 5. Economic “Bads” o Military Expenditures: o Social: o Defensive expenditures: technology that allows us to continue to survive and be sustainable 6. Dimensions of development o Political rights, racism, genderism 7. Cultural values o Buddhist values focus on “Gross national happiness” NOT Gross National Product 8. Activities that degrade the environment 9. Quality of durability of goods #2 HUMAN DEVELOPMENT INDEX: “ABOUT WHAT PEOPLE CAN DO” a) Health: Life expectancy b) Education: Literacy rates & school enrollment c) Standard of Living: GDP Per Capita (Their ability to acquire stuff) Created by: Mahbub ul Haq Rooted in: People Centered Development Objective: All individual have the opportunity to realize their full potential – Freedom from want http://hdr.undp.org/en/media/HDR_2010_EN_Table1.pdf Development as Freedom o A.K. Sen: Development is expanding peoples capabilities  An alternative notion of development o Capabilities: the ability to do what you want or achieve desired stated or being o Ex. Everyone gets a bike, Someone has a high income:  Useless to those = no place to ride/use it, physically incapable, socially oppressed • Proves: Improving people material abilities are not always the solution to development o Ex. Education, Health, Safety, Equality  Useful = expands peoples capabilities outside the use of material goods o “needed to quantify his theory to make it less theoretical” = Human Development Index o Mahbub Ul Haq + Sen = HDI Strengths and Weaknesses Q. Is the HDI a satisfactory measure of development? What are its strengths and weaknesses? Exposing a particular vision of development can be unethical, immoral, who is setting the standards and whos development are we measuring truly. Economic Growth and Inequality Doesn’t benefit the poorest of society o Ex. Brazil (success story) o Rapidly developing, extreme economic growth(5%yr) o Very extreme inequalities in income distribution o People in lavish villas vs. people living/sleeping on beaches (Latin American countries tend to be the most unequal in regards to wealth) Simon Kuznets: Growing inequality is necessary for poor countries to achieve economic growth o “Inverted U” o Peak Wealth = beginning of a decline in inequality o Inequality is needed because a small few of wealthy people are needed to control and capitalise on investments to bring more income Adelman and Taft Morris: Confirmed Simon Kuznets Curve o Economic growth in developed counties dramatically increases the incomes of the richest 5% o Share going to poorest 60% decreased World Bank: o Riches 20% of population receives more than 60% of new income o Poorest 40% receives less than 10% of new income Aside: Pro-Poor Economic growth Some countries do better at distributing new income that has increased their economic standings Taiwan, south- Asian countries  countries with existing fair-level socio-economic flow “Poverty Is subjective” Ex. India: Immiserizing Growth: Growth that makes people worse off o Economic growth occurs agriculturally and technically LECTURE 3: UNDERDEVELOPMENT IN HISTORICAL PERSPECTIVES Measure Inequality Income groups: dividing the population in a particular group & align the groups from poorest to richest o “quintile groups” : shows how much each group controls the most wealth of a country Lorenz Curve: another method of visualizing particular group aligned from poorest to richest o the more “bowed” out a curve is from the line of absolute inequality the more income inequality o perfect distribution of income = a “45 degree” line directly from 0 – 100 o imperfect distribution if income = a “L” shaped line Gini Coefficient: o Higher Gini coefficient = Closer to 100% = more unequal distribution of income  Takes up more area of the line of absolute triangle  Ex. Brazils Curve o Lower Gini coefficient = Closer to 0% = more equal distribution of income  Takes up less area of the line of absolute triangle  Ex. Hungry o Can be calculated form 0-100 or 0-1 Aside: Scandinavian countries are more egalitarian societies The world has a Gini coefficient of 87.1 – Why? Because the global scale of distribution income is very extreme, it’s like comparing the poorest person in Namibia to Bill Gates. Latin America is notorious for income inequality Inequality and Economic Growth Q. Does economic growth reduce poverty and inequality? No, you can have economic growth with growing inequality! Q. Does inequality affect rates of economic growth? Does economic growth reduce inequality? Kuznets Hypothesis: As countries become richer, inequality will inevitably increase before it eventually drops o Poorest countries with low inequality  need to invest to grow  so inequality is needed so wealth needs to be centralized to maximize growth o Relatively rich countries with high inequality  distribution of wealth is more disperse o Rich countries with low inequality Birdsall, Ross, and Sabot: Research shows there is no inverted “U” relationship with income and inequality Does economic growth producing poverty? Immiserizing Growth: Economic growth causes poverty to rise Michal Kalecki: The problems is that economic growth is unbalanced o Ex. “Boom Famine”: India military expenditure was spent to fight off the Japanese, this created jobs and income, and increases in purchases. Prices of food increased and people began to buy bulk and save, so they could sell it again when its price rise. Widespread famine occurred because of the hoarding of food by the wealth and the inability for the poor to buy food because it was unavailable. Impact of Economic Growth & upon poverty & inequality Economic growth, if present benefited the richest percentage of society. Impact of Economic growth upon economic growth Traditional – View: “Inequality is necessary for growth” Counter – View: “Inequality is bad for growth” o the overall number of consumers is limited o educated are more productive, conflict and instability leads to less investments, poor use of agricultural land means more productivity, demand for G&S Qualities Ascribed to the Global South Characteristics: Poor, formerly colonies, etc. Path Dependency The idea that institutions(norms, rules, laws) once formed tend to send societies down a particular trajectory o Ex. QWERTY: used to slow down writers: a historical practice because that is how type writers were aligned Q. What would the Global south look today had they not been colonialism? Colonialism’s Impact on the International Division of Labour Forced de-industrialization in the south o Ex. Indians once colonized by Britain had faced devastating destruction to their textile industry. Britain imposed taxes on their exports of textiles to the global markets. The British cut off the thumbs of Indians to eliminate the competition. The development of England was at the expense of the de-development of India. o Ex. Egypt has the Turks sent to war with them by the British, so Britain could eliminate the Egyptians growing fabric exporting abilities. Southern specialization in primary products o Ex. The global south could not be producers of manufacturing products so they were used to produce primary products. o Ex. Producing exports crops to avoid punishment Infrastructure (roads, railways) designed to ship products out of the South o Ex. Central American ports are on the Atlantic Ports because it’s closer to Europe, where historical products were shipped out of the colonies to the power states. Discouraged intra-regional trade o Ex. Africa was all about creating supplier economies, where trade only took place on the global scale and not the national scale. Surplus from South financed industrialization in the North o Ex. Fueling industrial development in England was from the income of Indians who were taxed, sold, for labour, overcharged, and under sold for goods. Created markets for manufactured goods o Ex. South producing primary products, north creating manufactured goods, each side sold products to one another. Killing the Indian manufacturing sector made Indians dependant on buying England textiles. Aside: Zambia = copper, Bolivia = minerals, Columbia = coffee. These countries currently sell the same goods that they did back in colonial periods. Countries today have industrialized and become a part of the manufacturing market, however they are not developed. LECTURE 4: UNDERDEVELOPMENT IN HISTORICAL PERSPECTIVE Learning Objective: Discuss how colonialism influenced the different trajectories of economic development in  the North and South o As former colonies, much of the Global South, today served as points of extraction in the interest of the  mother country o Little thought was given to the question of economic development Old Colonialism ­ New Colonialism ­  Old Colonialism: Spain in the 16th century o Emphasized short term gains ­  New Colonialism: The Dutch Republic (Netherlands) in the mid 17th century o  Emphasized speculative gains ­  British ‘new imperialism’: mid­19th century to early 20th century o  Era called one of Century of Free Trade yet, included widespread territorial occupation o US colonialism in late 19th century through first half of 20th century The Lasting Effects of Colonialism on Political Relations and Governance  Transformation of local social structures o  Slave trade and war o  Ethnic divisions exacerbated, ‘divide and conquer’ strategies  Unraveling of Moral Economies and traditional forms of governance and provisioning o  moral economies ­ economics functioned based on reciprocity ­ if one needed something they  can get it for another person Legacies of Colonialism  Nation state borders created through colonial decree o  Purpose = arbitrary at best; at worst borders devised to weaken colonized populations o  Consequence = political instability evident today, especially in Sub­Saharan Africa and the  Middle East  Population decline o  Unprecedented demographic decline in Americas o  Causes of demographic collapse indirect (no immunity to diseases) and direct (murder, labour  exploitation, dispossession) *** Old colonialism emphasized short­term gain ­> attributed to their debt ­> introduced to diseases The impact of the new global economic system  Comparative advantage o  Specialization in a division of labour o  Colonial economic policy emphasis on primary commodity export  Terms of trade o  Measured through the quantity of exports in exchange for quantity of imports o  Favorable terms of trade through 1800’s for colonial economies ­> encouraged further pursuit  of commodity exportation o  Ex. 19th century cattle industry in Argentina Decolonization Gandhi on the ‘idea’ of Western civilization Social movements, both armed and pacifist, across colonized regions Hegemonic shift: from British to US power Conclusion: The underdevelopment of the Global South History matters! o Path dependency o Political instability   Arbitrary division of nations: instigated, encouraged warfare among ethnic groups; exacerbated  divisions  e.g. Hutus and Tutsis  Comparative advantage Q.  Why do these countries only have the ability to produce primary goods rather than manufactured goods? Discussion Questions •How is the formation of nation­states in the Global South a result of colonialism? How has this shaped  underdevelopment? •How did colonialism shape the demographics of the Global South and  •How did colonialism shape political relations and governance in the Global South? •Explain how the Berlin Conference and resulting colonization of African exemplifies “the new imperialism”  (C&D) •Discuss the causes 
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