Introduction to Economic Development premises about what is or is not desirable

are central features of the economic

Development economics
discipline in general and of development
– The study of how economies are economics in particular.
transformed from stagnation to growth and - for example, the sanctity of private
from low-income to high-income status, and property, however acquired, and the right
overcome problems of absolute poverty. of individuals to accumulate unlimited
personal wealth; the preservation of
The Nature of Development Economics
traditional hierarchical social institutions
- In addition to being concerned with the and rigid, inegalitarian class structures;
efficient allocation of existing scarce (or the male head of household as the final
idle) productive resources and with their authority; and the supposed “natural
sustained growth over time right” of some to lead while others
- It must also deal with the economic, follow.
social, political, and institutional - It follows that value premises, however
mechanisms, both public and private, carefully disguised, are an inherent
necessary to bring about rapid (at least component of both economic analysis
by historical standards) and large-scale and economic policy. Economics cannot
improvements in levels of living for the be value-free in the same sense as, say,
people. physics or chemistry. Thus, the validity
- In comparison with the more developed of economic analysis and the correctness
countries (MDCs), in most less of economic prescriptions should always
developed countries, commodity and be evaluated in light of the underlying
resource markets are typically highly assumptions or value premises.
imperfect, consumers and producers
have limited information, major
structural changes are taking place in Economies as Social Systems: The Need to
both the society and the economy, the Go Beyond Simple Economics
potential for multiple equilibria rather
Social system – The organizational and
than a single equilibrium is more
institutional structure of a society, including
common, and disequilibrium situations
its values, attitudes, power structure, and
often prevail (prices do not equate supply
traditions.
and demand).
- By “social system,” we mean the
interdependent relationships between
The Important Role of Values in economic and noneconomic factors.
Development Economics
Noneconomic factors:
- Economics is a social science.
- attitudes toward life work and authority
- It is concerned with human beings and
- public and private bureaucratic, legal,
the social systems by which they
and administrative structures
organize their activities to satisfy basic
- patterns of kinship and religion
material needs and nonmaterial
- cultural traditions
- It is necessary to recognize from the
- systems of land tenure
outset that ethical or normative value
 - the authority and integrity of government - During the 1970s, economic
agencies development came to be redefined in
- the degree of popular participation in terms of the reduction or elimination of
development decisions and activities poverty, inequality, and unemployment
- flexibility or rigidity of economic and within the context of a growing
social classes. economy. “Redistribution from growth”
became a common slogan.
Traditional Economic Measures
- Development must therefore be
- Development has traditionally meant conceived of as a multidimensional
achieving sustained rates of growth of process involving major changes in
income per capita to enable a nation to social structures, popular attitudes, and
expand its output at a rate faster than the national institutions, as well as the
growth rate of its population. acceleration o
- f economic growth, the reduction of
Income per capita – Total gross national
inequality, and the eradication of
income of a country divided by its total
poverty.
population.
Gross National Income (GNI) – The total
domestic and foreign output claimed by
residents of a country. It comprises gross
Amartya Sen’s “Capability” Approach
domestic product (GDP) plus factor incomes
accruing to residents from abroad, less the - The 1998 Nobel laureate in economics,
income earned in the domestic economy argues that the “capability to function” is
accruing to persons abroad. what really matters for status as a poor or
nonpoor person. As Sen puts it, “the
Gross domestic product (GDP) - The total
expansion of commodity
final output of goods and services produced
productions...are valued, ultimately, not
by the country’s economy, within the
for their own sake, but as means to
country’s territory, by residents and non-
human welfare and freedom.”
residents, regardless of its allocation
- Sen argues that poverty cannot be
between domestic and foreign claims.
properly measured by income or even
The New Economic View of Development by utility as conventionally understood;
what matters fundamentally is not the
World War II and postcolonial
things a person has—or the feelings
development in the 1950s, 1960s, and
these provide—but what a person is, or
early 1970s
can be, and does, or can do. What
- When many developing nations did matters for well-being is not just the
reach their economic growth targets but characteristics of commodities
the levels of living of the masses of consumed, as in the utility approach, but
people remained for the most part what use the consumer can and does
unchanged, signaled that something was make of commodities.
very wrong with this narrow definition of - Sen calls functionings, that is, what a
development. person does (or can do) with the
commodities of given characteristics
 that they come to possess or control. Sen notes that functioning depends also on
Freedom of choice, or control of one’s (1) “social conventions in force in the
own life, is itself a central aspect of most society in which the person lives, (2) the
understandings of well-being. position of the person in the family and in
- A functioning is a valued “being or the society, (3) the presence or absence of
doing,” and in Sen’s view, functionings festivities such as marriages, seasonal
that people have reason to value can festivals and other occasions such as
range from being healthy, being well- funerals, (4) the physical distance from the
nourished, and well-clothed, to being homes of friends and relatives.
mobile, having self-esteem, and
“taking part in the life of the
community.” Development and Happiness
- Happiness is part of human well-being,
and greater happiness may in itself
Five sources of disparity between (measured)
expand an individual’s capability to
real incomes and actual advantages:
function.
1. Personal heterogeneities, such as those - As Amartya Sen has argued, a person
connected with disability, illness, age, or may well regard happiness as an
gender; important functioning for her well-being.
2. Environmental diversities, such as - Economists have explored the empirical
heating and clothing requirements in the relationship across countries and over
cold or infectious diseases in the tropics, time between subjectively reported
or the impact of pollution; satisfaction and happiness and factors
3. Variations in social climate, such as the such as income.
prevalence of crime and violence, and - One of the findings is that the average
“social capital”; level of happiness or satisfaction
4. Distribution within the family— increases with a country’s average
economic statistics measure incomes income.
received in a family because it is the - Richard Layard (British labour
basic unit of shared consumption, but economist from the London School of
family resources may be distributed Economics) identifies seven factors that
unevenly, as when girls get less medical surveys show affect average national
attention or education than boys do; happiness:
5. Differences in relational perspectives,  family relationships
meaning that some goods are essential  financial situation
because of local customs and  work
conventions. For example, necessaries  community and friends
for being able, in Adam Smith’s phrase,  health
“to appear in public without shame,”  personal freedom
include higher quality clothing (such as  personal values.
leather shoes) in high-income countries  the evidence says people are
than in low-income countries. happier when they are:
 not unemployed
  not divorced or the realization of the human potential
separated would not be possible. One clearly has to
 have high trust of “have enough in order to be more.”
others in society
 enjoy high
government quality 2. Self-esteem - To Be a Person
with democratic - Self-esteem: The feeling of worthiness
freedoms that a society enjoys when its social,
 have religious faith. political, and economic systems and
institutions promote human values such
The importance of these factors may shed light as respect, dignity, integrity, and self-
on why the percentage of people reporting that determination
they are not happy or satisfied varies so widely - A second universal component of the
among developing countries with similar good life is self-esteem—a sense of
incomes. worth and self-respect, of not being used
as a tool by others for their own ends.
- All peoples and societies seek some
Three Core Values of Development basic form of self-esteem, although they
1. Sustenance - The Ability to Meet Basic may call it authenticity, identity, dignity,
Needs respect, honor, or recognition.
- Sustenance: The basic goods and - The nature and form of this self-esteem
services, such as food, clothing, and may vary from society to society and
shelter, that are necessary to sustain an from culture to culture. However, with
average human being at the bare the proliferation of the “modernizing
minimum level of living values” of developed nations, many
- All people have certain basic needs societies in developing countries that
without which life would be impossible. have had a profound sense of their own
These life-sustaining basic human needs worth suffer from serious cultural
include food, shelter, health, and confusion when they come in contact
protection. When any of these is absent with economically and technologically
or in critically short supply, a condition advanced societies.
of “absolute underdevelopment” exists.
- A basic function of all economic activity,
therefore, is to provide as many people 3. Freedom from Servitude - To Be Able
as possible with the means of to Choose
overcoming the helplessness and misery - Freedom: A situation in which a society
arising from a lack of food, shelter, has at its disposal a variety of
health, and protection. To this extent, we alternatives from which to satisfy its
may claim that economic development wants and individuals enjoy real choices
is a necessary condition for the according to their preferences.
improvement in the quality of life that - Freedom here is to be understood in the
is development. Without sustained and sense of emancipation from alienating
continuous economic progress at the material conditions of life and from
individual as well as the societal level, social servitude to nature, other people,
 misery, oppressive institutions, and 3. To expand the range of economic and
dogmatic beliefs, especially that poverty social choices available to individuals
is predestination. and nations by freeing them from
- Freedom involves an expanded range of servitude and dependence, not only in
choices for societies and their members relation to other people and nation-states,
together with a minimization of external but also to the forces of ignorance and
constraints in the pursuit of some social human misery
goal we call development.
- W. Arthur Lewis (economist and
professor at Princeton University)
stressed the relationship between
Ideas and Theories of Economic
economic growth and freedom from
Development
servitude when he concluded that “the
advantage of economic growth is not that
wealth increases happiness, but that it
Economic doctrines of mercantilism
increases the range of human choice.”
- Wealth can enable people to gain greater  Economic ideas were focused on the vital
control over nature and the physical role of the state in economic development.
environment (e.g., through the  It is the duty of the state to create
production of food, clothing, and shelter) and accumulate wealth.
than they would have if they remained  Wealth came from gold and
poor. silver.
 Countries without gold and silver
- The concept of human freedom also
mines could acquire such precious
encompasses various components of
metals through favourable
political freedom, including personal international trade, and colonies
security, the rule of law, freedom of with gold and silver mines.
expression, political participation, and  As a result, big European
equality of opportunity. nations fought one another in
getting more colonies.
 To achieve this objectives of mercantilism,
The Three Objectives of Development manufacturing was given top priority.
 Agriculture was no longer appreciated
1. To increase the availability and widen because of its natural shortcomings.
the distribution of basic life-sustaining  Manufactured goods can be readily sold
goods such as food, shelter, health, and abroad than agricultural goods.
protection
2. To raise levels of living, including, in
Physiocracy – the rule of nature
addition to higher incomes, the provision
of more jobs, better education, and  The expansion of science in the 18th century
greater attention to cultural and human and the increasing number of various
values, all of which will serve not only to inventions opened up some realities of life
enhance material well-being but also to in the world.
generate greater individual and national  People started to rationalize human
self-esteem behaviour and the existence of institutions.
 They concluded that it was not the will of  They should be free to choose
God that created the conditions in the world. their own economic enterprise or
 Rather, it was the product of causes and occupation.
effects which conformed to the laws of  The government should not help
nature. or hinder them.
 Philosophers claimed that those who are
poor because they violated the laws of
The classical theories
nature.
 On the other hand, those who obey and  Founded by Adam Smith
follow the laws of nature were believed  Considered as the father of
to promote their own good. economics or father of capitalism
 Economy or society that conforms to the  In 1776, his book the An Inquiry to the
laws of nature would be successful. Nature and Causes of the Wealth of
Nations was published.
 It explains how wealth of nations is
Laissez faire theory created and distributed.
 For many years this book was the
 Literally means let alone (leave alone).
bible of economics.
 Further developed by classical economist,
 Free competition concept
Adam Smith.
 Free market mechanism could
 Is a French term introduced by the
provide more benefits to individuals
physiocrats.
to society than an economy run by
 It connotes non-interference, liberty or
the government like in the case of
freedoms.
mercantilism which even established
 In economics, it means the government
trade monopolies.
should not intervene in economic affairs.
 Just let the market forces interact
with one another.
 No grants or subsidies are given Production is real wealth
by government.  Based on industrialization and not on
 This is in accordance with natural agricultural development since at that time,
law, and the results would be most of the farmers in Great Britain are
good for the individuals and tenants and are exploited so the gave up
society. their farms and decided to work in factories.
 Quesnay, the leader of the  Smith believes that the only source of
physiocracts, stated that the prices wealth is production through labour and
of manufactured goods are higher resources.
than the prices of their raw  He wrote that wealth can be increased
materials. through division of labour and machinery.
 The difference should represent  He also said that improvements in
the actual cost of labour that transportation can promote the growth of
produced the goods, therefore the commerce and industry.
market process should be based  Under a free market economy, production
on the cost of labour. would be most efficient.
 Individuals must be free to pursue  Consumers can get the best
their own economic interests. quality and the lowest price.
 Law of supply and demand even
in wages and interests.
  If demand for labor is greater  Stated that population explosion is
than supply of labor, the wage the root cause of the problems in
increases. society.
 Although Smith stressed free competition  Malthus said that the rate of population
and non interference by the government in growth is higher than the rate of food
economic affairs, he made some exceptions. production.
 He encouraged government to  To control population growth, he
promote shipping. proposed late marriages and
 Favoured imposition of tariffs for abstinence.
bargaining purposes and for  Malthusian theory: As population
equalizing competitions. grows geometrically, food
 Smith stated that the role of the production grows arithmetically.
state should be confined to  This prediction of Malthus didn’t take place
defense, justice, education, public in developed countries.
works, protection of foreign  Their higher stage of economic
trade. growth became an effective birth
control device, and their modern
Theory on population
production.
 The Industrial Revolution which started in  It is only in less developed
the later part of 1700’s developed in an countries which are now afflicted
environment of laissez faire. with the Malthusian theory.
 It was just beginning during the time of  High birth rates but very low
Adam Smith so he was not able to witness food productivity
the results. When he explained the good
results of free competition, he had in mind
the virtues of people. But things did not Theory of Comparative Advantage
materialize for the good of individuals and
 David Ricardo one of the most famous
society. Instead, powerful capitalists
classical economists developed the law of
emerged and exploited the workers.
comparative advantage
 Flannel weaving industry in rural
 Based on this theory, nations should export
areas collapsed because of more
only goods which they enjoy the greatest
efficient factory system.
advantage, and should import the good
 Influx of rural people in the urban
which they have the greatest disadvantage.
communities looking for jobs.
 Which means do not produce the
 Created both social and economic
product if it is cheaper to buy.
problems.
 Ricardo explained this theory by giving two
 Capitalists took advantage and
countries and two products as examples.
gave very low wages to their
 The comparative advantage refers to the
workers and forced them to work
lesser number of hours or days to produce
for long hours.
the product.
 Government did nothing to help
 Classical economists like Ricardo equated
workers
the value of a product with the cost of labor
 Poverty become widespread
that went into its production.
among workers.
 Thomas Malthus, a religious minister saw  A product which takes more hours
the growth of population and human or days in producing has a higher
miseries. price or value than a product with
lesser hours on producing it.
  The theory of comparative advantage is  Capitalists want to accumulate
being practiced in international trade. more wealth at the expense of
workers.
 Agricultural countries export raw
 Marx predicted the downfall of capitalism
materials and import finished products
due to its limitations. This didn’t come true.
from industrial countries.
 There were no revolutions in
 The problem is the prices of raw industrial countries
materials and other agricultural products  In fact, compared with other
are very low in world markets and yet economic systems, countries with
prices of finished products are very capitalistic societies have high
high. standards of living (ex: USA,
Japan, Canada, UK, Germany…).
 Industrial countries control the  However, the ideas of Marx are
operations of the world markets, and not without significance. In fact,
they can manipulate prices of goods to his warnings greatly contributed
the disadvantage of less developed to the welfare of the working
countries which basically are agricultural class.
economies.  Workers have become more
united and organized their
labor unions.
Theory of Karl Marx  Capitalists have improved
 The economic ideas of Karl Marx were their management policies
basically derived from classical economists. towards their workers.
He only qualified his theory of value by
emphasizing that labor must be socially Promotion of human values
necessary.
 He believed that workers are the real  Jean Sismondi, an Italian writer,
producers of goods. He claimed that the disagreed with Adam Smith.
benefits of production go to the capitalists  Wealth should not be measured in terms of
and not to workers. material things but in terms of human
 Marks stated that there is class conflict welfare.
between workers and capitalists.  No nation can be considered prosperous if
 Marx developed his theory of scientific the conditions of the poor have not been
social evolution by saying that in the improved.
beginning – when it was still a primitive  He also rejected the laissez faire theory
society – there was social equilibrium. which provided freedoms to individuals to
However, when the new ideas and new tools seek their own self-interests for their own
of doing things were introduced, the old welfare. He asserted that the state should
system was disturbed. interfere to prevent the unfair distribution of
 Man became greedy for power wealth spawned by unrestrained capitalism.
and wealth.  Main contention of Simondi is focused on
 Man was greatly concerned with the welfare of the poor.
material things.  Interested in social justice rather
 This led to class struggle between than accumulation of wealth by
workers and capitalists. the industrial system manipulated
by powerful capitalists for their
own materialistic inclinations.
 population in the community
Factors of Economic Development and progress of society
 One can be rich by not
purchasing the best farm but a
 Friedrich List, a Germany professor of piece of land near the center of
economics and political science a fast growing city. It doesn’t
 Did not agree with classical economists matter if the land is the most
about production, free trade, and free fertile or solid granite.
competition.  Rent is unearned income.
 According to him, the progress of a  During the early days, land
nation is great not in proportion to the could be acquired through
accumulation of wealth, but in proper application from
proportion to the development of the government. Others got
productive forces. their land through
 Such forces refer to natural resources, inheritance or by historical
science, arts, government laws, accident. Because of
education, peace and order, mortality, sudden growth of
and the harmonious relationships of the population and business,
various industries and occupations. land rents have increased.
 List agreed with free trade if all nations Thus, landowners are the
were developed. beneficiaries of unearned
 He proposed that a nation should protect incomes.
its industries by means of tariffs during  Businessmen pay rents. In rents
its early stage of industrialization. increase, they have to pay more. This
 Once such industries become strong and means that cost of production or
viable, protection must be lifted. business gets higher. But cost is paid
 Once a nation becomes highly ultimately by the consumers when
developed, it could practice laissez faire. they buy the goods of businessmen.
 Businessmen let the buyers
Theory on Progress and Poverty pay rents in the form of
higher prices.
 Based on the book Progress and Theory by  This makes the economic
American author Henry George. conditions of the poor
 He saw rapid economic growth in California more depressed.
during the 1870s amidst widespread poverty
 Condition stimulated him to
analyze the different theories of Modern theory of Employment
distribution among the factors of
production.  Employment is determined by the supply
 He was not satisfied with the and demand for labor.
doctrines of the classical  A decline in employment means that wages
economists regarding wages, are high in relation to prices of goods.
profits and rent  Producers are not willing to manufacture
 He concluded that rent is the root goods if they know they are going to lose.
cause of poverty So they get more workers if they are willing
 The increase in value of land to accept lower wages. This means they
is not due to its fertility but make more profits.
due to the growth of
 The main point of the theory is that the  On the other hand, a very high interest
cause of high unemployment is high wages. rate does not discourage a borrower if he
There is more employment when wages are feels he will make more profit in his
low – classical theory of employment which projected investment.
was accepted for a many years.
 However, during the Great Depression in the
US in the 1930s, there was widespread  Keynes proposed to the US government to
unemployment. Even if people were willing spend more money in order to solve the
to accept lower wages, there weas no depression.
demand for jobs.  Many public works were
constructed which created
Keynesian theory of employment massive employment.
 The situation generated income
for the people.
 John Meynard Keynes, the father of modern  They started buying more
economics goods and services
 Based on the Keynesian theory of  Encouraged the private
employment, employment determines the business sector to meet the
necessity of equating the aggregate supply growing demand of the
with the aggregate demand for goods. people.
 As a result, employment was
generated by the private sector.
 When people buy more goods, it means
 They needed more people in
there is more expenditure or consumption.
producing goods and services
This condition stimulates more investments
 The Great Depression disappeared
which also increases employment and
as a result.
production.
Innovation theory

 Businessmen put up more factories

because they expect greater demand for  By Joseph Schumpeter
their products.  Emphasized the role of the innovator in
 There are other factors which determine economic development.
investment such as price, cost of  Innovator is the key factor in economic
production, interest rate, competition, development. He is the planner, organizer,
etc. coordinator, and implementor of economic
 The most important factor is the activities.
expectation of profit or returns of  The innovator is the economic leader or the
investment. entrepreneur who has the courage and
 According to Keynes, as long as returns imagination to handle old systems, and be
of investment are higher than interest able to transform theory into practice.
rates, there is investment. Even if  An innovation can be any change initiated
interest rate is very low, it does not by the entrepreneur which leads to a faster
follow that investment increases. and better development of an industry.
 During the Great depression, there was  Such change may be in the form
no investors even if they offered low of an invention, method of
interest on bank loans. The reason was production or marketing strategy.
that there was no profit expectations.
  Because of innovations introduced by  Key factor is capital like
few daring entrepreneurs, the industry machinery, buildings, equipment,
concerned became profitable. etc.
 Such favorable economic  The model shows the relationship
situation attracts more between the input and the output.
innovators. This means more The input is capital, and its
business expansion – employment efficiency is reflected in its
and production. output.
 It has been observed that the role of the  Ex: a certain amount of
innovator in less developed countries are capital stock or physical
limited. They are more conservative in capital has been invested. If
investments. Many business enterprises are the results or outputs have
family-owned and are managed by their own been substantial in terms of
members. employment, production and
income, then the capital has
been used efficiently.
Other growth models  The rate of growth in the
economy can be measured by
 Ricardian growth model – derived from the the GNP or the real per capita
law of diminishing returns by David income.
Ricardo.
 Key factor is land.
 Limits of economic growth  Kaldor model
brought about by the scarcity of  Nicolas Kaldor
land, its being a fixed input, and  Key factor is technology.
its diminishing productivity.  Technology is embodied in
 To reduce the constraints of physical capital.
economic growth, Ricardo  Technical process comes from
proposed the discovery of more investment
land for cultivation or more food  Examples are modern
at lower prices should be machineries, tools and
imported. equipment – these are
 Agricultural sector has a very symbols or technical
vital role in economic progress and they are
development. products of investments
 Very good example is Japan – it
invested a big slice of its national
 Harrod-Domar model budget for research and
 By economists Sir Roy Harrod of
technology. As a result, it has
England and Professor Evsey become very progressive as a
Domar of America in the 1930s nation.
and 40s
 Economic growth depends on the
amount of capital that is available
Determinants of Economic Development
for investment, and that the rate of
capital accumulation is  Economic development is not
proportional to the rate of savings. determined by economic factors alone.
There are non-economic factors that
 affect economic development, and they B. Technology
have greater influence than the economic  Generally refers to better techniques or
ones. methods of production.
A. Capital  Can also be applied in other fields like
 In economics, capital refer to finished public administration, education, social
goods which are being used to produce work.
other goods.  For ex: social technology is
 These are machines, buildings, tools, concerned with the improvement
equipment, etc. – specifically called of attitudes and values of the
physical capital. people.
 Financial capital – money  Public administration technology
 Machines accelerate the production and deals with the improvement of
distribution of goods. social goods in order to maximize
 Work can be done in lesser time the satisfaction of social wants.
and effort.  Research has contributed much to the
 Reduces unit cost development of technology.
 During ancient times, people relied on  According to Schumpeter: the discovery
men and animals for their production and of new techniques is invention
construction.  He pointed out that the practical
 Unfortunately, there are still many parts application of an invention to
of the world that rely on primitive production for the market is
methods of production and construction. innovation.
 Contributes to their slow pace in  However, not all innovations are
development. for markets.
 Developed countries like the United  Ex: political and social
States, Japan, Canada, United Kingdom, innovations are intended
Netherlands, etc. have been using for improving conditions in
modern machines in agriculture, the government or society.
industry, and service organizations.  R&D require big funds.
 As a result, they have become  Through these better ways
more efficient in their economic of doing things or
activities. producing goods are
 They better produce better good at discovered.
lower cost.  Richer countries can afford
 Less developed countries do not even to undertake necessary and
have enough funds for road construction, expensive R&D projects.
electrification, communication,  In richer countries both the
irrigation, and other vital projects for government and private sector
economic development. engage in R&D.
 Their incomes from selling raw  Developing countries usually
materials and crops to the more copy or imitate western
developed nations, together with technology.
taxes, are not sufficient.  This practice is cheaper.
 Most cases, less developed
Technology in less developed countries
countries depend on foreign loans
and investments to develop their  There is nothing wrong with the
economies. importation of technology.
 Saves time and money.
  But imported technology should  Their products are of better
be suitable to local conditions. quality.
 The economic, social, political,  Their products are cheaper if there
cultural and managerial aspects are no taxes and tariffs imposed
have to be taken into on them.
consideration in the application of  Developing countries are
foreign technology. excellent markets for their
 Has to strike a balance between better products.
technology vs unemployment.
C. Market
D. Social Structure
 The growth of markets reflects an
expanding economic development.  A society with a more equitable
 For as long as the various sectors of the distribution of wealth and income, and
economy are equitably benefited, economic freedoms provides a more
economic growth is real and enduring. fertile environment for economic
 A flourishing market which only development.
enriches foreigners and the very few  Members of the society are
local elites only aggravate the problems encouraged to pursue their own
emanating from the maldistribution of individual interests, be it
wealth and income. economic, social, cultural, or
 This condition is very political.
widespread in developing  Being an open economy, even the
countries. humblest citizen can aspire to be
 Transportation, communication and rich or be the leader of the
electricity greatly help in the growth of country.
markets.  Opportunities for improvement
 Contact between buyers and are open to all members of
sellers is easier and more society.
convenient.  A man from the lower class
 In this connection, capital and can actually move upward.
technology are directly involved.  A society whose wealth and income
 Machines and other physical belong to very few families does not
facilities are needed to accelerate encourage economic development.
production.  Since fruits of development do
 This makes it favourable to both not go to the people, they have no
sellers and buyers. enthusiasm to participate in any
 A market becomes bigger when more government development
people buy more goods. program.
 Stimulates investments and  Is even worst if it is a close
production. society.
 Businesses are expected to  People who belong to the
produce more if there is a good lowest class cannot move
demand for their products. to higher social structure.
 Highly developed countries have  Such situation can only breed
considerable advantages in both local poverty and ignorance.
and foreign markets.
  People tend to be open to be  Some don’t work hard and just
resigned to the fact that they have depend on their parents.
no better future.  May also hamper labor mobility
and the choice of better economic
opportunities.
 Example:  Grandparents and parents
 Caste system in India, although do not like their children to
abolished by their constitution, work in far places,
socially, they are still practiced. especially if they are
The untouchables/poorest class women.
(are the slaves) will have no  Family obligations of the older
chance to make it in life and are children to their parents and
exploited. younger siblings have been a part
 Apartheid policy in South Africa. of culture.
Blacks are considered lowest in  Unmarried older children
the social ladder. especially have an
obligation to support their
E. Family System old parents and the
 Family systems in the western societies younger siblings.
like the United States and Canada re  Such responsibilities
more individualistic and self-reliant. restrict economic
 Adult children are financially opportunities.
independent from their parents.
 They pay for their own tertiary F. Cultural Values
education.  Some cultural values have negative
 They are free to pursue their own effects on economic development.
economic inclinations anywhere.  They retard the growth of the economy.
 Considering the security of their parents,  Ex: in the Philippines cultural values
family obligations are minimized unlike like bahala na, mañana habit, nigas
in less developed countries, especially cogon, and other similar values are not
among Asians, children have to take conducive to economic development
personal care of their poor old parents.  According to Professor Gunnar Myrdal,
 Expended family system, which is industrialization requires efficiency,
common in the Philippines and other mobility, discipline, and punctuality.
developing countries, is good in a sense
that there is unity, and the welfare of the The desire to imitate
older and the young member of the  Many people in less developed countries
family are protected by the stronger adult admire consumption habits of Americans,
members. Europeans and rich neighboring countries
 However, it has dominant features that (Korea’s skincare, etc…)
are not favorable to economic  Colonial mentality: they take extreme pride
development. in eating their food, wearing clothes, using
 Ex: many married children live their appliances and tools.
with their parents  Such misplaced cultural values do not value
 In case parents can afford to do not encourage at all the production of
support their children, they lose local goods.
their self-reliance.  They do not help in the development of local
industries.
  Government corruption is the number
 Whenever an underdeveloped country one obstacle in economic development.
attains rapid economic industrial growth  Very precious scarce resources,
through foreign investments or through its like money, are not properly
own resources, some of its cultural values utilized for development due to
are not favorable for economic development graft and corruption.
do not change.  Govt corruption is present in any society.
 Such cultural lags form barriers to  But are more rampant in less developed
real and meaningful economic countries
development.  Has reached both the lowest and highest
levels of government officials and
politicians.
G. Political Conditions  Department concerned with Public
works, education, health, government
 Have considerable impact on economic purchasing agencies, those involved in
development. collection of taxes, customs duties, and
 Political stability and fair economic export and import licenses, and even
policies stimulate economic growth. courts of justice and universities.
 Attracts foreign and local
 Bribery has been a common practice.
investments.  It has become a need!
 The major role of government is to  Fixers!
provide a high standard of living for its  Their low income/salary
people. encourage them to commit
 Can be attained through higher
these crimes.
levels of investments which will  Task of cleaning the government is a
generate employment and long and difficult process.
production, and through the
equitable distribution of wealth I. Religion
and income.  During biblical times, materialism and
 Policies, plans and programs are tools of the pursuit of wealth were despised and
economic development. discouraged.
 Can only operate efficiently under a  The bible contains many chapters
regime of good and honest public and verses against wealth or
administration. materialism.
 Singapore is a very tiny state. Natural  “Blessed are the poor for
resources are very limited and poor. And they shall inherit the
yet is very rich and progressive kingdom of God.”
compared with most Asian countries.  “it is harder for a rich man
 Principal key to its economic to enter the gates of heaven
growth is foreign investments and than for a camel to pass
tourism. through the eye of a
 Excellent political stability and a needle.”
very efficient and honest public  Such religious concepts and
administration. teachings against materialism are
not favorable to economic
H. Corruption in Public Administration development.
 When people shy away from the
pursuit of wealth, economic
 growth tends to be slow and  Nevertheless, religion is only one of the
primitive. factors of the economic development.
 There is a need got man to work  It cannot totally influence
harder and to search for economic growth alone.
innovations.  The claim of Weber that Protestantism
 Max Weber, author of the Protestant was responsible for the growth of
Ethics and the Spirit of Capitalism, capitalism is not exactly correct.
claimed that Protestant countries are  Spain, Japan, Israel, Singapore
more progressive. and Taiwan are wealthy nations
 He proved his theory by pointing and yet they are not protestants.
out the presence of dominant
values like thrift, industry and J. Population
entrepreneurial spirit among
Protestant nations.  Is both an advantage and disadvantage in
 He pinpointed the rise of economic development.
Protestantism as the cause of  It is an advantage if people are educated,
growth of the capitalist order in productive and creative.
Europe.  Some development economists are not in
 Former colonies of Spain are Catholics favor of birth control.
which Spain gave them.  Instead, they suggested
 Most of these countries are less improvement of the methods of
developed. production, especially food
 Myrdal classified these the production.
cultural and religious values of  Developed countries that have
the Philippines as similar to Latin insufficient number of people encourage
American countries. immigration.
 There are several Catholic  They are needed to accelerate
practices that are inconsistent with economic development.
the principles of economic  On the other hand, population is a great
development. burden if the rate of population growth is
 Barrio and town fiestas are higher than the rate of production
celebrated to honor their growth.
respective patron saints.  Situation is more serious of
 Usually expensive resources of the economy are not
 Most people, equitably distributed.
usually in rural  Poor countries with high birth rates are
areas spend all their advised to adopt family planning
money. programs.
 People even borrow  Aren’t always successful due to
money to feed their religious, cultural, and economic
guests from reasons.
neighboring towns
K. Geography
and barrios.
 Such expenditures  Refers to climate, soil, natural resources,
are wasteful and topography, and structure of the land.
misplaced,  These have considerable influence on
especially for the economic development.
poor.
 Countries which are endowed with  Transportation and communication are
abundant natural resources have greater likewise affected by geographical
potentials for economic development. structure.
 However, there are some countries with  Presence of excellent harbors
barren land but are rich in oil resources favors both local and international
such as the Middle East countries. trade.
 Such resources are good sources of  Geographical disadvantages can be
income for various programs of the eliminated or reduced through the proper
government. use of technology and capital.
 Ex: massive construction projects
in the middle east are financed by
petro dollars (export earnings Poverty, Inequality, and Development
from oil).
 Africa is a giant continent but only 7% of Measuring Inequality
its land is arable. - Economists usually distinguish between
 Only 50% of the arable land is two principal measures of income
used for food production. distribution for both analytical and
 Such very limited agricultural quantitative purposes: the personal or
land is further compounded by size distribution of income and the
floods and droughts. functional or distributive factor od share
 Rains are too much, too little or distribution.
none at all.
 Many times, rains fall at the Size Distributions
wrong time. The personal or size distribution of income is
 Such natural hazards greatly impoverish the measure most commonly used by
the people of Africa. economists.
 During prolonged drought, crops die as It simply deals with individual persons or
well as their work animals. households and the total income they receive.
 Of course, the agonies of the millions of Economists and statisticians therefore like to
Africans are also man-made disasters arrange all individuals by ascending personal
like tribal slaughters, civil wars, incomes and
banditry, and graft and corruption. then divide the total population into district
 On the other hand, there are countries groups or sizes.
with poor natural resources but are they A common method is to divide the population
were able to achieve remarkable into successive quintiles (fifths) or deciles
economic growth. (tenths)
 Ex: Japan, Singapore, and Israel according to ascending income levels and then
 Japan: only about 16% of its total determine what proportion of the total national
land area is arable or can be income
farmed. is received by each income group.
 Because of meager natural Kuznets ratio is often used as a measure of the
resources, Japan imports degree of inequality between high- and low-
about 90% of raw materials income
for its industries. group
 Despite geographical - The personal or size distribution of
limitations, Japan is one of income is the measure most commonly
the biggest economies in used by economists. It simply deals with
the world.
 individual persons or households and the A common method is to divide the population
total income they receive. into successive quintiles (fifths) or deciles
- Economists and statisticians therefore (tenths)
like to arrange all individuals by according to ascending income levels and then
ascending personal incomes and then determine what proportion of the total national
divide the total population into district income
groups or sizes. is received by each income group.
- A common method is to divide the Kuznets ratio is often used as a measure of the
population into successive quintiles degree of inequality between high- and low-
(fifths) or deciles (tenths) according to income
ascending income levels and then group
determine what proportion of the total Functional Distributions
national income is received by each
- The second common measure of income
income group.
distribution used by economists, the
- Kuznets ratio is often used as a measure
functional or factor distribution of
of the degree of inequality between high-
income, attempts to explain the share of
and low-income group
the total national income of the factors of
Lorenz Curves
production (land, labor, and capital
- Another common way to analyze
personal income statistics is to construct Measuring Absolute Poverty
what is known as Lorenz curve. The
Lorenz curves the actual quantitative - Absolute Poverty as the number of
relationship between the percentage of people who are unable to command
income recipients and the percentage of sufficient resources to satisfy their needs.
the total income they receive during the It may be measured by the number, or
year “headcount”, H2 of those whose incomes
Gini Coefficients and Aggregate fall below the absolute poverty line Yp
Measures of Inequality when headcount is taking a fraction of
- A final and very convenient shorthand the total population, N-headcount index.
summary measure of the relative degree H/N. the poverty line is set at a level that
of income inequality in a county can be remains constant in real terms so that we
obtained by calculating the ratio of the can chart our progress on absolute level
area between diagonal and the Lorenz overtime.
curve divided by the total area of the The Foster-Greer-Thorbecke Measure
half-square in which the curves lies.
- Also often interested in the degree of
The personal or size distribution of income is income inequality among the poor, such
the measure most commonly used by as Gini coefficients among those who are
economists. poor, Gp1 or the coefficient of variation
It simply deals with individual persons or (CV) of income among the poor. CVp.
households and the total income they receive. There are criteria for a desirable poverty
Economists and statisticians therefore like to measure that are widely accepted by
arrange all individuals by ascending personal development economists:
incomes and
then divide the total population into district 1. Anonymity are very similar to the properties
groups or sizes. for inequality indexes.
2. Population independence
3. Monotonicity - means that if you add income curve to shift uniformly upwardand
to someone below the poverty line, all closer toward the line of equality
otherincomes held constant, poverty can be no
Growth and Poverty
higher than it was.
- Widespread poverty creates conditions in
4. Distributional sensitivity principles – other
which the poor have no access to credit,
things being equal, if you transfer income from
are unable to finance their children’s
a poor person to a richer person, the resulting
education, and, in the absence of
economy should be deemed strictly poorer.
physical or monetary opportunities, have
DUALISTIC DEVELOPMENT AND many children as a source of old-age
SHIFTING LORENZ CURVE SOME financial security.
STYLIZED TYPOLOGIES - The rich in contemporary poor countries
are generally not noted for their frugality
Gary Fields, an economist demonstrates how
or for their desire to save and invest
Lorenz curves can be used to analyze three
substantial proportions of their incomes
limiting cases of dualistic development.
in the local economy.
- The low incomes and low levels of living
for the poor, which are manifested in
Modern Sector Enlargement –economy poor health, nutrition, and education, can
develops by enlarging the size of its modern lower their economic productivity and
sector while maintain constant wages in both thereby lead directly and indirectly to a
sectors. slower-growing economy.
- Absolute incomes rise and - Raising the income levels of the poor
absolute poverty is reduced, but will stimulate an overall increase in the
the Lorenz curve will always demand for locally produced necessity
cross so that we cannot make any products like food and clothing, whereas
unambiguous statement about the rich tend to spend more of their
changes in relative inequality additional incomes on imported luxury
goods
Modern Sector Enrichment - economy grows
but such growth is limited to a fixed number of Income Poverty
people in the modern sector - we defined the extent of absolute poverty
- Growth results in higher incomes, a less as the number of people who are unable
equal relative distribution of income, and to command sufficient resources to
no change in poverty. The Lorenz curve satisfy basic needs. They are counted as
to shift downward and farther from the the total number living below a specified
line of equality minimum level of real income—an
international poverty line.
Traditional Sector Enrichment- – growth is
divided among traditional-sector workers, with Rural Poverty
little or its growth occurring in the modern - Perhaps the most valid generalizations
sector. about the poor are that they aredis
- Growth results in higher income, a more proportionately located in rural areas,
equal relative distribution of income, and that they are primarily engaged in
less poverty. Traditional sector agricultural and associated activities, that
enrichment growth causes the Lorenz they are more likely to be women and
children than adult males, and that they
 are often concentrated among minority distribution of an economy
ethnic groups and indigenous peoples. translated into a size distribution
by knowledge of how ownership
Women and Poverty
and control over productive assets
- Women make up a substantial majority and labor skills are concentrated
of the world’s poor. If we compared and distributed throughout the
thelives of the inhabitants of the poorest population. The distribution of
communities throughout the these asset holdings and skill
developingworld, we would discover that endowments ultimately
virtually everywhere women and determines the distribution of
childrenexperience the harshest personal income.
deprivation. They are more likely to be 3. Moderating (reducing) the size
poor andmalnourished and less likely to distribution at the upper levels
receive medical services, clean water, through progressive taxation of
sanitation,and other benefits. personal income and wealth. Such
taxation increases government
Ethnic Minorities, Indigenous Populations, revenues that decrease the share
and Poverty of disposable income of the very
- A final generalization about the rich—revenues that can, with
incidence of poverty in the developing good policies, be invested in
world is thatit falls especially heavily on human capitaland rural and other
minority ethnic groups and indigenous lagging infrastructure needs,
populations. Wepointed out in Chapter 2 thereby promoting
that some 40%of the world’s nation- inclusivegrowth. (An individual
states have morethan five sizable ethnic or family’s disposable income is
populations, one or more of which faces the actual amountavailable for
serious economic,political, and social expenditure on goods and services
discrimination. and for saving.)
4. Moderating (increasing) the
Policy Options on Income Inequality and size distribution at the lower
Poverty: Some Basic Considerations levels throughpublic expenditures
- We can identify four broad areas of of tax revenues to raise the
possible government policy incomes of the poor eitherdirectly
intervention,which correspond to the (e.g., by conditional or
following four major elements in the unconditional cash transfers) or
determination of adeveloping economy’s indirectly (e.g.,through public
distribution of income. employment creation such as local
1. Altering the functional infrastructure projects orthe
distribution—the returns to provision of primary education
labor, land, and capital as and health care). Such public
determined by factor prices, policies raise the real income
utilization levels, and the levels of the poor above what
consequent shares of national their personal income levels
income that accrue to the owners would otherwise be, and, as will
of each factor. become clear in later chapters, can
2. Mitigating the size distribution do so sustainably when they build
—the functional income the capabilities and assets of
people living in poverty.
Human Capital: Health and Education IN HUMAN CAPITAL (EQUITY AND
EFFICIENCY) = POSITIVE EFFECTS ON
The Central Roles of Education and Health
INCOMES
Basic Objectives of Development:
 Health and Education has close
- Health – central to well-being
relationship.
- Education – essential for satisfying and
rewarding life  There are dual impacts of the effects of
 Both are fundamental to the health spending on the effectiveness of
broader notion of expanded the educational system and vice versa.
human capabilities that lie in  We should need to invest in health and
the heart of the meaning of education
economic development  Despite of their close relationship,
we still see a higher household
Health: Why this became a essential in income is no guaranteed of improved
Economic Development? health and education.
- A prerequisite for increases in  Human capital must be given direct
productivity, and successful education attention in its own right, even in
relies on adequate health as well. economies that are growing rapidly.
 REALITY: Health and education may be
Education: Why this became a part of distributed very unequally, just as
Economic Development? income and wealth are. But,
- Plays key role in the ability of a IMPROVED health and education help
developing country to absorb modern families to escape some various circles
technology and of poverty in which they are trapped.
- To develop the capacity for self-  We need to take a close look at
sustaining growth and development educational and health systems in
developing countries: to identify the
sources of the severe inequalities and
 Both Health and Education is seen as inefficiencies that continue to plague
vital components of growth and them.
development –which are inputs to the
aggregate production function.
 Their dual role as both input and Education and Health as Joint
outputs gives health and education Investments for Development
their central importance in economic - Health and Education are closely related
development. in economic development
HUMAN CAPITAL – Productive - Greater health capital may improve
Investments embodied in human the return of investments in
persons, including SKILLS,ABILITIES, education, in part because health is an
TALENTS, HEALTH, and LOCATIONS, important factor in school attendance and
often resulting from expenditures on in the formal learning process of a child.
EDUCATION,ON-THE-JOB TRAINING - A LONGER LIFE raises the RETURN
PROGRAMS, and MEDICAL CARE. TO INVESTMENTS in EDUCATION,
in part because better health at any point
during working life may in effect lower
Health and Education Development as the rate of depreciation of education
Human Capital Issues: INVESTMENT capital.
 - Greater education capital will improve - Human capital – term that the
the return to investments in health economists use for education, health, and
because many health programs rely on other human capacities that can raise
basic skills often learned at school productivity when increased.
including personal hygiene and - An analogy is made to conventional
sanitation. investments in physical capital.
- Education is also needed for the - This is done by estimating the present
formation and training of health discounted value of the increased income
personal. stream made possible by these
investments and then comparing it with
Linkages between Investments in Health
their direct and indirect costs.
and education
- Discount Rate – in present value
- Health and education are investments calculations, the annual rate at which
made in the same individual future values are decreased to make them
comparable to values in the present.
Improving Health and Education: Why - Health and education also contribute
Increasing Income is not sufficient? directly to well-being.
- Health and education levels are much higher - Basic human capital approach – focuses
in high-income countries on the indirect ability to increase well-
being by increasing incomes.
- With higher income, people and governments - The impact of human capital
can afford to spend more on education and investments in developing countries
health, and with greater health and education, can be quite substantial.
higher productivity and incomes are possible. - Incomes vary over the life cycle for
-We need a multipronged strategy to address the people with various levels of education.
stubborn problems of absolute poverty. - Those with higher levels of education
start full-time work at a later age
- People will spend more on human capital but their incomes quickly outpace those
when income is higher. But even if we were who started working earlier.
able to raise incomes without a large - Future income gains from education
improvement in health and education, we could must be compared with the total costs
not count on that income increase being incurred to understand the value of
used to adequately invest in children’s human capital as an investment.
education and health. - Education costs include direct tuition and
- Income is spent on other goods besides other related expenditures.
food, and part of the increased food
expenditures is used to increase food
variety without necessarily increasing the Child Labor
consumption of calories. - Child labor is a widespread problem in
Investing in Education and Heath: The Human developing countries. When children
Capital Approach under age 15 work, their labor time
disrupts their schooling and, in a
majority of cases, prevents them from
- Analysis of investments in health attending school altogether.
and education is unified in the Compounding this, the health of child
human capital approach. workers is significantly worse, even
accounting for their poverty status, than
 that of children who do not work; protect natural resources, preserve biodiversity,
physical stunting among child laborers is and mitigate the impacts of climate change.
very common. In addition, many Sustainable agriculture contributes to the long-
laboring children are subject to term health and resilience of ecosystems and
especially cruel and exploitative working rural communities.
conditions. 5. Economic Growth: Agriculture and
agribusinesses are key drivers of economic
The imperative of agricultural progress and
growth in many developing countries.
rural development
Strengthening the agricultural sector can
stimulate economic activity, promote value
The imperative of agricultural progress and
addition, and enhance export potential, leading
rural development is a critical aspect of
to overall economic development.
sustainable economic growth and poverty
6. Resilience to Shocks: Improving agricultural
reduction, particularly in developing countries.
practices and rural development can increase
Agriculture plays a crucial role in providing
the resilience of communities to shocks such as
food security, generating employment, and
natural disasters, economic crises, and health
supporting rural livelihoods. Advancing
emergencies. Diversified and well-managed
agricultural practices and investing in rural
agricultural systems can better withstand and
development are essential to address various
recover from adverse events.
global challenges and achieve broader
7. Access to Markets: Improved infrastructure
development goals. Here are some key reasons
and rural development facilitate better access to
why agricultural progress and rural
markets for farmers, enabling them to sell their
development are imperative:
produce at fair prices and reach broader
markets, both domestically and internationally.
1. Food Security: Agriculture is the primary
8. Gender Equality: In many rural societies,
source of food for the world's population.
women play a significant role in agriculture.
Advancements in agricultural technology,
Empowering women in agriculture through
practices, and infrastructure are essential to
access to resources, education, and training not
increase productivity and ensure an adequate
only benefits their well-being but also
and stable food supply for a growing global
contributes to better agricultural outcomes and
population.
development outcomes overall.
2. Poverty Alleviation: The majority of the
9. Food Quality and Nutrition: Agricultural
world's poor live in rural areas and depend on
progress can support the production and
agriculture for their livelihoods. Enhancing
availability of diverse, nutritious crops,
agricultural productivity and diversification can
contributing to improved diets and better
lift people out of poverty, reduce income
nutrition outcomes, particularly for vulnerable
disparities, and improve living standards in
populations.
rural communities.
3. Employment and Livelihoods: Agriculture
remains the largest employer in many
Agricultural Growth: Past Progress and
developing countries. Investing in rural
Current Challenges
development and modernizing agricultural
Addressing the imperative of agricultural
practices can create employment opportunities,
progress and rural development requires a
especially for rural youth, and help reduce
multi-faceted approach involving investments in
urban migration and its associated challenges.
research and development, infrastructure,
4. Sustainable Development: Sustainable
education, extension services, access to credit,
agricultural practices, such as conservation
and supportive policies. Collaborative efforts
farming and agroforestry, are essential to
between governments, international
organizations, the private sector, and civil rising temperatures affecting crop yields and
society are essential to ensure sustainable and livestock production.
inclusive rural development that benefits 2. Land Degradation: Soil degradation,
farmers, communities, and the broader society. deforestation, and overexploitation of natural
resources have led to declining land
Agricultural growth has played a crucial role in productivity and reduced arable land, impacting
shaping human societies throughout history. agricultural sustainability.
The past progress in agriculture has led to 3. Water Scarcity: Many regions face water
significant advancements in food production, scarcity, impacting agricultural production and
rural livelihoods, and economic development. exacerbating competition for water resources
However, the agricultural sector faces various between agriculture, industry, and domestic use.
challenges in the present day. Let's explore the 4. Urbanization: Rapid urbanization leads to
past progress and current challenges of land conversion and the loss of agricultural
agricultural growth: land, affecting food production and rural
livelihoods.
Past Progress: 5. Rural Poverty: Despite progress in some
1. Green Revolution: In the mid-20th century, areas, rural poverty persists in many developing
the Green Revolution brought about a countries, with farmers often facing low income
transformation in agriculture through the levels, limited access to credit, and inadequate
adoption of high-yielding crop varieties, social safety nets.
improved irrigation, and increased use of 6. Input Costs: The rising costs of agricultural
fertilizers and pesticides. This led to substantial inputs, such as seeds, fertilizers, and pesticides,
increases in crop yields, boosting food can burden farmers, particularly smallholders
production and reducing hunger in many parts with limited access to affordable credit.
of the world. 7. Food Security: Despite past progress,
2. Technological Advancements: Advancements challenges in achieving food security persist,
in agricultural technologies, such as with millions of people still facing hunger and
mechanization, improved irrigation techniques, malnutrition globally.
precision agriculture, and biotechnology, have 8. Inequality: Disparities in land ownership,
contributed to increased productivity and access to resources, and market opportunities
efficiency in the sector. can lead to social and economic inequalities
3. Infrastructure Development: Investments in within the agricultural sector.
rural infrastructure, including roads, storage
facilities, and market linkages, have facilitated 9. Sustainable Practices: The need for
better access to markets and reduced post- sustainable agricultural practices, conservation
harvest losses. of biodiversity, and reducing the environmental
4. Market Access: Globalization and trade impact of agriculture remains a priority.
liberalization have expanded market
opportunities for agricultural products, enabling Addressing these challenges requires
farmers to access international markets and coordinated efforts from governments,
diversify their income sources. international organizations, research
institutions, and the private sector. Investments
Current Challenges: in agricultural research, extension services,
1. Climate Change: Climate change poses sustainable practices, climate-smart agriculture,
significant challenges to agriculture, with and rural infrastructure are essential to ensure
increased frequency and intensity of extreme agricultural growth while safeguarding natural
weather events, changes in rainfall patterns, and resources and livelihoods for current and future
generations. Additionally, policies that promote
inclusive agricultural development, support
smallholder farmers, and address rural poverty 5. Sustainable Resource Management: Rural
are crucial to achieve sustainable and equitable areas often encompass significant natural
agricultural growth. resources, such as forests, water bodies, and
biodiversity. Sustainable rural development
Why rural development is important to focuses on conserving these resources and
Philippines promoting responsible management practices
Rural development is crucial to the Philippines for long-term environmental sustainability.
for various reasons, as it directly impacts the
well-being of rural communities and contributes 6. Social Services and Infrastructure: Investing
to the overall economic and social progress of in rural development improves access to
the nation. Here are some key reasons why rural essential services such as education, healthcare,
development is important to the Philippines: clean water, and sanitation. Building
infrastructure such as roads, bridges, and
1. Poverty Reduction: A significant portion of electricity networks enhances mobility and
the Filipino population resides in rural areas, connectivity, improving overall well-being and
and rural communities often face higher levels economic opportunities for rural communities.
of poverty compared to urban areas. Rural
development initiatives that improve 7. Social Cohesion and Inclusivity: Rural
infrastructure, livelihood opportunities, and development fosters social cohesion by
access to basic services can help reduce poverty strengthening community ties and promoting
and improve the living conditions of rural local participation in decision-making
residents. processes. Inclusive rural development ensures
that marginalized and vulnerable groups,
2. Balanced Regional Growth: Focusing on including indigenous communities, have
rural development ensures a more balanced equitable access to development benefits.
distribution of economic activities and
development across different regions of the 8. Disaster Resilience: Many rural areas are
country. This reduces the concentration of prone to natural disasters such as typhoons,
population and economic activities in urban floods, and landslides. Rural development can
centers, alleviating pressures on infrastructure incorporate disaster risk reduction measures,
and services in cities. making communities more resilient and better
prepared to face adverse events.
3. Agriculture and Food Security: Agriculture is
a key economic sector in rural areas. Rural 9. Cultural Heritage and Identity: Rural areas
development initiatives that promote sustainable often preserve cultural traditions, customs, and
and modern agricultural practices, access to heritage that are part of the Philippines' identity.
credit, technology, and markets can boost Rural development initiatives can help preserve
agricultural productivity and contribute to food and promote these cultural assets, contributing
security for the entire nation. to national pride and tourism opportunities.

4. Employment and Livelihoods: Rural 10. National Stability: Strengthening rural

development can create job opportunities and communities and economies contributes to
diversified livelihoods in non-agricultural overall national stability and reduces the
sectors, including agro-processing, small-scale potential for social unrest and migration-related
industries, and services. This can help reduce challenges in urban centers.
rural-urban migration and provide a better
quality of life for rural residents.
In conclusion, rural development is critical to 5. Rural Development: Strengthening
the Philippines as it addresses issues of poverty, agricultural activities and promoting
regional imbalances, food security, agricultural value chains can foster rural
employment, and environmental sustainability. development, improving access to
By focusing on inclusive and sustainable rural infrastructure, social services, and economic
development, the country can achieve more opportunities in rural communities.
equitable economic growth, improve living
standards for rural populations, and enhance its 6. Export Potential: The Philippines has a
overall development trajectory. comparative advantage in producing various
agricultural products. Agricultural progress can
Why agricultural progress is important to enhance the competitiveness of these products
Philippines in international markets, leading to increased
Agricultural progress is of paramount agricultural exports and foreign exchange
importance to the Philippines due to its earnings.
significant impact on the nation's economy,
food security, employment, poverty reduction, 7. Industrial Linkages: Agriculture provides raw
and overall development. Here are some key materials for various industries, including agro-
reasons why agricultural progress is crucial to processing, textiles, and pharmaceuticals,
the Philippines: contributing to value addition and industrial
linkages.
1. Food Security: Agriculture is the backbone of
the country's food supply. Achieving 8. Climate Change Adaptation and Mitigation:
agricultural progress ensures a stable and Advancing agricultural practices and
sufficient food production, reducing technologies can enhance the resilience of
dependency on food imports, and enhancing the farming systems to climate change impacts and
country's ability to feed its growing population. contribute to climate change mitigation efforts.

2. Economic Contribution: The agricultural 9. Environmental Sustainability: Sustainable

sector contributes significantly to the Philippine agricultural practices promote resource
economy. It is a major source of employment, conservation, biodiversity protection, and
income, and foreign exchange earnings through environmental sustainability, safeguarding
agricultural exports. natural resources for future generations.

3. Poverty Reduction: A substantial portion of 10. Social Stability: Strengthening the

the population in the Philippines lives in rural agricultural sector and improving rural
areas and depends on agriculture for their livelihoods contribute to social stability by
livelihoods. Agricultural progress can lift reducing income disparities, enhancing rural-
farmers and rural communities out of poverty urban balance, and addressing migration-related
by improving productivity, incomes, and access challenges.
to markets.
11. Food Diversity and Nutrition: Agricultural
4. Employment Generation: Agriculture progress can promote the production of diverse
remains a vital source of employment in the and nutritious crops, contributing to improved
Philippines, providing livelihood opportunities diets and better nutrition outcomes for Filipinos.
for millions of people, particularly in rural
areas. 12. Research and Innovation: Advancing
agriculture encourages investments in
agricultural research and innovation, leading to
the development of new technologies, improved naglalayong mapabuti ang ekonomiya, lipunan,
seeds, and better farming practices. at kapaligiran.
3. Sibil na Lipunan (Civil Society):
To realize these benefits, the Philippine
government, along with relevant stakeholders, Ang sibil na lipunan o civil society ay binubuo
should prioritize agricultural development, ng mga non-government organizations (NGOs),
invest in research and extension services, mga samahan, mga relihiyosong organisasyon,
improve access to credit and markets for at mga indibidwal na aktibong nakikilahok sa
farmers, promote sustainable practices, and mga isyung panlipunan.
develop supportive policies that foster the
growth of the agricultural sector. By doing so, May mga pagkakataon kung saan maaaring
the Philippines can harness the potential of its magkaroon ng “government failure” o kabiguan
agricultural resources and contribute to the ng pamahalaan sa pagtupad ng kanilang mga
country's overall economic growth and tungkulin at responsibilidad. Ang ganitong mga
development. sitwasyon ay maaaring magbunsod ng mas
pabor na paggamit ng mga pamilihan kaysa sa
Agricultural progress pamamahala o pagpaplano ng pamahalaan.
Agricultural progress refers to the positive and Narito ang mga paliwanag:
continuous advancement and improvement in Kabiguan ng Pamahalaan (Government
the agricultural sector. It encompasses a range Failure):
of positive changes and developments that lead
to increased productivity, efficiency, and 1. Korupsiyon: Ang korupsiyon ay isa sa
sustainability within the agriculture industry. mga pangunahing dahilan ng government
Agricultural progress involves adopting new failure. Kapag ang mga opisyal ng pamahalaan
technologies, implementing improved practices, ay nagsasamantala sa kanilang posisyon para sa
and making innovative changes to enhance personal na interes at hindi para sa kapakanan
agricultural outputs and outcomes. ng mamamayan, maaaring maging hadlang ito
sa tamang pagpaplano at implementasyon ng
mga programa at patakaran.
2. Kakulangan sa Kapasidad: Minsan, ang
Development Policymaking and the Roles of pamahalaan ay maaaring kulang sa kakayahan
Market, State, and Civil Society. at kaalaman upang matugunan ang mga
1. Merkado (Market): pangangailangan ng lipunan. Ito ay maaaring
magresulta sa hindi epektibong pagpaplano at
Ang merkado ay may malaking papel sa pagbuo pagpapatupad ng mga proyekto at programa.
ng mga polisiya ng pag-unlad dahil ito ang
lugar kung saan nagaganap ang mga Pagpili sa Pamilihan kaysa sa Planning:
transaksyon at kalakalan ng mga kalakal at 1. Malawakang Partisipasyon: Minsan, ang
serbisyo. mas malawakang partisipasyon sa mga
2. Estado (State): pamilihan ay nagbibigay ng mas mabilis at mas
epektibong tugon sa mga pangangailangan ng
Ang estado, o pamahalaan, ay may kritikal na mga mamimili. Sa pamamagitan ng mga
papel sa paghubog ng polisiya ng pag-unlad. Ito negosyo at merkado, ang mga produkto at
ang may hawak ng kapangyarihan at mga serbisyo ay maaaring mas mabilis na maging
instrumento upang magpatupad ng mga available at mas personalized sa mga
regulasyon, programa, at proyekto na kagustuhan ng mga mamimili.
2. Mabilis na Adaptasyon: Ang mga sa kalikasan at pag-unlad na may pag-iingat sa
pamilihan ay mas mabilis na makapag-ayos at kapaligiran.
makapag-adapt sa mga pagbabago sa
Ang mga Non-Government Organizations
ekonomiya at teknolohiya. Ito ay
(NGOs) at ang mas malawak na sektor ng
nagpapahintulot ng mas madaling pag-unlad ng
mamamayan ay may mahalagang papel sa
mga bagong produkto at serbisyo.
proseso ng pag-unlad ng isang bansa.
Ang “market economy” sa Filipino ay tinatawag
Narito ang mga mahahalagang tungkulin ng
na “ekonomiyang pamilihan.” Ito ay isang uri
mga NGOs at ang mas malawak na sektor ng
ng sistema ng ekonomiya kung saan ang mga
mamamayan:
pangangailangan ng kalakalan at pagpapasya sa
produksyon, distribusyon, at pagkonsumo ay 1. Pagpapalaganap ng Edukasyon at
batay sa mga interaksyon ng pamilihan o Kaalaman: Ang mga NGOs ay aktibong
merkado. nakikipagtulungan sa pagpapalaganap ng
edukasyon at kaalaman sa mga komunidad.
Ang ekonomiyang pamilihan ay kilala sa
Ipinaglalaban nila ang mga karapatan sa
pagiging dynamic at malikhaing. Ito ay
edukasyon at nagpapatakbo ng mga programa at
maaaring magtaguyod ng mas mabilis na pag-
proyekto para mapalawak ang access sa
unlad, mas malawakang pag-access sa mga
edukasyon, pagsasanay, at pagkatuto ng mga
produkto at serbisyo, at mas mataas na kalidad
mamamayan.
ng mga kalakal at serbisyo. Gayunpaman,
mahalaga rin na may tamang regulasyon at 2. Pagtulong sa Mahihirap at Marginalized:
pangangalaga ang pamahalaan upang maiwasan Isa sa mahalagang papel ng mga NGOs ay ang
ang mga negative na epekto ng ekonomiyang pagtulong sa mga mahihirap at marginalized na
pamilihan tulad ng monopolyo, korupsiyon, at sektor ng lipunan. Sila ay nagpapatupad ng mga
pag-aabuso sa kapangyarihan. programa para sa mga kapatid nating may
kapansanan, kababaihan, kabataan, indigenous
Ang “Washington Consensus” ay isang termino
peoples, at iba pang mga nangangailangan.
na tumutukoy sa pangkalahatang patakaran at
pananaw hinggil sa papel ng estado sa pag- 3. Paggigiit sa Karapatan at Kalayaan: Ang
unlad ng ekonomiya. Ito ay unang naitaguyod mga NGOs ay nagiging boses ng mga hindi
noong mga dekada ng 1980 at 1990, at ito ay napapakinggang sektor ng lipunan.
isinulong ng mga ekonomista at mga Ipinaglalaban nila ang karapatan at kalayaan ng
organisasyong pandaigdigang pinansya na mga mamamayan at nagmumungkahi ng mga
nakabase sa Washington. pagbabago sa mga patakaran at batas.
Ang mga sumusunod na pagbabago sa 4. Environmental Conservation: Malaki rin
Washington Consensus ay kinikilala upang mas ang ambag ng mga NGOs sa pagprotekta ng
maging patas at mas epektibo ang pag-unlad: kalikasan at kapaligiran. Sila ay nagpapatupad
ng mga kampanya at programa para sa
Pangangalaga sa mga Mahihina at
environmental conservation, climate change
Marginalized: Ang mga bagong modelo ay
adaptation, at sustainability.
naglalagay ng mas malaking diin sa
pagpapalaganap ng pantay na oportunidad at Ang mas malawak na sektor ng mamamayan,
proteksyon sa mga mahihina at marginalized na kasama na ang mga indibidwal, komunidad, at
sektor ng lipunan. mga organisasyong hindi pampamahalaan, ay
may aktibong bahagi sa pagpapalaganap ng
Pagtutok sa Kapaligiran at Kalikasan: Kasama
pagbabago at pag-unlad sa lipunan. Ang
na rin sa mga bagong patakaran ang pagprotekta
pagtutulungan ng mga NGOs at mas malawak
na sektor ng mamamayan ay nagbubunga ng
mas matagumpay na pagtugon sa mga hamon at
pangangailangan ng lipunan. Sa pamamagitan
ng kanilang pagkilos at pakikipagtulungan, ang
mga ito ay nakapaglilikha ng positibong epekto
at nagpapalakas sa pag-unlad ng bansa.