CHAPTER V DOMESTIC PROBLEMS AND POLICIES

Learning Objectives

At the end of the lesson, I am able to:

1. define the term poverty, absolute poverty;
2. demonstrate how the Lorenz Curve can be used to illustrate the distribution of
income;
3. compare and contrast the rate of population growth in LDC’s and that of modern
Developed nations;
4. discuss the various manifestations of the underutilization of labor;
5. identify government policies which will promote a better balance between urban and
rural economic and social opportunities;
6. explain what is meant by “integrated” rural development; and
7. explain what is meant by “economics of education”.

1. Poverty, Growth and Income Distribution

Economic growth reduces poverty because growth has little impact on income inequality.
In the data set income inequality rises on average less than 1.0 percent a year. Since income
distributions are relatively stable over time, economic growth tends to raise incomes for all
members of society, including the poor.
When economic growth is measured by GDP per capita, the statistical relationship
between growth and poverty reduction is still present, albeit not quite as strong. Economic
growth reduces poverty because growth has little impact on income inequality. In the data set
income inequality rises on average less than 1.0 percent a year. Since income distributions are
relatively stable over time, economic growth tends to raise incomes for all members of society,
including the poor. When growth is measured by survey mean income (consumption), the
elasticity of poverty with respect to growth is -2.59. In other words, on average, a 10-percentage
point increase in economic growth (measured by survey mean income) will produce a 25.9
percent decrease in the proportion of people living in poverty($1 a person a day).
The concept of development has been debated for a long time and has major
philosophical implications, which we will not discuss here (for a discussion, see Sen, 1989).
What we are concerned with here is changes in the economic welfare (or living standard) of
people, and this also has many dimensions. We will concentrate on three dimensions of
economic welfare, namely per capita income, income distribution, and poverty. It will be
assumed that, given a certain level of the other two variables, higher per capita income implies
higher welfare, whereas greater income inequality and poverty imply lower welfare. We will
focus on these three indicators, but to get a more complete picture of welfare levels, others could
supplement these. One example of a broader concept is UNDP’s Human Development Indicator
- a composite index based on (the log of) per capita income, life expectancy, and the literacy rate.
There are countries that do much better on this index than on per capita income alone, but there
is generally a high correlation between the two rankings. There is a vast literature on the
problems of measuring development. With regard to poverty, the main dividing line is between
income-consumption poverty measures and the rest.2 It is argued that an exclusive focus on
income and expenditures misses important aspects of well-being, which are considered more
important by the poor than income alone. While all researchers agree that poverty should be seen
as a multidimensional concept, the defense of income poverty measures is that income is a means
by which other needs are satisfied. On the other hand, one could argue that poverty should be
measured with output indicators, such as infant mortality, literacy, and enrolment rates, rather
than with an input indicator such as income.Against this viewpoint, one could argue that many
social indicators have a distributional element, and may improve although there is no
improvement of the well-being of the poorest.
While proponents of the different methods were for some time each arguing their own
case, there has been a shift towards more of a consensus, and even attempts to combine the
methods in assessing poverty. Comparative analyses using the different concepts show that some
indicators may be correlated, while others might not. Moreover, when quantitative analyses are
compared with participatory studies, inconsistencies in poverty patterns have sometimes been
found (Narayan et al, 1999). Although, at the aggregate level, a broader definition of poverty
does not change the number of poor, it expands the set of policies that are relevant for poverty-
alleviation (Kanbur and Squire, 1999). Still, income or consumption is bound to remain an
important part of any discussion of the consequences of economic policies and reforms on the
poor (Dercon, 2000). Economic reforms will be judged inter alia on their effect on gross
domestic product (GDP), and since both GDP and household income (consumption) are
measured in monetary terms, income (consumption) poverty-measures provide at least a starting
point.
2. Population Growth
Population growth is the increase in the number of individualsin a population. Global
human population growth amounts to around 83 million annually, or 1.1% per year. The
global population has grown from 1 billion in 1800 to 7.774 billion in 2020.
One way to understand the distribution of people across the world is to reform the world
map, not based on the area but according to population.
This is shown here in a population cartogram: a geographical presentation of the world
where the size of the countries is not drawn to the distribution of land, but according to the
distribution of people. The cartogram shows where in the world the global population was at
home in 2018.
The cartogram is made up of squares, each of which represents half a million people of a
country’s population. The 11.5 million Belgians are represented by 23 squares; the 49.5 million
Colombians are represented by 99 squares; the 1.415 billion people in China are represented by
2830 squares; and the entire world population of 7.633 billion people in 2018 is represented by
the total sum of 15,266 squares.
 As the size of the population rather than the size of the territory is shown in this map you
can see some big differences when you compare it to the standard geographical map we’re most
familiar with. Small countries with a high population density increase in size in this cartogram
relative to the world maps we are used to-look at Bangladesh, Taiwan, or the Netherlands. Large
countries with a small population shrink in size (look for Canada, Mongolia, Australia or Russia)
3. Unemployment
Unemployment is a term referring to individuals who are employable and seeking a job
but are unable to find a job. Furthermore, it is those people in the workforce or pool of people
who are available for work that does not have an appropriate job.
Unemployment occurs when a person who is actively searching for employment is unable
to find work. Unemployment is often used as a measure of the health of the economy. The most
frequent measure of unemployment is the unemployment rate, which is the number of
unemployed people divided by the number of people in the labor force.
Unemployment is a key economic indicator because it signals the ability (or inability) of
workers to readily obtain gainful work to contribute to the productive output of the economy.
More unemployed workers mean less total economic production will take place than might have
otherwise. And unlike idle capital, unemployed workers still need to maintain at least subsistence
consumption during their period of unemployment. This means an economy with high
unemployment has lower output without a proportional decline in the need for basic
consumption. High, persistent unemployment can signal serious distress in an economy and even
lead to social and political upheaval.
Conversely, a low unemployment rate means that the economy is more likely to be
producing near its full capacity, maximizing output, and driving wage growth and rising living
standards over time. However, extremely low unemployment can also be a cautionary sign of an
overheating economy, inflationary pressures, and tight conditions for businesses in need of
additional workers.

While the definition of unemployment is clear, economists divide unemployment into

many different categories. The two broadest categories of unemployment are voluntary and
involuntary unemployment. When unemployment is voluntary, it means that a person has left his
job willingly in search of other employment. When it is involuntary, it means that a person has
been fired or laid off and must now look for another job. The coronavirus pandemic affecting the
U.S. and the world in 2020, for example, is causing massive levels of involuntary
unemployment.

4. Rural-Urban Migration
Rural-urban migration is the movement of people from the countryside to the city.
This causes two things to happen:
1. Urban growth - towns and cities are expanding, covering a greater area of land.
2. Urbanization - an increasing proportion of people living in towns and cities.

Rural-urban migration is a form of so-called internal migration which means a movement

within a country and which stays in contrast to international or intercontinental migration. It
refers to the movement of people from the countryside respectively the rural areas into the cities,
often the metropolitan cities of a country. This change of residence is often connected with the
migration of labor and a career change from primary to second or third sector - not necessarily,
though, as it can refer to the migration of people who are not working in agriculture or farming
as well.

It is obvious that these developments always show their two sides: one side or the area of
destination gains population whereas the other side respectively the area of origin loses people.
One always has to keep that in mind because interaction, networking, and communication
between both sides are absolutely necessary in trying to achieve a balanced development of both
rural and urban areas. There are different reasons that cause rural-urban migration in developing
countries - they are the so-called push and pull factors. They can be seen as a simultaneous
analysis of factors that force migrants out of rural areas (push-factors) and factors that attract
migrants to urban areas. Factors and determinants of migration are rather diverse and they can be
split up in economic and non-economic reasons:

Effects of rural-urban migration

With this push and pull factors in mind one can imagine that there are crucial changes
and results in both areas of origin and destination caused by these movements from the
countryside to the city. The increasing numbers of people moving towards the large urban areas
cause three things to happen.

First - urban growth which means that towns and cities are spatially expanding. They
cover an increasing area of land, mainly because there aren’t enough housing facilities in the city
itself so that new incomers often have to move to shanty towns that are increasing in size and
number.

Second - urbanization which refers to the fact of a significant increase in the proportion
of people living in cities in the total population.

Third - rural depopulation which usually means that large numbers of working age
people migrate from the countryside to earn more money in the city. But then they leave behind
the very old and the very young, causing further problems in rural development as the young,
skilled adults are missing. At the same time, it has to be mentioned that rural-urban migration
also can have a positive effect on the rural areas namely by the fact that many migrants once
settled in a city remit to their family in the rural area of origin - money that could contribute to
further development in the village of origin

What can be stated at this point is that the attraction to urban areas is high because people
think that they will have better opportunities to work there. Indeed, for some of their life
becomes better and living conditions improve. However, a lot of migrants end up in poverty
because many cities are not able to absorb the large influx of new residents properly. This leads
to the association of rural-urban-migration with problems like poverty, insufficient sanitary
conditions, sub-standard housing, growth of slums, and shantytowns increasing air pollution,
congestion, crime, or insecurity. Which of these factors are more challenging and urgent is
regionally different (for instance, China quotes air pollution, crime, and congestion as negative
consequences whereas Ghana presents slums, poverty, and lower quantity and quality as the
main issues).

Obviously, there is no universally valid evidence possible about the question of who
migrates most. Still, the migration decision has shown to be somehow selective in society. It
mainly concerns young adults who already have relatives in town, because “they are more likely
to have a positive net expected return on migration due to their longer remaining life
expectancy” (LALL et al., 2006: 4). Additionally, internal migration has a gender aspect in many
countries as most migrants are young male adults. Usually, urban job markets offer a large share
of occupations available to rural male migrants; another reason might be the fact that “men bear
lower risks of vulnerability than women when migrating” (LALL et al., 2006: 4), as women
usually migrate less or to a shorter distance - typically they specialize in different economic
activities (services and processing).

4. Education and Development

Education is fundamental to development and growth. Because growth, development, and

poverty reduction depend on the knowledge and skills that people acquire, not the number of
years that they sit in a classroom, we must transform our call to action from Education for
Allto Learning for All. Jan 28, 2011

What Is Educational Development?

Educational development is a sub-discipline of higher education research and practice.

Specifically, it is about:

 supporting and enhancing the design and development of high-quality student learning
experiences
 facilitating positive change in teaching and learning in post-secondary institutions at the
individual, program/department and institutional levels
 enhancing teaching and learning practices, curriculum design and learning support
including the appropriate use of learning technologies
 helping institutions function as robust, evidence-based, student-centered learning
communities
 promoting the scholarship of teaching, learning, and research into higher education goals
and practices
 Educational development is about the continuous professional and personal growth of faculty
members, and the ongoing evolution of teaching and learning across the entire university. It is
both theory and practice, both a discipline and a profession and both with clarity and uncertainty.

It is an invisible job that many faculty members, deans, associate deans, and chairs do daily –
most times without knowing it labeled as such.

Educational development is a way to initiate and respond to change. It is an enhancement to

the roles we already play by taking risks with new practices and communicating our discoveries
to colleagues. Educational development allows us to take a proactive responsibility for
onboarding and mentoring new faculty, engaging in curriculum redesign or renewal and driving
forward new changes at the department and Faculty levels.

Sources: Teaching Commons @ York University; Stefani, L. (2003). What is staff and
educational development? In P. Kahn, P. & D. Baume (Eds.), A guide to staff and educational
development (pp. 9–23). SEDA Series. London: Kogan Page.

Dimensions of Educational Development

Educational development is about facilitating positive change in teaching and learning in
post-secondary institutions at the individual, program/department, and institutional levels. It is
about helping these institutions function as robust, evidence-based, student-centered learning
communities. The person undertaking educational development activities will wear many hats,
fulfill many roles, and be engaged in many activities. Here are just some of the dimensions of the
field of educational development.

6. Agricultural Transformation and Rural Development

Agricultural transformation is the process by which individual farms shift from highly
diversified, subsistence-oriented production towards more specialized production-oriented
towards the market or other systems of exchange (e.g., long-term contracts). The process
involves a greater reliance on input and output delivery systems and increased integration of
agriculture with other sectors of the domestic and international economies. Agricultural
transformation is a necessary part of the broader process of structural transformation, in which an
increasing proportion of economic output and employment is generated by sectors other than
agriculture. “It is in the agricultural sector that the battle for long-term economic development
will be won or lost.” (Gunnar Myrdal, Nobel laurate in Economics). “Many development policies
continue to wrongly assume that farmers are men” (World Bank 2018).
The Imperative of Agricultural Progress and Rural Development
If the migration of people with or without school certificates to the cities of Africa, Asia,
and Latin America is proceeding at historically unprecedented rates, a large part of the
explanation can be found in the economic stagnation of outlying rural areas. Despite real
progress, some 2 billion people in the developing world grind out a meager and often inadequate
existence in agricultural pursuits.
Traditionally, in economic development, agriculture has been assumed to play a passive
and supportive role. Its primary purpose was to provide sufficient low-priced food and
manpower in the expanding economy, which was thought to be a dynamic “leading sector” in
any overall strategy of economic development.
Today, development economics have come to realize that far from playing a passive,
supportive role in the process of economic development, the agricultural sector in particular and
the rural economy, in general, must play an indispensable part in any overall strategy of
economic progress, especially for the low-income developing countries.
Agriculture and employment-based strategy of economic development require at minimum three
basic complementary elements such as:
1. Acceleratedoutputgrowth through technological, institutional, and price incentive changes
designed to raise the productivity of small farmers.
2. Rising domestic demand for agricultural output derived from an employment-oriented urban
development strategy, and
3. Diversified, non-agricultural, labor-intensive rural development activities that directly and
indirectly support and are supported by the farming community.
To a large extend, therefore, agricultural and rural development has come to be regarded
by many economists as the sine qua non of national development. Without such integrated rural
development, in most cases, industrial growth either would be stultified or, if it succeeded, would
create such severe internal imbalances in the economy that the problems of widespread poverty,
inequality, and unemployment would become even more pronounced.
7. Environment and Development
Environment and Development
ESCAP pursues a development agenda that focuses on integrating environmental
sustainability into development policymaking, in particular by turning resource constraints and
the climate crisis into an economic opportunity that generates a double dividend of higher
economic growth necessary to reduce poverty with lower environmental impact by improving
the efficiency of resource use and increasing investments in human and natural capital.

Economic growth cannot be an end in itself. Gains from current growth have not been
evenly distributed and environmental and social externalities are growing worse. However,
poverty reduction and decent job creation are not possible without economic growth. This is why
we need economic growth with different economic, social, and ecological qualities, such as high
economic dynamism, social inclusion, and ecological sustainability. The green growth approach,
promoted in the ESCAP region since 2005, focuses on improving the ecological quality of
economic growth as an important tool for sustainable development and is a key strategy for
delivering the green economy in the context of sustainable development and poverty eradication.
 These approaches underpin ESCAP’s direction in integrating environment and
development policymaking, and in addressing the challenges of rapid urbanization, water
resource management, and energy security. Recognizing that countries share many development
challenges, but have different aspirations and development contexts, the secretariat is supporting
building capacity, implementing pilot projects, facilitating the sharing of best practices, and
forging new approaches that can enable member States to better cope with emerging
developmental challenges through the strengthening of regional cooperation.

Name: _______________________________ Date: ________________

Course/Section: __________________________ Instructor: _______________

ACTIVITY 5.1

QUESTIONS FOR DISCUSSIONS

1. Define the term poverty and absolute poverty.

2. Ineffective management is shrinking the fundamental roots of the enterprise economy. Is this
happening in developing countries?

3. Immediate outcome of Corona crisis is increased unemployment except for morbidity &
mortality.” What will be the long-term effects on the economy?

4. COVID 19 will be going to hit SDG objective to zero hunger. What will be the measures to
overcome the food crisis especially the least developed countries?
5. What will be the socio-economic impact of corona pandemic spread?

6. Why adoption of precision agriculture in developing countries is still infirm?

7. What are the characteristics of rural and urban development? What are the differences and
similarities?

8. What are the challenges facing developing countries to transfer environmentally friendly
technologies?
References:

https://swopec.hhs.se/gunwpe/papers/gunwpe0032.pdf

https://ourworldindata.org/world-population-growth

https://www.investopedia.com/terms/u/unemployment.asp

https://www.grin.com/document/180759

Sources: Teaching Commons @ York University; Stefani, L. (2003). What is staff and
educational development? In P. Kahn, P. & D. Baume (Eds.), A guide to staff and educational
development (pp. 9–23). SEDA Series. London: Kogan Page.

https://ciel.viu.ca/scholarly-teaching-practice/leading-teaching-and-learning/what-educational-
development

https://www.academia.edu/40330662/Agricultural_Transformation_and_Rural_Development
https://www.researchgate.net/publication/303748985_Environment_and_Development