Global Development Studies
Lectures 2020-2021
Lecture 1
For many millennia, people have been living at
subsistence levels (see the horizontal, flat line in
the graph above). Around the start of the
Industrial Revolution, GDP per capita increased
massively. In Malawi, GDP per capita is still close
to subsistence (relatively low nowadays compared
to that of the Netherlands). Western countries
have on average a quite high level off income per
capita. Countries like India and China also faced an
increase in GDP per capita.
- Japan’s GDP per capita started to stagnate
(afvlakken) around 1990s. From 1990
onwards, an increased gap in GDP per capita
emerged between Japan and Germany
- GDP per capita in Germany is following the US
pattern
- S. Korea catches up from 1970s onwards and is
still continuing to catch up with USA, Japan and
Germany.
- There is an increasing gap in GDP per capita
between US and Brazil (Brazil’s GDP per capita
increases at a much slower rate – this started
1980s). Before 1980, Brazil’s GDP was growing
at the same rate as USA.
- China started to catch up in GDP from late 70s from very low levels – because China decided
to open up for foreign countries in the 1970s. Since then it’s catching up rapidly.
- GDP per capita in China at the moment is the level of S. Korea in the 90s.
- Currently the average income of Chinese is ¼ of that of US. However, there are 4 times as
many Chinese → so in total their economy is bigger than that of the US.
Why is Tanzania poor (low GDP per capita)? Why is US rich?
- poverty trap, poor educational system / low level of educated citizens, exploitation by other
countries, limited infrastructure, bad nutrition, high birth rates
→ many potential explanations. Explanatory growth framework helps to structure these
potential explanations.
Economies as social systems: the need to go beyond simple economics
-social system = interdependent relationships between economic and non-economic factors
-success or failure of development policy = importance of taking account of institutional and
,structural variables along with more traditional economic variables
→ Policies can either result in successes or failures
-Socio-economic outcomes are influenced
by proximate sources
→ use of land, labor and capital influence
the socio-economic outcomes. These 3
factor resources can be used to help
determine the productivity in which these
factors are being used.
➔ Improve productivity
o Low productive activities → high productive activity: f.e. selling food on the streets. If
those workers could move to a higher productive activity, increase in welfare is likely
to occur and/or welfare in other socio-economic outcomes.
o The way production is being organized can improve (by technological change)
o Over time you can get a higher price for the things that you trade in the international
market (terms of trade)
➔ Proximate source: there is a reasonable way to measure and see those in our economy. We
know the amount of workers, we know how much is being invested, etc.
➔ Proximate sources are influenced by ultimate sources of growth
o F.e. impact of aid, e.g. how open is a country to international trade
o Ultimate sources of growth are fixed → things that hardly change in a country, such
as ethnicity
o This framework will help understand why a certain country is poor, whereas another
one is rich
Why are some countries rich and other countries poor?
- Internal explanations – what’s happening within an economy?
- lack of investment and structural change
- social and technological capability
- institutions
- role of government
- informal institution, e.g. level of trust for institution
- External explanations
- International trade, e.g. do countries receive a fair price for their goods
- Colonial past
- International order
,Expected to be in the exam!
Why do some countries develop faster than other countries?
- Time dimension: some countries are currently rich and some poor. This is not fixed/stable over time
- Relationships between rich and poor countries changes over time. It’s not stable.
➔ Vertical = GDP per capita
➔ Between 1000 and 1300: China’s GDP was higher than that in West-Europe
➔ Around 1800: Europe’s GDP per capita started to accelerate. From the late 70s, China has
been catching up
➔ NB: The current situation is likely to be very different in 20 years’ time
[Hij heeft een aantal dias over geslagen ]
Problems associated when using GDP per capita as an indicator of socio-economic development
o Hard to measure GDP per capita. Purchasing Power Parity theories are used to
compare GDP per capita from different countries. As PPP helps to measure to what
people can purchase with a similar amount of money in a particular economy. As
prices of similar goods are different in countries, so this has to be taken into account
when comparing the GDP per capita.
, o Hard to use GDP per capita to measure the size of an economy in a particular country.
In developing countries, lots of people work in the informal sector. Thus, their
incomes aren’t administered by the government to avoid taxes. This also means that
the GDP per capita is not fully representable, since it is missing the income of people
working in the informal sector.
o GDP per capita doesn’t account for inequality within countries. GDP per capita is just
an average income per person in a country – it doesn’t inform you how wealth is
distributed within a country/economy. However, in many countries (especially
developing countries), the income distribution is very unequal.
▪ F.e. in the US wealth has increased during the past decade for the top
wealth. For medium income, their income stayed stable or perhaps even
declined.
o Socio-economic development is wider than income increases
- In developed countries, are people happier? Reduction in poverty? Sustainable development?
What is meant by development?
Capability Approach by Amartya Sen
- Mainly focused at what individuals are able to achieve
- It’s about beings and doings
- Quality of life is determined by looking at functionings and capabilities
o Functionings (as an achievement) = beings and doings, f.e. being well-nourished (NB:
possessing a bike is NOT a functioning, being able to travel yourself is a functioning)
o Capabilities (as freedoms enjoyed in terms of functionings) = the sense about the
functionings the person affectively has, what type of functionings can a person
enjoy? Being able to life a well-nourished, healthy, literate life.
o Possessions are inappropriate because it does not help people in what they are or
what they can do. Means are only valuable when people have the capabilities to use
it properly(f.e. owning a bike but can you ride it?)
- Some beings and doings in capability to function:
o Being able to live long
o Being healthy
o Being mobile
o Being able to take part in the life of the community
o Being happy – as a state of being – may be valued as a functioning
Three core values of development
1. Sustenance – the ability to meet basic needs
2. Self-esteem – to be a person
3. Freedom from servitude – to be able to choose/make your own choices
Human development index – holistic measures of living levels and capabilities
1. Health
2. Education
3. Income (in logs)
