Economic and Human Development

Defining Economic and Human Development

• Economic Development: The process of increasing a country's wealth through the diversification of goods and services and increasing production efficiency.

  • Progress involves a structural shift from agriculture to manufacturing (simple to sophisticated), ultimately transitioning to a service- and professional-dominated postindustrial economy.

  • Measured by structural shifts in production and gross domestic product (GDP) per capita.

• Human Development: The process of expanding the choices people have to lead lives they value, such as being well-fed, healthy, safe from violence, literate, numerate, and politically engaged.

• Human Development Index (HDI): A composite measure ranging from $0$ to $1$, evaluating three components:

  • Health (life expectancy at birth).

  • Knowledge (adult literacy rates and school enrollments).

  • Standard of living (purchasing power parity income).

  • In 2012, Norway held the highest score ($0.955$) and Mozambique the lowest ($0.313$).

• Inequality-Adjusted Human Development Index (IHDI): Accounts for internal inequality in the distribution of health, education, and income achievements.

  • Significant disparities between HDI and IHDI emerge in unequal nations (e.g., in 2012, the United States dropped from 3rd at $0.937$ to 16th at $0.821$; India dropped from $0.554$ to $0.392$).

Levels of Development and Global Poverty

• Classification Criteria:

  • World Bank: Classifies economies by per capita income into high-, upper-middle-, lower-middle-, and low-income categories.

  • United Nations Development Programme (UNDP): Categorizes nations by HDI into very high, high, medium, and low human development.

• Extreme vs. Relative Poverty:

  • Extreme (Absolute) Poverty: Life-threatening poverty, defined by the World Bank as living on less than $\text{\$}1.25$ a day (adjusted for purchasing power).

  • Relative Poverty: Deprivation relative to the surrounding society's income and wealth; generally not life-threatening.

• Poverty Trends and Regional Distribution:

  • Between 1990 and 2010, extreme poverty in developing regions fell from $43\%$ ($1.91\text{ billion}$ people) to $21\%$ ($1.22\text{ billion}$ people).

  • China: Accounted for three-fourths of global poverty reduction from 1981 to 2008, decreasing extreme poverty from $84\%$ to $13\%$.

  • Sub-Saharan Africa: Possesses the highest percentage of people living in extreme poverty and low capabilities.

  • South Asia: Holds the largest absolute number of people in extreme poverty and low capabilities.

State Capacity, Governance, and Development

• State Power:

  • Infrastructural Power: The capacity of a state to implement decisions and policies effectively across its territory.

  • Authoritative Power: The capacity of a state to get citizens to comply with its directives.

  • Weak states lack both powers, often failing to maintain basic public order or enforce laws outside capital cities (e.g., Afghanistan).

• Corruption: The misuse of public office for private gain by public officials, family, or political allies.

  • Creates a wide divergence between formal statutory rules and actual bureaucratic practice.

  • While rapid economic growth can occur alongside corruption in the short term (e.g., 19th-century United States, post-1980 China), sustained long-term development to high-income status requires low corruption levels.

• Democracy: Low-income states often exhibit weak democratic institutions, electoral manipulation, and voter coercion by local elites.

Explanations for Development Disparities

• Geography:

  • Jared Diamond (Guns, Germs, and Steel): Eurasia's east-west continental axis and native species of domesticable plants and large mammals enabled early agricultural surpluses, social stratification, specialized technology, and disease immunity.

  • Disadvantages persist for landlocked nations without navigable waterways, tropical disease zones (e.g., malaria endemicity), and countries with small internal markets.

  • Limitations: Fails to explain wide income divergence between geographically identical regions (e.g., South Korea vs. North Korea).

• Culture:

  • Max Weber: The Protestant ethic emphasized disciplined work, thrift, punctuality, and reinvestment rather than consumption.

  • David Landes: Emphasizes diligence, rationality, and productivity.

  • Francis Fukuyama: Emphasizes generalized social trust as an essential lubricant for complex economic coordination.

  • Limitations: Cannot easily account for sudden shifts in economic performance (e.g., China's post-1978 expansion).

• Colonialism:

  • European extraction of wealth, slave labor, and export commodities impoverished colonies (e.g., post-independence reparations imposed on Haiti by France).

  • Left legacies of single-commodity dependencies, arbitrary borders, and ethnic divisions.

  • Limitations: Fails to explain why some former colonies achieved high-income status (e.g., Canada, Singapore, South Korea) or why commodity windfalls did not automatically produce domestic development.

• Institutions (Daron Acemoglu and James A. Robinson):

  • Inclusive Economic Institutions: Secure private property rights, universal legal protections, and open competitive markets that incentivize investment.

  • Inclusive Political Institutions: Broad distribution of political power, rule of law, and constitutional constraints on executive authority.

  • Extractive Institutions: Concentrate wealth and power in a narrow elite (e.g., Zimbabwe under Robert Mugabe).

  • Settler Mortality Hypothesis: Regions with high European settlement established inclusive institutions; regions with high mortality or plantation economies established extractive institutions.

• Leadership: Strategic policy choices, institutional reforms, and coalition-building by state leaders (e.g., Park Chung Hee in South Korea, Paul Kagame in Rwanda).

Testing Per Capita Income Against Citizen Capabilities

• Physical Well-Being (Infant Mortality):

  • Higher GDP per capita strongly correlates with lower infant mortality rates.

  • The effect plateaus at higher income levels, with low-income states exhibiting wide variation (e.g., Haiti having significantly lower infant mortality than Sierra Leone at similar per capita income levels).

• Informed Decision-Making (Adult Literacy):

  • Higher per capita income corresponds to higher literacy.

  • Low-income nations can achieve universal literacy through targeted public policy (e.g., Armenia achieving $100\%$ adult literacy with a GDP per capita of $\text{\$}5{,}500$).

• Safety (Homicide Rates):

  • Homicide rates generally decline with higher income levels.

  • Notable exceptions exist: the United States exhibits an elevated homicide rate relative to high-income peer nations; mid-income Latin American and Caribbean nations exhibit high variance (e.g., Venezuela, Jamaica).

• Democracy:

  • Modest positive association between GDP per capita and democracy index scores.

  • Resource-rich autocracies (e.g., Qatar) remain significant outliers with high incomes and low democratic participation.