Apply Now! VACANCY FOR THE POSITION OF HEAD OF TRAINING AND RESEARCH, AFRICAN INSTITUTE FOR ECONOMIC DEVELOPMENT AND PLANNING (IDEP)

Name: ABUGU JONAS FRANK
REG NO:2018/SD/37266
DEPARTMENT:EDU/ECONOMICS
LEVEL: 3/5
COURSE CODE:ECO 361
COURSE TITLE: DEVELOPMENTPMENT CONOMICS
PURPOSE: ASSIGNMENT.
Question 1:What can be learned from the historical records of economic progress in the now developed world? Are the initial conditions similar or different for contemporary developing countries from what the developed countries faced on the eve of their industrialization.

By the end of the 1950s the experience gained from efforts to promote economic development showed great differences among developing countries. Some had broken away relatively quickly from the import-substitution, government-control and -ownership pattern that had been the early development wisdom. Others persisted with the same policies for several decades. A great deal was learned from the experiences of different developing countries.

The importance of agriculture

Despite early emphasis on industrialization through import substitution, a first major lesson of postwar experience was that there is a close connection between the rate of growth in the output of the agricultural sector and the general rate of economic development. The high rates of economic growth are associated with rapid expansion of agricultural output and low rates of economic growth with the slow growth of agriculture. This is (in hindsight, at least) to be expected, since agriculture forms a large part of the total domestic product and of the exports of the developing countries. What is more interesting is that the expansion of agricultural output was by no means confined to those countries with an abundant supply of unused land to be brought under cultivation. Taiwan and South Korea, with some of the highest population densities in the world, were able to expand their agricultural output rapidly by a vigorous pursuit of appropriate policies. These included the provision of adequate irrigation facilities, enabling a succession of crops to be grown on the same piece of land throughout the year; the use of high-yielding seeds and fertilizers, which raised the yields per acre in a dramatic fashion; provision of adequate incentives for producers by setting producer prices at reasonable levels; and improvements in credit and marketing facilities and a general improvement in the economic organization of the agricultural sector. Agricultural development is important because it raises the incomes of the mass of the people in the countryside; in addition, it increases the size of the domestic market for the manufacturing sector and reduces internal economic disparities between the urban centres and the rural districts.

The role of export.

A second conclusion to be drawn from
experience is the close connection between export expansion and economic development. The high-growth countries were characterized by rapid expansion in exports. Here again it is important to note that export expansion was not confined to those countries fortunate in their natural resources, such as the oil-exporting countries. Some of the developing countries were able to expand their exports in spite of limitations in natural resources by initiating economic policies that shifted resources from inefficient domestic manufacturing industries to export production. Nor was export expansion from the developing countries confined to primary products. There was very rapid expansion of exports of labour-intensive manufactured goods. This phenomenon occurred not only in the extremely rapidly growing, newly industrialized countries (NICs)—Singapore, South Korea, and Taiwan, as well as Hong Kong—but also from other developing countries including Brazil, Argentina, and Turkey. Countries that adopted export-oriented development strategies (of which the most notable were the NICs) experienced extremely high rates of growth that were regarded as unattainable in the 1950s and ’60s. They were also able to maintain their growth momentum during periods of worldwide recession better than were the countries that maintained their import substitution policies.
Analysts have pointed to a number of reasons why the export-oriented growth strategy seems to deliver more rapid economic development than the import substitution strategy. First, a developing country able to specialize in producing labour-intensive commodities uses its comparative advantage in the international market and is also better able to use its most abundant resource—unskilled labour. The experience of export-oriented countries has been that there is little or no disguised unemployment once labour-market regulations are dismantled and incentives are created for individual firms to sell in the export market. Second, most developing countries have such small domestic markets that efforts to grow by starting industries that rely on domestic demand result in uneconomically small, inefficient enterprises. Moreover, those enterprises will typically be protected from international competition and the incentives it provides for efficient production techniques. Third, an export-oriented strategy is inconsistent with the impulse to impose detailed economic controls; the absence of such controls, and their replacement by incentives, provides a great stimulus to increases in output and to the efficiency with which resources are employed. The increasing capacity of a developing country’s entrepreneurs to adapt their resources and internal economic organization to the pressures of world-market demand and international competition is a very important connecting link between export expansion and economic development. It is important in this connection to stress the educative effect of freer international trade in creating an environment conducive to the acceptance of new ideas, new wants, and new techniques of production and methods of organization from abroad.

The negative effect of controls

Another major lesson that was learned is that poor people are, if anything, more responsive to incentives than rich people. Nominal exchange rates that are pegged without regard to domestic inflation have strong negative effects on incentives to export; producer prices for agricultural goods that are set as a small fraction of their world market price constitute a significant disincentive to agricultural production; and controls on prices and investment serve as significant deterrents to economic activity. Indeed, in most environments, controls lead to “rent-seeking” behaviour, in which resources are diverted from productive activity and instead are used to try to win import licenses, or to get the necessary bureaucratic permissions. In addition, in many countries, “parallel,” or black, markets emerged, which diverted resources from activities in the official sector. In some countries, legal exports diminished sharply as smuggling and underinvoicing intensified in response to increasing discrepancies between the official exchange rate and the black-market rate.
The importance of appropriate incentives
As a corollary to the lesson that controls may strongly divert economic activity from an efficient allocation of resources, it became increasingly evident that inappropriate incentives can adversely affect economic behaviour. The response of agricultural supply to increases in producer prices is considerably stronger than was earlier believed. Likewise, individuals respond to incentives with respect to their education and training. Thus, much of the overinvestment in education referred to earlier came to be seen as the result of artificially inflated wages for university graduates in the public sector and of the fact that university education was virtually free to students in many developing countries. As a consequence, students perceived an incentive to obtain university degrees, even when there was a chance that they would remain unemployed for an extended period of time. When they did eventually find employment, the high wage would compensate for their earlier period of unemployment. Privately, such behaviour makes good sense in response to existing incentives; socially, however, it represents a waste of valuable and scarce resources.
The role of the international economy
In the modern view of development, an open, expanding international economy is the greatest support that the developed countries can provide for developing countries. Foreign aid can be extremely helpful in situations in which policies are conducive to development, but development will in any event be accelerated if the international economy is experiencing healthy growth. Removal of the trade barriers that developed countries have erected against developing countries is at least as important as economic aid. Trade barriers are many. They include restrictions on temperate-zone agricultural products and sugar; restrictions on the simpler labour-intensive manufactured goods (which often can be produced more cheaply in developing countries) including especially the Multifibre Arrangement under which imports of textiles and clothing into developed countries are greatly restricted; and tariff escalation, or higher rates of duties on processed products as compared with raw materials, which discourages the growth of processing industries in the developing countries. The removal of these trade barriers can help those developing countries that have already shown their capacity to take advantage of the available external economic opportunities to grow even more satisfactorily and can also provide additional incentives for other developing countries to alter their economic policies.

Population growth

Still another lesson is the desirability of slowing down the rapid population growth that characterizes most developing countries. Their average rate of population growth is about 2.2 percent per year, but there are some countries where population growth is 3 percent or more. If the aim of economic development is to raise the level of per capita incomes, it is obvious that this can be achieved both by increasing the rate of growth of total output and by reducing the rate of growth of population. Development economists of the 1950s tended to neglect population-control policies. They were partly seduced by theories of dramatically raising total output through crash investment programs and partly by the belief that population growth could be controlled only slowly, through gradual changes in social attitudes and values. But it is now recognized that some births in developing countries are unwanted. Great technical advances in methods of birth control about the same time made possible mass dissemination at very low cost. Countries where these methods were made available experienced significant declines in birth rates, although significant changes in social attitudes and values are necessary before average family size declines enough to halt population growth. As soon as birth rates stop rising, the relative increase in population in the working-age groups and the higher income available to existing family members immediately start to release resources for increasing consumption and saving.
Development of domestic industry
The positive case for the expansion of the manufacturing sector may now be considered. It is based on the general assumption that the manufacturing sector will in due course become the leading sector, drawing in workers (in part, siphoning off a portion of the increase in the labour force that would otherwise tend to drive down labour productivity in agriculture) from the traditional agricultural sector and providing them with higher-productivity jobs than could be obtained in agriculture. Agricultural productivity would necessarily be rising simultaneously, as investments in that sector permitted increasing output. Whereas it was earlier thought that this process would follow the historical experience of countries such as England and Japan, the lesson from the successful developing countries is that by providing incentives and infrastructural support to encourage exports, there are significant opportunities for expansion of manufacturing of labour-intensive commodities, opportunities that can promote rapid growth.
Thus, given the much greater size of the international economy, and the much lower transport and communications costs that confront contemporary developing countries as contrasted with conditions in the 19th century, the potential for rapid growth is much greater now. Countries such as South Korea and Taiwan have experienced in a decade proportionate increases in per capita incomes that it took England and Japan a century to achieve. Whether other developing countries can follow this lead depends on a number of factors, including their economic policy
The central problem of countries with low per capita output is that they have not as yet succeeded in making use of their potential economic opportunities. To do so, they must achieve an efficient allocation of the available resources and provide incentives for resource accumulation. But efficient allocation of resources is not merely a matter of the formal optimum conditions of economic theory. It requires the building up of an effective institutional and organizational framework to carry out the allocation of resources. In the private sector this requires the development of a well-articulated market system that embraces the markets for final products and the markets for factors of production. In the public sector the development of the organizational framework requires improvements in the administrative machinery of the government, especially in its fiscal machinery.
In the setting of the developing countries, one is concerned not only with the once for all problem of efficient allocation of resources but also with improving the capacity of these countries to make a more effective use of their resources over a period of time. That is to say, one is concerned not only with the static problem of the efficient allocation of given resources with the given organizational framework but also with dynamic problems of improving the capability of this framework. From this point of view, there is no conflict, as some have maintained, between the static, or the short-run, considerations and the dynamic, or long-run, considerations. The two sets of requirements move in the same direction.
The problem of the efficient allocation of investable funds in the developing countries may be taken as an example. Static rules would require the developing countries to have higher rates of interest to reflect their greater capital scarcity. But many developing countries, under the influence of dynamic theories of economic development, have used a variety of direct and indirect controls to divert large sums of capital to the manufacturing sector in the form of loans at interest rates well below the level required to equate the demand and supply of capital funds. This practice has resulted not only in a wasteful use of scarce capital resources but also in a retardation of the development of a domestic capital market. Instead of developing a unified capital market for the whole country, it aggravates the financial dualism characterized by low rates of interest in the modern sector and high rates in the traditional sector. The policy of keeping the official rate of interest below the equilibrium rate of interest also results in an excess demand for loans, leading to domestic inflation and pressure on the balance of payments and to a discouragement of the growth of domestic savings. Few private individuals are prepared to buy government securities when they frequently carry rates of interest below the rate of depreciation in the value of money. Through the pursuit of “cheap money” policies that contradict the real facts of capital scarcity, the governments of developing countries have failed to make use of the opportunity of building up a domestic capital market based on an expanding volume of transactions in government securities.
After World War II it was thought that developing countries would require foreign aid in their early stages of development. This aid would supplement the capital created by domestic savings, permitting a higher rate of investment and thus stimulating growth. It was expected that their reliance on official sources of additional capital would continue until their economies had progressed enough to gain them access to private international capital markets.
Until the 1980s this pattern seemed to evolve as predicted. In the 1950s almost all capital flows to developing countries were from official sources, in the form of foreign aid from developed countries or of resources from the multilateral institutions, the World Bank and the International Monetary Fund. In the 1960s some of the export-oriented, rapidly growing countries began to rely on private international capital markets. Some, such as Singapore, attracted direct private foreign investment; others, such as South Korea, relied more on borrowing from commercial banks. In the 1970s many oil-importing developing countries were able to turn to borrowing from private sources when their economies were hit by the severe oil price increase of 1973.
The borrowing by rapidly growing countries was of the type earlier envisaged. Investment yielded a very high rate of return in these countries, so additional foreign resources could be attracted and productively used. However, some other countries borrowed in order to offset higher oil prices and in order to maintain an excess of expenditures over consumption, without developing the highly profitable investments with which to finance the debt-servicing obligations they incurred. Balance-of-payments crises and debt-servicing difficulties had been experienced by a few countries in most years since the 1950s, but with the second oil price increase and the worldwide recession of the early 1980s, developing countries increased their borrowing and total indebtedness sharply until commercial banks virtually ceased voluntary lending after Mexico experienced difficulty meeting its obligations in 1982. The result was that a large number of developing countries were unable to meet their debt obligations, as export earnings declined owing to the recession, interest rates were rising, and new money was not forthcoming.
For many heavily indebted developing countries, the consequence was a prolonged period of slow growth or even declines in outputs and incomes. The lessons were several: The buoyant conditions of the 1970s were not likely to recur, and policies that had sustained satisfactory growth rates in those conditions were not likely to do so in the future; countries that had not yet moved away from import-substitution policies and direct governmental controls would need to undertake structural adjustments rather rapidly in order to resume their growth and to restore creditworthiness; and future private lending to developing countries would need to be somewhat more discriminating as to the economic prospects of recipient countries.
Development in a broader perspective
Modern economic development started in Great Britain, which in the 1780s accounted for a little over 1 percent of the total world population at that time. Since then, economic development has spread in widening circles to other parts of the world, spurred on by a series of technological innovations, particularly in the form of improvements in transport and communications. In the early decades of the 19th century the circle of the developed countries was limited to western Europe. By the late 19th century the circle had widened to include North America, Australia and New Zealand, and Japan. By the early 1970s about 34 percent of the total world population belonged to the developed countries, which among them had 87.5 percent of the total world GNP. What are the prospects of the still-to-develop countries of Asia, Latin America, and Africa joining this circle of economic development?
On the negative side there are a number of factors that add to their difficulties. First, the level of per capita product in the present-day developing countries is much lower than in the developed countries in their preindustrialization phase (with the exception of Japan). Second, the present-day developing countries have large population bases and are handicapped by much faster rates of population growth. Third, they have generally a much weaker social and political framework to cope with the more explosive forces of discontent engendered by their reaction against their colonial past and by their internal economic disparities.
On the positive side, the present-day developing countries can draw upon a greater store of scientific and technical knowledge from the developed countries. The potential opportunities to exploit the “technological gap” are not confined to manufacturing. Modern science and technology can make immense contributions to agriculture, as illustrated by the Green Revolution created by the introduction of improved seeds and fertilizers in some Asian and Latin-American countries. Modern methods of birth control can make a decisive contribution in the race for raising per capita incomes. In addition, as the circle of the developed countries widens, they are bound to exert an increasing upward pull on the developing countries.
The economic growth of the developed countries has generally resulted in an expanding demand for the products and sometimes for direct labour services from the developing countries. But there are also the stronger localized pulls, such as the pull of the United States economy on Mexico and the pull of western Europe on the developing countries of southern Europe. The spectacular economic growth of Japan since World War II may also exert a similar pull on neighbouring countries in East Asia.
Countries such as South Korea, Taiwan, and Singapore are rapidly approaching developed-country status, and the circle is widening still farther. Rapid growth rates are being experienced by many countries in Southeast Asia. If one considers the successful developing countries of the 1950s and ’60s, it is evident that the rapid growth of the international economy was a very positive contributing factor in their success. Future widening of the circle will no doubt depend in large part on whether the growth of the international economy attains a satisfactory level.
In conclusion, the experience of the postwar years has provided many lessons that form a basis for optimism. A great deal has been learned about the types of economic policies that are conducive to rapid economic development. Rates of growth of per capita income experienced by the developing countries have been significantly higher than had been achieved by the first countries to develop. Attainable rates of growth of per capita income appear to be far above what formerly was thought feasible. The chief potential obstacles to successful development appear to be the spectre of disintegration of the international economy, should protectionist pressures be increasingly effective, and the inability or unwillingness of leaders in developing countries to adopt policies conducive to rapid economic growth.
Question 2: What economic institutions and how do they shape problems of underdevelopment and prospects for successful developmentpment.
Cross-country empirical analyses, in combination with micro-level studies, provide strong support for the overwhelming importance of institutions in predicting the level of development in countries around the world (Hall and Jones, 1999; Acemoglu, Johnson and Robinson, 2001). Protection of property rights, effective law enforcement, and efficient bureaucracies, together with a broad range of norms and civic mores, are found to be strongly correlated to better economic performance over time. This essay aims to explain why institutions are important to economic development and to provide evidence for the arguments made. It argues that institutions support economic development through four broad channels: determining the costs of economic transactions, determining the degree of appropriability of return to investment, determining the level for oppression and expropriation, and determining the degree to which the environment is conducive to cooperation and increased social capital. Evidence is derived from the literature, from comparison of countries, and from examples at the micro level.
Such institutions increase the security that the risk of incurring in an economic transaction is matched by the full appropriation of its eventual benefits. This includes the presence of individual private property rights. If property is protected individuals are more willing to invest and to incur sunk costs. Recounting the land-ownership system in Ghana, Pande and Udry (2005) are able to show that where individual perception of security of land tenure is low, investment in the land is significantly reduced, and output consequently drops. In fact, in the few cases in which land is obtained through commercial transactions (as opposed to the traditional informal system of land redistribution), there ceases to be any difference in levels of investment because security of tenure is assured. This increases output and thus is conducive to economic development.
The protection of property rights requires an expanded role for state authority. Individuals and groups sacrifice a degree of freedom in order to ensure state protection; they accept levies and taxes to cover policing expenses, and state monopoly over the use of force for common security (Bates, 2001, p. 65-66). However, there is a risk that states which have the power to enforce property rights may use that power to expropriate property too. Instead of reducing risk of economic transactions, this increases it. Thus property rights are by no means sufficient to spur economic growth, and must be balanced by institutions which limit the extractive capacity of state power. These typically involve independent parliaments and judiciaries. Democratic institutions of political representation strongly contribute to this process (Rodrik, 2000).
Thus institutions determine the extent to which those in power are able to expropriate the economy’s resources to their private advantage. Unequal institutions strongly limit development by reducing the capacity of individuals to access resources, expand production and increase their incomes. A comparative analysis of development trajectories of countries indicates that institutions which benefit elites and allow their appropriation of resources and products have perpetuated underdevelopment.
Countries which have undergone colonial domination tend to be plagued by such extractive institutions. These have outlived the gaining of independence on behalf of these countries, and their control has largely been taken over by local elites. There are countless examples of societal outcomes the cause of which can be traced to institutional arrangements of many decades before.Institutions which are conducive to development ensure greater self-expression, allow the free flow of information and encourage the formation of associations and clubs. These form prosperous social relationships, which are conducive to greater economic interaction by increasing levels of trust and wider availability of information (Putnam, 1993). They allow greater sharing of resources through democratic institutions and the use of the state to reduce the risk attached to economic activity (Bardhan, 2006, p.5). The welfare state is an example of an institution which pools resources to limit the negative effects of business cycles on incomes and unemployment. Institutions conducive to development pool resources to provide the investments in education, health and infrastructure which lie at the basis of economic interaction and are necessary and complementary to private investment. Informal institutions lie at the basis of an economy. They include public agencies, trade unions, community structures and professional associations. They make up the fabric which determines the response to laws and government decisions. Most often they shape these outcomes themselves.Question 3: How can the extremes between rich and poor be so very great?
Economic inequality (also known as the gap between rich and poor, income inequality, wealth disparity, or wealth and income differences) consists of disparities in the distribution of wealth (accumulated assets) and income. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries. The issue of economic inequality is related to the ideas of equity: equality of outcome and equality of opportunity.
There are many reasons for economic inequality within societies, and they are often interrelated. Acknowledged factors that impact economic inequality include, but are not limited to:
Inequality in wages and salaries;
The income gap between highly skilled workers and low-skilled or no-skills workers;
Wealth concentration in the hands of a few individuals or institutions;
Labor markets;
Globalization;
Technological changes;
Policy reforms;
Taxes;
Education;
Computerization and growing technology;
Racism;
Gender;
Culture;
Innate ability
A major cause of economic inequality within modern economies is the determination of wages by the capitalist market. In the capitalist market, the wages for jobs are set by supply and demand. If there are many workers willing to do a job for a great amount of time, there is a high supply of labor for that job. If few people need that job done, there is low demand for that type of labor. When there is high supply and low demand for a job, it results in a low wage. Conversely, if there is low supply and high demand (as with particular highly skilled jobs), it will result in a high wage. The gap in wages produces inequality between different types of workers.
Apart from market-driven factors that affect wage inequality, government sponsored initiatives can also increase or decrease inequality. Social scientists and policy makers debate the relative merits and effectiveness of each approach to regulating inequality. Typical government initiatives to reduce economic inequality include:
Public education: Increasing the supply of skilled labor and reducing income inequality due to education differentials.
Progressive taxation: The rich are taxed proportionally more than the poor, reducing the amount of income inequality in society.
Minimum wage legislation: Raising the income of the poorest workers
Nationalization or subsidization of products: Providing goods and services that everyone needs cheaply or freely (such as food, healthcare, and housing), governments can effectively raise the purchasing power of the poorer members of society
7 ways to narrow the rich-poor gap.
Income inequality isn’t inevitable. As economists and the president have argued, it is the result of bad policies that favor the rich and leave everyone else struggling.
The income gap is too wide for our own good. Here are seven ways that can and should change:
1. Break down the social barriers
One of the reasons income inequality persists, says Michael Norton, an associate professor at Harvard, is that people don’t realize how wide the gap between rich and poor has become. Credit masks poverty, and most of us are stuck in an income bubble — we tend only to see and associate with people who are like us, economically.
A solution: We should get out of our collective comfort zone and create conversations across the income divide. Willis, the young woman in Lake Providence, says she wants to come back to her hometown to build a bridge across the lake that largely separates the richer folks on the north from the poorer folks on the south. If they talked more, they might support policies to help each other.
2. Improve public schools; unify them
There’s no surer ticket out of poverty than a solid education. But that education has to be affordable (modern college isn’t) and it has to be equally distributed. It would be impossible to argue that’s true of America’s public schools, which are supported by property taxes. Big houses equal better schools. And poorer kids, of course, lose out. That’s a tragedy, and leads, according to a recent Stanford study, to poorer students who are years behind their richer peers.
3. Raise the minimum wage to 1960s levels, at least
The fast-food workers are right: It’s impossible to live on today’s minimum wage, which is substantially lower, when adjusted for inflation, than it was in the late 1960s. or slightly above the federal minimum of #30,000. per month and who can’t pay their bills.
4. Tax the rich at a reasonable rate.
Tax rates on the very rich are so low that billionaire Warren Buffett says he pays a lower tax rate than his secretary. That has not always been the case.

The top marginal tax rate has dropped considerably since the late 1970s, according to the Tax Policy Center.
The top marginal tax rate has dropped considerably since the late 1970s, according to the Tax Policy Center.
It’s clear the rich are getting a big break on their taxes and should be paying more. The idea isn’t to take so much money that taxation, in and of itself, closes the income gap. It’s to use that tax money to fund programs, like public education, that could give everyone a fair shot at success in an economy that only serves the very wealthy.
5. Give workers a voice in their companies
Union membership is way down since more equal times. In the early 1960s, nearly 35% of workers were members of unions, according to data compiled by the Economic Policy Institute. By 2008, that number had plunged to less than 15%. As union membership declined, workers’ voices shrank to a whisper. Meanwhile, the economy, over that same period, pushed a greater and greater share of money to the richest Americans.
6. Reign in crazy-huge donations to political campaigns
Rich people these days have the ability and access to essentially buy — or heavily influence — political campaigns. Take a look at the recent numbers:
Elections in the United States are more expensive now than before, giving greater sway to the rich.
Elections in the United States are more expensive now than before, giving greater sway to the rich.
Limits on campaign spending would help level the playing field, ensuring that the majority of the people — not the minority of the rich — elect our representatives.
7. Give money to the poor — maybe at random
Question 2: What are sources of national and international economic growth? Why do some countries rapid progress towards development while many others remain poor
How individuals and societies develop over time is a key question for global citizens. Too many people in the world still live in extreme poverty. About one billion people live on less than $1.25 a day (the World Bank’s definition of extreme or absolute poverty) while about 2.2 billion people live on less than $2 per day. What can be done about this?
Development Studies as an academic discipline is relatively new, but the questions being asked are not—philosophers have puzzled over them for millennia. There are many definitions of development and the concept itself has evolved rapidly over recent decades. To develop is to grow, which many economists and policy-makers have taken to mean economic growth. Yet development is not confined to economic growth. Development is no longer the preserve of economists and the subject itself has enjoyed rapid evolution to become the subject of interdisciplinary scholarship drawing on politics, sociology, psychology, history, geography, anthropology, medicine and many other disciplines.
* Why Do Some Countries Develop and Others Not?
A hundred years ago, Argentina was amongst the seven wealthiest nations in the world, but now ranks 43rd in terms of real per capita income. In 1950, Ghana’s per capita income was higher than that of South Korea; now South Korean people are more than 11 times wealthier than the citizens of Ghana. Meanwhile, more than 20 failed states and over a billion people have seen little progress in development in recent decades, whilst over three billion people have seen remarkable improvements in health, education and incomes.
Within countries, the contrast is even greater than between countries. Extraordinary achievements enjoyed by some occur alongside both the absolute and relative deprivation of others. What is true for advanced societies, such as the United Kingdom and United States, is even more so in most, but not all, developing countries.
Many factors accounting for the successes and failures in the extreme unevenness of development outcomes. There is an extensive literature which seeks to explain outcomes on the basis of natural resource endowments, geography, history, cultural or other.
Some of those factors are as follows:
Many factors accounting for the successes and failures in the extreme unevenness of development outcomes. There is an extensive literature which seeks to explain outcomes on the basis of natural resource endowments, geography, history, cultural or other.
1: Poverty and Inequality
Inequality between countries and within countries requires an analysis which goes beyond the headline economic indicators. While average per capita incomes are growing in most countries, inequality is also growing almost everywhere. The world’s richest 20% of people account for three quarters of global income and consume about 80% of global resources, while the world’s poorest 20% consume well under 2% of global resources. Where poor people are is also changing. Twenty years ago over 90% of the poor lived in low income countries; today approximately three quarters of the world’s estimated one billion people living on less than $1.25 per day live in middle income countries.
2: Explaining Different Development Trajectories
Every country is unique. Yet it is still possible to identify a range of factors that affect development trajectories. A number of economic historians have shown that patterns of resource endowments can reinforce inequalities and favour elites, with this in turn leading to “capture” and predatory institutional development. The resource curse has been examined by Paul Collier (2007), Jeffrey Frankel, and others, who have shown that ample endowments of natural resources may be linked with stunted institutional development, particularly in the case of mining and oil. In mining and oil multinational or local investors have often operated behind a veil of secrecy. The awarding of contracts for extractive industries provides a source of power and patronage to corrupt leaders. Evidence of corruption by international firms who have made offshore payments through international banks provides a clear example of how both advanced and developing countries have a responsibility to clamp down on corrupt practices, not least in mitigating the risks associated with the extraction of natural resources.
For the classical and neo-classical economists, as well as their critics on the Left, natural and human resource endowments were a key determinant of trade and market integration. While the former group argued that revealed comparative advantage would lead to development, the critics argued the opposite, concluding that it would lead to more uneven development. Both groups saw international trade as a critical determinant of growth, explaining the convergence (or divergence) of growth rates and global incomes, with Dani Rodrik, Jeffrey Sachs and Andrew Warner, Jeffrey Frankel and David Romer, and David Dollar and Aart Kray contributing conflicting evidence of the relationship between trade and development. n
As countries become better off they have the capacity to invest in more education and skills and better institutions, which in turn makes them better off.

Although we may well live in a world shaped by natural resource endowments, geography, history and institutions, politics and power can still play a decisive role in terms of driving economic performance and determining vulnerability to poverty. In Amartya Sen’s Poverty and Famines, he showed that political power and rules that are embedded in ownership and exchange determine whether people are malnourished or have adequate food, and that malnourishment is not mainly the result of inadequate food supply. Sen shows how droughts in North Africa, India and China in the nineteenth and Twentieth centuries were catastrophic for social and political reasons, with power relations, not agricultural outcomes, leading to widespread starvation and destruction of the peasantry. In 1979, Colin Bundy, in The Rise and Fall of the South African Peasantry was among a new wave of historians who argued that colonialism led to the deliberate collapse of a previously thriving domestic economy. In 1997, Jared Diamond’s, Blood, Germs and Steel, while emphasising the importance of geography and history, showed how technology, culture, disease and other factors led to the destruction of native American and other previously thriving communities.
If the abuse of power can set development back, what about the counter argument that democracy leads to more rapid and equitable development outcomes? According to Irma Adelman, the long-term factors governing the association between development and democracy include the growth of middle classes, increase in quantity and quality of education, urbanisation (including more infrastructures), the need for participation in development strategies, and the need to manage the psychological and social strains arising from change. Acemoglu, Robinson and others went further in 2014, arguing that democracy does cause growth, and that it has a significant and robust positive effect on GDP. Their results suggest that democracy increases future GDP by encouraging investment, increasing schooling, and inducing economic reforms, improving public good provision, and reducing social unrest. The difficulty of defining democracy, and the weight attached to the non-democracies which have enjoyed very rapid growth, such as China and Singapore, as well as the slowing of growth and paralysis in decision making in many parts of Latin America, Europe and other democratic regions means that the academic jury remains divided on the relationship between development and democracy.
3:What Can Be Done to Accelerate Development?
Peace and stability are essential for development as conflict and war leads to development in reverse, destroying not only lives, but also the infrastructure and cohesion which are fundamental to development. Literacy and education—and particularly the role of education for women—are vital, not least in overcoming gender inequities. The literature shows that these are key contributors to declining fertility and improved family nutrition and health. Infrastructure investments, particularly in clean water, sewerage and electricity, as well as rural roads, are essential for growth and investment, as they are for achieving improved health outcomes. The rule of law and the establishment of a level playing field, through competition and regulatory policies are vital for ensuring that the private sector is allowed to flourish. The capturing of the market by monopolies or small elites, often with the connivance of politicians or civil servants, is shown to lead to the skewing of development and growing inequality.
No country is an island economically and the way that countries engage with the rest of the world is a key determinant of their development outcomes. The increasing integration of the world, in terms of financial, trade, aid and other economic flows, as well as health, educational, scientific and other opportunities requires an increasingly sophisticated policy capability. So too does the management of the risks associated with increased integration into the global community. The threat posed by pandemics, cyberattacks, financial crises and climate change and other global developments could derail the best laid development efforts. Systemic risks have a particularly negative impact on development outcomes, and without exception tend to have negative distributional consequences. The existence of effective policies, or their absence, shapes the harvesting of the upside opportunities and mitigation of the risks.
3:Literacy, Education and Health
There are both theoretical and empirical reasons for believing that literacy and education are essential for economic and social development. The education of girls has served to reduce widespread gender inequalities and has improved the relative position of women in poor countries. The education and empowerment of women has been associated with improvements in a range of development outcomes, and is associated with sharp falls in infant mortality and fertility.
The links between education, health and development are many and varied; in many contexts “all good things” (or “bad things”) go together. The demographic transition describes how fertility and mortality rates change over the course of economic and social development. In the early or first phase of development birth rates and mortality rates are high due to poor education, nutrition and healthcare. In such circumstances, characteristic of many developing countries prior to the Second World War, population growth remains low. As living standards, nutrition and public health improve during the second phase of the transition, mortality rates tend to decline. As birth rates remain high, population growth becomes increasingly rapid. Historically, much of Africa, Asia and Latin America experienced this trend during the second half of the twentieth century. 4:Gender and Development
Gender inequalities and unequal power relations skew the development process. In many developing countries women’s opportunities for gainful forms of employment are limited to subsistence farming—often without full land ownership rights or access to credit and technology that might alter production relations and female bargaining power. In many societies, women are confined either to secluded forms of home-based production that yield low returns, or to marginal jobs in the informal economy where income is exceptionally low and working conditions are poor. In addition women typically have to endure the “double burden” of employment and domestic work—the latter includes housework, preparing meals, fetching water and wood, and caring for children—amongst many other tasks.
A range of studies over the last four decades have shown that households do not automatically pool their resources, and that who earns and controls income can make a major difference to household well-being. Numerous empirical studies examining the relationship between women’s market work, infant feeding practices and child nutrition indicate that the children of mothers with higher incomes are better nourished. In the gold mining industry in Africa for example an increase in women’s wage earning opportunities has been shown to be associated with the removal of healthcare barriers, the halving of infant mortality rates—especially for girls—and a reduction in the acceptance rate of domestic violence by 24%.
The distribution of benefits and burdens becomes more equitable when women have a stronger voice and more access to education and employment. Improving women’s economic opportunities can prove a highly effective way to reduce poverty and improve women’s relative position and that of their children. Ensuring that more women are enrolled in education, can read, write and count, and have appropriate skills for jobs are also likely to improve the overall well-being of households. Steps to tackle restrictive cultural norms and laws regarding women’s education, participation in the labour force, ownership of land and other assets, inheritance rights, marriage and freedom to participate in society make important contributions in this regard.
The participation of women in the workplace together with gender differences in pay, promotion and business leadership are important aspects of empowerment. Political representation and gender disparities in healthcare and education (often reflecting “boy preference” in many parts of the world) are also key indicators of social progress. Since the introduction of the MDGs in 1990, women in many countries have made progress towards parity with men, although much more still needs to be done. Significant progress has been made in terms of tackling female infant mortality and enabling your girls to attend school, although gross disparities between men and woman persist across the board. Despite some notable progress, so too do practices which fundamentally constrain women, such as female genital mutilation, which affects at least 125 million women in over 29 count
Knowing that education, health and nutrition, and gender equity—amongst other things—are important for development is only the start. Developing policies to tackle these issues is a major challenge. In many countries, for example, the failure of education systems relate to a lack of quality rather than quantity of resources spent. In India case studies have catalogued a number of issues including poorly trained and qualified teachers, mindless and repetitive learning experiences, lack of books and learning material, poor accountability of teachers and unions, school days without formal activities, and high rates of absenteeism amongst staff and students. Moreover, improving outcomes is more complex than finding money for school fees or budgets for teachers. Issues such as having appropriate clothes for the walk to school or the availability of single sex toilets at school can play a decisive role, especially for girls.
5:Agriculture and Food
Agriculture provides the main source of income and employment for the 70% of the world’s poor that live in rural areas. The price and availability of food and agricultural products also dramatically shapes the nutrition and potential to purchase staples for the urban poor.
Policies which discriminate against farmers and seek to create cheap urban food by holding down agricultural prices can perversely lead to rising poverty, especially where the bulk of the poor are in the countryside. Low agricultural prices depress rural incomes, as well as the production and supply of food and agricultural products. The urban poor are however more politically powerful than the rural poor, not least as they are present in capital cities. An important contributor to the French Revolution of 1789 was the doubling of bread prices, and urban food protests have continued to pose a serious threat to governments.
Whereas in many developing countries farmers are discriminated against through price controls or restrictions on exports, which keep the price of their products artificially low, in many of the more advanced economies, and notably in the United States, European Union and Japan, certain groups of farmers have achieved an extraordinarily protected position. Tariff barriers and quotas which restrict imports, together with production, input subsidies, tax exemptions and other incentives benefit a small group of privileged farmers at the expense of consumers and taxpayers in the advanced economies. This fundamentally undermines the prospects of farmers in developing countries, who are unable to export the products that they are competitive in. It also makes the prices of these products more volatile on global markets, as only a small share of global production is traded so that the international markets become the residual, onto which excess production is dumped.
An added cause of instability is that the concentration of production in particular geographic areas increases the impact of weather related risks which exacerbates the instability in world food prices. Because farmers in many developing countries cannot export protected crops, they are compelled to concentrate their production in crops that are not produced in the advanced economies, and produce coffee, cocoa and other solely tropical agricultural commodities. This reduces diversification and leads to excessive specialisation in these commodities, depressing prices and raising the risks associated with monocultures. The levelling of the agricultural playing field, which has been a key objective of the Doha Development Round of Trade Negotiations, which was initiated by the World Trade Organization (WTO) in 2001, remains a key objective of development policy.
6:Infrastructure
Infrastructure is the basic physical and organisational structures and facilities required for the development of economies and societies. Infrastructure includes water and sanitation, electricity, transport (roads, railways and ports), irrigation and telecommunications. Infrastructure provides the material foundations for development. Investments in infrastructure tend to require very large and indivisible financial outlays and regular maintenance. These investments shape the evolution of cities, markets and economies for generations and lock in particular patterns of urbanisation and water and energy use. Prudent investment in energy and transport infrastructure can have a significant impact on environmental sustainability through ensuring lower emissions, higher efficiency and resilience to climate change. Investment in sewerage and sanitation, as well as recycling of water, similarly has a vital role to play in reducing water-use and pollution.
7:Legal Framework and Equity
Laws serve to shape societies and, in particular, affect the nature of the relationships of citizens to each other and to their governments. Legal frameworks include the “systems of rules and regulations, the norms that infuse them, and the means of adjudicating and enforcing them”. The rule of law has shaped development processes through the operation of laws, regulation and enforcement; enabled conditions and capacities necessary to development outcomes; and remained a core development end in itself. Therefore, the rule of law is of fundamental importance to development outcomes as it expresses and enables a society’s conception of social and economic justice, and more specifically its attitudes to extreme poverty and deprivation. It also frames wealth, resource and power (re)distribution.
An effective legal and judicial system is an essential component for economic development, as it is for human development and basic civil liberties. Ensuring that decision making and justice are not determined by individual favours or corruption and that all citizens have equal access to the rule of law is vital to overcoming inequality and social exclusion. It is also required for the creation of transparent and well-functioning financial and other markets. similarly facilitate development. Consistent and fair regulation and dispute resolution facilitates the smooth operation of the market system, and reduces the opportunities for corruption, nepotism and rent seeking.
8:The Future of Development
Over the past 75 years ideas about the responsibility of development have shifted from the colonial and patronising view that poor countries were incapable of developing on their own and required the guidance and help of the rich colonial powers, to a view that each country has a primary responsibility over its own development aims and outcomes and that development cannot be imposed from outside. However, while both simple colonial and Marxist ideas of the interplay of advanced and developing countries are discredited, foreign powers and the international community can still exercise a profoundly positive or negative impact on development. This goes well beyond development aid as international trade, investment, security, environmental and other policies are typically more important. The quantity and quality of aid, the type of aid, as well as its predictability and alignment with national objectives nevertheless can play a vital role in contributing to development outcomes, particularly for low income countries and the least developed economies. Access to appropriate technologies and capacity building helps to lay the foundation for improved livelihoods. So although development is something which countries and citizens must do for themselves, the extent to which the international community is facilitating or frustrating development continues to influence and even at times dramatically shape development trajectories.
It is now widely recognised that while governments must set the stage and invest in infrastructure, health, education and other public goods, the private sector is the engine of growth and job creation.
The coherence of aid and other policies is an important consideration. For example, supporting agricultural systems in developing countries requires not only investments in rural roads and irrigation, but also support for international research which will provide improved seeds, trade reform which allows access to crops, and actions which will stop the devastating impact of climate change on agricultural systems in many of the poorest countries. As noted earlier, the establishment of a level playing field for trade, and in particular the reduction of the agricultural subsidies and tariff and non-tariff barriers in rich countries that severely discriminates against agricultural development and increase food price instability, would provide a greater impetus for many developing countries than aid. Not all trade is good, and the prevention of small arms trade, toxic waste, slave and sex trafficking and other illicit trade should be curtailed and corruption dealt with decisively. The prevention of transfer pricing and of tax avoidance is important in building a sound revenue base which provides the means for governments to invest in infrastructure and health, education and other systems which provide the foundation for development.
The provision of global public goods, for example by improving the availability, price and effectiveness of vaccinations and drugs, especially against tropical diseases and the treatment of HIV/AIDS, is a similarly important contribution for the international community. The creation of an intellectual property regime that allows for affordable drugs and the encouragement of research on drugs and technologies that foster development, not least in agriculture, is another essential role for the international community.
Development is a national responsibility, but in an increasingly integrated world the international community has a greater responsibility to help manage the global commons as an increasing share of problems spill over national borders. All countries of the world share a collective responsibility for the planet, but the bigger and more advanced the country, the larger the share of this responsibility that it is capable of shouldering.
9:Our Common Future
As individuals get wealthier and escape poverty the choices they make increasingly impact on others. The tension between individual choice and collective outcomes is not new, with the study of the management of commons going back at least 500 years. Commons were shared lands, rivers or other natural resources over which citizens had access. In England, the rights of access became defined in common law. Many of these rights were removed in the enclosure movement which in the eighteen century converted most of the common lands into private property.
As development raises income and consumption and increases connectivity, the spillover impact of individual actions grows. Many of these spillovers are positive. Evidence includes the close correlation between urbanisation and development. When people come together they can do things that they could never achieve on their own. However as incomes rise, so too do the often unintended negative spillover effects, with examples including obesity, diabetes, climate change, antibiotic resistance and biodiversity loss. Rising inequality and the erosion of social cohesion are also growing risks.
As Sen has explained, a key objective of development is freedom. Freedom to avoid want and starvation, to overcome insecurity and discrimination, and above all to be capable of achieving those things we have reason to value. But with this freedom comes new responsibilities. Our individual contribution to our shared outcomes and as guardians of future generations rises with our own development.
REFERENCES.
Acemoglu, D., Johnson, S., & Robinson, J. (2001). The colonial origins of comparative development: An empirical investigation. Colonialism and development. American Economic Review, 91(5), 1369–1401.
Acemoglu, D., Johnson, S., & Robinson, J. (2002). Reversal of fortune, geography and institutions in the making of the modern world income distribution. Quarterly Journal of Economics, 117, 1231–1294.
Acemoglu, D., Naidu, S., Restrepo, P., & Robinson, J. (2014). Democracy does cause growth (NBER working paper 200004). Cambridge, MA: National Bureau of Economic Research.
Cruz, M., Foster, J., Quillin, B., & Schellekens, P. (2015). Ending extreme poverty and sharing prosperity: Progress and policies. No 101740. Policy Research Notes (PRNs), The World Bank
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NAME: UGOCHUKWU CLEMENT
REG. NO: 2018/SD/37180
FACULTY: SOCIAL SCIENCES
DEPARTMENT: EDUCATION ECONOMICS
YEAR: 3/5
COURSE CODE: ECO 361
COURSE TITLE: DEVELOPMENT ECONOMICS 1
LECTURER: DR. TONY ORJI

Critically discuss and analysis these questions as a potential special adviser to Mr. President on poverty alleviation and economic Development.
What can be learned from the historical record of economic progress in the now developed world? Are the initial conditions similar or different from the contemporary developing countries faced on the eye of their industrialization?

I will like to narrow my focus on four of the well developed countries in our world today as a case study in the cause of this discussion. The countries that quickly come to mind includes America, great Britain, China and Germany. It is important to note that these countries had great passion for development of their countries. They had great love for and right mind set for their nations. They made great sacrifices for the well being of their nations. The result of their hard work were clearly visible in the following area (1)good policies (2) implementation of free trade (3) strong and very good patent laws in other to foster good and vary high economic development.
4. They used tariffs protection and subsidies to develop their industries very early in the life of their nation.
I therefore wish to most respectfully advice that our dear Nation need a radical rethinking our economic life is both primitive and stagnant. Our poverty level is both a handicap and a threat to our generation and generations unborn. Now that we have our own dear daughter, Ngozi Okonji Iwuala as the exercutive director of World Trade Organisation (WTO) offensive and very damaging rules and policies should immediately be changed so that we can actively use tariffs and subsidies for industries development just like we have them in the developed world.
Improvement in all economic
Institutions should immediately be enforced. Above all, the unfortunate conditions attached to bilateral and multilateral financial assistance should immediately be dropped because the recipe is not working. Improvement in all economic institutions should immediately be enforced. There must be liberalization of trade and investment. Most of the recommendations of the developed nations must henceforth be critically and carefully scrutinized before implementation the different forms of corruption which is the major cause of our under development must be conquered and completely eradicated while the perpetrators should be brought to book. Finally, institutions like democracy, bureaucracy, intellectual property rights, institution of cooperate governance, financial institutions, welfare and labour institutions need serious over handling and transformation for better results.
NO: 2.
Economic institutions are companies or organizations that deals with money or with managing the distribution of money, goods and service in an economy such as banks and other financial institutions, government organizations like the Nigerian custom services, National Drug law enforcement Agency, economic financial crime commission etc. when these given an enabling environment to operate without undue interference by corrupt government agents, they surely will enhance successful development and curb all forms of crimes and attitudes that promote underdevelopment in any nation.

NO. 3.
The growing disparity between the rich and the poor is undermining the fight against poverty, damaging our economics and tearing our societies apart. Factors that bring about these inequalities includes;
Government policies: Some government policies are deliberately made to further inpoverish the masses and overwhelmingly enrich the privileged few.
Under funded public services like Nitel, NEPA and even education has made private companies to take over government public funded service provides and completely exclude the poorest people.
Corruption: The different forms of corruption in high places had continued to worsen the plight of the poor in the society.
NO. 4. There are three major sources of economic growth namely;
Natural factors: This has to do with those lands and various raw materials that leads to increase in potential growth. This according to Jeffery such is known as “Resource.
Human factor: This has to do with the quantity of labour, the bigger the population, the larger the labour force that contribute to growth of an economy.
Physical capital: These includes factories, machineries, motor vehicles offices, shops etc. nations that have very health strong and very active sources of nation economic agents of growth as mentioned above will surely make rapid progress towards development while the countries that are still struggling with these sources of national economic agents of growth will continue to wallow in great poverty.