Economic Development: Global Challenges and Ethics
Why Economic Development?
- Global Events: 9/11, Indian Ocean Earthquake
- Striking Statistics: 35,000 children and 7 adults die daily
Poverty in the Developing World
Absolute poverty, headcount, poverty gap: aggregate income of the poor falls short of the poverty line. Transfer income can only alleviate short-term misery.
The Development Enigma
Rich vs. poor (Mexico vs. USA, South Korea, China). Moral dimension.
Fundamental Values: Sufficient resources, healthcare, social security, democracy, equal treatment, economy.
Why Now?
Decolonization, diffusion of progress.
Economic Growth
How societies allocate resources. Decrease in agriculture, changes in trade partners, increase in human capital (knowledge, habits, social and personality attributes).
Barriers
- Internal: Inequality, inadequate education, lack of natural resources, civil war
- External: IMF, World Bank, multinational corporations, geopolitical interests, FDI
Economic Development Defined
Absolute Poor: Minimum level of income for food, etc.
Subsistence Economy: Production mainly for personal consumption.
Development: Improving the quality of human lives and capabilities by raising living standards, self-esteem, and freedom.
Economics and Development Studies
- Traditional Economics: Utility, profit maximization, market efficiency, determinism.
- Political Economics: Social and institutional influences on resource allocation.
- Development Economics: Social and political aspects affecting the poor, both private and public.
Key Factors
- Basic Material: Food
- Non-material: Education
- Subjective: Universal education, access to opportunities, political and economic participation, no poverty, personal fulfillment.
Social Systems
Social and institutions include values, attitudes, and power structures.
Meaning of Development
Expand output, growth in income per capita.
Capability Approach
Poverty not correctly measured by income per capita. Focus on functions and what people can do. Capabilities: freedom to choose functions and commodities.
Three Values of Development
- Sustenance: Basic human needs
- Self-esteem: Respect
- Freedom from servitude
Millennium Development Goals
Eradicate poverty, combat AIDS/HIV, gender equality. Criticized for not being ambitious enough and lacking prior goals.
Comparative Economic Development
Disparities
Comparing economic development in developing countries: adverse geography, low productivity, high population, rural areas, lack of industry.
Development Indicators
Income per capita, UNDP, indebtedness, industrialized countries.
Indicators of Development
Purchasing Power Parity: GNI with world prices. Health indicators: life expectancy, undernourishment, fertility, literacy.
Human Development Index
Measures socio-economic development based on health, education, and real income. Criticisms include quality issues.
Human Capital
Productive investments in people (skills, values, health) through education, training, and medical care.
Developing World
- Poverty Trap: Circular and cumulative causation
- Country size, high inequality (top 20%)
- Absolute poverty: minimum income for basic needs. High population, social fractures, large rural areas, lack of industry, geography, lack of market information, colonialism, structure, dependency, ethnicity.
False Paradigm
Developing countries failed due to incorrect development strategies (overemphasis on capital accumulation or market liberalization without social and institutional change).
Ethics in Economic Development
Rationality and Efficiency
How people make decisions and the nature of economic arrangements when people choose rationally.
Argument 1: Pollution should be in the lowest-cost countries.
Argument 2: Less developed countries are under-polluted.
Argument 3: Demand for clean environments has high-income elasticity.
Further Development
Breaks down aspects of the memo. Transport of residues, death differences between rich and poor countries.
Promoted Values
Utilitarianism, freedom, individualism.
Demoted Values
Human dignity, equality, social consequences.
Cost-Effectiveness
Initial goal and how to achieve it. Solution: export pollution to LDCs at minimum cost.
Benefit-Cost Analysis
The cost of a clean environment in LDCs may be larger than the discounted benefits.
Market Liberalization
Remove social and economic restrictions, promote free markets, discourage government intervention. Efficiency should be a preeminent value.
Ethics: Influences
Moral Limits of the Market
Ethical domain: Should only rich people get an education? What is repugnant?
Demoted Market Principles
Utilitarianism, freedom interference, freedom of opportunity, market virtues, justice, reciprocity, property rights.
Promoted Ethics
Dignity, social justice, responsibility, equity, equality, rights, justice, non-market virtues, need.
Rules
Boundary Rules: Prevent economics from crowding out ethics. Prohibitions, laws, social justice, conscience.
Alternative Rules: Government social effects.
Pluralism of Values
Humans operate on irreducible different principles. It’s complex with many individual motivations.
Policies: Social tolerance and promotion of democracy from the bottom up.
Moral Limits of the Market
There’s an ethical domain independent of other domains that needs to be defended. What policy is needed? Plural values.