Sample Economics Essays on The Concept of development

The Concept of development

  1. Definition of development

Development is a complex and multifaceted notion about growth.  According to James Cypher (2014), development as a term needs to be conceived beyond the outset particularly in terms of income and growth levels because there are different standards that can be used to measure it. He, therefore, ended up defining development as broad and diverse aspirations on what is considered as “decent life” in regards to social, political and economic dimensions which are set by every society. The goals which help in defining development include: equal opportunities, a rising in standard of living and income of the people, equity in wealth and income distribution, and political democracy. The other societal values that can be used to define development include: increased opportunities for self-improvement and education standards for the minority groups, religious groups, or gender (Cypher, 2014). Improvement in healthcare and safety nets for the private and public sectors to protect individuals who are most vulnerable particularly the poorer, the young, the old, and infirm are also values which are important. At the same time, development can be defined in regards to having a sustainable, clean and healthy environment. A reasonable competition levels and consumer safety within the private and public sectors also show that development has been achieved in a nation.

Development requires that a nation that has been suffering makes changes that are crucial to it that will radically transform its future. It can be achieved by coming up with new values and doing things in a different way. For instance, a nation can decide to have new institutions or new market regulations that would ensure that the business environment is functioning perfectly with the intention of acquiring growth. According to Cypher (2014), a small marginal change may be a crucial point to achieving development. The values above shows that development goes beyond the income level of an individual in a country, but the overall well-being of the entire society in regards to health, education, social life, politics, and economic life. Development economists also identifies these values as the index of having a broader ambitions for a nation that will entail an all round development.

Amartya Sen (1988) though has similar concepts in regards to his definition of development stresses on some important points that differs from the traditional definitions in the textbook. He defines development as the ability of a nation to protect its “own” territory while at the same time keeping the motivational foundations on the subject of economics. He believes that development needs to take a broader perspective in regards to economics instead of narrowing down to other values such as the social life and politics in a nation. Sen (1988) believes that though values such as fair education and better healthcare are important to determine the levels of development in a nation, these factors should not be fully relied on when defining development. It is because they are simply the measures of success which are judged based on the human lives especially their living conditions. However, for economic problems to end, the government of a nation needs to take full control by protecting its “own” territory. If this happens, then it will be easy to enhance the living conditions of the people which is an essential object in economic exercise. The enhancement in the lives of people in terms of growth is essential in defining the concepts of development in the nation.

  1. Ways of measuring development 

There are different ways in which economists measures the development levels in a nation. The first method comprise of using income per person or sometimes the economic growth method. These factors can suggest that there is some development in the nation especially when the income levels of people are reasonably good. Economists, therefore use this strategy to measure the overall progress of development in a nation. However, the weakness of using the income per person measure comes about when collecting data. It is because there are a wide range of goals of development with various variables which makes it difficult to find the real value of growth in a country. The complexity of having to compare the various variables with diverse values will make it hard to interpret the overall development in a nation. Today, economists acknowledge that it is no right to use higher income levels of people to measure development. However, the best method that can be used which is reasonable is the economic growth levels and higher income levels in a nation.

According to Cypher (2014), the higher income levels will act as a means for reaching the development goals in a nation. Based on these facts, the strength of using higher incomes levels to measure development is by economists using the ranking strategy by consideration those nations with the highest to the lowest income levels per capita. The strength of using the per capita levels to measure economic growth is its simplicity. It is easy to use data that has been collected from nations on their economic activity levels but employing high degree of accuracy then comparing them with the data which had been initially collected about growth levels. The annual data that the World Bank publishes in its development report can be used as a source to have accurate information when measuring development before ranking the nations based on income levels per capita.

Sen (1988) believes that growth can be used to measure development in a country. However, when economists use this strategy to measure growth, they need to take into consideration GNP and any other variables that are related to growth. It is because when there is an expansion in the GNP in a nation, the living condition of the people will be enhanced. At the same time, the life expectancy figures will expand because people have money to spend on their health. However, the limitation of taking this direction in measuring development in a nation is that other variables such as life expectancy are limited to the quality of life. It, therefore, becomes an index instead of a quality that is important in measuring development. At the same time, when the relationship between life expectancy or other variables are compared with GNP, an immediate result will not be achieved. On the other hand, the strengths of using GNP in determining economic development is that it defines the growth levels in a country which can be used as a measure of real incomes. The concept is important for those economists who are taking into consideration the aggregated levels of incomes of people in a country to measure development.

Role of colonialism in development

Capitalism can be considered as economic systems whereby private businesses own things that make money such as transportation system, factories, communication and land. Though there exists competition in the market, these private corporations investment their money heavily on their businesses to acquire profits. When this happens, a division of classes takes place whereby the upper class controls everything because they have most wealth leaving the poor at their mercies. Colonialism played a crucial role in the emergence and development of the capitalism in Europe. It all started with the transatlantic slave trade whereby the British government took control of the entire trade preventing other organizations from making profits. Cypher (2014) has mentioned that Marx Weber had a belief that capitalism came about because of the primitive communism which evolved slowly towards slavery, then feudalism and eventually to capitalism. However, the historical progression was not the same in all nations and the speed of growth rate was also not similar across the world.  Europe was among the first nations to achieve economic growth because of capitalism.  On the other hand, nations such as Portugal suffered economically because they did not have productive institutions which were modeled like those in Europe. The expansion of bilateral trade after the signing of the Methuen Treaty in the year 1703 left Portugal without any sizeable markets to operate (Cypher, 2014). It is because Britain controlled all the markets making Portugal fall short of the exports and imports that could have helped in building its economy.

The reason this happened is because Britain not only accumulated much wealth in regards to the physical capita such as owning slaves to work on their farms, but also in monetary form. According to Cypher (2014), the economic growth rate in a nation depends greatly on the physical capital accumulation. In case there is a rapid level of capital accumulation, it is easy for a country such as Britain to acquire high levels of economic growth rate while other nations like Portugal remains behind in terms of development. Europe had established money-lending activities which enabled it to establish a stable circuit of financial growth though this was not sufficient reason for the development of industrial capitalism in the country. Industrial capitalism came about because of technological development. Nonetheless, since they had good technology, Europe was able to bring out the unequal exchange in the market place which symbolized their colonizing power. They, therefore, ended up dominating all the producers and applying monopoly conditions in their companies such as Dutch East India Company.

Technology made it possible for Britain to manufacture better goods that nations such as Africa were not in a position to produce. The production process became easy for Britain making them distinct in regards to capability. However, Britain decided to use a different logic to acquire more capital; they decided to reject the workers who in this case were slaves in order to objectively focus on machines. In the end, the workers who belonged to the lower class could not keep up with the pace of production in the market leaving them more deprived economically while the rich merchants continued to acquire more wealth.

The Solow model

One of the things that have shaped the economic growth thinking style during the neoclassical period was the Solow model. The main implication of Solow model is that for any amount of savings and investments made, there is a steady real per capita level of income attained. It means that as people save money, the capital returns back in the economy in terms of stock. When this happens, the stock levels increase until the level of capital become steady in the market and the per capita income in the nation is reached. The growth rate, therefore, in a nation will depend on the amount that investors are willing to save. If the Solow model is applied in nations which are poorer, it is expected that their growth level will be faster compared to the richer nations. However, this is only possible when there is an equal saving rate because Solow model assumes that a convergence in the per capita will improve the economic growth rate in a nation.

The evidence of the prediction of convergence is when two nations which have similar saving rates and population growth rate will have similar levels of per capita income. It is because with a lower level of income and non-equilibrium levels it is possible for the economy of a nation to grow faster to a point where it reaches a place of steady equilibrium income (Cypher, 2014). However, this is mainly associated with the population growth rate and the rate of savings in the country which causes a convergence. The Solow model assumes that technological progress has the potential to affect the production process in a nation resulting in more output and input levels. As production levels increases, people are willing to invest more money which decreases the marginal returns bringing a balance in the economy because of this convergence. It is also important to consider that in this case, technology does not affect the employment rate which remains constant in the market. It is also assumed that there is equal income share that accrues from individuals who are employed which increases the value levels which can be used to describe development in a nation. Another implication that this model makes is that poor countries are not developing or achieving economic growth because people are not willing to invest and save sufficiently (Cypher, 2014). However, for countries that invests and saves more increase their standard of living because of the large amount of national income that makes production process easy and simple.

References

Cypher, J.M. (2014). The Process of Economic Development, 4th edition. London and New York: Routledge. Retrieved from https://books.google.co.ke/books?id=TxFxAwAAQBAJ&pg=PA150&lpg=PA150&dq=4.4+A+Solow-type+production+function&source=bl&ots=ym-RRWJFci&sig=LW23espVvEwYJP7uhRYftBi7ZJI&hl=en&sa=X&redir_esc=y#v=onepage&q=4.4%20A%20Solow-type%20production%20function&f=false

Sen, A.K. (1988). “The Concept of Development” in H. Chenery and T. N. Srinivasan (eds.),Handbook of Development Economics, Vol. 1. Amsterdam: North-Holland. Retrieved from http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.475.6070&rep=rep1&type=pdf