Question

A summary of Chapter 1 from the book "Economic Development" by Michael Todaro.

Answer 1

Development economics is a distinct yet very important extension of both traditional economics and political economy. While necessarily also concerned with efficient resource allocation and the steady growth of aggregate output over time, development economics focuses primarily on the economic, social, and institutional mechanisms needed to bring about rapid and large-scale improvements in standards of living for the masses of poor people in develop - ing nations. Consequently, development economics must be concerned with the formulation of appropriate public policies designed to effect major eco - nomic, institutional, and social transformations of entire societies in a very short time. As a social science, economics is concerned with people and how best to provide them with the material means to help them realize their full human potential. But what constitutes the good life is a perennial question, and hence economics necessarily involves values and value judgments. Our very concern with promoting development represents an implicit value judgment about good (development) and evil (underdevelopment). But development may mean dif - ferent things to different people. Therefore, the nature and character of develop - ment and the meaning we attach to it must be carefully spelled out. The central economic problems of all societies include traditional ques - tions such as what, where, how, how much, and for whom goods and services should be produced. But they should also include the fundamental question at the national level about who actually makes or influences economic decisions and for whose principal benefit these decisions are made. Finally, at the inter - national level, it is necessary to consider the question of which nations and which powerful groups within nations exert the most influence with regard to the control, transmission, and use of technology, information, and finance. Moreover, for whom do they exercise this power? Any realistic analysis of development problems necessitates the supple - mentation of strictly economic variables such as incomes, prices, and savings rates with equally relevant noneconomic institutional factors, including the nature of land tenure arrangements; the influence of social and class strati - fications; the structure of credit, education, and health systems; the organi - zation and motivation of government bureaucracies; the machinery of public administrations; the nature of popular attitudes toward work, leisure, and self-improvement; and the values, roles, and attitudes of political and economic elites. Economic development strategies that seek to raise agricultural output, create employment, and eradicate poverty have often failed in the past because economists and other policy advisers neglected to view the economy as an interdependent social system in which economic and noneconomic forces are continually interacting in ways that are at times self-reinforcing and at other times contradictory. As you will discover, underdevelopment reflects many individual market failures, but these failures often add up to more than the sum of their parts, combining to keep a country in a poverty trap. Govern - ment can play a key role in moving the economy to a better equilibrium, and in many countries, notably in East Asia, government has done so; but all too often government itself is part and parcel of the bad equilibrium.

Achieving the Millennium Development Goals will be an important milestone on the long journey to sustainable and just development. Although progress has been substantial, many of the interim targets remain unachieved—nor do the MDGs include all of the critical objectives of development. The emerging Sustainable Development Goals, planned as the MDGs’ successor after 2015, will be even more ambitious, including the full eradication of extreme poverty. Despite the great diversity of developing nations—some large, others small; some resource-rich, others resource-barren; some subsistence economies, others modern manufactured-good exporters; some private-sector oriented, others to a large degree run by the government—most share common problems that define their underdevelopment. The oil price shocks of the 1970s, the foreign-debt crisis of the 1980s, and the twenty-first-century concerns with economic globalization, economic imbalances and financial crises, global warming, and international terrorism have underlined the growing interdependence of all nations and peoples in the international social system. What happens to life in Caracas, Karachi, Cairo, and Kolkata will in one way or another have important implications for life in New York, London, and Tokyo. It was once said that “when the United States sneezes, the world catches pneumonia.” A more fitting expression for the twenty-first century would perhaps be that “the world is like the human body: If one part aches, the rest will feel it; if many parts hurt, the whole will suffer.” Developing nations constitute these “many parts” of the global organism. The nature and character of their future development should therefore be a major concern of all nations irrespective of political, ideological, or economic orientation. There can no longer be two futures, one for the few rich and the other for the very many poor.