CHAPTER 1 ©E.Wayne Nafziger Development Economics World map CHAPTER 1 ©E.Wayne Nafziger Development Economics

CHAPTER 1 ©E.Wayne Nafziger Development Economics Introduction CHAPTER 1 ©E.Wayne Nafziger Development Economics

CHAPTER 1 ©E.Wayne Nafziger Development Economics Chapter organization Chapters 1-5 focus on principles and concepts of economic development. Chapters 6-7 examine income distribution, including a discussion of the distribution between urban and rural areas and the process of agricultural transformation. Chapters 8-13 analyze the role of population, production factors, and technology in economic development, with special emphasis in Chapter 13 on the environment and natural resources. Chapters 14-17 discuss the macroeconomics and international economics of development. Chapter 18 looks at planning for economic development. Chapter 19 analyzes stabilization, adjustment, reform, and privatization. CHAPTER 1 ©E.Wayne Nafziger Development Economics

HOW THE OTHER TWO-THIRDS LIVE Inequality between the world’s rich and poor Development economics focuses primarily on the poorest two-thirds of the world's population. These poor are the vast majority, but not all, of the population of developing countries, which comprise 82 percent of the world’s population. If you have an average income in the United States and Canada, you are among the richest 5 percent of the world's population. CHAPTER 1 ©E.Wayne Nafziger Development Economics

Inequality between the world’s rich and poor 700-1,000 million (10-15%) of world’s 6.5 billion (5.3 billion in less developed countries or LDCs) are living on no more than $1/day (i.e., in 1985 prices, $1.50 in 1993 prices, $2/day in 2005 prices). A person’s material well-being (whether rich, poor, or in between) is tied to the long-run growth record of his or her country, a focus of this course. Income inequality is even greater for the world as a whole than for South Africa and Brazil. CHAPTER 1 ©E.Wayne Nafziger Development Economics

A North American family An average family in the United States and Canada. A family of four. Has an annual income of $55,000 to $60,000. Lives in a three bedrooms apartment, a living room, kitchen. Three meals a day. Children are in good health. Average life expectancy of 77 years. Both parents received a secondary education. Jobs relieved by modern machinery and technology. However, they may experience stress, frustration, boredom, insecurity. CHAPTER 1 ©E.Wayne Nafziger Development Economics

Farm families in a low-income country, India Illustrates majority of the world’s low income population in Asia, Africa, and Latin America. Father, mother and their four children. Combined annual income of $900 to $1200. Family receives consumption shares from the landlord in return for agricultural work. The rice‑based daily meal. One‑room mud house thatched with palm leaves, and the crudely stitched clothing are produced locally. No electricity, clean water, or latrine. Average life expectancy is 63 years. Neither parents can read or write. Contrast to tiny middle and upper class in peasant, agricultural society. CHAPTER 1 ©E.Wayne Nafziger Development Economics

CHAPTER 1 ©E.Wayne Nafziger Development Economics Asia’s Development Asia’s Golden Age of Development Asia’s Competition Asia/US Relative Income CHAPTER 1 ©E.Wayne Nafziger Development Economics

Globalization, Outsourcing, & Information Technology India & other Asian economies gain from economic growth and reform. A.P. D’Costa (2003): of India “You have fiber optic lines running parallel with bullock carts.” India’s and US’s worlds increasingly intersecting. Asia’s competition and American protests. CHAPTER 1 ©E.Wayne Nafziger Development Economics

CHAPTER 1 ©E.Wayne Nafziger Development Economics

Critical Questions in Development Economics How do the poorest two-thirds of the world live? What is the meaning of economic development and economic growth? What is the history of economic development? How have developing countries performed economically in the last half century? What are the major characteristics and institutions of developing countries? What are the major theories of economic development? Has economic growth in the third world improved the living conditions of its poor? How can poverty be reduced in the rural areas of low-income countries? What effect does population growth have on economic development? Why is there so much unemployment in developing countries? What factors affect labor skills in the third world? continued CHAPTER 1 ©E.Wayne Nafziger Development Economics

Critical Questions in Development Economics What criteria should be used to allocate capital between alternative projects? How important are information and other technology in economic development? What factors contribute to successful entrepreneurial activity in developing countries? Are humankind’s economic policies sustainable over the next few centuries? What monetary and fiscal policies should a country use to achieve economic development with price stability? How can less-developed countries (LDCs) export more and import less? What policies can ease the international debt and financial crises in developing countries? What trade strategies should developing countries use? Should developing countries rely on market decisions or state planning in allocating resources? Do price and exchange-rate decontrol, financial liberalization, deregulation, and privatization improve LDC performance? CHAPTER 1 ©E.Wayne Nafziger Development Economics