Case Study 6 Development and Inequalities

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Case Study 6 Development and Inequalities

• 1 Global Inequalities
• 2 The Expression of Needs
• 3 Reducing Inequalities

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The Notion of Development

• What is development?
• Development is about people, not necessarily the
  economy.
• Development is a process.
• Improvement of the welfare of the population.
• Create an enabling environment for people.
• Often forgotten in the immediate concern with the
  accumulation of commodities and wealth.
• Conditions
• Appropriate social conditions.
• Appropriate political and legal conditions.
• Appropriate economic conditions.

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The Notion of Development
Outcomes

• Outcomes
• Improvement of the physical and human capital.
• Human capital
• Improved health or knowledge.
• Improved opportunities for people to use their
  acquired capabilities.
• Improved work or leisure conditions.
• Physical capital
• Improved private infrastructures.
• Improved collective infrastructures.

Human Capital
Physical capital
Development
-Health -Education -Quality of life
-Rights -Equity -Rule of law
-Employment -Surplus
Conditions
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The Notion of Development

• Physical capital
• All infrastructures and resources available on a
  territory and that can be used in a productive
  manner.
• Natural resources are not physical capital.
• Include public utilities (energy,
  telecommunications, water supply and waste
  disposal).
• Public works (roads, dams, irrigation canals).
• Transport infrastructures (ports, airports,
  railways, public transit).

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Accumulation and Physical Capital
9,000
Developed Countries
1,200
Physical capital per capita
Developing Countries
160
Under-Developed Countries
22,000
150
1,000
400
3,000
8,000
GDP per capita
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The Notion of Development

• Human capital
• Simultaneously the total population and its
  qualification level.
• The development of human capital is supported by
  education systems.
• Reproduce and improve the productivity of the
  labor force.
• In an information economy human capital becomes a
  resource that differentiates nations.
• Not always because of wage differences, but
  because of differences in the qualification level.

7
Annual Mean Earnings by Level of Education,
United States, 1998
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The Notion of Development

• Fallacy in development
• Main assumption that countries are poor because
  their physical capital is not developed and
  inefficient.
• The World Bank was one of the main protagonists
  of this perspective.
• Economic growth and development
• Development is often used to describe growth
  processes.
• Not to be confused, even if they are highly
  related.
• Means and not an end of development.
• Economic growth implies the generation of more
  capital.
• Not necessarily indicate a proportional
  development of the welfare.
• Economic growth is the best known method to
  improve the welfare of a population.

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Gross World Product, 1900-99 (in 1998 US)
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Global GDP, 1995

• Concentration
• The generation of wealth is highly concentrated.
• The USA accounts for 22 of the global GDP with
  less than 5 of the population.

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Demographic Growth and Development

• Context
• Development is seen as the process of improving
  the welfare of populations.
• The fruits of development are not efficiently
  distributed in an economy.
• Lead to the creation of inequalities.
• Normal process that has happened in developed
  countries.
• In the Third World its expression is far more
  acute.

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Demographic Growth and Development

• Relationships
• Link the underdeveloped status of Third World
  countries to demographic growth.
• 95 of the demographic growth of the next decade
  will occur in Third World countries.
• Middle of their demographic transition.
• Malthusian Perspectives
• Demographic growth undermines development.
• Each new individual consumes resources.
• At one point, demographic growth will overtake
  the growth of resources and economic and social
  problems will appear.
• Not confirmed because the growth of resources was
  accelerated by technological innovations.
• Remains of great concern for the future of the
  Third World.

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Demographic Growth and Development

• Creative Pressures Perspectives
• Demographic growths generate development
  opportunities.
• Seen as a process causing pressures on
  populations.
• More intensive agriculture and technological
  innovation.
• Assessment
• Demographic growth is causing pressures on an
  economy.
• Third World countries are less able to handle it.
• If the economy is not able to absorb new labor,
  unemployment is the outcome.
• Surplus labor will enter the informal sector with
  low wages and low levels of productivity.
• Income distribution is an important factor of
  development.

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Distribution of Global Income Groups, 1990

• Inequalities
• 20 of the worlds population was controlling 85
  of the available capital in 1995.
• This share was 70 in the 1960s.
• 1 of the population controls 40 of the capital.
• 50 of the global population live with less than
  2 a day.
• The richest 200 people
• Combined income of 41 of the global population
  (2.46 billions).
• Net worth of 1,042 billion.
• Make 500 per second.

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Income Growth and Development

• 5 income levels
• A highest.
• E lowest.
• Developed Countries
• Bulk of population in medium income range.
• Massive demand for consumption goods.
• Newly Industrialized Economies
• Emerging middle class.
• Least Developed Countries
• Small elite class.
• Bulk of population in the lowest income range.

A B C D E
DCs
A B C D E
NIEs
A B C D E
LDCs
16
Income Ratio of the 20 Richest over the 20
Poorest, 1995
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Employment and Development

• Employment growth and population growth
• Equilibrium between the growth of workers and
  employment growth has been destroyed in several
  Third World countries.
• Huge increase of unemployment and
  underemployment.
• Downward pressure for wages.
• About a third of the global work force, 1 billion
  people, is either unemployed or underemployed.
• Must create 35 million new jobs per year.
• 30 to 50 of the population cannot find a job.

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World Labor Force, 1995-2050 (in millions)
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Employment and Development

• Informal sector
• Emergence of the informal sector, employing from
  30 to 70 of the workers.
• Bazaar economy.
• Low wages.
• Wages
• At a macro-economic level, the employment market
  is affected by a disequilibrium.
• Demographic growth in the Third World has a
  strong impact on wages and on the welfare of the
  working population.
• Increasing number of population who are willing
  to work a low wages with limited benefits.

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Demographic Growth, Labor and Wage
Wage
Labor
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Human Development Index

• Nature
• Composite indicator developed in 1990 by the
  United Nations Program for Development (UNPD).
• More complex and representative measure of
  development.
• The HDI ranges from 0 to 1 and is a comparative
  measure.
• The country having the highest score for a
  variable has a value of 1 and other countries are
  graded from how far they are from this best
  score.
• Three major sets of variables.
• Level of health
• The variable used is the life expectancy at
  birth.
• A good health system is likely to improve the
  life expectancy significantly in a nation.

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Human Development Index

• Level of education
• Alphabetization level.
• Average years of attending school.
• Gross enrolment ratio.
• GDP per capita
• Adjust the GDP per capita to take account of the
  purchasing power parity.
• Purchasing power parity considers the cost of
  living in each country and adjusts the GDP
  accordingly.
• Going from a GDP per capita of 1,000 to 2,000
  is more important for the human welfare of that
  country than going from a GDP per capita of
  15,000 to 16,000.

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Human Development Index, 1999
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Global Inequalities

• Trends
• Economic development has increased global
  inequalities.
• When development occurs, it reinforces the
  differences between countries and even within
  countries themselves.
• Democracy linked to inequality and injustice.
• In the US, the income of the poorest 20 has
  declined since the 1970s.
• The income of the richest 20 has increased by
  15.
• The income of the richest 1 has increased by
  100.
• Difference between those contributing to the
  generation of wealth and the excluded.
• Ethnic origin, language, skills, etc.).

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Estimated Global GDP (in millions of 1980 dollars)
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Global GDP, 1995

• Concentration
• The generation of wealth is highly concentrated.
• The USA accounts for 22 of the global GDP with
  less than 5 of the population.
• The richest 200 people
• Combined income of 41 of the global population
  (2.46 billions).
• Net worth of 1,042 billion.
• Make 500 per second.

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Distribution of Global Income Groups, 1990

• 20 of the worlds population was controlling 85
  of the available capital in 1995.
• This share was 70 in the 1960s.
• 1 of the population controls 40 of the capital.

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Income Ratio of the 20 Richest over the 20
Poorest, 1995
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Gross Economic Product Per Capita by Region,
1950-99
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Variations in Income and Life Expectancy
80
1990
1960
70
Towards 1930
60
Towards 1900
Life Expectancy
50
40
5,000
15,000
10,000
20,000
25,000
Income per capita (1990 )
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The Expression of Needs

• Context
• Goods and services that population groups need.
• Food, shelter, clothing, health care and water.
• Expression of new needs.
• Demographic growth.
• Each level of development linked to a level of
  need from the population.
• Consuming goods, energy, mobility and education
• Demographic growth creates the most important
  needs.
• Food
• Every new individual must consume food resources
  in order to survive.
• 2,500 calories per day is considered the minimal
  intake necessary for a working adult.

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The Expression of Needs

• Any addition of population must be matched by a
  proportional addition of food supply.
• Health
• Populations consume health services that are
  getting very complex and expensive with
  development.
• Programs have been put forward by developed
  countries to protect themselves against the risk
  of epidemics.
• Population growth will put additional pressures
  on health resources and programs.
• Education
• Any society requires some level of education of
  its members.
• More advanced economies obviously require a
  higher level of education.

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The Expression of Needs

• Education is perceived as a fundamental way to
  improve the welfare of populations.
• Population growth generates new needs for
  education.
• Housing
• Housing is the fundamental expression of comfort
  and status.
• It requires infrastructures such as
  transportation and utilities.
• Subjective needs
• Values imposed by a modern society such as
  clothing and entertainment.
• Governments putting more attention on subjective
  needs than on real needs, for the sake of
  modernity and prestige.
• Projects that fill subjective needs (and the ego
  of governments) but contribute little to improve
  the objective welfare of their populations.

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Reducing Inequalities

• Distribution of wealth
• The assets of the 3 richest people are more than
  the combined GNP of all least developed
  countries.
• The assets of the 200 richest people are more
  than the combined income of 41 of the worlds
  population.
• A yearly contribution of 1 of the wealth of the
  200 richest people could provide universal access
  to primary education for all.
• African Americans
• Owned 0.5 of the wealth in 1865.
• Owned 1 of the wealth in 1994.
• Accounted for 12 of the population in 1994.

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Income Growth and Development, Uniform Income
Distribution
Time A
Consumption threshold
Total income available to the population with at
least the threshold income
Population
Pop. with the threshold income (A)
Income per capita
36
Income Growth and Development, Unequal Income
Distribution
Time A
Consumption threshold
Total income available to the population with at
least the threshold income
Population
Pop. with the threshold income (A)
Income per capita
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Reducing Inequalities

• Participation of women
• The capacities, perspectives and contributions of
  women in particular have long been undervalued or
  ignored.
• Often been valued primarily for their
  reproductive role.
• Limited womens opportunities for education and
  employment.
• Recognition of basic rights and responsibilities.
• Autonomy in person and property.
• Rights to land ownership and inheritance.
• Access to credit.
• Participation in political life and
  decision-making authority within the family and
  their communities.

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Female Economic Activity Rate (age 15), 1997
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Reducing Inequalities

• Improvements in basic health
• Improve the quality of life.
• Increase productivity.
• Extend the duration and the security of the
  support
• Access to healthy and safe shelter, to water,
  sanitation and to productive livelihoods.
• Education
• Exercise of personal capacities.
• Requires quality basic education and the
  opportunity for further advancement.
• Access to and promotion of education.
• Education creates and strengthens capacities for
  informed decision-making.