Caribbean Economic Development
Karen_2
Unit5econ.pdf
ECON3501
CARIBBEAN ECONOMIC
DEVELOPMENT
UNIT 5 – ECONOMIC DEVELOPMENT
RESOURCE MATERIALS
Levitt, Kari; Witter, Michael (1996). The Critical Tradition of Caribbean Political
Economy: The Legacy of George Beckford. Kingston. Ian Randle Publishers
Beckford; George (2000) Persistent Poverty; Underdevelopment in the Plantation
Economies of the Third World. UWI Press.
Todaro Michael & Smith Stephen; C. (2011) 11th Ed. Economic Development. Pearson
Education & Addison-Wesley
Bhagwati Jagdish (2004). In Defence of Globalization, Oxford University Press
Blackman; Courtney. (2005). The Practice of Economic Management: Caribbean
Perspective Kingston: Ian Randle Publishers
United Nations- UNDP, Human Development Report. World Bank-World
Development Report 2
THE CONCEPT OF ECONOMIC DEVELOPMENT
Development can be conceptualized in two ways:
1. Goals – desirable things that society should strive towards
Development goals include, for example, the elimination of hunger and poverty,
universal access to education and healthcare, representative government, social
stability and many others, including those listed in the United Nation's (UN)
charter on human rights.
In recent times, the most publicized development goals have been
the Millennium Development Goals (MDGs). These were agreed by the
United Nations at the Millennium Summit in September 2000 and aimed to be
met by 2015; and subsequently the Sustainable Development Goals (SDGs)
to achieve by 2030. 3
THE CONCEPT OF ECONOMIC DEVELOPMENT
2. Process – mutually recognized frameworks for
understanding and achieving such goals.
Development processes, then, concern the means by which
development goals are reached. They might involve
specific policies and strategies adopted by governments and other
development agencies, or they may relate to wider forces of change
outside the control of governments or individual organizations.
Whilst it is relatively easy for people and governments to agree on
broadly defined aims, it is often much harder to prioritize between
them or reach agreement on how to achieve them. 4
ECONOMIC VS HUMAN DEVELOPMENT
Economic development usually refers to improvements in material living
standards and therefore to improvements in income, consumption,
employment, savings and investment.
It also concerns how resources are distributed between different people
and the processes that influence this distribution. Ensuring that economic
improvements benefit the majority rather than just the few is an important
goal in development.
This broad-based development is important for both ethical and
economic reasons, as large inequalities can be an obstacle to further
economic development (Ravallion 2005). 5
ECONOMIC VS HUMAN DEVELOPMENT
Economic development is also associated with improvements in technology
and institutional change as well as changes in the structure of the economy
as a country typically diversifies away from agriculture and expands its
industrial and service sectors.
Human or social development relates to quality of life issues, such as
security, health, education, social stability, equality, empowerment, dignity,
and so on.
These are themselves seen as means for achieving a wider
conceptualization of 'development as freedom' (Sen 2001 p. 382), as these
goals and means are necessary components of freedom - to live, to
participate in society, to choose, to consume, etc.
6
ECONOMIC DEVELOPMENT VERSUS ECONOMIC GROWTH
The definition of economic development, according to Michael Todaro, is “an
increase in living standards, improvement in self-esteem needs and freedom from
oppression as well as a greater choice.”
Therefore the concept of economic development is a normative one.
This means that it applies in the context of people’s sense of morality (right and
wrong, good and bad). It is subjective in nature.
Economic growth, on the other hand, is an increase in the output that an economy
produces over a period of time given all its productive resources are used
efficiently.
Growth can be seen as an increase in the quantity of resources and improvements in
technology or in another way an increase in the value of goods and services produced
by every sector of the economy (GDP).
7
OBJECTIVES OF DEVELOPMENT
Development is both a physical reality and a state of mind in which
society has (through some combination of social, economic, and
institutional processes), secured the means for obtaining a better life.
1. To increase the availability and widen the distribution of basic life-
sustaining goods (food, shelter, and protection)
2.To raise quality of living (higher income, more jobs, better education,
greater attention to culture and human values)
3.To expand the range of economic and social choices (freeing them from
servitude and dependence not only in relation to other people and
nation-states but also to the forces of ignorance and human misery) 8
THE RELATIONSHIP BETWEEN GROWTH AND DEVELOPMENT
So what drives a country towards achieving these development goals?
The orthodox view, adopted by most governments, most major international
organizations, and the economists that advise them, is that a big part of the answer lies in
economic growth.
Economic growth is measured in terms of rising gross domestic product (GDP) or
related indicators, such as gross national product (GNP) or gross national
income (GNI) which are derived from the GDP calculation.
Do high levels of GDP necessarily correspond with high levels of development? Not
necessarily.
It is not aggregate GDP that is important, but GDP per capita. Countries like China
and India have much higher levels of GDP than, say, Singapore, New Zealand or
Belgium, but few would suggest that the latter are economically less developed than
the former.
9
THE RELATIONSHIP BETWEEN GROWTH AND DEVELOPMENT
Certainly, statistics reveal that the most developed countries are those with
the highest GDP per capita.
Clearly, though, GDP per capita doesn't tell the whole story. It says nothing about
how incomes are distributed or spent. Growth in GDP per capita could result
from growth in the incomes of richer groups in society, with incomes of poorer
groups remaining largely unchanged. It coincides with spending patterns that are
skewed towards the rich and which exclude the needs of the poor.
It doesn't necessarily follow that growth in per capita GDP will lead to a
reduction in poverty or to broader social and economic development. Indeed,
there are those who argue, rightly or wrongly, that in many countries economic
growth is associated with increasing levels of poverty, rather than the reverse. 10
MEASUREMENT OF ECONOMIC DEVELOPMENT
There are some other problems:
It does not take into consideration the underground economy.
It does not tell the whole story of a country’s economic or social situation.
For example, there can be widely varying standards of health and education for
countries with similar levels of GDP per head.
Non-marketed output may never get measured.
Therefore, many economists believe development should be less about growth
but more about inclusive well-being, and building capacities and resilience
in a fast-changing and unpredictable world. 11
THE HUMAN DEVELOPMENT INDEX (HDI)
The United Nation Development Programme (UNDP) defines human
development as a process of enlarging people’s choice.
The most critical ones are to lead a long and health life, to be educated and
enjoy a decent standard of living.
The HDI is a tool developed by the United Nations to measure and rank
countries' levels of social and economic development .
Human Development Index is a holistic measure of living standards that
attempts to measure and rank countries' levels of social and economic
development on a scale 0 to1 based on three goals or end products;
longevity, knowledge, and standard of living as measured by real per capita
income.
12
THE HUMAN DEVELOPMENT INDEX (HDI)
The HDI is calculated based on the following criteria:
1.A long and healthy life: Life expectancy at birth
2.Education index: Mean years of schooling and expected years of
schooling
3.A decent standard of living: GNI per capita (PPP US$)
The HDI index makes it possible to track changes in development
levels over time and to compare development levels in different
countries 13
THE HUMAN DEVELOPMENT INDEX (HDI)
Before the HDI itself is calculated, an index is created for each of
these dimensions.
To calculate these indices—the life expectancy, education and GDP
indices—minimum and maximum values (goalposts) are chosen for each
underlying indicator.
For example, in 2019 the HDI’s reported maximum and minimum
values for life expectancy were 85 and 25 years, respectively. Expected
years of schooling and mean years of schooling were 18 and 0 and 15
and 0 respectively. Standard of living was $75,000 and $100
respectively. 14
THE HUMAN DEVELOPMENT INDEX (HDI)
The HDI is then calculated as a simple average of the
dimension indices:
HDI = 1/3 (life expectancy index) + 1/3 (education index)+
1/3 (GDP index)
The closer the value is to 1 the more developed a country is
believed to be.
15
THE HUMAN DEVELOPMENT INDEX (HDI)
http://hdr.undp.org/en/content/latest-human-development-index-
ranking
16
LIMITATIONS OF THE HDI INDEX
Limitations of its use include:
It does not take inequality into account.
It focuses on three specific elements: health, education and income.
Millennium Development Goals and their associated international development targets demonstrate that a
set of other factors are equally important.
It is open to criticisms for the continuing omissions e.g. access to clean water and the elements which it is
unable to measure e.g. political freedom.
It has its own issues such as the equal weighting of the components and the difficulty in measuring quality as
opposed to quantity.
It does not capture the adverse effects of gender disparities on social progress. The Gender-related
Development Index was established.
The HDI can be adjusted to take into account income distribution and can be disaggregated for individual
groups of regions. In these ways it improves on GDP, gives a simple comparison and reflects important
elements of development. Other measures such as the HPI and MEW may be alternatives.
17
OTHER INDEXES
UNDP publishes a number of different human development indicators,
many of which are composites of other weighted indexes. Other than
the HDI other indexes include:
Inequality Adjusted Human Development Index (IHDI)
Gender Inequality Index (GII)
Multidimensional Poverty Index (MPI)
Gender Empowerment Measure (GEM) 18
HDI AND IHDI
19
• The IHDI takes into
account not only the
average achievements of
a country in health,
education, and income,
but also how those
achievements are
distributed among its
population by “discounting”
each dimension’s average
value according to its level
of inequality.
THE GENDER INEQUALITY INDEX (GII)
20
• The GII It measures gender inequalities in three important aspects of human development—reproductive health,
measured by maternal mortality ratio and adolescent birth rates; empowerment, measured by proportion of
parliamentary seats occupied by females and proportion of adult females and males aged 25 years and older with at
least some secondary education; and economic status, expressed as labour market participation and measured by
labour force participation rate of female and male populations aged 15 years and older.
• The GII is built on the same framework as the IHDI—to better expose differences in the distribution of
achievements between women and men. It measures the human development costs of gender inequality. Thus the
higher the GII value the more disparities between females and males and the more loss to human development.
THE MULTIDIMENSIONAL POVERTY INDEX (MPI)
21
• The Multidimensional Poverty Index (MPI) is published by the UNDP’s Human Development
Report Office and tracks deprivation across three dimensions and 10 indicators: health (child
mortality, nutrition), education (years of schooling, enrollment), and living standards (water,
sanitation, electricity, cooking fuel, floor, assets).
• The MPI provides a comprehensive and in-depth picture of global poverty and its intensity– in
all its dimensions – and monitors progress towards SDG#1 – to end poverty in all its forms.
PHYSICAL QUALITY OF LIFE INDEX (PQLI)
In 1979, D. Morris constructed a composite Physical Quality of Life
Index (PQLI). He found that most of the indicators were inputs to
development process rather than result of the development process.
He combined three component indicators to measure performance in
meeting the basic needs of the people. Indicators include:
1. Life Expectancy Indicator (LEI)
2. Infant Mortality Indicator (IMI)
3. Basic Literacy Indicator (BLI) 22
PHYSICAL QUALITY OF LIFE INDEX (PQLI)
The indicators are averaged to give what is called the Physical
Quantity of life Index (PQLI).
PQLI= (1/3) (LEI + IMI +BLI)
23
SUSTAINABLE DEVELOPMENT
In the world we live in today, it is not possible to discuss development without involving
the concept of sustainability and sustainable development.
"Sustainable development is development that meets the needs of the present,
without compromising the ability of future generations to meet their own needs.
The concept of sustainable development can be interpreted in many different ways,
but at its core is an approach to development that looks to balance different, and often
competing, needs against an awareness of the environmental, social and economic
limitations we face as a society.
Economists, however, often view sustainable development purely in terms of
consumption. Thus, sustainable development is said to occur when increases in
consumption are capable of being sustained indefinitely. Environmental sustainability is
only important insofar as it facilitates this. 24
SUSTAINABLE DEVELOPMENT
The triple-f crisis
Sustainability is typically associated with a degree of stability, whether in relation to the economy,
environment, or social relations. The late 2000s and early 2010s has been marked by considerable
instability. In economic terms that instability has manifested itself in sharp movements in the prices
of food, fuel and financial assets. Together these shocks have come to be known as the triple-f
crisis. Some see sharp rises in food and fuel prices as marking the start of new era of growing
scarcity, both of food and fossil fuels. The scarcity is linked to both supply and demand factors with
rapid economic growth in emerging economies, especially China and India, helping drive up the
demand for both food and energy in the face of supply constraints.
As emerging economies industrialise their demand for energy increases. So, too, does their
demand for grain as meat and dairy products (which require large amounts of grain to produce)
begin to feature more prominently in people's diets due to rising incomes. The increased demand
for grain also drives up demand for energy as agricultural production becomes ever more
dependent upon fossil fuels, especially in the production of fertilisers.
25
SUSTAINABLE DEVELOPMENT
Global Consumption Patterns
Consumption lies at the heart of the sustainable development problem. At a global level
consumption of natural resources is growing at an unsustainable rate. It is also
highly skewed, with rich countries consuming a disproportionate amount of the earth's
resources. In the pursuit of sustainable development there is clearly a case to be made for
curbing the consumption of the rich whilst increasing the consumption of the poor. In the
world's rich and/or rapidly growing countries excessive consumption poses the most
serious threat to sustainable development; whilst in poor countries it is the lack of
consumption that is the main problem.
In the latter, poor people are often unable to consume even the most basic of necessities.
This represents a failure of development, but can have damaging environmental
consequences too, as poverty often forces people to degrade their environment just to
survive.
26
SUSTAINABLE DEVELOPMENT
The focus of sustainable development is far broader than just the
environment.
It's also about ensuring a strong, healthy and just society.
This means meeting the diverse needs of all people in existing and
future communities, promoting personal wellbeing, social cohesion and
inclusion, and creating equal opportunity.
27
UN MILLENNIUM DEVELOPMENT GOALS (MDGS)
The United Nations Millennium Development Goals are eight goals
that all 191 UN member states have agreed to try to achieve by the
year 2015.
The United Nations Millennium Declaration, signed in September
2000 commits world leaders to combat poverty, hunger, disease,
illiteracy, environmental degradation, and discrimination against
women.
The MDGs were derived from this Declaration, and all have specific
targets and indicators. 28
UN MILLENNIUM DEVELOPMENT GOALS (MDGS)
MDG#1 - Eradicate Extreme Poverty and Hunger
Target 1a: Reduce by half the proportion of people living on less than a dollar a
day
Target 1b: Achieve full and productive employment and decent work for all,
including women and young people
Target 1c: Reduce by half the proportion of people who suffer from hunger
MDG#2 - Achieve Universal Primary Education
Target 2a: Ensure that all boys and girls complete a full course of primary
schooling
MDG#3 - Promote Gender Equality and Empower Women
Target 3a: Eliminate gender disparity in primary and secondary education
preferably by 2005, and at all levels by 2015
29
UN MILLENNIUM DEVELOPMENT GOALS (MDGS)
MDG#4 - Reduce Child Mortality
Target 4a: Reduce by two thirds the mortality rate among children under five
MDG#5 - Improve Maternal Health
Target 5a: Reduce by three quarters the maternal mortality ratio
Target 5b: Achieve, by 2015, universal access to reproductive health
MDG#6 - Combat HIV/AIDS, Malaria and Other Diseases
Target 6a: Halt and begin to reverse the spread of HIV/AIDS
Target 6b: Achieve, by 2010, universal access to treatment for HIV/AIDS for all
those who need it
Target 6c: Halt and begin to reverse the incidence of malaria and other major
diseases 30
UN MILLENNIUM DEVELOPMENT GOALS (MDGS)
MDG#7 - Ensure Environmental Sustainability Target 7a: Integrate the principles of sustainable development into country policies and programmes; reverse loss of environmental resources Target 7b: Reduce biodiversity loss, achieving, by 2010, a significant reduction in the rate of loss Target 7c: Reduce by half the proportion of people without sustainable access to safe drinking water Target 7d: Achieve significant improvement in the lives of at least 100 million slum dwellers, by 2020
MDG#8 - Develop a Global Partnership for Development Target 8a: Develop further an open, rule-based, predictable, non-discriminatory trading and financial system. Includes a commitment to good governance, development, and poverty reduction - both nationally and internationally Target 8b: Address the special needs of the least developed countries. Includes tariff and quota free access for least developed countries' exports; enhanced programme of debt relief for HIPCs and cancellation of official bilateral debt; and more generous ODA for countries committed to poverty reduction. Target 8c: Address the special needs of landlocked countries and small island developing States Target 8d: Deal comprehensively with the debt problems of developing countries through national and international measures in order to make debt sustainable in the long term Target 8e: In co-operation with pharmaceutical companies, provide access to affordable essential drugs in developing countries Target 8f: In co-operation with the private sector, make available the benefits of new technologies, especially information and communications
31
UN MILLENNIUM DEVELOPMENT GOALS (MDGS)
Each goal had specific targets, and dates for achieving those targets.
To accelerate progress, the G8 finance ministers agreed in June 2005 to provide enough
funds to the World Bank, the International Monetary Fund (IMF) and the African
Development Bank (AFDB) to cancel $40 to $55 billion in debt owed by members of the
heavily indebted poor countries (HIPC) to allow them to redirect resources to programs
for improving health and education and for alleviating poverty.
Critics of the MDGs complained of a lack of analysis and justification behind the chosen
objectives, and the difficulty or lack of measurements for some goals and uneven progress,
among others.
Although developed countries' aid for achieving the MDGs rose during the challenge
period, more than half went for debt relief and much of the remainder going towards
natural disaster relief and military aid, rather than further development. 32
UN MILLENNIUM DEVELOPMENT GAP TASK FORCE REPORT
2015
According to the Task Force, significant achievements have been made in a number of targets.
Flows of official development assistance (ODA) which reflect the international commitment to
provide financial resources to support the development efforts of developing countries, have
increased from about $81 billion in 2000 to $134 billion in 2014 in constant dollars, accounting for
about 0.3 per cent of the gross national income (GNI) of developed countries.
Denmark, Luxembourg, Norway, Sweden and the United Kingdom of Great Britain and Northern
Ireland has met the established United Nations target of providing 0.7 per cent of GNI as ODA in
2014.
There have also been improvements in developing countries’ access to developed-country
markets, including increased duty-free admission, although progress towards this target has been
very limited since 2010.
Major initiatives to reschedule or write down the external debt of developing countries have
reduced debt burdens, in particular, for low and middle-income countries.
33
UN MILLENNIUM DEVELOPMENT GAP TASK FORCE REPORT
2015
Yet major gaps remain in reducing vulnerabilities for many developing
countries, including least developed countries (LDCs), small island
developing States (SIDS) and other low-income countries.
Access to essential medicines at affordable prices remains highly
problematic, with many households squeezed out of the market due to high
prices and limited availability.
While the rapid expansion of information and communication technologies
(ICTs) has allowed several billion people in developing countries to join the
information society, a major digital divide is still in place, with more people
offline than online and particularly poor access in sub-Saharan Africa. 34
UN SUSTAINABLE DEVELOPMENT GOALS
There has been a transformative development agenda, which includes
a set of sustainable development goals (SDGs) to be achieved by 2030
Among them, aiming for a meaningful and universal agreement on
climate change.
The transition from the MDGs to the SDGs presents a once-in-a-
generation opportunity to advance prosperity, secure the planet’s
sustainability for future generations, and unlock resources for
investments in education, health, equitable growth and sustainable
production and consumption. 35
STRATEGIES FOR ACHIEVING ECONOMIC DEVELOPMENT
The livelihood aspirations of poor people can be divided into three broad objectives which
(following Dorward 2009) we refer to as 'hanging in', 'stepping up', and 'stepping out'.
'Hanging in' takes place when people engage in activities with the objective of clinging onto the
assets they currently possess or control. It refers to their effort not to lose assets as a result of
unfavourable trends and shocks. Examples include smallholders trying to maintain the fertility of
their soils, trying to keep hold of their land in the face of competing claims on it, trying to avoid
stress-induced sales of livestock and other assets.
'Stepping up' occurs when people enhance the productivity of their existing assets and activities
through investments in new assets, such as new equipment, better skills and technology, or more
land. Examples include smallholders investing in new seeds and improved irrigation technology to
enhance the productivity of their land.
'Stepping out' takes place when people's livelihoods shift to new, more productive, activities, and
is associated with the accumulation of a new set of assets. Examples include smallholders investing
in off-farm enterprises or investing in education and skills in order to qualify for urban jobs.
36
STRATEGIES FOR ACHIEVING ECONOMIC DEVELOPMENT
37
An Economy-wide Transformation
STRATEGIES FOR ACHIEVING ECONOMIC DEVELOPMENT
The concept of livelihoods was introduced as a useful starting point
for examining how success or failure in achieving development goals
manifests itself.
This conceptualization of development expressed in the diagram
above explicitly recognizes the importance of structural changes in
people's livelihood activities as development progresses. It highlights
the need to understand interactions between (a) livelihood
strategies and transformations at the household level and (b)
development at higher levels of social organization. 38
STRATEGIES FOR ACHIEVING ECONOMIC DEVELOPMENT
Reducing high crime rates in some countries
Restructuring the education system
Breaking into major new non-traditional markets –more
trade and partnership alliances with Brazil and China
Land reform policies
39
STRATEGIES FOR ACHIEVING ECONOMIC GROWTH
Economic growth strategies could include:
Attract and encourage significant flows of foreign investment that will add enough
local input to transform an economy (Business Process Out-sourcing-BPO;
Logistics hub development)
Use a Citizenship programme as is done by Grenada, Antigua & Barbuda,
Dominica, St Kitts-Nevis; St Lucia;
Become or widen financial centre activities (despite the de-risking risks it faces
from hostile and big developed countries)
Focus on state led expansion projects (e.g. road infrastructure development-toll
roads)
Widen tourism contribution and linkage industries/sectors.
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