An assignment

On

Development Economics

Submitted by

Kumar Debasis Dutta (杜 塔)

Student Id# LXS2018010049
Session: 2018-19
PhD in Finance
School of Finance
Zhongnan University of Economics and Law

Date of submission: October 29, 2018

Zhongnan University of Economics and Law

 An assignment

On

Development Economics

Submitted by

Mallika Saha (玫 琳 卡)
Student Id# LXS2018010034
Session: 2018-19
PhD in Finance
School of Finance
Zhongnan University of Economics and Law

Date of submission: October 29, 2018

Zhongnan University of Economics and Law

1. Most development economists now seem to agree that the level and rate of growth of
GNI and per capita income do not provide sufficient measures of a country’s
development. What is the essence of their argument? Give some examples.

Most development economists seem to agree that the level and rate of growth of GNI and per
capita income do not provide sufficient measures of country’s development. This statement is
true. As the term development is a vast term that encompasses in itself the various indicators
of development. These include;

 Increase in per capita income, GDP (Gross Domestic Product)and GNI (Gross National Income)
 Purchasing power or Standard of living of people
 Health facilities enjoyed by the general population
 The levels of literacy, employment and income inequality
 People lying below the poverty line and measures taken by government to eradicate poverty
 Status of women and children in the society and various other indicators.

Example: let’s take an example of Bangladesh. The country showed an averaged positive
increase in GDP of 5.69 percent during the period of 1994 until 2016, reaching an all time
high of 7.11 percent in 2016 and a record low of 4.08 percent in 1994. This rate of growth
was higher than the employment growth (Unemployed and Employed Persons at 2.70 Million
and 60.80 Million respectively). Bangladesh is considered as a developing economy. Yet,
almost one-third of Bangladesh’s 150m people live in extreme poverty. In the last decade, the
country has recorded GDP growth rates above 5 percent due to development of microcredit
and garment industry. Although three fifths of Bangladeshis are employed in the agriculture
sector, three quarters of exports revenues come from producing ready-made garments. The
biggest obstacles to sustainable development in Bangladesh are overpopulation, poor
infrastructure, corruption, political instability and a slow implementation of economic
reforms.

Considering all this the GDP growth of Bangladesh is not called development because there
is an increase in income with unemployment. This means that the economy must have
produced more goods and services that were bought only by the rich class and unaffordable
by major chunk of the population. This era must have increased the income inequality too.

12. What types of poverty policies have proved effective?

The poverty alleviation policies that have proved quite useful in eradication of poverty are the
workfare programs, like food for work program in Bangladesh and the Maharashtra
Employment Guarantee Scheme in India.According to food for work program, there is a
nationwide guarantee of 100 days of employment to at least one family member each year in
working building infrastructure.Means-tested welfare benefits to the poorest in society; for
example, unemployment benefit, food stamps, income support and housing benefit.Minimum
wages; Regulation of labour markets, for example, statutory minimum wagesFree market
policies to promote economic growth; hoping rising living standards will filter to the poorest
in society.Direct provision of goods/services; subsidized housing, free education and health
care.
13. Economic growth is said to be a necessary but not sufficient condition to eradicate
absolute poverty and reduce inequality. What is the reasoning behind this argument?

Growth simply means total economic output. If all the additional output goes to the top 10%
of the income ladder, then the economy becomes more unequal, and poverty doesn’t change.
It is a question of distribution of the benefits of growth - “who” gets the additional stuff - not
a question of the simple amount of growth.Assuming nobody wants to get less of the output
than they are getting now, then to increase output that goes to poor people requires increasing
total output.
A problem with this whole GDP idea is that it actually measures total money spending-
earning, and uses the money price of all output bought-sold as a proxy for the economic
“value” of all the real stuff that is bought-sold. What most people really need is more money-
income to paydown their debts and pay their monthly bills; not more stuff. Producing stuff
does not produce any money.
There is no relationship between money creation and economic production. In the 1920s and
30s, CH Douglas promoted his “social credit” money and price system, in which money
creation would be linked to economic production. But no such system has ever been
implemented anywhere.
When you’re looking for the reasoning behind arguments, find the assumptions that the
arguments are based upon. Often the assumptions are just taken for “realities”, without any
awareness that they are arbitrary assumptions. Economics routinely makes the logical error of
“conflating” money and value; and treating deposit account balances in bank accounts, and
the economic value of iPads, as if “money” and “value” are just 2 different “words” for the
same real “thing”.