INTRODUCTION TO ECONOMIC DEVELOPMENT

DEFINITION

At first glance, people might define economic development in the same manner they
perceive what an economic growth is. Although they are synonymous as it may seem, these two
terms differ in some economical concepts. Growth, economically speaking, solely refers to a
sudden lift or upright change in an economy's production, particularly in one's Production
Possibilities Curve. On the other hand, Economic development is a much broader economic topic
compare to the former. Development, in its deeper sense, means the way of improving one’s
quality of life in general (Agarwal, 2019). With the "quality of life" being in the concept of
economic development, it particularly refers to the factors that drive a nation to improve
everyone's way of living. These factors may include health, education, employment, and even in
culture as long as it can be a nation’s means in lowering poverty. In a more logical sense,
Economic Development involves a nation's growth in every single economic factor. Its core is
deeper than growth for it focuses on the long run of an improvement in the quality of lives of a
nation's subordinates through developing their levels of living.

An economic development can be understood in a more comprehensive manner through

life situations. For example, upon the new ordinance from the government, roads here in the
Philippines are on the process of widening. Through this project, the aftermath that might take
effect on the lives of every person residing within the said locus of widening, goes on a list.
Many effects are on the list but to purely relate these aftermaths to economic development, we
can name some that are directly relevant in improving ones' quality of life. First, through this
road widening, the commuters may find it more convenient to go to places because transport
system will now have a much smoother flow of travel. The catch in here is that the production
level of these commuters will certainly grow because of the time that has been saved through the
minimization of their travel time. Aside from the former, business entities level of productivity
will also be enhanced through this. The transfer of raw materials and finished products will now
be more lively. Through an active transfer of goods, the mechanism of businesses will certainly
boom in regards to production. If businesses are doing well, the catch is a wide range of
employment that will be in the end of the normal citizens. One's development has an effect not
only to him but to the rest of the people; growth and development should always be in a
domino-effect. In general, the simple growth that a nation has will definitely pave a way to a
larger development in improving everyone's quality of living.

SCOPE

Economics, in its entirety has a lot of underling topics. Most of these topics root from the
aim of allocating effectively the scarce resources that the human race has. For the discussion of
Economic Development, one thing that should be tackled is Development Economics. A nation's
economic development will only be comprehended through the study of Development
Economics. More than the allocation of resources, the depth of this cores to the long-run
improvement of the people's quality of life in line with factors of politics, social, institutional,
and economic in general (Todaro & Smith, 2015)With these factors, the study of one's economic
development is not limited to the efficient allocation of productive resources but more and
deeper than that. In example, a person's quality of life will be said improved politically the
moment he exercise certain growth to his political powers such as the freedom and safety to
choose who will lead him and the rest of the nation. The effect that will be taken from this are
the future benefits that his freedom on expressing his political beliefs and aspiration. In
addition, economic development also focuses on the other factors that enable people to
experience comfort and happiness. According to Smith & Todaro, a person's development could
be reflected in his level of happiness. This was seen in the argument of Amartya Sen that they
presented which states how people regard their wellness or their state through their happiness.

PRESSING ISSUES AND CHALLENGES

As it is common for a country to put its aim towards growth and development, it is also
known that this is not a one step process. Every nation has to deal with issues involving the
economy and its people in broad sense. Each challenge that they have to face towards the desired
development differs depending on the primary needs of such nation. However, there are
challenges where every nation meets at an end such as poverty.

United Nations, as the leading advocate of eradicating poverty worldwide, defines

poverty as something more than the lack of sustainable living through economic factors such as
income. More than the usual factors, poverty entails hunger, malnutrition, and limited access to
education and basic necessities. In addition, the UN has reported that one in ten people still lives
on less than US$1.90 a day in developing regions. Up to this date, the UN still focuses its works
towards the aim of ending poverty to achieve the utmost development of every neighboring
nation.

MILLENNIUM DEVELOPMENT GOALS

The Millennium Development Goals is technically an eight-point goal signed by the UN

state members in 2000, aiming to combat poverty in line with nation's hunger, illiteracy, and
degradation. These goals are signed and expected to be assessed for fifteen years. The MDGs
cored the aim of ending extreme poverty, preventable diseases, and hunger. These goals were
considered the most important global development goals that the UN had (UNDP, n.d.).
In reference to the United Nations Development Programme, here are the MDG's that are signed:

1. Eradicate extreme poverty and hunger

2. Achieve universal primary education
3. Promote gender equality and empower women
4. Reduce child mortality
5. Improve maternal health
6. Combat HIV/AIDS, malaria and other diseases
7. Ensure environmental sustainability
8. Develop a global partnership for development

MDGs drove the way for countries to impost their own responsibilities towards
eradicating poverty. Through aiding help, loans, debt, insurances, and other means of bridging
the poor towards the growth, rich countries were able to become a help in reducing poverty
(Migiro, 2007). By the year, 2015 the UN has done its report regarding the progress these goals
had made through the fifteen years. It was written in their report that the rate of poverty has been
halved ahead of the targeted deadline. However, since these goals seem ambitious, the goal of
reducing the rate of hunger unfortunately wasn’t met successfully. More than the achievements
of these eight-point goals have made, the connection of several countries working together and
coherently towards the centralized end, is something worth sharing in line with the economic
prizes the MDGs have made.

SUSTAINABLE DEVELOPMENT GOALS

Since, MDGs are bound to expire in the year 2015, the UN has launched another set of
goals as its successor- the Sustainable Development Goals. Formed at the end of the success of
the MDGs, Sustainable Development Goals has a further vision about ending poverty in all
extremes through its 17 stated goals.

In reference with United Nations, here are the 17 Sustainable Development Goals:

GOAL 1: No Poverty
GOAL 2: Zero Hunger
GOAL 3: Good Health and Well-being
GOAL 4: Quality Education
GOAL 5: Gender Equality
GOAL 6: Clean Water and Sanitation
GOAL 7: Affordable and Clean Energy
GOAL 8: Decent Work and Economic Growth
GOAL 9: Industry, Innovation and Infrastructure
GOAL 10: Reduced Inequality
GOAL 11: Sustainable Cities and Communities
GOAL 12: Responsible Consumption and Production
 GOAL 13: Climate Action
GOAL 14: Life Below Water
GOAL 15: Life on Land
GOAL 16: Peace and Justice Strong Institutions
GOAL 17: Partnerships to achieve the Goal

Just like the Millennium Development Goals, SDGs aim is to eradicate poverty.
However, SDGs differ in a way that it involves more countries for it is not limited to developing
countries only (Ocampo, 2017). One thing that distinguishes Sustainable Development Goals
from other set of goals signed by UN is that, it applies to all nations, may it be the poor, middle,
or even the rich countries, these goals cater every nation. MDGs became a process of "rich
aiding the poor" in a way that it does not rationalize the concept of inequality that they propose,
which in SDGs, through applying all means of obtaining these goals to every nation, regardless
of their state, aided such lap in MDGs. In addition, SDGs are assigned to finish the jobs left by
the MDGs. The former set of goals were successful in getting done the half of the nation's
poverty, in relation to this, SDGs are expected to finish the whole percentage left. The
expansion made with these goals is expected to bear fruits in the year 2030.

BASIC INDICATORS OF DEVELOPMENT/ GROWTH DETERMINANTS

REAL INCOME

Among the other indicators, a nation's real income is the most widely used indicator of
growth and development (Todaro & Smith, 2015 p.45). This indicator has three underlying
concepts that comprehend real income in its entirety. One concept is how GDP works which
measures the production of every country. Next concept is the Real GDP, this concept refers to
the former in the manner price changes is neglected. The last concept would be the "per capita"
which solely means individually or per person (Amadeo, 2019). To sum up, Real income of a
nation is an indicator in a way that a nation's economic production is comparable to other
nations. It is computed by dividing Gross domestic product by the entire population.

HEALTH AND EDUCATION

One indicator that is relatively significant to a nation's development is the rate of literacy
among its people. Prioritizing education produces highly-educated workforce that enables a
knowledge-based economy performs its mechanisms. Furthermore, people who are well
educated contribute well enough to the betterment of the nation through collective effort in
making their own lives improved and developed. Same thing goes with health industry. Life
expectancy is treated as an indicator of a good health of nation's development. An increased rate
of life expectancy at birth mirrors rising living standards in economic terms and even in
education. Workforce is a must in moving a nation towards development that is why health and
education are indicators of development.
PURCHASING POWER PARITY

Purchasing power parity simply refers to a theoretical rate used by government to

compare their outputs to other nations that uses different exchange rates (Amadeo, 2019).
Through this, it would tell how things would cost if they are sold within a same exchange rate,
the US dollars, allowing you to buy same amount of commodities from other countries. Under
this theory of Purchasing power parity, the prices of commodities should equalize between
nations over time. trade contributes a lot in the mechanism of efficient market system.

NEW HUMAN DEVELOPMENT INDEX

Human development index, is a measurement of how well residents of a nation is in

terms of socio-economical factors such as health, education, and their income, or basically
assessing them in terms of the determinants of development(Todaro & Smith, 2015 p. 51). In line
with this, this comparative measurement was refined in 2010 under United Nations Human
development report. The new HDI ranks each nation solely based on three things: life
expectancy, education, and of course real income per capita.
The HDI is calculated by getting the geometric mean of the following index:
Geometric mean is derived by multiplying each index and getting their cube root (Seidel, 2018).
Life Expectancy Index

Life expectancy is the index that refers to how long the average residents of a nation lives, and
how much of her working life she can contribute to a nation. The HDI measures life expectancy
from 20 to 85 years. In reference to the UN, those nations with longer life expectancies are also
those who gain higher HDI units than those in the opposite run.

The computation would be: ( Life expectancy-20)/ (85-20)

Education Index

This index basically refers to the access of the citizens towards proper education in the long run.
The education index is derived by dividing the average number of years of schooling for adults
whose age is above 25, by the expected years of schooling for children of school age.

Gross National Income Per Capita

Theoretically based, the GNI measures annual income of the average residents of a nation based
on purchasing power parity. In relation, the computation on this index uses a minimum income
of $100 and a maximum of $75,000. The computation uses logarithm to show the decrease in
purchasing power as income increases.

The computation would be:

[Log(GNI Per Capita) - Log(100)]/ [Log(75,000) - Log(100)]

WHO ARE THE DEVELOPING COUNTRIES?

In everyone's knowledge, developing countries are those considered low-income

countries. However, to be more technical, it is the World Bank, a financial institution aiding
funds to developing countries, is the one who could tell which countries belong to the developing
sector.
The World Bank has classified developing countries as those who are in the low,
lower-middle, and upper-middle incomes. Low-middle income countries are those who have less
than $1025 while upper-middle income countries are those above them but lower than $12475
based on their 2011 research (Todaro & Smith, 2015 p. 42).

FEATURES OF DEVELOPING COUNTRIES

1. Lower levels of living and productivity
- Low income levels often leads to limited access to education and health services, which
has a vital role in one's productivity. A nation with less productivity rate has a lesser chance of
investment developments for future income.

2. Lower levels of human capital

- Workforce is a nation's asset towards development in productivity. In line with the low
level of income, a limited access to education basically limits opportunities for production in the
economy and the same goes with the health system.

3. Higher Levels of Inequality and Absolute Poverty

4. Higher Population Growth Rates
- Population increases rapidly especially to those belonging in the developing world.
However, the way of living in a nation finds it hard to go along with the level of increase in
population leading to a more rate of poverty.
5. Greater Social Fractionalization
6. Larger Rural Populations but Rapid Rural-to-Urban Migration
7. Lower Levels of Industrialization and Manufactured Exports
8. Adverse Geography
9. Underdeveloped Markets
10. Lingering Colonial Impacts and Unequal International Relations