ECONOMIC GROWTH & ECONOMIC DEVELOPMENT  factors such as access to basic services, social inclusion,

 Interchangeably used but not one and the same thing. gender equality, and political freedoms.
 It is important to note however that economic development
and economic growth are interconnected concepts, and 6) TECHNOLOGY AND INNOVATION:
both are crucial for the progress of an economy.  Economic growth may occur through increased
 ECONOMIC GROWTH refers to an increase in the total productivity and efficiency, but it does not necessarily
output of goods and services in an economy over time, promote technological advancements.
typically measured by the Gross Domestic Product (GDP). Is  Economic development recognizes the importance of
focused more on economic indicator technological progress and innovation as drivers of long-
 ECONOMIC DEVELOPMENT, on the other hand, economic term development.
development goes beyond mere economic indicators. It
encompasses a broader range of factors, including 7) REGIONAL DISPARITIES:
improvements in quality of life, human well-being, and  Economic growth can lead to regional disparities, with
social progress, and inclusive and sustainable development. some areas benefiting more than others.
 Economic development aims to address regional
1) SCOPE: imbalances and promote balanced growth across different
 Economic growth primarily focuses on quantitative regions.
changes, such as increases in production, consumption,
and income levels. 8) ENVIRONMENTAL CONSIDERATIONS:
 Economic development considers both quantitative and  Economic growth may not prioritize environmental
qualitative aspects, including factors like education, sustainability and can lead to negative externalities such
healthcare, infrastructure, and environmental as pollution and resource depletion.
sustainability.  Economic development integrates environmental
considerations and aims for sustainable practices that
2) PERSPECTIVE: minimize environmental impact.
 Economic growth is primarily concerned with the
perspective of the economy as a whole, focusing on ECONOMIC GROWTH (EG)
aggregate measures.  an increase in a country's real level of national output
 Economic development takes a more holistic approach, which can be caused by:
considering the well-being of  increase in the quality of resources (by education etc.)
 individuals, communities, and the environment.  increase in the quantity of resources
 improvements in technology
3) INCOME DISTRIBUTION:  an increase in the value of goods and services produced
 Economic growth does not necessarily ensure equitable by every sector of the economy.
distribution of wealth.  can be measured by an increase in a country's GDP (gross
 Economic development places greater emphasis on domestic product).
reducing income inequality and improving living standards  does not take into account the size of the informal economy.
for all segments of society.  THE INFORMAL ECONOMY is also known as the black
economy which is unrecorded economic activity.
4) HUMAN CAPITAL:
 Economic growth does not explicitly consider investments FACTORS AFFECTING ECONOMIC GROWTH IN DEVELOPING
in education, healthcare, and skills development. COUNTRIES
 Economic development recognizes the importance of a) Levels of infrastructure
human capital and emphasizes investments in  e.g. transport and communication
 education and healthcare to enhance the productive b) Levels of corruption
capabilities of individuals.  e.g. what percentage of tax rates are actually collected
and spent on public services.
5) SOCIAL PROGRESS: c) Educational standards and labour productivity.
 Economic growth does not provide a  Basic levels of literacy and education can determine
 comprehensive assessment of social progress or societal productivity of workforce.
well-being.
 Economic development takes into account
PANESA, SAMANTHA GALE C. – BSAIS 2C
 d) Levels of inward investment.  HUMAN DEVELOPMENT INDEX – takes into account the
 For example, China has invested in many African literacy rates & life expectancy which affect productivity and
countries to help export raw materials, that its could lead to Economic Growth.
economy needs.  It also leads to the creation of more opportunities in the
e) Labour mobility. sectors of education, healthcare, employment and the
 Is labour able to move from relatively unproductive conservation of the environment.
agriculture to more productive manufacturing.  It implies an increase in the per capita income of every
f) Flow of foreign aid and investment. citizen.
 Targeted aid, can help improve infrastructure and living
standards. The HDI combines:
g) Level of savings and investment. a) Life Expectancy Index.
 Higher savings can fund more investment, helping  Average life expectancy compared to a global expected
economic growth. life expectancy.
b) Education Index
MICHAEL TODARO on Economic Development  mean years of schooling
The definition of economic development given by Michael  expected years of schooling
Todaro c) Income Index (GNI at PPP)
 "an increase in living standards, improvement in self-
esteem needs and freedom from oppression as well as GNI at PPP
a greater choice."  Gross National Income (GNI) in Purchasing Power Parity
(PPP) per capita.
ECONOMIC DEVELOPMENT  Purchasing power parity (PPP) measures how much a
 Development looks at a wider range of statistics than just currency can buy in terms of an international benchmark
GDP per capita. (usually dollars), since the cost of goods and services differs
 Development is concerned with how people are actually between countries.
affected.
 It looks at their actual living standards and the freedom ECONOMIC GROWTH WITHOUT DEVELOPMENT
they have to enjoy a good standard of living.  It is possible to have economic growth without
 As we say in economics, Ceteris paribus, we would expect development. I.e. an Increase In GDP, but most people don't
economic growth to enable more economic development. see any actual Improvements in living standards.
 Higher real GDP, enables more to be spent on health care  Let's go through the following 6 examples for proper
and education. elucidation:
 However, the link is not guaranteed. 1) Benefiting small % of Population
 The proceeds of economic growth could be wasted or  Economic growth may only benefit a small % of the
retained by a small wealthy elite. population.
 For example, if a country produces more oil, it will see
MEASURES OF ECONOMIC DEVELOPMENT an increase in GDP.
Measures of economic development will look at:  However, it is possible, that this oil is only owned by one
a) Real income per head - GDP per capita firm, and therefore, the average worker doesn't really
b) Levels of literacy and education standards benefit.
c) Levels of health care e.g. number of doctors per 1000 2) Corruption
population  A country may see higher GDP, but the benefits of
d) Quality and availability of housing growth may be siphoned into the bank accounts of
e) Levels of environmental standards politicians
f) Life expectancy. 3) Environmental problems
 Measuring economic development is not as precise as  Producing toxic chemicals will lead to an increase in real
measuring GDP, because it depends what factors are GDP.
included in the measure.  However, without proper regulation it can also lead to
 There are several different measures of economic environmental and health problems.
development, but the most accurate method of measuring  This is an example of where growth leads to a decline in
development is the Human Development Index. living standards for many.

PANESA, SAMANTHA GALE C. – BSAIS 2C

 4) Congestion FACTORS IN BUILDING AN ECONOMY
 Economic growth can cause an increase in congestion. 1) Saving and investment
 This means people will spend longer in traffic jams.  need capital to produce more
 GDP may increase but they have lower living standards  would also mean sacrifice to consume more
because they spend more time in traffic jams
5) Production Not Consumed 2) Investment from abroad; foreign investment
 if a state owned industry Increases output, this is  more opportunities to produce more Ex. FDI
reflected in an increase in GDP.  a certain interest in that money is foreseen
 However, if the output is not used by anyone then it
causes no actual increase in living standards. 3) Diminishing returns and catch-up effect
 market system will be affected /failure of economy  Concept of diminishing returns
6) Military spending  Assurance needed that additional inputs will
 A country may increase GDP through spending more  yield to corresponding output by adding other inputs
on military goods.
 However, if this is at the expense of health care and 4) Education
education it can lead to lower living standards.  Investments in human capital; more quality educated
people would mean more opportunities to generate
CONCLUSION educated more and better ideas to produce goods and
 Development alleviates people from low standards of living services
into proper employment with suitable shelter.  Highly educated individuals in developing economies may
 Economic Growth does not take into account the depletion opt to serve in other countries with a higher standard of
of natural resources which might lead to pollution, living; brain drain e.g. nurses
congestion & disease.  Inequalities between men and women; minorities and
 Development however is concerned with sustainability whites
which means meeting the needs of the present without
compromising future needs. 5) Health and nutrition
 These environmental effects are becoming more of a  also an investment in human capital; a healthy
problem for Governments now that the pressure has population can maximize employment because they are
increased on them due to Global warming. able to produce more goods and services
 Economic growth is a necessary but not sufficient condition  government policies should consider promoting healthy
of economic development. workers to enhance greater productivity

BUILDING AN ECONOMY 6) Property rights and political stability

 Governments around the world are faced with issues  ensure the exercise of rights over one's property
concerning with productivity and living standards in their  efficient executive, legislative, and judiciary systems
efforts to end extreme poverty and shared prosperity. working harmoniously together for a stable sustainable
 Productivity by boosting the national output, the total value political environment
of all goods and services produced by one country. Ex. GNP
 Living standards by enhancing education, healthcare, 7) Free trade
innovation, environment, etc.  trade restrictions
 opportunity to interact with other countries

8) Research and Development

 for continuous improvement on the ways things are done
 protection of ideas of innovators and inventors

9) Population Growth
 on one hand, a large population means more human
resources working and contributing to the country's
productivity
 on the other hand, it may also mean more people to
consume those goods and services
PANESA, SAMANTHA GALE C. – BSAIS 2C
PRODUCTIVITY  THE POVERTY INCIDENCE is the number of individuals with
 The key factor in defining the standard of living is the income below the per capita poverty thresholds divided by
advances in productivity the total number of individuals.
 Productivity means the amount of goods and services
produced (output) from each unit of input (factors of MAJOR TYPES OF POVERTY
production): land, labor, capital, entrepreneurship 1) Absolute poverty
2) Relative poverty
DETERMINANTS OF PRODUCTIVITY
1) PHYSICAL CAPITAL - assets to produce goods and services
2) HUMAN CAPITAL - comprises knowledge, skills, and 1) Absolute Poverty
abilities  A condition characterized by severe deprivation of basic
3) NATURAL RESOURCES - such as trees, water, minerals, human needs, including food, safe drinking water,
metals, fruits, crops, oil, etc sanitation facilities, health, shelter, education, and
4) TECHNOLOGY - makes production more efficient and faster information.
using less input  It depends not only on income but on access to social
services (United Nations)
POVERTY AND INEQUALITY  UN further defines absolute poverty as THE ABSENCE OF
WHAT IS POVERTY (WORLD BANK) ANY TWO OF THE FOLLOWING:
 Poverty is pronounced deprivation in well-being such as  Food  Shelter
low income and the inability to acquire the basic goods  Safe drinking water  Education
and services necessary for survival with dignity.  Sanitation facilities  Information
 Poverty also encompasses low levels of health and  Health  Access to services
education, poor access to clean water and sanitation,  Living in absolute poverty is harmful and can endanger
inadequate physical security, lack of voice and insufficient your life!
capacity and opportunity to better one's life.
 Poverty may also be tied to a specific type of consumption; 2) RELATIVE POVERTY
for example, people could be house-poor or food-poor or  Sometimes called inequality,
health-poor.  is the comparison of incomes and expenditures of the
 These dimensions of poverty often can be measured poor with reference to the rich
directly, for instance, by measuring malnutrition or  It refers to individuals' or groups' lack of resources when
literacy. compared to that of other members of the society, in
other words, their RELATIVE STANDARD OF LIVING.
POVERTY IN INDIA  It is a condition in which people lack the minimum
 Poverty is about not having enough money to meet basic amount of income needed in order to maintain the
needs including food, clothing and shelter. average standard of living in the society in which they
 However, poverty is more, much more than just not having live.
enough money.
 THE WORLD BANK describes poverty as: MEASURING POVERTY
"Poverty is hunger. Poverty is lack of shelter. Poverty is  The most common measure of poverty is POVERTY RATE,
being sick and not being able to see a doctor. Poverty is not the proportion of the population that is below the poverty
having access to school and not knowing how to read. line; the ratio of the number of people whose income falls
Poverty is not having a job, is fear for the future, living one below the poverty line.
day at a time."  THE POVERTY LINE OR THE POVERTY THRESHOLD - defines
the minimum requirement of income required by an
DEFINITION OF TERMS individual to fulfil his/her basic necessities.
 THE POVERTY RATE - the proportion of the population that
is below the poverty line; the ratio of the number of people (WORLD BANK LAST UPDATED: DEC 14, 2023)
whose income falls below the poverty line.  The international poverty line is set at $2.15 per person per
 THE POVERTY LINE OR THE POVERTY THRESHOLD - defines day using 2017 prices.
the minimum requirement of income required by an  This means that anyone living on less than $2.15 a day is in
individual to fulfil his/her basic necessities. EXTREME POVERTY.

PANESA, SAMANTHA GALE C. – BSAIS 2C

  About 701 million people globally were in this situation in  ON AVERAGE
2019.  Countries that have embraced globalization have done
 As of 2022, the Philippine Statistics Authority has set the better, on the whole, than those who have not
poverty threshold at PHP12,030 per month for a family of  Within those countries, economic growth has raised
five, or PHP79 per day per person to spend on food and incomes at all levels, including the poor
non-food requirements.  Some countries have done especially well by exporting
 Latest data from the Philippine Statistics Authority (PSA)  S. Korea
showed that the country's poverty rate already declined to  Other Asian countries
22.4 percent in the first half of 2023 from 23.7 percent in
the same period in 2021. Jan 19, 2024  IN GENERAL
 However, two countries with the same poverty rates may Globalization alone is never enough to cure poverty
differ in terms of the relative income-level of the poor. Other things needed
 In the Philippines, 18.1% of the population lived below the  Investment in capital and infrastructure
national poverty line in 2021.  Education
 In the Philippines, the proportion of employed population  Good governance
below $1.90 purchasing power parity a day in 2022 was
2.2%. For every 1,000 babies born in the Philippines in RICH-COUNTRY POLICIES
2021, 26 died before their 5th birthday.  Don't import goods produced in "sweatshops" and/or by
child labor
GLOBALIZATION AND GLOBAL POVERTY  Motive is (said to be) to improve conditions of poor-
WHAT IS GLOBALIZATION? country workers and children
 Increased trade in goods and services  Effect is likely to make them worse off
 Increased international movement of capital  Much better to use positive policies, like financial
 Increased international migration assistance
 ALL OF WHICH IMPLY:  To make factories safer
Increased economic interdependence among countries  To put children in school

THE BIG ISSUES

 Does Globalization make for more poverty or less poverty?
 If poor countries resist globalization, does it help or hurt?
 How do policies of rich countries matter for global poverty?

WHY THIS MATTERS

 A large part of the world is poor.
 Poverty is not just low income; it is also high child
mortality, low life expectancy, adverse working
conditions, etc.
 OPINIONS DIFFER ON:
 The role of globalization as cause or cure for poverty.
 The desirability of particular policies

DOES GLOBALIZATION HELP OR HURT THE POOR

 THERE IS NO SINGLE ANSWER
The poor in many countries benefit from
 Increased jobs
 Cheaper consumption
 Opportunity for education, savings, entrepreneurship
In other cases
 Workers are displaced by imports and lose jobs
 Poor consumers pay more, not less, for what they need

PANESA, SAMANTHA GALE C. – BSAIS 2C