Economic Development ECONOMICS TODAY Edited by Andrew Leake The 'Economics Today' series surveys contemporary headline topics in applied economics. Each book in the series is written by an expert in the field in a style that is fluently readable. It serves the student of introductory economic principles while also making the subject accessible to a more general reader. The series embraces the problem-solving skills of the new generation of students and stresses the importance of real-world issues and the significance of economic ideas. Published: Jean-Louis Barsoux and Peter Lawrence: The Challenge of British Management Andy Beharrell: Unemployment and Job Creation S. F. Goodman: The European Union (3rd edition) Nigel Healey and Mark Cook: Growth and Structural Change Ian Hodge: Environmental Choices Andrew Leake: The Economic Question Kent Matthews: Macroeconomics and the Market Gareth Rees and Charles Smith: Economic Development (2nd edition) Jenny Wales: Investigating Social Issues John Wigley and Carol Upman: The Enterprise Economy Margaret Wilkinson: Taxation Series Standing Order If you would like to rereive future titles in this series as they are published, you can make use of our standing order facility. To place a standing order please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address and the name of the series. Please state with which title you wish to begin your standing order. (If you live outside the United Kingdom we may not have the rights for your area, in which case we will forward your order to the publisher concerned.) Customer Servires Department, Macmillan Distribution Ltd Houndmills, Basingstoke, Hampshire RG21 2XS, England ECONOMIC DEVELOPMENT Second Edition Gareth Rees and Charles Smith MACMILLAN Business @ Charles Smith 1994, Gareth Rees and Charles Smith 1998 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1P 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their right to be identified as the authors ofthis work in accordance with the Copyright, Designs and Patents Act 1988. First edition 1994 Reprinted three times Second edition 1998 Published by MACMILLAN PRESS LTD Hound mills, Basingstoke, Hampshire RG216XS and London Companies and representatives throughout the world ISBN 978-0-333-72228-2 ISBN 978-1-349-14689-5 (eBook) DOI 10.1007/978-1-349-14689-5 A catalogue record for this book is available from the British Library. This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. 10 9 8 7 6 5 4 3 2 1 07 06 05 04 03 02 01 00 99 98 Dedications: Irene Rees, my mother D.G.R. * * * Francis Archie Smith, Mary Louise Quibell, Jose Brocca Ramon, and Rosa Garcia Lopez; my grandparents, misabuelos C.E.S. Make John Lennon's dream come true ... It's the least we can do. Song by Gerry Murray (Brandon Publishers), performed by Christy Moore (WEA Records). Contents List of Tables, Figures and Boxes xi Acknowledgements xiii Preface to the First Edition xv Preface to the Second Edition xviii List of Abbreviations xx 1 The World and its Welfare 1 Income, Growth and Welfare 2 National income 3 Domestic or national? 4 What is Economic Growth? 5 GNP and Living Standards 9 Living Standards and Welfare 12 2 Development: Economic and Human 14 Growth and Development 14 Economic Development 15 What is Human Development? 16 vii viii Contents How and Why does Development Take Place? 26 Accumulation ofp hysical capital 26 Human resource development 29 Food production 29 Industrial and technological change 33 International relationships 33 Government and markets 34 Development Policy 35 3 Population Growth: Threat or Opportunity? 36 Supply and Demand 36 Population Pressures 37 The Prophet of Doom 39 The Case for Population Growth 41 The Case Against 42 The Dependency Ratio 43 Social Attitudes 44 Population Control 44 Children in the Population 45 The Human Poverty Index 48 The Development Trap 48 The Malthusian Trap 51 4 Can We Cure Poverty? 53 Who Are the Poor? 53 Too Poor to Live? 55 How to Cure Poverty? 55 Aid and Absolute Poverty 56 Poverty and the Environment 56 Relative Poverty 57 Income and Wealth 58 How can we Measure Income Inequality? 60 Why do Poorer Countries seem Prone to Disaster? 63 Disease and Famine 64 The Rural Poor and 'Empowerment' 68 Poverty and the Role of Women 69 Contents ix 5 Feeding the World 73 Famine, Chronic Hunger and Nutrition 73 Terms of Trade 76 The Banks and the Debt Crisis 78 Stabilisation and Structural Adjustment Policies 79 Local Producers and International Markets 80 Price Fluctuations 80 Social Organisation and the Size of Farms 81 Land Ownership 83 Land Degradation 84 Interdependence 85 EU Surpluses 85 Alternatives to Cash Crops 87 What can the MDCs Do? 89 What can the LDCs Do? 90 6 Industrialisation: The Key to Development? 91 The Historical Background 91 Stage Theories of Development 92 Structural Change: Fisher-Clark Theory 95 The Dual-sector Development Model 97 Criticisms of the Lewis Model 100 The Myrdal Theory 101 The Todaro Model 102 The Role of Government 103 Rural versus Urban: a False Dichotomy? 103 Appropriate Technology 104 Multinational Enterprises 108 MNEs and LDCs 110 MNEs in the 1990s 112 7 Trade and Development 114 The Sectoral Balance and Economies of Scale 115 Outward Orientation 117 Inward Orientation 118 Trade and Welfare 119 Protectionism and Welfare 122 New Protectionism 125