10. BECE-016 Economic Development Comparative Analysis and Contemporary Issues

IGNOU BA Economics Study Material

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Block-1 Economic Growth and Development

Block-2 Models of Development in the Twentieth Century-I

Block-3 Models of Development in the Twentieth Century-II

Block-4 Emerging Global Economic Order

Block-5 Emerging Challenges and Issues of Development in the 21st Century

Block-1: Economic Growth and Development

At the outset, it is crucial to distinguish between economic growth and economic development. Economic growth refers to the quantitative increase in a country’s output of goods and services, typically measured by the percentage change in Gross Domestic Product (GDP) or Gross National Income (GNI). It is a measure of the expansion of an economy’s productive capacity.

Economic development, on the other hand, is a broader and more qualitative concept. It encompasses not only economic growth but also improvements in the quality of life and well-being of the population. This includes advancements in areas such as health, education, and social justice, as well as the enhancement of individual freedoms and capabilities. The Human Development Index (HDI), which combines measures of life expectancy, education, and income, is a widely used metric to capture these multifaceted dimensions of development.

While economic growth is a necessary condition for sustained development, it is not sufficient. Development requires that the benefits of growth are widely shared, leading to poverty reduction, improved social indicators, and structural transformation of the economy.

Block-2: Models of Development in the Twentieth Century-I

The twentieth century was a laboratory for various development models, each offering a different pathway to prosperity. The early to mid-twentieth century was dominated by several key paradigms:

Linear Stages of Growth Models: Prominent in the 1950s and 1960s, these models, such as W.W. Rostow’s “Stages of Economic Growth,” posited that all countries pass through a series of sequential stages on their path to development, starting from a traditional society and culminating in an age of high mass consumption. These models emphasized savings, investment, and capital accumulation as the primary drivers of growth.
Structural Change Models: Emerging in the 1960s and 1970s, these theories focused on the transformation of a country’s economic structure from a traditional, agrarian base to a modern, industrialized one. The Lewis model, for instance, described a “two-sector” economy where surplus labor from the agricultural sector is transferred to the expanding industrial sector, fueling growth.
Dependency Theory: Gaining traction in the 1960s and 1970s, particularly in Latin America, dependency theory offered a critique of the mainstream development models. It argued that the global economic system is inherently unequal, with developed “core” countries benefiting at the expense of underdeveloped “peripheral” countries. This school of thought contended that underdevelopment is not a stage but a condition created by the dynamics of global capitalism.

Block-3: Models of Development in the Twentieth Century-II

The latter part of the twentieth century witnessed a shift in development thinking, with the rise of new models that challenged the state-centric approaches of the past:

Neoclassical/Market-Oriented Models: Becoming dominant in the 1980s, these models, often associated with the “Washington Consensus,” advocated for free markets, privatization, deregulation, and trade liberalization. The belief was that minimizing the role of the state and allowing market forces to operate freely would lead to the most efficient allocation of resources and, consequently, economic growth. This approach was championed by international financial institutions like the International Monetary Fund (IMF) and the World Bank.
Human Development Approach: Pioneered by economists like Amartya Sen and Mahbub ul Haq, this approach, which gained prominence in the 1990s, shifted the focus of development from national income to human well-being. It emphasizes expanding people’s capabilities and freedoms, with a strong focus on health, education, and empowerment. The United Nations Development Programme’s (UNDP) annual Human Development Reports are a key outcome of this thinking.

Block-4: The Emerging Global Economic Order

The turn of the twenty-first century has been marked by a significant reconfiguration of the global economic landscape. The post-Cold War unipolar moment has given way to a more multipolar world, characterized by the rise of emerging economies, particularly the BRICS nations (Brazil, Russia, India, China, and South Africa).

This shift is evident in the changing shares of global GDP, with emerging and developing economies now accounting for a substantial portion of global output and growth. The center of economic gravity is gradually shifting from the North Atlantic to the Asia-Pacific region.

This evolving economic order is also reflected in the sphere of global governance. While the Bretton Woods institutions (the IMF and the World Bank) remain influential, new multilateral development banks, such as the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB), have been established, reflecting the growing influence of emerging powers. Regional trading blocs and bilateral trade agreements are also becoming increasingly important, sometimes challenging the primacy of the multilateral trading system embodied by the World Trade Organization (WTO).

Block-5: Emerging Challenges and Issues of Development in the 21st Century

The development agenda of the twenty-first century is confronted with a new set of complex and interconnected challenges:

Climate Change and Environmental Sustainability: The urgent need to transition to a low-carbon and sustainable development model is perhaps the most significant challenge of our time. This requires decoupling economic growth from environmental degradation and investing in renewable energy and green technologies.
Rising Inequality: While poverty has declined in many parts of the world, inequality of income and opportunity has been on the rise both within and between countries. This can undermine social cohesion, fuel political instability, and hinder long-term growth.
Technological Transformation and the Future of Work: Rapid advancements in automation, artificial intelligence, and digitalization are transforming labor markets. While these technologies offer new opportunities, they also pose challenges related to job displacement and the need for new skills.
Global Pandemics and Health Security: The COVID-19 pandemic has starkly illustrated the vulnerabilities of our interconnected world to health crises. Strengthening public health systems and enhancing global cooperation on health security are now critical development priorities.
Geopolitical Instability and Conflict: Increasing geopolitical tensions and conflicts can disrupt trade, displace populations, and divert resources away from development priorities, posing significant threats to global stability and progress.

Navigating these challenges will require innovative policy solutions, strengthened international cooperation, and a renewed commitment to inclusive and sustainable development for all.

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