11
Part Lecture III: Why are some countries
more developed than others?
Comparative political economy (CPE):
the comparative study of the reciprocal
effects of economics and politics
Both domestic and international aspects
But contrast to International Political
Economy (IPE): concerned with the
governance of the international
economic sphere
What is this development thing?
Organisation for Economic Cooperation and
Development (OECD)
United Nations Development Programme (UNDP)
The US Agency for International Development (USAID)
Inter-American Development Bank (IADB)
African Development Bank (ADB)
Asian Development Bank (ADB)
The European Bank for Reconstruction and
Development (EBRD)
Development and
Modernization Theory
Modernization theory is a theory of what
causes democracy
The goal of development is not
democracy per se, although it may be a
by-product
In MT, development good because it is
a necessary precondition for democracy
and capitalism
Development as modernization
Lerners setup:
Tradition= (The Chief of Balgat)
Agrarian, non-cash economy
Isolated rural society
Patrimonial rule (Muhtar)
Non-democratic, charismatic national authority
(Atatrk)
Modernity = (The Grocer of Balgat)
Industrial and service economy, cash-based
Cosmopolitanism
Democratic competition at local and national levels
Lerners classic MT tropes
Whiff of ethnocentrism
Bright line between tradition and
modernity
Lament for paradise lost
But faith in combined forces of
democracy and capitalism to improve
on traditional society
What does development
entail?
Replacement of tradition with modernity
Shift in cultural values
Democratization of politics
Economic transformation
Development
What is development (again)?
The right political institutions
(often democracy)
The right economic institutions
(often free markets)
The right political and economic
components
The achievement of specific outcomes
So:
We can define development as
satisfaction of basic human needs
But still remain AGNOSTIC about which
political and economic institutions are
the best way of getting to those
development goals
Alternative development
criteria
Aggregate
Distributional
Political/philosophical
Aggregate view Economic of
development
growth and development are
ends in themselves
Indicators of development:
High income: GDP/cap
Industrialization: Agr/Ind labor, or Agr/GDP
KIND of Industrialization: high value added
goods/primary goods
Why industrialization?
Because it leads to higher incomes for
individuals
Because industry generates higher
growth rates than agriculture
Agr. depends on vagaries of weather
Agr. is labor intensive, low productivity
Engels law
Critiques of aggregate view
1. Countries experiencing the highest
levels of economic growth were
authoritarian (Brazil, Pakistan)
2. Aggregate growth wasnt trickling
down
a new approach to understanding
development
Distributional view of
development
Economic growth is a means to an end
of improved welfare for people, not an
end in itself
2 ways of thinking about level of wellbeing
Absolute
Relative
Absolute measures of
development
How many people have access to the
basic needs of life?
E.g.: in Sen
E.g.: US poverty line
Relative measures of
development
E.g. European poverty line
Relative: 60% of median household income
E.g. 90/10 ratio
Share of national income earned by those in top
10% versus those in bottom 10% of the national
income distribution
E.g. Gini coefficient
Measure of distribution of national income over the
entire population (all percentiles). Ranges from 0
(totally equal distribution) to 1 (all income
concentrated in highest percentile)
Gini = A/(A+B)
A
B
Why use a relative measure?
Rough gauge of prevalence of
deprivation
In rich countries, relative
deprivation more salient than
absolute deprivation
Distributive justice is an end in itself
Political/philosophical view of
development
E.g.: Sen: Development as
Freedom
Sen: Development as
Freedom
Negative liberty
Freedom from
Necessary/sufficient for growth?
Mainly feeds Aggregate view of
development
Positive liberty
Freedom to = entitlement
Feeds Distributive view of development
Democracy is crucial
component of development
POSITIVE LIBERTY to demand
sustenance
CHOICE is the most refined
functioning
But democracy may not be
enough
Need to level the playing field first
Problems of representation
Effects of democracy depend on
the economy