Chapter 1 and 2 Summary.docx - Chapter 1 and Chapter 2...

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Chapter 1 and Chapter 2 Summary Chapter 1: Introducing Economic Development: A Global Perspective Prologue Russia was descending into depression after the collapse of its Soviet economy. India was trying to rebound from its worst economic crisis since independence. China had launched its period of very rapid growth, but the 1989 massacre in Tiananmen Square was a fresh memory and future prospects for reform and growth in China were uncertain. Since 1992, we have moved from a sharp dualism between a rich Center and a backward Global South periphery to more dynamic and complex relationships Asia has been growing at an average rate almost triple that of high-income Western countries, and growth has returned to Africa, heralding the promise of an era of global convergence Health has improved strongly with dramatic declined in child mortality; and the goal of universal primary educations is coming into sight The number of people living in extreme poverty in China fell from about 743 million in 1992 to 157 million in 2009 In Brazil, economic growth fell from a spike of close to 7.5% in 2010 to under 1% in 2012. Growth in India, topping 10% for the first time in 2010, fell to barely a third that level in 2012. Growth in China fell from over 10% in 2010 to below 8% in 2012 with projections of a permanently slower pace of perhaps 7%. Section 1.1: How the Other Half Live About two-fifths of the world’s population lives on less than $2 per day Absolute Poverty- a situation of being unable to meet the minimum levels of income, food, clothing, health care, shelter, and other essentials. Subsistence Economy- an economy in which production is mainly for personal consumption and the standard of living yields little more than basic necessities of life. Development- the process of improving the quality of all human lives and capabilities by raising people’s levels of living, self-esteem, and freedom Developing Countries- countries of Asia, Africa, the Middle East, Latin America, eastern Europe, and the former Soviet Union that are presently characterized by low levels of living and other development deficits. Section 1.2: Economics and Development Studies Traditional Economics- an approach to economics that emphasizes utility, profit maximization, market efficiency, and determination of equilibrium Traditional economics is concerned primarily with the efficient, least-cost allocation of scarce productive resources and with the optimal growth of these resources over time so as to produce an ever-expanding range of goods and services Traditional neoclassical economics deals with an advanced capitalist world of perfect markets; consumer sovereignty; automatic price adjustments; decisions made on the basis of marginal, private-profit, and utility calculations; and equilibrium outcomes in all product resource markets.
Political Economy- the attempt to merge economic analysis with practical politics Political economy goes beyond traditional economics to study, among other things, the social

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