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Reflective Response to Colleagues Presentations in Fundamentals of Economics for International Development

Fundamentals of Economics for International Development involve the study of basic micro and macro economic concepts and ideologies in the field of economics and how they interplay with international development. This involves the integration of the discipline of economics as well as political economy (Todaro & Smith 2009). Over the past few decades, economic development has become a central and significant agenda in development strategic planning both at the local, national and international levels. Some scholars argued that, development economics is no difference from other related fields of studies, which include but are not limited to “macroeconomics, labor economics, public finance, or monetary economics” (Todaro & Smith 2009:7). Nevertheless, they argued that development economics is rather an integrated field of study, which is basically an individualized study of economics in developing countries in Africa, Asia and Latin America. This paper seeks to present a reflective analysis of presentations that were made by students of the Fundamentals of Economics for International Development class specifically looking at employment, food security, water, health, energy and transportation, microfinance, gender and empowerment, good governance and emerging economies as they interplay with economic development. The other half of the paper will address a reflective summary of Todaro and Smith’s book “Economic Development” that was published in 2009 by the Pearson Education Limited in the United Kingdom of which half of the course materials were based on.


According to the World Development Report (2009), the current world population is around 6.8 billion people with about 40% of that population living on less then $2 a day most of which is situated in developing countries in Africa, Latin America and Southeast Asia. There continue to be disparities between developed and developing countries concerning their access and availability to resources. Critiques of development argued that development projects has not been successful in bridging these gaps or breaking these barriers between developed and developing countries, but they continue to increase exponentially.

However, critics of development failed to acknowledge the improvements that development has proven to be successful in some regions. After taking a closer look at the differences in living standards both in developed and developing countries one is left with the question as to how can these differences be settled or significantly minimized so that the gaps between developed and developing countries can be bridged. This points to the fact that understanding how to bridge these gaps between developed and developing countries become a major focus for proponents of development economics (Todaro & Smith 2009). This is because, with the rise in globalization and modernization and human’s pursuit for progress and a happy life, the earth is becoming a global village in which what affect one person at one point of the universe can directly or indirectly affect another person at the other edge of the universe in completely different ways. This also suggests that we are all becoming interdependent on each other for existence. For example, the incident of 9/11 even though it directly impacted the United States economically, politically, socially and culturally had a global impact on all spectrum of the universe touching the lives of a native farmer in South Africa, the live of a school child in Mexico and the family of a soldier in Iraq. This incident had both a local and global impact. This proves that we are all interconnected one way or the other. What happens on the cocoa producing plantation in Ivory Coast affects the chocolate manufacturing industry in the United States, as well as, what takes place within the Nike shoe company in Thailand impacts the market globally. Now that I have established the need for global awareness of the importance to recognizing the role that international and national development have played in economic growth and development let me know shift the discussion to a reflection of specific domains or topics that were explored in class during the course.

Employment

This section of the students’ presentation looked at the issue of employment as it relates to development economics with specific reference to unemployment, inflation and trade, wage differentials between developing countries, youth and employment. They also looked at the trade-off between inflation and unemployment that is associated with the New European Union and its member states specifically referencing Philips’ Curve, which suggests that decreases in inflation rates and unemployment rates are directly proportional. The decrease in one aspect affects the other. Philips’ analysis was based on the fact that he added and subtracted variables to predict and explain the relationship between inflation and unemployment. He derived at the conclusion that an effort to control or restrict unemployment in anyway would significantly increase the inflation rate and subsequently lead to economic and political instability. He also suggested that it is natural to undergo a period as a nation during which unemployment rate would exceed the natural rate to promote a lower inflation rate. He also proposed that each country has its own distinct characteristics, which set it apart from other country as such, policies formulation should be country specific. He also argued that there is a tradeoff that governments have to encounter in the process of dealing with unemployment and inflation rates. These tradeoffs include the ability of governments to rapidly reduced unemployment rate and thereby inducing inflation rate to increase or sustaining unemployment rate and thereby promoting small decreases in inflation. Research has shown that in order for a country to improve its trade, policies to be instituted must be centered around the following core points: facilitation of transition after trade, provision of security and insurance against diverse events, policies that promote the redistribution of resources, and education.

Employment and Youth

The question of why youth should be employed was significant to this session of their presentation directing the audience to the connection between youth and economic development and how youth are also one of the disadvantage groups within the labor markets. According to the United Nations definition of youth, there are about 1.2 billion people who are classified as youth who fall between the ages from 15-24 years old, which constitutes about 17% of the world’s population. It is also estimated that 87% of the world’s youthful population live in developing countries where access to employment opportunities is difficult and rarely possible. It is estimated that in 2005 about 62% of Africa’s population fell below the age of 25. This means that the population in Africa is relatively young and also points to the fact that high unemployment rate leads to high poverty rate, because bulk of the continent’s population is unemployed. It is also important to recognize that the issues of regionalism, gender, age, level of educational, ethnicity and health pose a significant amount of impact on the issue of employment for youth in these areas.

Some solutions suggested by the presenters in addressing the issue of unemployment within the context of youth throughout developing countries are as follows: the provision of job opportunities in rural areas, improving investment and macroeconomic environment, improving access to education and skills development, addressing demographic characteristics, improving youth caught up in violent and post-violent crisis, and the advancement of the labor markets and the conditions associated with these ventures.

The group summarized their presentation by considering the relationships between employment opportunities and educational demands and made some fruitful recommendations to bridge the gaps between the two. In order to satisfy the demand for employment, educational needs must be fulfilled and this involves creating a system that will produce a well-educated workforce that will be absorbed by the job markets, because of their qualifications, institution of an educational cost system that is affordable by the parents, the depoliticizing the educational systems; that is, the availability of a school in a rural area should not be a factor of political ideologies or agenda.

The Economics of Food Security

The issue of global food insecurity is paramount to economic development. However, food insecurity could also be a product of the capitalist modern markets or capitalist modern markets can be a solution to food insecurity. The group started their presentation by looking at the adverse relation stated above and seeing how that relationship is connected with the issue of food security.

According to the World Bank (2010), food security is defined as access by all people at all times to enough food for an active and healthy life. It is also considered “when all people at all times have access to sufficient, safe, nutritious food to maintain a healthy and active life” (World Food Summit). The issue of food security is centered on five basic and interrelated principles, which include: availability, accessibility, stability, utilization and quality of food.

According to the Food and Agricultural Organization of the United Nations (FAO), the highly undernourished countries in the world are located in Sub-Saharan Africa, Southeast Asia and Latin America. However, Central and Southern Africa has the high density of undernourished population. As of 2009, it is estimated by the FAO that the global population of hungry people will increase to about 1020 million a figure that is exponentially increasing every year. The United States, European Union and Japan are said to be the world’s major donors in food aid to developing countries where food insecurities are a major concern. In 2001 global food aid was about 10.9 metric tons, but as of 2008 global food aid significantly dropped to 6.3 metric tons. This can also be pointed to the increase in global population. As population increase there is a significant decrease in food supply, thus creating an issue of food insecurity. This is because land that should have been used for agricultural productivities are not been used to built new cities and homes to contain the increasing population thus leading to less agricultural productivity.

The major causes of food insecurity include the lack of technological innovation, trade barriers, changes in markets trends, lack of economic growth, natural and human-made disasters, poor health, gender inequality, lack of good governance, and poor or inadequate agricultural infrastructures. The group in their presentation also discussed the issue of food insecurity and poverty and they defined poverty as the lack of basic things such as food, shelter, water and health.

The impact of food insecurity and women was also discussed. It is estimated by the World Food Programme (WFP) that about 60% of the world’s hungry population are said to be women. Some of the issues stipulated that contributes to food insecurity among the women population global is: unequal access to resources (such as land and capital), lack of education (formal and informal education), and lack of participation in the decision making process at the family, local, community, regional, national and international levels.

Africa is one of the regions in the world where the issue of food insecurity in a major concern and this is intensified as a result of conflicts. It is estimated that about 218 million people who constitute about 30 percent of the population suffer from chronic hunger and malnutrition. In Africa, it is also estimated that about 35% of the population are children under the age of 5 years old who are affected by chronic malnutrition. The issues of access to natural resources, lack of appropriate technology, dependence on the importation of foreign goods and services, challenges posed by changes in the climate, and the linkages between agriculture and nutrition.

The questions about what role do multilateral organizations such as the World Bank, International Monetary Fund (IMF) and the United Nations Food and Agricultural Organization (FAO) play in food security and their policies in the implementation of strategies was also addressed in their presentation. These questions are significant because these institutions are key players in the development atmosphere when it comes to humanitarian aid in terms of the supply and distribution of food.

They also talked about the sustainable livelihood index as a tool for analyzing and identifying future possible methods of development. This is a framework that assists in understanding the multiplicities of poverty. It is also considered as sets of principles that direct actions leading to overcoming poverty.

Some of the proposed food security strategies include livelihood provisioning which involves that the protection of basic human needs such as food aid, livelihood protection and livelihood promotion.

Water

This group assessed this topic by basing their analysis and presentation on evaluating the hypothesis that water privatization is the only solution to the global water crisis. They further assert that water privatization significant and essential in the process of economic productivity and which also conserve this natural resource, which is scarce. They further suggested that the purpose for the privatization of water is for the equitable distribution of this scarce resource while at the same time making sure that it is sustained. The key questions to assist them test their hypothesis is that how can clean, safe water be supplied to the billion and more people who lack assess to clean and safe drinking water, without at the same time interfering with the resources for future generations. Some ethical questions also aroused from their analysis and those include universal question of who own waters to set a price to it, who is going to operate it, who will be responsible for pay for it, how much should water be priced for, who decides on who pays and how much, and by what criteria are they basing their price? All these ethical questions are what are being debated upon today in relations to the global water crisis.

Started in the early 1990s, privatization became to gain global attention with do’s and don’ts associated with this ideology. At present, about 3% of the world’s poor mostly in developing countries have access to clean and safe drinking water through private vendors. The issue of the global water crisis refers to global shortage in water supply as a result of increase in global population. The term water scarcity has reference to the shortage of water when the demand for water exceeds water supply, which involves both the physical water and economic scarcities of water. Some of the paramount issues presented by the group during their presentation that significantly underlie the idea of water privatization include poverty, financial crisis, and political corruption.

The major sources for the world’s water include the rain, surface water, and ground water. The uses of water supply include residential, public institutions, businesses, agricultures, and ecological or environmental uses. It is estimated that the 53% of the Europe’s water is being used by for industrial purposes followed by agricultural productivity, which constitute 42% followed by water for domestic activities, which takes about 8% (World Resources Institute 1992). However, it is also estimated that 88% of water use in Africa is for Agricultural production whereas, only 7% and 5% are dedicated to domestic and industrial use respectively. The unequal distribution of water led to about 1.1 billion people worldwide who go thirsty everyday without access to clean drinking water. An example of the inequalities in the water crisis can be seen from India and Bangladesh. Accessibility and availability of water has also become the epicenter of conflicts globally between groups and even nations.

In most developing countries, women play a significant role in making sure that their family has access to water supply and this process takes a significant amount of their time and energy, which is rarely accounted for. If they were to invest their time and energies in something else like in education and work that would have increase their income.

Water has very special characteristics as a commodity. It is essential for human survival; it is a finite and vulnerable resource. Water supply and distribution is time bound; that is, water supply can differs over time and space. In terms of geographic space, the availability of water differs irrespective of geographic locality; that is, certain area has water than others. The issue of access to water in certain areas is determinant based on gender, class and race.

There are shortages in water supply and distribution, because there is under investment in the water industry and this process is also enhanced by inadequate maintenance practices. In some areas, there are little or no infrastructures to a sustainable water management system. If they exist, locals do not have the technical knowledge to operate the equipments and they rely on foreigners for such technical knowledge and expertise. Also, the issue of water investment is paramount to the process of making this resource available to a wider range of the population. This is important because, the provision of the right technology for the right population is equally important for project management aspects. Some of the reasons that can be attributed for the shortages in water supply and distribution are the weaknesses associated with water authorities; that is, lack of competence, increasing political control, and deliberate incentives structures and laws and regulations governing the water industry.

Health Economics

The central thesis for this group work is that economic liberalization is the most promising and effective model for the maximization of the efficiency of a healthcare system from the perspective of economic growth and equity. However, it is suggested in their analysis that under certain conditions state-public sector-NGO partnership are significant in achieving this goal. Globally, the state of health care is very important and some of the areas that are very important in assessing healthcare are costs, diseases, gender disparities and reproductive health, Human Development Index indicators, and the relationships between HDI, GDP and productivity.

There are different approaches within the healthcare field specific to different gender, race, sexual orientation, and ethnicity. There are population specific differences in the presence disease, health outcomes, or access to healthcare. For example, overall most men have better access to healthcare services, but women in general live longer than men. Access to healthcare in rural areas verses access to healthcare in urban communities. In most developing countries, access to health is better in urban areas as oppose to rural areas where there are limitations in terms of staff, infrastructures, roads and transportation and income. Also worth considering in this section are the different aspects of the healthcare system and how they interplay with the overall economic progress of the state and the individuals citizens. These aspects include healthcare services as commodities for making profits, inputs necessary for the implementation of an effective healthcare system, healthcare products industries, human capital; that is, clinical or hospital staff and other professional personnel, human rights, and growth and employment.

The healthcare product industries these are industries specifically established to manufacture healthcare products and equipments that will be used in the effective operation of hospital staff functions. Human capital on the other hand refers to the skilled labor force that is healthy to produce maximum outputs in the industry. The human rights component of the healthcare systems promote activism that healthcare in a basic human rights that must be provided by the state and such rights must be given to all humanity irrespective of their sexual orientation, gender, race, ethnicity, financial status and level of education. Another component of the healthcare system that was discussed in their presentation has to do with healthcare services as a commodity. The healthcare industry in the United States and in most countries is the heart of employment opportunities for the massive. Technological advancements in the healthcare industry also create opportunities for new for employment and also assist in the efficient treatment of illnesses. Property rights for patented materials are also paramount in the healthcare industry.

In relations to input and output in the healthcare industry one percent increase in the survival rate substantially increase labor by 2.8% and as such productivity also increase by 1.68%. Just as in any other specialization higher productivity leads in the healthcare system leads to higher wages for the labor force and thus promotes growth in the economy. The more people make the more they are able to invest and at the same time purchase goods and services. Also, increase in wages lead better accessibility to healthcare. There is a correlations between a good healthcare system and Gross Domestic Product (GDP); that is, a workforce that has better healthcare and are paid well are able to invest their savings into income generating investment ventures and are also able to use their spending money to buy goods and services from vendors within the market-system.

The healthcare system is also challenged with some conflicting goals, which may tend to create balance in some instances in the system. The issue of equity and economic growth, and efficiency are some of the challenges that the healthcare system is being challenged with. For example, the formulation of the Structural Adjustment Program by the World Bank emphasized on efficiency producing economic growth over equity. The Free Market system also needs to be supportive by providing opportunities for everyone; however, it discourages equity and does favor certain groups over the other. The issues of prevention verses treatment of major illnesses need to be tackled substantially. In most developing countries there seems to be avenues for cheap production over safety concerns. This posse a serious challenge to the healthcare system, because people who are poor may seem to be considering cheap form of production and treatment over their safety concerns, which can lead to future health issues.

Energy and Transportation

This group started their presentation based on their theses that energy and transportation are major drivers of economic growth both of which serves as separate industrial warehouses and at the same time serve as inputs to other industrial components of the economy. The other argument that the group proposed was that poor or insufficient allocation of energy and transportation resources can be a major impediment economic growth and development specifically on Third World Countries. They were also able to defined major terminologies associated with energy and transportation in the process of creating an academic platform to deliberate their concepts and ideologies.

Energy according to the presenters can be categorized into two broader contexts; that is, non-renewable energy such as crude oil, natural gas, coal and uranium and renewable energy (Storable and Non-Storable energies), such as biomass, hydroelectric, geothermal (storable energy) and wind and solar (Non-Storable energy). According to the BP Statistical Review of World Energy in 1965 oil was the major source of energy globally followed by gas and then coal.

The global energy consumption shows that demand for energy is derived from wishes to use energy to obtain desired services, not from preference for the energy commodity itself. Therefore, increases in energy prices reduced the demand by reducing use of energy equipment. There is always substitute for something. Energy commodities are typically economic substitutes each other.

Consequentially, there are also environmental impacts for how we use or consume energy. The environmental implications or damages are a result of the processes through which flow from the production site, to the conversion site to the consumption sites (homes, offices, malls, etc). Throughout this linear process energy is eliminated in the and that has significant amount of damage to the environment plus taking into account how much was invested into the initial production process and how much is being generated. The issues of greenhouse gas emission, land subsidence and water pollution are some of the key implications of energy production and use.

According to Tolley et al (1995), motor vehicles account for about 66% of the world’s energy use by transportation followed my energy generation, which accounts for about 17% of energy consumption. There is also a close link between transportation and energy in reference to the impacts of transportation on energy consumption. The impacts associated with firstly manufacturing a vehicle, maintenance and disposal, operation, the development of the infrastructures and maintenance, etc all creates a system of flow in which the consumption if energy is inescapable.

Microfinance, Gender and Empowerment

The distinction between microcredit and microfinance were made at the beginning of their presentations while establishing their thesis. Microcredit refers to small loans given to groups of individual that is a subset of broader approach of microfinance ventures. On the other hand, microfinance involves the provision of financial services, such as savings, loans and or insurances to poor people in rural or urban settings with the hope of creating or investing that money into income generating ventures for financial empowerment. Usually those who benefit from these programs and services are marginalized in the formal financial sector. The presenters outlined some of the problems or challenges associated with lending to poor people and these include: adverse selection, moral hazard, collateral, risk assessment, monitoring and transaction costs, and political patronage.

There are specific conditions that once they occur could be used as means to launch a microfinance project in a specific areas and some of these include: the exclusion of the poor from participation in the formal economy, the vast majority of poor people live in informal sectors, the issue of gender mainstreaming, the increasing gaps in rural-financial intermediation, political realities and neoliberal economic reforms.

Microfinance started back in the 1970s by Muhammad Yunus, an economist and professor at the University of Bangladesh. He came up with this idea as a result of consistent flooding, famine and the impacts of civil wars within the country. The purpose of this project was to lend out money to poor households in Bangladesh. As a result of this goal; that is, to provide poor households the financial capital to engage in micro-business ventures to sustain their lives lead to the establishment Grameen Bank was established. The Grameen Bank currently has about 2.50 million in membership since its establishment in the early 1970s. The Grameen Bank accomplishes its objectives by getting involve in reversed conventional banking practices, provides credit to the poorest of the poor, views credit as a cost effective weapon, and innovates the process of group lending. In the group lending business scheme the process of facilitated by peer pressure, constituting group of four to seven members, who collectively agreed to repay the loan after it has been taken, the availability and accessibility to future loans depends on the repayment of any outstanding loans and contracts as well as group members’ recommendation of a particular member. Why it is true that credit loans can be empowering to the poor they do come with burdens that tend to increase the stress and anxiety of most poor people. However, most of the time those taking the loans are able to repay the loan within the require time frame. These credit loans have the following aspects that make very difficult for poor people to follow through, which include high interest rates, very strict repayment schedules and single use allocation; that is, the loan can not be transferred to a third party. These issues can create high default rates in loans repayment.

Good Governance

The stability of the market is most vulnerable when there are imperfections in structure and operations. Through Good Governance markets are able to maximize private and social benefits.

The importance or significance of good governance is can not be underemphasized, because in order for the economy and other sectors of the country to function governments must demonstrate an excellent knowledge and applicability of the rule of law in the process of managing and allocating resources for national economic development. An efficient economy and market systems rely purposefully on institutional preconditions, which are often according to the literatures, missing in most developing countries. It is within this scope that good governance comes in to bridge the gap by serving as a mechanism to combat this absence through accountability and transparency for the maximum good for the private and public sectors. The conditions that most developing countries lack in their institutional frameworks are divided into two broad categories and these include socio-cultural practices and legal and economic practices.

However, with the global capitalist economic system, most developing countries also encounter significant amount of challenges as they forge their way through the global economy. Some of these problems include, but are not limited to: lack of transparency and accountability, substantial externalities, investment in infrastructure and Capital formation, income distribution and structural change.

Between 1980s and 2008, Washington D.C. and her collaborators met and discussed about developing a strategy to address the issues that developing countries were encountering. Through this meeting institutions such as the World Bank and the International Monetary Funds (IMF) were established to address the issues that developing countries were encountering with their economy. As a result, the institution developed and embarks on the free market approach to development with specific focus ten aspects of economic reformation, which include: fiscal policy discipline, redirection of public spending from subsidies, tax reform, interest rates that are market determined and positive, competitive exchange rates, trade liberalization, liberalization of inward foreign direct investment, privatization of state enterprises, deregulation and legal security for property rights. These are the code factors of the structural adjustment program used by the World Bank and the International Monetary Fund (IMF).

However, a call for a new consensus is in place that promotes market-based development approaches, which eliminates the government’s control of direct production but through stable macro environment, infrastructure, public health system, educational and training opportunities, technology transfer, environmental sustainability and protection of the ecosystem, export incentives, facilitate the process of coordination in the private sector, sharing growth thereby reducing poverty and eliminating inequality, the promotion and enhancement of regulation and support in the financial sector, enforce the legal structure and strengthen property rights regulations. Therefore, to summarize good governance is to ensure that corruption is minimized, point of views of minority groups are heard and their concerns are addressed, and the ability to hear the voice of the voiceless and after that addressing their needs.

Good Governance in Vietnam

Good Governance in Vietnam is looked at from two specific domain by the presenter and those areas are economic freedom and corruption. Vietnam has a history of domination by the Chinese, which lasted for about 1,000 years. About a century ago, Vietnam was colonized by the French and in 1945 became an independent nation after which she participated in two very important wars: American war and Vietnam civil war followed by the renovation of the country in 1986.

According to the World Bank rankings freedom, Vietnam ranked 60.7 in business freedom, 68.9 in trade freedom, 68.4 in labor freedom and 20 in investment freedom. Vietnam also ranked 49.8 in economic freedom.

Links Between Good Governance and Poverty in Sub-Saharan Africa

Sub-Saharan Africa is the region that is located south of the Sahel including Western Eastern, Central, and Southern Africa with the exception of Northern Africa. Most developing countries in this region of Africa is stricken by absolute poverty, malnutrition, increasing rates of HIV/AIDs, Malaria, and other diseases, civil and political upheavals, environmental degradation and bad governance practices, which significantly fuel the above factors pointing to the fact that most countries in this region contains government were good governance is non-existence thus leading to the increasing rate of poverty, because the allocation and distribution of resources by the government is imbalance. Corruption in government is high in Sub-Saharan Africa leading to the misappropriation of public taxes a

Reference

World Development Report (2009). World Bank Website: http://web.worldbank.org
Accessed: 11/02/2010

Santiso, Carlos 2001 “ Good Governance and Aid Effectiveness: The World Bank and Conditionality Georgetown Public Policy Review Volume 7 pp 1-22

Smith, Stephen and Todaro, Michael 2009 Economic Development Pearson

United Nations Development Program 1997 “Governance for Sustainable Human Development”

http://mirror.undp.org/magnet/Docs/!UN9821.PDF/!GOVERNA.NCE/!GSHDENG.LIS/Front.df Accessed December 4 2010

United Nations Development Program “ Fast Facts: UNDP and Civil Society” www.undp.org/partners/cso Accessed November 30 2010

United Nations Economic and Social Commission 2010 “What is good governance?” United Nations http://www.unescap.org/pdd/prs/ProjectActivities/Ongoing/gg/governance.asp
Accessed December 2 2010

Woods, Ngaire 2001 “The Challenges of Good Governance for the IMF and the World Bank Themselves” World Development Vol 28, No. 5 (May 2000)

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