Introduction to Economics                                      Lesson of 28 November 2006



An annual meeting of the G20, an informal group of Finance Ministers and Reserve Bank Governors from 20 major industrial and emerging nations from around the world, was held in Melbourne last weekend.  Member nations include Argentina, Australia, Brazil, Canada, China, France Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, UK, USA and the European Union.  The IMF and the World Bank also participated.  Between them the members include 80% of world trade, 85% of global GDP and 2 thirds of the world’s population.

The theme of the meeting was “Building and Sustaining Prosperity”.  This is very much an economic theme.  It is part of what is called Development Economics.



Development Economics is the branch of economics that studies developing countries, by which is meant relatively poor countries or those with a low standard of living.  Since it is often said that development in such context means enabling the inhabitants of a country to lead happy, healthy, creative and fulfilling lives it is more than just a question of economics.  That is to say, development is more than a matter of income growth, including such things as cultural integrity, equality and political freedom.  Economics however clearly has a major role to play in development.

Most relatively poor countries are found in one of 3 regions; Sub-Saharan Africa, South Asia and Latin America.  However poor countries are found everywhere and relatively rich ones in the 3 regions.



In the modern context, Development is largely a post WW 2 phenomenon, its beginnings coinciding with the large-scale decolonisation that followed such event.  It arose initially from a world divided into 3; firstly the Free World, largely comprising the developed countries of the so-called West, secondly the Soviet bloc and thirdly the rest, or the countries of the Third World.  Terminology has tended to vary over the years and has included the under- or less- developed world, the South or less developed counties [LDCs], all of which are essentially synonymous. 

Development is big business.  This is reflected in the size and significance of the large number of institutions, departments and organisations international, national and private that are dedicated to or involved with it.  They include for example the World Bank, the Asian Development Bank, the African Development Bank, the Food and Agricultural Organisation [FAO], USAID, AusAid and Oxfam.  It is estimated that in the last 50 years the so-called West [or North] has expended US $ 2.3 trillion by way of foreign aid.

There are a large number of economists involved in the study of development economics including a number of Nobel Laureates such as Gunnar Myrdal and Amartya Sen.  Each year thousands of articles and a large number of books are published on the subject.  It involves major themes such as globalisation, foreign aid and central planning. In 2006 a Nobel Prize [the Peace rather than the Economics] was awarded to Professor Muhammed Yunus and his Grammeen Bank of Bangladesh, an institute aiming to provide effective small scale lending to individual development and the reduction of poverty.

Within the economics profession itself there is much disagreement about the theories and methods of development economics.  Some challenge the idea that separate or unique theories of economic development exist at all outside of the ambit of mainstream economics.  There is often considerable acrimony between some of the leading proponents of development economics such as Professor Jeffrey Sachs, who emphasis geography as a leading cause of ongoing poverty and urges increased aid and foreign aid sceptics such as William Easterly or Peter Bauer.  Other major areas of dispute include the role in economic development of population control and the need or efficacy therein of large-scale debt forgiveness or reduction.


                      David Sharp

                            November 2006





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