Chapter 8. Economic and Human Development
Chapter Overview
The chapter addresses the question of why some countries are more developed than others. The
question matters because differences in development make a big difference in the choices people
have to lead the lives that they value. The first section of the chapter explains the differences
been economic and human development. The next discusses the criteria used to assign countries
to different levels of development. The third examines how wealthy and poor countries differ in
levels of income, capabilities, economic growth, and state strength. The following section turns
to the puzzle of why there are vast disparities in economic development among countries. It
examines five explanations for why countries have different levels of development: geography,
culture, colonialism, institutions, and leadership. The chapter ends by examining the relationship
between economic development and capabilities.
Economic development is defined as the process of increasing a country’s wealth by diversifying
the goods and services it produces and making that production more efficient. In the process,
countries’ economies change from being primarily agricultural to primarily industrial and, then,
postindustrial. Human development is defined as “the process of expanding the choices people
have to lead the lives that they value.” It can be measured by the Human Development Index
(HDI). In most cases, increases in economic development lead to increases in human
development, but not always. Some countries have higher levels of human development than
their level of economic development would suggest, while others have lower. The difference is
an indicator of a country’s success, or failure, in converting economic resources to human
development.
Countries differ considerably in their levels of economic development and human development.
The next section of the chapter introduces four categories of development: high, upper middle,
lower middle, and low. The chapter then discusses how high and low income countries differ in
income, capabilities, economic growth rates, and state strength. Low income countries tend to
have more citizens living in absolute poverty, having lower capabilities (including lower literacy
rates, shorter life expectancies, and higher infant mortality rates), a lack of sustained economic
development, and weaker states, with less infrastructural and authoritative power.
The penultimate section of the chapter explores five different explanations for why such
differences exist. First are those who argue that geography is the main explanation. Geography
favored countries in Eurasia over countries in Africa and Latin America in past centuries.
Geographic location today penalizes poor, landlocked countries and those where deadly diseases
are prevalent. Culture is used as the main explanation offered by others. For some favoring this
explanation, the key is an ethic that encourages disciplined hard work, saving, and effective use
of time. For others favoring cultural approaches, the level of trust in society is the key to
development. The third explanation argues that colonialism is the main cause. Colonialism
increased the wealth of colonial powers while impoverishing their colonies and leaving them
with major obstacles to development. The fourth explanation uses institutions to explain
differences in economic development. European countries were the first to develop the
institutions most supportive of economic development. Finally, leadership matters. Some leaders
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make a difference in how rapidly countries advance economically and how successful they are in
converting economic success into improvements in people’s capabilities.
The chapter ends by testing the hypothesis that higher income per capita is associated with lower
infant mortality and homicides and higher rates of literacy and democracy.
Learning Objectives
Upon completion of this chapter students will be able to do the following:
8.1 Understand how a country’s overall wealth or poverty can affect the lives of its citizens.
8.2 Distinguish between economic development and human development.
8.3 Describe the criteria used for assigning countries to different levels of development.
8.4 Explain the difference between extreme poverty and relative poverty and identify which
regions of the world have the highest numbers and percentages of people living in extreme
poverty.
8.5 Identify the regions of the world with the highest percentages and numbers of people with
low capabilities.
8.6 Compare and contrast rates of economic growth and the consequences for incomes between
countries with high and low levels of development.
8.7 Explain why weak states have difficulty promoting sustained economic development.
8.8 Evaluate the strengths and limitations of the main explanations for why some countries are
more economically developed than others.
8.9 Analyze the results of testing the hypothesis that higher income per capita is associated with
higher capabilities.
Chapter Outline
I. INTRODUCTION
A. This chapter addresses one of the biggest questions in the social sciences: Why
are some countries more developed than others?
B. The differences in development among countries make big differences in citizens’
changes to develop capabilities and live well.
II. ECONOMIC DEVELOPMENT AND HUMAN DEVELOPMENT
A. Social scientists distinguish between economic development and human
development.
B. Economic Development
1. Economic development is the process of increasing a country’s wealth by
diversifying the goods and services it produces and making that production
more efficient.
a. The process often begins with crop diversification and the creation of
industries outside of agriculture.
b. As countries develop, agriculture usually becomes a smaller percentage
of the economy, and manufactured goods become more important.
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c. Countries shift from making products that require relatively simple
manufacturing processes to ones that require more sophisticated
production methods.
d. Skilled labor replaces unskilled labor and complex technologies replace
simple machines.
e. Quality replaces quantity as the standard of production.
2. Most developed countries began this process in the mid to late 1800s.
3. Most less-developed countries did not begin the process of industrialization
until the 1950s and 1960s when they became independent countries, the
exception being the Latin American countries that had won their
independence much earlier.
1. Human development is defined as “the process of expanding the choices
people have to lead the lives that they value.”
2. Human Development Index (HDI) measures human development—three
components.
a. How healthy people are as measured by life expectancy at birth?
b. How knowledgeable people are as measured by adult literacy rates and
school enrollments?
c. People’s standard of living as measured by purchasing power
3. HDI index has values from 0 to 1
D. The authors of the Human Development Index emphasize that the Index
Measures what could be attained if achievements were distributed equally
among residents. However, since this does not tend to happen in practice, the
authors also created an “Inequality-Adjusted Human Development Index,”
which is the actual level of human development, accounting for inequality.
1. In the best of circumstances, economic and human developments reinforce
each other.
2. Economic development and rising incomes can give people more choices
about the kinds of lives they want to live. It can also provide governments
with increased revenues that can be used to pay for safe water, clinics and
hospitals, schools, and universities.
3. Generally speaking, the more economically developed a country is, as
measured by GDP per capita, the higher is citizens’ capability, as measured
by HDI scores.
4. Even so, the correlation is not perfect. Countries can have nearly identical
per capita incomes and very different HDI scores.
a. Improving capabilities “requires active public policies to ensure that the
fruits of economic growth are widely shared.”
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b. It also requires making good use of the public revenue generated by fast
economic growth for social services, especially for public healthcare
and public education.”
F. In-Depth: South Korea—From Least Likely to Succeed to Most Successful in
Its Class
1. In the 1950s, after the Korean War, an American official referred to South
Korea as an economic “basket case.”
2. By 2005, it had become a high-income country.
3. How it succeeded:
a. In 1961, a military regime set out to industrialize the country as fast as
possible.
b. Government-controlled banks funded the development of privately
owned industrial conglomerates, enabling them to become
internationally competitive.
4. The puzzle is why such a strategy did not lead to massive corruption and
creation of inefficient state-funded firms—three reasons why it did not.
a. Existence threatened by hostile neighbors, and South Korea’s leaders
believed it had to industrialize to survive.
b. Military needed capitalist support to achieve the goal.
c. South Korea inherited a relatively competent bureaucracy and good
infrastructure from Japanese colonialism.
d. Received considerable economic aid from the U.S.
5. Capabilities improved
a. Education system expanded, increasing literacy and numeracy.
b. Health care improved.
c. On negative side, the military regime suppressed civil and political
rights.
III. DIFFERING LEVELS OF DEVELOPMENT AMONG COUNTRIES
A. How to draw the line between developed and less-developed countries?
B. The Good Society uses World Bank and United Nations categories.
1. Each organization groups countries into four categories of development from
lowest to highest in economic development and human development.
2. The Good Society uses these categories to group countries into four categories
of development.
a. High—countries that are in both organizations’ top category
b. Developed
c. Moderate
d. Low—countries that are in both organizations’ lowest category
e. In 2013, the World Bank placed countries with a per capita income of
IV. COMPARING INCOMES BETWEEN COUNTRIES WITH HIGH AND LOW LEVELS
OF DEVELOPMENT
A. Examines the difference between extreme, or absolute, poverty and relative
poverty.
1. Poor people in the most highly-developed nations, such as the United States,
tend to be poor relative to other people, but not so poor that their lives are
endangered.
2. The least-developed countries have large numbers of absolutely poor people,
defined as people living on less than $1.25 per day adjusted for purchasing
power differences among countries.
3. Although sub-Saharan Africa has the highest percentage of extremely poor
people, the region with the largest number of absolutely poor people is South
Asia.
V. COMPARING CAPABLITIES BETWEEN COUNTRIES WITH HIGH AND LOW
LEVELS OF DEVELOPMENT
A. The wealthier a country, the higher the level of citizens’ capabilities tends to be.
B. The difference in capabilities is particularly stark between the highly developed
and the least developed countries.
1. The difference in infant mortality levels is particularly striking.
2. As is the case with extreme poverty, most of the countries with low
capabilities are located in sub-Saharan Africa.
3. Whereas sub-Saharan Africa contains the highest percentage of citizens with
low capabilities, South Asia has the highest number.
VI. COMPARING ECONOMIC GROWTH RATES BETWEEN COUNTRIES WITH HIGH
AND LOW LEVELS OF DEVELOPMENT
A. Low-income countries differ not only in levels of income per capita but in rates of
economic growth.
B. Sustained economic growth during the 19th and 20th centuries led to rising
capabilities in today’s high-income countries, while growth over the past two
decades decrease poverty in low and middle-income nations of Asia and Latin
America.
C. Other low-income nations did not do as well, given low growth rates from the
1960s to the 1990s. However, they have experienced more economically
sustainable growth in the 21st Century.
D. Nevertheless, some observers remain skeptical about these countries’ future.
VII. STATES AND DEVELOPMENT
A. Countries with strong states tend to have higher rates of economic growth,
whereas nations with weak states typically have lower growth rates.
B. Countries with high levels of development have strong infrastructural and
authoritative power—former being the power to implement decisions and the
power to get citizens to comply with decisions, respectively.
C. Less-developed countries have weaker and less democratic states.
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1. States in many of the least-developed countries cannot maintain law and
order, which is the bare minimum of what defines a state.
2. Afghanistan is an example.
3. In these states, large areas of the country are not under the control of the state.
4. States are weakened by corruption, defined as behavior by government
officials that deviate from their formal duties for private gain.
5. Even when states in these countries are formally democratic, elections are
often not free or fair, and in urban slums and rural areas poor citizens are
dominated by gangs, local strongmen, and landlords.
D. Corruption is often a major problem in low income countries.
1. Corruption is defined as behavior by government officials which “deviates
from the formal duties of a public role” for private gain for the official and the
official’s family members, friends, and allies.
2. Levels of corruption are measured by the Corruption Perceptions Index.
E. Important to note that countries can have economic growth along with corruption
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2. The key to whether rapid economic growth can coexist with corruption is who
benefits from the corruption.
3. In some countries, such as China, officials demand payoffs from business
people, but have interests in seeing business people succeed because the more
they earn, the higher the payoffs officials can demand.
4. In a number of low income countries, officials squeeze whatever they can
from businesspeople even if this destroys economic growth.
5. Growth that eventually lifts countries into the high income category is not
compatible with high levels of corruption.
VIII. WHY DID SOME COUNTRIES BECOME MORE DEVELOPED THAN
OTHERS?
A. Geography
1. Geography favored some regions of the world over others.
2. Geography particularly favored Eurasia in terms of climate for growing crops
and the ease with which new crops could spread.
3. Rich yields from crops were aided by the presence of large, domestic animals
such as horses, which could also be used for war.
4. These advantages allowed the early emergence of complex societies and
strong states as well as specialization of occupations.
5. Geography continues to favor some countries more than others because some
countries have infertile soils, no valuable mineral resources, no easy access to
sea routes, and deadly diseases.
6. Geography does not work as an all-purpose explanation because not all
countries in Eurasia are developed, some of the poorest countries do have
access to the sea, and some of the wealthiest countries have no valuable
mineral resources.
B. Culture
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1. Some scholars believe that Europe advanced economically ahead of other
countries because of a Protestant ethic that valued disciplined hard work,
thriftiness, and effective use of one’s time.
b. In European countries with access to Atlantic Ocean, profits from trade
and colonialism provided merchants with the economic and political
power to demand institutions necessary for economic growth.
c. Differences in growth rates among former colonies can be explained by
the kinds of institutions left there by colonial powers.
d. Where Europeans settled in large numbers, they brought growth-
promoting institutions from Europe, but where they settled in small
numbers and used forced labor, they created institutions to preserve their
economic and political privileges, which hampered subsequent economic
development.
e. Colonialism matters for economic growth not so much because of what
the colonialists took out of countries but because of the institutions they
left behind.
E. Leadership
1. Leaders’ will and skill matter in three ways.
a. Choosing successful policies.
b. Creating coalitions of support for these policies.
c. Helping establish effective political and economic institutions.
2. Examples of such leaders include Park Chung Hee of South Korea and Paul
Kagame of Rwanda.
IX. COMPARATIVE POLITICAL ANALYSIS: INSTITUTIONS AS THE MAIN CAUSE
OF DEVELOPMENT AND UNDERDEVELOPMENT
A. Problem
1. Citizens in highly developed countries have a much higher probability of
developing their capabilities than those of the least-developed countries.
2. Why do such differences exist?
B. Hypothesis and method
1. The hypothesis is that economic institutions protecting property rights and
relying on markets are most likely to sustain economic growth.
2. The method is the comparative case studies method comparing North and
South Korea.
a. The advantage of using these two countries is that they were the same
political entity for hundreds of years.
b. They had the same geography, culture, and colonial history as a Japanese
colony.
c. They differ in economic and political institutions as a result of being
separated into two countries after the Korean War.
C. Operationalizing concepts
1. Independent variable is the presence or absence of property rights and market
incentives.
2. Dependent variable is GDP growth per capita.
D. Results
1. The communist party that ruled North Korea abolished private property and
markets.
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2. The military government that ruled South Korea and promoted the
development of industries capable of competing in international markets.
3. The results confirm the authors’ hypothesis.
4. South Korean institutions generated rapid economic growth and
improvements in citizens’ lives. North Korea’s economy fell further and
further behind that of South Korea.
5. By 2010, South Korea ranked among the World Bank’s high income
economies while North Korea remained a low income country.
X. DEVELOPMENT, UNDERDEVELOPMENT, AND THE GOOD SOCIETY
A. Physical well-being
1. Begins with the hypothesis that higher income per capita is linked to lower
infant mortality rates.
2. In general, the higher the level of per capita income the lower the infant
mortality rate.
3. There are exceptions to the pattern.
a. Countries with per capita incomes from $30,000 to $60,000 have nearly
identical infant mortality rates, suggesting it is possible to have very low
mortality rates without having extremely high income levels.
b. Very poor countries differ dramatically in infant mortality levels,
demonstrating that some countries do a better job than others at converting
meager incomes into lower infant mortality rates.
B. Informed decision-making
1. Higher-income countries have higher literacy rates.
2. Countries at very different levels of income have achieved nearly 100 percent
literacy.
3. Also, some very poor countries have done a much better job than others of
converting meager resources into higher literacy levels.
C. Safety
1. For many poor countries, homicide rates are a misleading indicator of citizens’
sense of safety.
2. Despite this caveat, a test is included of the hypothesis that the higher a
country’s per capita income, the lower its homicide rate tends to be.
3. One discrepancy is that the United States is the only country with a per capita
income over $20,000 to have a homicide rate over 5.
4. Very poor countries vary wildly in homicide rates.
D. Democracy
1. With the exception of the outlier of Qatar, an oil-rich monarchy in the Middle
East, there is a modest relationship between GDP per capita and level of
democracy.
2. The relationship is far from perfect.
3. Countries with very different levels of income have similar scores, suggesting
several other variables also contribute to the level of democracy in a country.
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REVEL Assets
8.2 Distinguish between economic development and human development.
Video: Untamed poverty hurting India’s economic ambitions
Reading: Patchy insurance and state underfunding compound India’s poverty
8.3 Describe the criteria used for assigning countries to different levels of development.
Reading: A primer on how corruption works
8.7 Explain why weak states have difficulty promoting sustained economic development.
Case Study: Political Corruption in Afghanistan
8.9 Analyze the results of testing the hypothesis that higher income per capita is associated
with higher capabilities.
Video: Democratic Republic of Congo: Rape Victims
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