Issues in Global Economics
Lecture 1: Introducing Economic Development
Prof. Dr. Tom Potoms
Today’s Lecture
• Setting up key questions and issues addressed in the course
• Poverty, development, and economic growth
• Slides based on Chapter 1: “Introducing Economic Development: A Global
Perspective”
o Todaro & Smith, Economic Development, Pearson, 13th Edition
The Study of Economic Development Raises world’s most fundamental Questions
• Why do living conditions differ so drastically across countries and regions?
• Why are there large disparities in:
o Health
o Nutrition
o Education
o Freedom of choice
o Women’s autonomy
o Environmental quality
o Market access
o Security and political voice?
• Why is output per worker many times higher in some countries than others?
• Why do some workers have secure, formal jobs while others face insecure and
fluctuating earnings?
• Why are populations growing rapidly in some countries and shrinking in others?
• Why are public services effective in some countries and corrupt or insufficient in others?
• Why have some formerly poor countries progressed rapidly while others have not?
• How have child illness and death rates fallen globally, and why do they remain high in
some places?
• How can we measure the impact of government policies and NGO programs?
• How did large global divergences emerge, and how does history matter?
1
, • Malthusian trap→ increasing real wages till natural maximum an then there happens
something natural→ crops are dead en then real wage declines and
• Je bouwt op naar een piek (met goede welvaart en reele lonen), Ge zit op een natuurlijke
piek→Dan gebeurt er iets natuurlijk zoals slechte oogst en dan daalt de real wage en de
bevolking → Daarna stijgt het weer naar een natuurlijke piel→Zo blijft dat doorgaan
Introducing Economic Development: A Global Perspective
• Significant progress in growth and poverty reduction in developing countries over the
past 25 years
o Developing countries have grown faster than rich countries, but unevenly
o Global income poverty rate has more than halved
• International economic relations are less one-sided, but more fragile
• Major remaining challenges for sustainable economic development and ending poverty
remains enormous
o Persistent violent conflict and governance problems
o Climate change and environmental degradation
o Sustainability of manufacturing-led growth
o Automation and the future of jobs (e.g. manufacturing in Africa vs. robots)
o Trade tensions
o Risk of global financial crises
o Pandemic resilience
• Inclusive growth and zero poverty are not automatic outcomes of growth trends
• Free markets generate welfair
• International economy in the 19th century→ colonies
• Trade between countries → specialisatie→ comparative advantage (sommige landen
zijn beter in wijn produceren en sommige in autos)
Four Stylized Living Standards Strata
• Country averages are informative, but individuals are the ultimate unit of concern
• These strata are stylized, not descriptions of real families
• Certainly, not all the living conditions apply most of the one-to-three billion people in
each of the strata; and
• Broad stylized characteristics can help us visualize what living standards differences
mean in daily life
2
, • strata→ categorien bv van heel arm naar rijk
Poorest Stratum (Lowest Level)
• Close to 1 billion people
• Majority live below $1.90/day extreme poverty line
• Mostly rural and remote
• Characteristics:
o Subsistence farming
o Self-built shelters and furniture
o Few roads; difficult transport
o Irregular school attendance
o No electricity or hospitals
o Unsafe water sources, long walking distances
o Poor sanitation
o Malnutrition common
o Cooking over open fires; indoor smoke
o Mud floors, leaking roofs, parasites
Second-Lowest Stratum
• Close to 3 billion people
• Not classified as extremely poor, but still very poor by rich-country standards
• Income roughly twice $1.90/day
• Characteristics:
o Urban or peri-urban residence common
o Informal employment or family businesses
o Use of bicycles
o Majority does not cook in open fire
o Outdoor water taps; water often unsafe
o Use of kerosene or improved fuels
o Improved floors, walls, and roofs
o Exposure to noise and environmental stress
3
, o Often experience multidimensional poverty
Second-Highest Stratum
• More than 2 billion people
• Around $15 per person per day
• Solid middle-income by global standards
• Characteristics:
o Mostly urban
o Jobs often informal or unstable
o Manufactured cooking burners
o Television ownership
o Motorbike transport
o Mobile phones (often not smartphones)
o Tap water inside the home
o Limited indoor plumbing
o High urban inequality
Highest Stratum
• Close to 1 billion people
• Income around $75 per person per day
• Characteristics:
o Formal employment with protections
o Comfortable housing
o Full indoor plumbing
o Consumer goods and appliances
o High-speed internet and smartphones
o Good access to healthcare and education
o Life expectancy near 80 years
Movement Between Strata
• Many people remain within the stratum they are born into
4
Lecture 1: Introducing Economic Development
Prof. Dr. Tom Potoms
Today’s Lecture
• Setting up key questions and issues addressed in the course
• Poverty, development, and economic growth
• Slides based on Chapter 1: “Introducing Economic Development: A Global
Perspective”
o Todaro & Smith, Economic Development, Pearson, 13th Edition
The Study of Economic Development Raises world’s most fundamental Questions
• Why do living conditions differ so drastically across countries and regions?
• Why are there large disparities in:
o Health
o Nutrition
o Education
o Freedom of choice
o Women’s autonomy
o Environmental quality
o Market access
o Security and political voice?
• Why is output per worker many times higher in some countries than others?
• Why do some workers have secure, formal jobs while others face insecure and
fluctuating earnings?
• Why are populations growing rapidly in some countries and shrinking in others?
• Why are public services effective in some countries and corrupt or insufficient in others?
• Why have some formerly poor countries progressed rapidly while others have not?
• How have child illness and death rates fallen globally, and why do they remain high in
some places?
• How can we measure the impact of government policies and NGO programs?
• How did large global divergences emerge, and how does history matter?
1
, • Malthusian trap→ increasing real wages till natural maximum an then there happens
something natural→ crops are dead en then real wage declines and
• Je bouwt op naar een piek (met goede welvaart en reele lonen), Ge zit op een natuurlijke
piek→Dan gebeurt er iets natuurlijk zoals slechte oogst en dan daalt de real wage en de
bevolking → Daarna stijgt het weer naar een natuurlijke piel→Zo blijft dat doorgaan
Introducing Economic Development: A Global Perspective
• Significant progress in growth and poverty reduction in developing countries over the
past 25 years
o Developing countries have grown faster than rich countries, but unevenly
o Global income poverty rate has more than halved
• International economic relations are less one-sided, but more fragile
• Major remaining challenges for sustainable economic development and ending poverty
remains enormous
o Persistent violent conflict and governance problems
o Climate change and environmental degradation
o Sustainability of manufacturing-led growth
o Automation and the future of jobs (e.g. manufacturing in Africa vs. robots)
o Trade tensions
o Risk of global financial crises
o Pandemic resilience
• Inclusive growth and zero poverty are not automatic outcomes of growth trends
• Free markets generate welfair
• International economy in the 19th century→ colonies
• Trade between countries → specialisatie→ comparative advantage (sommige landen
zijn beter in wijn produceren en sommige in autos)
Four Stylized Living Standards Strata
• Country averages are informative, but individuals are the ultimate unit of concern
• These strata are stylized, not descriptions of real families
• Certainly, not all the living conditions apply most of the one-to-three billion people in
each of the strata; and
• Broad stylized characteristics can help us visualize what living standards differences
mean in daily life
2
, • strata→ categorien bv van heel arm naar rijk
Poorest Stratum (Lowest Level)
• Close to 1 billion people
• Majority live below $1.90/day extreme poverty line
• Mostly rural and remote
• Characteristics:
o Subsistence farming
o Self-built shelters and furniture
o Few roads; difficult transport
o Irregular school attendance
o No electricity or hospitals
o Unsafe water sources, long walking distances
o Poor sanitation
o Malnutrition common
o Cooking over open fires; indoor smoke
o Mud floors, leaking roofs, parasites
Second-Lowest Stratum
• Close to 3 billion people
• Not classified as extremely poor, but still very poor by rich-country standards
• Income roughly twice $1.90/day
• Characteristics:
o Urban or peri-urban residence common
o Informal employment or family businesses
o Use of bicycles
o Majority does not cook in open fire
o Outdoor water taps; water often unsafe
o Use of kerosene or improved fuels
o Improved floors, walls, and roofs
o Exposure to noise and environmental stress
3
, o Often experience multidimensional poverty
Second-Highest Stratum
• More than 2 billion people
• Around $15 per person per day
• Solid middle-income by global standards
• Characteristics:
o Mostly urban
o Jobs often informal or unstable
o Manufactured cooking burners
o Television ownership
o Motorbike transport
o Mobile phones (often not smartphones)
o Tap water inside the home
o Limited indoor plumbing
o High urban inequality
Highest Stratum
• Close to 1 billion people
• Income around $75 per person per day
• Characteristics:
o Formal employment with protections
o Comfortable housing
o Full indoor plumbing
o Consumer goods and appliances
o High-speed internet and smartphones
o Good access to healthcare and education
o Life expectancy near 80 years
Movement Between Strata
• Many people remain within the stratum they are born into
4
