Chapter one the concept of development policy.ppt

CHAPTER ONE
The Concept of Development Policy
2

Introduction
 Let us start with the following questions.
• Why are some countries rich and others poor?
• Why are the citizens of some countries more free to realize their
potential succeeded than others?
• Why are some organizations more efficient and effective in
achieving their particular goals than others?
• For instance, consider Germany and Spain and Ghana and Sri
Lanka.
• Why are the citizens of Germany and Spain richer and more free
than those of Ghana and Sri Lanka? Is it because the former are
more intelligent? Because they work harder? Because they are
morally more just/ fair and impartial?
3

• Think about the development transitions of the United
Kingdom (UK), the United State (US), Germany, the
Netherlands, and Korea.
• Economic historians commonly estimate that the UK’s
industrialization process took about 150 years.
• Industrialization process took the UK (the world’s first
industrial nation) 54 years to develop from a low per-
capita income economy to a middle-income economy.
4

• The next country to follow, the US, learned from the UK’s many examples of
both success and failure, and so was able to complete the transition in about
half that time – some 80 years.
• Germany, the Netherlands, and other northern European economies took
between 50 and 80 years to industrialize.
• The country that holds the world record for transition from a low productivity,
largely agricultural economy to a fully industrialized, sophisticated and high
technology, high productivity economy, with high levels of fixed capital and a
highly trained labor force is South Korea.
• The Korean transition is commonly thought to have taken about 30 years,
although some scholars put the number below 20 years. In the context of
economic, this is a miracle.
5

Concept of Development- Todaro
• Development is not purely an economic phenomenon but rather a
multi-dimensional process involving reorganization and
reorientation of entire economic and social system
• Development is process of improving the quality of all human
lives with three equally important aspects. These are
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• 1. Raising peoples living levels, i.e. incomes
and consumption, levels of food, medical
services, education through relevant growth
processes
• 2. Creating conditions conducive to the growth of
peoples self-esteem through the establishment of
social, political and economic systems and
institutions which promote human dignity and
respect
• 3. Increasing peoples freedom to choose by
enlarging the range of their choice variables,
e.g. varieties of goods and services
7

Alternative Interpretations of Development (Mabogunje)
• Development as Economic Growth- too often commodity output
as opposed to people is emphasized-measures of growth in GNP.
• Note here the persistence of a dual economy where the export
sector contains small number of workers but draws technology as
opposed to traditional sector where most people work and is
dominated by inefficient technology
8

• Development as Modernization- emphasizes process of social
change which is required to produce economic advancement
examines changes in social, psychological and political processes
• How to develop wealth oriented behavior and values in
individuals profit seeking rather than subsistence and self
sufficiency
• Shift from commodity to human approach with investment in
education and skill training
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3.1 The Concept of Development Policy
 From international perspective, development policy refers to all
political, economic and social measures taken by a country to
achieve sustainable improvements in living conditions in
developing and transition countries.
 In this respect, it refers to activities that aim to reduce poverty,
implement fundamental rights and promote sustainable
development globally.
 From national perspective, development policy is the basic
principles by which a government is guided or it is a courses of
action or declared objectives that a government seeks to achieve

• Development policy is not a clearly defined field in its own right
since it contains various development policy-related aspects.
• Hence, one of the main development policy challenges is how to
coordinate all sub-policy areas into a coherent whole (coherence).
• Development policy is regarded as coherent if foreign policy, trade
policy, financial policy, economic policy, agricultural policy,
research policy, labour market policy, refugee policy and migration
policy have all been aligned (holding together as a harmonious) so
as not to undermine the country’s development policy objectives.

• Policy may not apply only to public but it also may apply to
private sectors, as well as individuals. For example:
 Official government policy (presidential executive orders,
parliamentary rules or laws or guidelines that govern how laws
should be put into operation).
 Broad ideas and goals in political manifestos, and pamphlets (a
small political leaflet/ brochure or paper booklet, usually unbound
and coverless, that gives information or supports a position).
 A company or organization’s policy on a particular topic. For
example, the equal opportunity policy of a company shows that
the company aims to treat all its staff equally.

• In summary, development policy is a goal-directed course of action,
taken by government, to deal with a public problem.
• Governments use development policy to solve a social problem
(housing, welfare), or to pursue an objective (revenue generation).
• Development policy, then, is a choice made by official government
bodies and agencies that affect the public interest.
• Development policymaking involves a series of activities that leads
ultimately to a policy decision and the application of that decision.
• Overall, development policy may take the form of:
 A declaration of goals;

 A declaration of course of action;
 A declaration of general purpose (useful for a wide variety of
purposes); and
 An authoritative/ a reliable decision which is supported by an
established and accepted authority.
• From the above concepts of policy, one can understand that there should be a
reason why a policy exists. A policy is not formulated unless it is thought to be
necessary or to have a benefit.
• In other word, the policy exists for a purpose.
• It either intended to poverty reduction, making less income inequalities or
strengthening the commitments to human rights and human development.
14

3.2 Defining Development Policy Objectives
• An international perspective on development policy might
underline four priorities. These are:
1. Poverty reduction
2. Moderating/ reducing income inequalities
3. Seizing / using the benefits of globalization
4. Strengthening the commitments to human rights and human
development
1. Poverty reduction
• Poverty reduction is the primary objective for development policy.
15

• People differ as to how to define poverty.
• Economists typically favor monetary measures to define poverty by
using data collected from household surveys of incomes and
expenditures.
• If the household falls below a defined poverty line, then it is
classified as poor.
• However, since not all countries have the data to define poverty in
this way.
• It is useful to include non-monetary measures to define poverty such
as infant mortality, life expectancy, and literacy since poverty is a
multi-dimensional phenomenon. 16

There are at least four reasons why policies focused toward
reducing poverty levels.
 First, widespread poverty creates conditions in which the poor
 have no access to credit,
 are unable to finance their children’s education, and,
 are absent to physical or monetary investment opportunities,
 have many children as a source of old-age financial security.
 Together these factors cause per capita growth to be less.
17

 Second, the low incomes and low levels of living for the poor, which
are manifested in poor health, nutrition, and education, can lower
their economic productivity and thereby lead directly and indirectly
to a slower-growing economy.
• Strategies to raise the incomes and levels of living of the poor would
therefore contribute not only to their material well-being but also to
the productivity and income of the economy as a whole.
 Third, raising the income levels of the poor will stimulate an overall
increase in the demand for locally produced necessity products like
food and clothing, whereas the rich tend to spend more of their
additional incomes on imported luxury goods.
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• Rising demand for local goods provides a greater stimulus to local
production, local employment, and local investment.
• Such demand thus creates the conditions for rapid economic growth
and a broader popular participation in that growth.
 Fourth, a reduction of mass poverty can stimulate healthy economic
expansion by acting as a powerful material and psychological
incentive to widespread public participation in the development
process.
• By contrast, wide income disparities and substantial absolute poverty
can act as powerful material and psychological disincentives to
economic progress. 19

2. Moderating/ reducing income inequalities
• Income inequality is usually defined as a large variation of income within a
nation and between nations.
• Income inequality tells that the income of the wealthy in the group of
people is very high when compared with that of the poorest.
• Income inequality is a critical detriment to the development of society. It can
lead to unstable social outcomes that can damage all developmental efforts.
• One of its negative impact is the persistent existence of absolute and relative
poverty, especially in less developed nations.
• Poverty was seen as just an issue of low income per capita within some groups,
but we now understand it is a highly undesirable outcome at both a personal and
a national level.
20

• It is well known that an income per capita is an average measure of
a country’s living standard (the conditions in which people live,
especially in terms of their level of material comfort and disposable
income), and there can be a wide variation around this mean.
• This variation - the inequality of income - exhibits substantial
differences across countries.
• Brazil and the southern African economies of Botswana, Namibia,
and South Africa have the highest levels of income inequality in the
world, for example.
21

• These cross-country differences in income inequality reveal
differences in:
the distribution of wealth (land, other property, and financial
wealth) and
human capital (defined as peoples’ skills and capabilities, which
are partly a product of their education, and which make them
more productive).
• These differences in turn reflect country-specific histories of
colonization, war, and policy decisions.
22

• For instance, South Africa’s extreme inequality in income and
wealth is a legacy of apartheid.
• Literatures showed that when society starts to grow from a situation
of high inequality (as in Brazil and South Africa) then economic
growth has a smaller benefit in reducing absolute poverty than
when society starts from a position of lower inequality.
• So looking at it another way, high-inequality societies need to grow
a lot faster to achieve the same amount of annual poverty reduction
as low-inequality societies.
23

• Therefore, in practice, as an economic growth more rapidly
proceeds, some of the poor will begin:
 to accumulate some capital to invest in their livelihoods,
 to buy more land, and;
 to use their own money to pay for their children’s education—who will then
obtain more remunerative occupations than their parents.
• But this will be a very hard challenge and they will be vulnerable to any setback;
some will never get started at all, or will fall deeper into poverty, perhaps
because of ill health.
• So, countries need to protect and build the assets of the poor, particularly their
human capital as well as the natural capital such as the soils, forests, and
fisheries on which their livelihoods depend.
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• In addition, there is also a need of subsidizing primary education, basic health
care, water and sanitation because these need will not only raise the human
development of poor people (measured by such indicators as life expectancy,
infant mortality, and literacy) but will also raise their productivity.
• This will help them diversify their livelihoods in both self-employment (for
example, from dependence on subsistence agriculture to cash crops and micro-
enterprises) and wage-employment (the poor will earn more as skilled workers
than as unskilled workers).
• Moreover, asset redistribution may also be necessary to build assets of the poor,
namely land, and the transfer of land from rich to poor. This needs discussions
and political commitments as well as political revolutions (a significant change
in ideas or practice).
25

• In these ways, economic growth will start to become more pro-poor
in order to reduce more poverty. Hence, a greater number of people
will start to earn more than a dollar a day.
• Thus, income inequality is an issue that needs to be addressed as it
can curb all other developmental goals; no country can delay
addressing it.
3. Seizing/ using the benefits of globalization
• Globalization has positive and negative effects.
• In development policy, every country are made an attempt to seize
or use the benefits of globalization while minimizing its risks and
costs. 26

• Globalization has led to increasing global competition, however,
developing countries concern about this competition.
• There are a lot of beneficial (positive) effects of competition such
as:
 competition increases production and efficiency since globalization creates
wider market for trade.
 competition has led developing countries to improve their economic situation
since globalization brings better access to new technologies and credit.
 globalization may increase productivity because of the rationalization of
production on a global scale and the spread of technology.
27

 globalization brings large capital flows.
 moreover, globalization improves of the living standard of some people.
• There are a lot of challengeable (negative) effects of competition such as:
 Globalization marginalizes the disadvantaged peoples that are lost or excluded from
the process due to market force, liberal ideology, privatization, and free involvement
of production factors and free market.
 There are uneven distribution of the benefits and costs of globalization across
countries and within countries. People who have access to technology are integrated
to use opportunities of globalization while those disadvantaged ones are not
benefited.
 Increasing financial market and transnational corporations (TNCs) or multinational
corporations (MNCs) so a tendency to create in inequality in global and national
28

4. Strengthening the commitments to human rights and human
development
• Human rights and human development both aim to promote well-
being and freedom of all people.
• The right to development is an inalienable human right (not able to
be taken away because of being protected by law) that means every
human person and all peoples are entitled to participate in,
contribute to, and enjoy economic, social, cultural and political
development.
29

• Human development means a process of enlarging people’s choices.
• Choices are to lead people to enjoy a long and health life, to be educated and to
have access to the resources needed for a decent standard of living.
• Additional choices include:
 Political freedom
 Guaranteed human rights and personal self-respect
 Build human abilities to lead long and healthy lives, to be knowledgeable, and to
participate in community affairs.
• Thus, public policy should promote wider access to educational opportunities (for
girls as well as boys) as a means of increasing income-earning potential for more
people.
30

3.3 Components of Development Policy
1. Purposively and deliberatively formulated
 Development policy must have a purpose or a goal (desired
effect or intended outcome).
 The goals or objectives of a policy are based on values (the
usefulness of the policy to the public).
 Goals or objectives are one of means towards to the ends.
 Policies involve a deliberate/ planned choice of actions designed
to attain goals and objectives.
 The actions can take the form of directives to do or not to do
from certain actions. 31

- Policies as well as goals and objectives are chosen under the
influence of values.
- Values are principles, standards, or qualities that a society or
groups within it considers worthwhile or desirable.
- Decision makers often act on the basis of their beliefs or
perceptions of the public interest about what is a proper or morally
correct policy.
- Thus goals and objectives depend on the values of the policy-
makers. This could be explained in the following manner:
Values
Goals and
objectives
Policies Directives
Action
Programs
32

2. A policy is well thought-out/ careful planned and is not a series of
isolated decisions.
3. A policy is what actually done and not done, what is intended or
unintended and desired or undesired.
4. Policy also delineates/defines a time frame in which its goals have
to be achieved.
5. Policy follows a defined course of action in a sequential order:
identification, formulation, legitimation, implementation,
evaluation and termination.
33

3.4 Typologies of Development Policy Issues
 Some social scientists and scholars have attempted to provide the
typologies of policy issues.
 For example, Theodore J. Lowi, who is the famous American
political scientist, proposed four types of policy in terms of their
issues.
 These are Distributive, Redistributive, Regulatory, and Constituent
Policy Issues. Each type has its own special purpose.
3.4.1 Distributive Policy Issues
 Distributive policy issues which are concerned with the distribution
of new resources. It tends to collect payments or resources from
many but concentrates direct benefits on relatively few.
 So that it is intended for specific segments of the society, groups, or
corporations for the provision of benefits to them.
34

• Governments use distributive policy to encourage certain activities.
For instance:
 Tax abatements to promote economic development,
 Farm subsidies are also an example of distributive policy because they
encourage people to farm, which is an activity that the government thinks is
beneficial and which might not be done enough without subsidies,
 Tax write-offs for homeowners to promote the housing industry,
 Social insurance is an insurance provided by state or state insurance that uses
compulsory contributions to pay for benefits unemployed and retired people,
 Scholarships to students from the disadvantaged social backgrounds,
 Assistance to aged and physically challenged persons.
35

3.4 2 Redistributive Policy Issues
 Redistributive policy issues which are concerned with the changing
of the distribution of existing resources.
 Redistribution policies geared to reducing income inequality and
expanding economic opportunities in order to promote
development, including income tax policies, rural development
policies, and publicly financed services.
 However, the major purpose of redistributive policy is to promote
equality.
36

 Because income and wealth are disproportionately or unequally
distributed among certain segments of the society, and hence they
are rearranged through redistributive policies to help the poor since
without this their lives would be far worse.
 In short, the goal of most redistributive policies are to transfer
income and wealth from one group to another such that everyone
enjoys at least a minimal standard of living.
 To do this, government takes three redistribution means or forms.
• First, there are direct anti-poverty programs, like welfare services
such as services include housing, child protection, free school
37

 Second, the government redistributes societal wealth usually taking money from
the rich in the form of taxes and giving it to the poor.
 Progressive taxation, is a good example of a redistributive policy, which transfers
wealth from richer to support low-income individuals and poorer families.
Government uses these public funds to provide affordable housing to low income
group, health care, etc.
 Third, there are policies that incline to economic outcomes in specific markets to
benefit people with lower incomes (minimum-wage laws are a classic example).
 Our means to redistribution requires a profound re-orientation. We need to think
through the relationship between what such programs should aim to do and what
the programs we now have actually do.
38

3.4.3 Regulative Policy Issues
• Regulative policy designed to ensure order and to prevent negative things from
happening.
• It is most effective for controlling or protecting public or common resources. For
instance, it designed to protect public health and safety, and the environment.
• Regulative policy has the following goals:
• One, a major goal of regulatory policy is to maintain order and prohibit behaviors
that cause danger to society.
• Government accomplishes this goal by restricting citizens, groups, or
corporations from engaging in those actions that negatively affect the political
and social order.
• Examples include:
 attempt to administer voting procedures, 39

 prohibit people from using certain drugs via antidrug laws
 restricting the use of the death penalty
• The second goal of regulatory policy is to protect economic activities and
business markets by prohibiting industry from practicing activities detrimental to
the free market. Examples:
 creation of monopolies.
 prohibit an unfair methods of competition: Businesses are taken legal action
for using illegal methods against their competitors.
40

• Thirdly, regulatory policy is also evident in the use of laws designed to protect
the workplace and the environment.
• In general, it deals with regulation of trade, banking, insurance and other financial
business, safety measures (device preventing unintentional operation, for example
keeping a gun from being fired by accident), and public utilities (service provided
by public utility such as electricity, gas, or water), etc.
• This policy is usually assumed to be best applied when good behavior can be
easily defined and bad behavior can be easily regulated and punished through
fines or sanctions.
• Without regulatory policy, the nation itself falls to the victim of corruption.
41

• This is because this policy prescribes do’s (rules about what you
must do in a specific condition) and don’ts (rules about what you
must not do in a specific condition) for different groups to prevent
individuals from becoming their victims.
• Regulatory policy tends to create losers and winners by allowing
one group to enjoy more freedom than the other.
• This type of regulation is done by Independent Organizations
that work on behalf of the government.
• Regulatory policies made by the government organizations that should
appropriate to the relevant services, and who render these services to public. For
example, Commercial Bank of Ethiopia, Telecom Regulatory Authority of
Ethiopia. 42

3.4.4 Constituent Policy Issues
 For government, a constituent policy is connected mainly to
development of new departments, reorganization of institutions,
internal distribution of funds and rules for public servants, and
create executive power entities, or deal with laws.
 That is why; such a policy is either structural or procedural.
Example of structural policy:
 In 2018, Ethiopian government established Ministry of Peace to
maintain peace of the nation.
 After 9/11, USA government established Department of Homeland
Security to prevent future terrorist attacks. 43

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