The Process of Economic Development

James M. Cypher

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000244496
• Edition: 5
• Topic: Business
• Subtopic: Business Development
• Index: Business

The fifth edition of The Process of Economic Development offers a thorough and up-to-date treatment of development economics. It has been extensively revised throughout, reflecting the most recent developments in research and incorporating the latest empirical data, as well as key theoretical advances and many new topics. The world has seen vast economic growth in China, economic transformation in India, new challenges in Latin America, rapid economic progress in Southeast Asia, and the deepening impact of environmental issues such as climate change. This new edition addresses all these critical issues as well as the pivotal role of the state, where China's capacity is contrasted with that of African states.

Transnational corporations' reliance on low-wage manufacturing and labor arbitrage is featured in the book. Agricultural policy—extensively explored—remains crucial, as does the promotion of industrialization. This fifth edition offers a 'state-of-the-art' analysis of these essential themes and many others. Numerous case studies and issue focuses have been integrated with sundry central topics. Neoclassical theories and applications, including a timely exploration of behavioral economics, are both rigorously and accessibly explicated.

Cypher's comprehensive account remains the development economics text par excellence, as it takes a much more practical, hands-on view of the issues facing the developing countries than other, overly mathematical texts. This book is unique in its scope and in the detailed attention it gives to a vast range of ideas, including pioneering developmentalist and heterodox formulations. Distinct institutional structures are examined within their historical contexts.

This landmark text will continue to be an invaluable resource for students, teachers, and researchers in the fields of development economics and development studies.

Part I
An overview of economic development

Chapter 1

The development imperative

AFTER READING AND STUDYING THIS CHAPTER, YOU SHOULD BETTER UNDERSTAND:

• the development imperative and past-binding structural conditions;
• trends in poverty rates and some of their human and social costs;
• what is meant by inclusive growth;
• the centrality of the Sustainable Development Goals;
• the extent of inequality in the distribution of income and in participation in economic and social life by the world’s poor;
• multidimensional poverty, societal poverty, and the shared prosperity premium;
• the obstacles to development, both internal and external, that tend to thwart economic, social, and human development;
• the significance of fundamental structural change and of technological and institutional innovation to more rapid progress in the future.

Why study development?

On December 8, 2019, a large group of exhausted garment workers were sleeping, as usual, in the factory next to the plastic and leather processing machines where they labored, receiving the meager sum of $2.10 per day for their efforts. Their multistory factory was tiny—only 5,400 square feet—and up to 100 migrant laborers, unable to afford housing, were crowded into a rickety building in one of New Delhi’s 30,000 illegal sweatshops. New Delhi, India’s second largest city with an estimated 18 million population, has many factory-filled crumbling neighborhoods like Anaj Mandi, where, at 5:30 in the morning, an illegally converted residential building ignited, killing at least 43 workers (Yasir and Schultz 2019). Two weeks later, under very similar circumstances, nine laborers died when the cloth storage and factory facility where they slept was incinerated in Delhi’s desperate Kirari district.

Fires commonly start in such factories because of slapdash electrical wiring. The Anaj Mandi fire was rated as the second worst ever in New Delhi. Firefighters were all but helpless because they could not bring equipment close to the building since the alleyway was too narrow. There was only one unlocked exit; workers attempting to flee were blinded by dense smoke. In 2001, when officials in New Delhi began to close unregulated factories, there were 130,000 in operation. But their efforts are frequently thwarted by clandestine business owners like the five contractors who rented out the floors in the now-destroyed converted apartment building in order to profit from illegally employing impoverished migrants from the countryside. According to the International Labor Organization, in these factories, it is common to demand nine hours of labor per day, six days a week, while frequently imposing five hours of overtime during peak months (ILO 2017: 12).

India has minimum wage laws and other legislation designed to protect garment workers from sweatshop conditions, but less than one-half of them actually gain the meager legal minimum wage and fire code provisions are commonly ignored. It is estimated that 49 percent of garment operatives receive the minimum wage ($70 per month in 2014), which still leaves them existing on an income that is 74 percent below India’s “living wage” (ILO 2017: 6).

Press reporters wrote of the tragedy caused by fire—but it was no tragedy. Rather, it was the predictable outcome of systemic structural work conditions in India—which are duplicated in many countries of the Global South. At $2.10 per day—or roughly 23 cents per hour—the New Delhi workers were living above (however slightly) the threshold for extreme poverty, set at $1.90 per day by the World Bank in late 2015.

Throughout the Global South, labor legislation is generally incomplete and compliance is frequently lax. It would be hard to claim that the garment workers in New Delhi should be seen as an exception—many nations, including nearby Bangladesh—offer similar, or worse, working conditions in their “underground” (i.e. unregulated, or “informal”) manufacturing sectors.

There is a clear imperative, here and elsewhere, to overcome such working conditions—both in the underground economy and, often, in what is termed the “formal” economy (where working condition broadly comply with “official” regulations, although frequently sidestepped through lax enforcement). The development imperative reaches far beyond labor conditions to include safe water and food, adequate infrastructure and housing, and minimal medical care, to list but a few critical immediate structural concerns. It goes far beyond the “emergency” aid that wealthy nations provide when poor nations are overwhelmed by flood, famine, drought, and other, now increasingly climate-related, impacts.

Development economics strives to both understand and overcome the systemic structural conditions of underdevelopment—conditions with a long historical legacy. It is, therefore, a field of critical study and analysis and of policy action. Policy actions can be “bottom-up” initiatives—in the case of garment workers, most likely through the actions of labor unions and/or local social justice advocates clustered in non-governmental organizations (NGOs). Likewise, necessary policy changes can be, and are, introduced from the top-down, by state governments, national governments, and by international organizations. From whichever way change originates, it must be kept in mind that unsavory conditions continue to exist because powerful groups have vested interest in the status quo and are willing to fight to maintain it.

Often, the connections between unendurable situations for the majority or near-majority and those who effectively sanction such conditions are complex and largely hidden. For example, in the early twenty-first century, dengue fever—once thought to be “conquered”—has reappeared. It is a public health problem—a water-borne, mosquito-borne pestilence—whose impact is generally felt by slum dwellers, poor villagers, and squatters in neighborhoods inadequately drained of stagnated, polluted waters. The World Health Organization states that roughly one-half of the world’s population is at risk from this disease, with 390 million confirmed cases per year. The poor lack the “resources” to address the problem at the individual level. Only a public solution will suffice. But the wealthy and the highly privileged “middle-class” (i.e. those in the top 20 percent of the income distribution) usually live far away from the putrefying slums and never visit them. Their (often willing) ignorance of the struggles of the bottom 40 or 50 or 60 percent of the population means that those who could confront a public health problem will often not do so since the tax burden of remediation will fall on them. All this is part of a common “vicious circle” of underdevelopment. Hence, ‘top-down” solutions are hard to find.

From afar, addressing the development imperative might seem but a matter of some “will” and some “common sense.” Up close, however, things appear in a different light. There are only two ways to address the development imperative. Economists usually prefer economic growth—which they argue can make everybody better-off and nobody worse-off. Yet throughout the Global South, societies are disarticulated, with a majority or near majority that most likely will not be affected by economic growth; this is the massive slum-dwelling populace which frequently subsists in an “informal” economy, all but untouched by any national economic growth. The garment workers in New Delhi, for example, are unlikely to find any substantive change in their conditions even while India’s economy grows rapidly (as it generally has in recent years, with above 7 percent growth for 11 years between 2002 and 2018). Thus, for those many left behind in growing economies, the only remedy is legislation that makes the top 20 percent very slightly (often almost immeasurably) “worse off” via modest taxation in order to alter how the benefits of growth are distributed....