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Economics Essay Examples

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Published on: Jun 6, 2023

Last updated on: Jan 31, 2024

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What is an Economics Essay?

An economics essay is a written piece that explores economic theories, concepts, and their real-world applications. It involves analyzing economic issues, presenting arguments, and providing evidence to support ideas. 

The goal of an economics essay is to demonstrate an understanding of economic principles and the ability to critically evaluate economic topics.

Why Write an Economics Essay?

Writing an economics essay serves multiple purposes:

• Demonstrate Understanding: Showcasing your comprehension of economic concepts and their practical applications.
• Develop Critical Thinking: Cultivating analytical skills to evaluate economic issues from different perspectives.
• Apply Theory to Real-World Contexts: Bridging the gap between economic theory and real-life scenarios.
• Enhance Research and Analysis Skills: Improving abilities to gather and interpret economic data.
• Prepare for Academic and Professional Pursuits: Building a foundation for success in future economics-related endeavors.

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If you’re wondering, ‘how do I write an economics essay?’, consulting an example essay might be a good option for you. Here are some economics essay examples:

Short Essay About Economics

A Level Economics Essay Examples

Here is an essay on economics a level structure:

Band 6 Economics Essay Examples

Here are some downloadable economics essays:

Economics essay pdf

Economics essay introduction

Economics Extended Essay Examples

In an economics extended essay, students have the opportunity to delve into a specific economic topic of interest. They are required to conduct an in-depth analysis of this topic and compile a lengthy essay. 

Here are some potential economics extended essay question examples:

• How does foreign direct investment impact economic growth in developing countries?
• What are the factors influencing consumer behavior and their effects on market demand for sustainable products?
• To what extent does government intervention in the form of minimum wage policies affect employment levels and income inequality?
• What are the economic consequences of implementing a carbon tax to combat climate change?
• How does globalization influence income distribution and the wage gap in developed economies?

IB Economics Extended Essay Examples 

IB Economics Extended Essay Examples

Economics Extended Essay Topic Examples

Extended Essay Research Question Examples Economics

Tips for Writing an Economics Essay

Writing an economics essay requires specific expertise and skills. So, it's important to have some tips up your sleeve to make sure your essay is of high quality:

• Start with a Clear Thesis Statement: It defines your essay's focus and argument. This statement should be concise, to the point, and present the crux of your essay.
• Conduct Research and Gather Data: Collect facts and figures from reliable sources such as academic journals, government reports, and reputable news outlets. Use this data to support your arguments and analysis and compile a literature review.
• Use Economic Theories and Models: These help you to support your arguments and provide a framework for your analysis. Make sure to clearly explain these theories and models so that the reader can follow your reasoning.
• Analyze the Micro and Macro Aspects: Consider all angles of the topic. This means examining how the issue affects individuals, businesses, and the economy as a whole.
• Use Real-World Examples: Practical examples and case studies help to illustrate your points. This can make your arguments more relatable and understandable.
• Consider the Policy Implications: Take into account the impacts of your analysis. What are the potential solutions to the problem you're examining? How might different policies affect the outcomes you're discussing?
• Use Graphs and Charts: These help to illustrate your data and analysis. These visual aids can help make your arguments more compelling and easier to understand.
• Proofread and Edit: Make sure to proofread your essay carefully for grammar and spelling errors. In economics, precision and accuracy are essential, so errors can undermine the credibility of your analysis.

These tips can help make your essay writing journey a breeze. Tailor them to your topic to make sure you end with a well-researched and accurate economics essay.

To wrap it up , writing an economics essay requires a combination of solid research, analytical thinking, and effective communication. 

You can craft a compelling piece of work by taking our examples as a guide and following the tips.

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Our economics essay writing service is always ready to help students like you. Our experienced economics essay writers are dedicated to delivering high-quality, custom-written essays that are 100% plagiarism free.

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Barbara is a highly educated and qualified author with a Ph.D. in public health from an Ivy League university. She has spent a significant amount of time working in the medical field, conducting a thorough study on a variety of health issues. Her work has been published in several major publications.

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Two Clashing Giants: Marxism and Darwinism

How will the covid-19 virus evolve, openmind books, scientific anniversaries, air pollution, the greatest environmental risk to health, featured author, latest book, the past, present and future of economic development.

This overview considers the past, the present, and the future of economic development. It begins with the conceptualization, definition, and measurement of economic development, highlighting that a narrow focus on the economic is inadequate to capture development and even, paradoxically, economic development itself. Key aspects of economic and human development over the past seven decades are then outlined, and the current landscape is described. The paper then considers the future of economic development, highlighting the challenges faced by developing countries, especially the opportunities and risks provided by the recent downward global trend in the share of labor in overall economic activity.

Economic Development

What is economic development and how has the concept evolved through the years? The economic part of it could be thought to be relatively straightforward. Surely, a steady rise in per capita income as conventionally measured is an anchor, in concept and in reality. It would be odd indeed to describe declining per capita income as economic development. But rising per capita income, while necessary, is certainly not sufficient for development, and even for economic development.

The distribution of this rising income among the population is legitimately in the domain of economic development. Two key features of the distribution of income are inequality and poverty. If average income rises but the inequality of its distribution also increases, then an egalitarian perspective would mark down the latter as a negative aspect of economic development. If poverty, the population below a socially acceptable level of income, also increases then this is another negative mark to be set against rising average income in assessing economic development. Of course, the actual outcome on poverty will depend on an interaction between average income and inequality and which of the two forces dominates empirically.

If higher average income is accompanied by increasingly unequal distribution, an egalitarian perspective will qualify it as negative. Growing poverty would also contrast negatively with highter average income in any evaluation of economic development

But identifying economic development purely with income is too narrow a conception. Other aspects of well-being are surely relevant. Education and health outcomes, for example, go beyond income. They are important markers of well-being in their own right, but they influence, and are influenced by, income. High income can deliver an educated and healthy population, but an educated and healthy population also delivers high income. Thus, any assessment of development, and even economic development, needs to take into account a broader range of measures of well-being than simply income and its distribution. Education and health, and their distribution in the population, are important as well.

Distribution is not simply about inequality between individuals. Inequality across broadly defined groups is also a key factor. Gender inequality saps economic development as it suppresses the potential of half the population. Thus, improvements in measures of gender inequality are to be looked for in their own right, but also because of the contributions they make to economic growth and to addressing economic inequality. Similarly, inequalities between ethnic and regional groups stoke social tension and affect the climate for investment and hence economic growth. It is difficult to separate out these seemingly non-economic dimensions from the narrowly economic. Economic development is thus also about development more generally.

A narrow focus on measured market income misses out on use of resources which are not priced appropriately in the market. The most important of these is the environment, especially in the context of greenhouse gas emissions and climate change. Rising national income as conventionally measured does not price in the loss of irreplaceable environmental resources at the national level nor, in the case of climate change, irreversible moves toward catastrophic risks for the planet we live on.

A broader conception of development has been embraced by the international community, first through the Millennium Development Goals (MDGs) of 2000, and then through the Sustainable Development Goals (SDGs) of 2015. The eight MDGs were expanded and modified to seventeen SDGs, which include conventional economic measures such as income growth and income poverty, but also inequality, gender disparities, and environmental degradation (Kanbur, Patel, and Stiglitz, 2018). Indeed, the crystallization and cementing of this broader conceptualization of development, and even of economic development, has been one of the sure advances during the past decade of thinking, and surely represents a move toward a “new enlightenment” in assessing trajectories of achievement. But what have these trajectories been over the past seven decades since World War II? The next section takes up the story.

The six decades after the end of World War II, until the crisis of 2008, were a golden age in terms of the narrow measure of economic development, real per capita income (or gross domestic product, GDP). This multiplied by a factor of four for the world as a whole between 1950 and 2008. For comparison, before this period it took a thousand years for world per capita GDP to multiply by a factor of fifteen. Between the year 1000 and 1978, China’s income per capita GDP increased by a factor of two; but it multiplied six-fold in the next thirty years. India’s per capita income increased five-fold since independence in 1947, having increased a mere twenty percent in the previous millennium. Of course, the crisis of 2008 caused a major dent in the long-term trend, but it was just that. Even allowing for the sharp decreases in output as the result of the crisis, postwar economic growth is spectacular compared to what was achieved in the previous thousand years.

The six decades after the end of World War II, until the crisis of 2008, were a golden age in terms of the narrow measure of economic development, real per capita income. This multiplied by a factor of four for the world as a whole between 1950 and 2008

But what about the distribution of this income, and in particular the incomes of the poorest? Did they share in the average increase at all? Here the data do not stretch back as far as for average income. In fact, we only have reasonably credible information going back three decades. But, World Bank calculations, using their global poverty line of $1.90 (in purchasing power parity) per person per day, the fraction of world population in poverty in 2013 was almost a quarter of what it was in 1981—forty-two percent compared to eleven percent. The large countries of the world—China, India, but also Vietnam, Bangladesh, and so on—have contributed to this unprecedented global poverty decline. Indeed, China’s performance in reducing poverty, with hundreds of millions being lifted above the poverty line in three decades, has been called the most spectacular poverty reduction in all of human history.

But the story of the postwar period is not simply one of rising incomes and falling income poverty. Global averages of social indicators have improved dramatically as well. Primary school completion rates have risen from just over seventy percent in 1970 to ninety percent now as we approach the end of the second decade of the 2000s. Maternal mortality has halved, from 400 to 200 per 100,000 live births over the last quarter century. Infant mortality is now a quarter of what it was half a century ago (30 compared to 120, per 1,000 live births). These improvements in mortality have contributed to improving life expectancy, up from fifty years in 1960 to seventy years in 2010.

Focus on just income, health, and education hides another major global trend since the war. This has truly been an age of decolonization. Membership of the UN ratcheted up as more and more colonies gained political independence from their colonial masters, rising from around fifty in 1945 to more than 150 three decades later. There has also been a matching steady increase in the number of democracies with decolonization, but there was an added spurt after the fall of the Berlin Wall in 1989, when almost twenty new countries were added to the democratic fold. To these general and well quantified trends we could add others, less easily documented, for example on women’s political participation.

With this background of spectacular achievements at the global level, what is to stop us from declaring a victorious past on human progress? The answer is that we cannot, because good global average trends, although they are to be welcomed, can hide alarming counter tendencies. Countries in Africa which are mired in conflict do not have any growth data to speak of, and indeed any economic growth at all. Again in Africa, for countries for which we have data, although the fraction of people in poverty has been falling, the absolute number in poverty has been rising, by almost 100 million in the last quarter century, because of population growth.

A similar tale with two sides confronts us when we look at inequality of income in the world. Inequality as between all individuals in the world can be seen as made up of two components. The first is inequality between average incomes across countries—the gap between rich and poor countries. The second is inequality within each country around its average. Given the fast growth of large poorer countries like India and China relative to the growth of richer countries like the US, Japan, and those in Europe, inequality between countries has declined. Inequality within countries displays a more complex picture, but sharp rises in inequality in the US, Europe, and in China and India means that overall within-country inequality has increased. Combining the two, world inequality has in fact declined overall (Lakner and Milanovic, 2016). The importance of between-nation inequality has fallen from a contribution of four fifths of global inequality a quarter century ago. But its contribution is still not lower than three quarters of total world inequality. These two features, rising within nation inequality in large developing countries, and the still enormous role of between-nation inequality in global inequality, are the other side of the coin from the good news of developing country growth on average in the last three decades.

Inequality among Earth’s inhabitants comprises two elements: the first, which is expressed by each country’s average income, reflects the gap between rich and poor countries; the second reflects inequalities within each country in terms of average incomes

But income growth, if it comes at the expense of the environment, mis-measures improvement in human well-being. Particulate pollution has increased by ten percent over the last quarter century, with all of its related health implications. The global population under water stress has almost doubled in the last half century, and there has been a steady decline in global forest area over the same period. Global greenhouse gas emissions have increased from under 40 gigatons equivalent to close to 50 gigatons in the last quarter century. On present trends global warming is projected to be around 4°C by 2100, well above the safe level of 1.5°C warming. The consequences of global warming have already begun to appear in terms of an increase in severe weather outcomes.

Thus, the past seven decades have indeed been golden ones for economic development on some measures, and even development more broadly measured. But all is not golden. The trends hide very worrying tendencies which have begun to surface in terms of their consequences, and are shaping the landscape of development we have with us. The next section takes up the story with a focus on the present of economic development.

The Present

The present of the economic development discourse is, of course, shaped by the trends of the distant and recent past. An interesting and important feature of the current landscape is the shift in the global geography of poverty. Using standard official definitions, forty years ago ninety percent of the world’s poor lived in low-income countries. Today, three quarters of the world’s poor live in middle-income countries (Kanbur and Sumner, 2012). The fast growth of some large countries, accompanied by rising inequality in these countries, means that the average income increases have not been reflected in poverty reduction to the same extent. So, although these countries have now crossed the middle-income category boundary, which depends on average income, they still have large absolute numbers of poor people. These poor in middle-income countries vie with the poor in poor countries for global concern and attention.

This disconnect between a person being poor and their country being poor is shaking up the global development assistance system, which was built on the notion that the bulk of the world’s poor lived in poor countries. This is manifested in the “graduation” criteria used by most aid agencies, whereby aid is sharply reduced and then cut off when a country’s average income crosses a threshold, typically related to middle-income status. It raises the question posed by Kanbur and Sumner (2012): “Poor countries or poor people?” The response has been, by and large, to stay with the average income criteria. This has led to and will increasingly lead to a dichotomy between very poor countries, often mired in conflict, and middle-income countries where, in fact, the bulk of the world’s poor now live. Thus, if the World Bank’s soft loan arm sticks to its graduation criteria, it will in effect disengage from the vast majority of the world’s poor, while focusing on the poorest countries in the world. This disengagement is difficult to justify on ethical grounds, but also difficult to understand if middle-income countries are also the source of global environmental problems and, for some of them, the source of conflict-based migration.

Migration, conflict-based and economic, brings us to another important feature of the present landscape of economic development, one which is the result of past trends and which will surely have global implications for the future. Rising inequality in rich countries has intersected with increased migration pressures from poor countries. Despite the closing of the gap between rich and poor countries because of the fast growth of some poor countries, the gap is still enormous, both on average and especially so for the poorest countries who have not grown as fast. These gaps have combined with increased pressures because of armed conflict and exacerbated by environmental stress.

The hollowing out of the middle class in rich countries has coincided with greater immigration, leading to a toxification of democratic politics in these countries and the rise of far-right, nativist, and xenophobic tendencies in the body politic (Kanbur, 2018). The election of Trump, the vote for Brexit, and the entry of Alternative für Deustchland into the German Parliament are only the most obvious outward manifestations of the current malaise of the body politic. Nor is this just an issue in rich countries. The anti-migrant mob violence in South Africa and ethnic conflict in countries such as Myanmar are part of the same pattern of migration tensions which color economic development today.

The current terrain of economic development has clearly been influenced by the great financial crisis of 2008. Most recently, the global crisis has proved disruptive to development gains, although the losses can be said to have been mainly concentrated in the rich countries. But the reactions and the backlash now apparent in rich countries are having and will have consequences for economic development in poor countries. Further, the genesis of the crisis exposed fault lines in the economic model pursued by rich countries, with wholesale deregulation of markets and especially of banking and capital flows.

The hollowing out of the middle class in rich countries has coincided with greater immigration, leading to a toxification of democratic politics in these countries and the rise of far-right, nativist, and xenophobic tendencies in the body politic

The current state of affairs and ongoing debates relate back to the trajectory of thinking since the fall of the Berlin Wall in 1989. It will be recalled that in a famous statement of the time the events were characterized as marking “the end of history” (Fukuyama, 1989), meaning by this that liberal democracy and free markets had won the battle of ideas. But, as noted by Kanbur (2001), “the end of history lasted for such a short time.” The financial crisis of 1997, emanating from the newly liberalized capital markets of East Asia, was a warning shot. The financial crisis of 2008, emanating in the deregulated financial markets of the US and Europe, led to the world global depression since the 1930s.

The world as a whole is only just recovering from this catastrophe. Its effect on economic thinking has been salutary. Queen Elizabeth II of the United Kingdom famously asked British economists why they did not see it coming. The response from Timothy Besley and Peter Hennessy was that: “So in summary, Your Majesty, the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole” (quoted in Kanbur, 2016). But the risks to the system as a whole were magnified by the deregulatory stance of policy makers in the early 2000s, still basking in the “end of history” narrative of the turn of the millennium. It is to be hoped that the lessons of the devastating crisis of 2008 will not be forgotten as we go forward.

Thus the crisis of 2008 sits atop, and sharpens, negative aspects of trends identified in the previous section and shapes the present and future prospects. These future prospects are taken up in the next section.

The past and present of economic development sets the platform for the long-term future. Environmental degradation and climate change will surely worsen development prospects and ratchet up conflict and environmental stress-related migration. The issues here have been well debated in the literature (see for example, Kanbur and Shue, 2018). And the actions needed are relatively clear—the question is rather whether there is the political will to carry them out.

Beyond challenges that arise due to ecological change and environmental degradation, another prominent challenge that has arisen since the 1980s is the global decline in the labor share. The labor share refers to payment to workers as a share of gross national product at the national level, or as a share of total revenue at the firm level. Its downward trend globally is evident using observations from macroeconomic data (Karababounis and Neiman, 2013; Grossman et al., 2017) as well as from firm-level data (Autor et al., 2017). A decline in the labor share is symptomatic of overall economic growth outstripping total labor income. Between the late 1970s and the 2000s the labor share has declined by nearly five percentage points from 54.7% to 49.9% in advanced economies. By 2015, the figure rebounded slightly and stood at 50.9%. In emerging markets, the labor share likewise declined from 39.2% to 37.3% between 1993 and 2015 (IMF, 2017). Failure to coordinate appropriate policy responses in the face of these developments can spell troubling consequences for the future of economic development. Indeed, the decline in labor share despite overall economic progress is often seen as fuel that has fanned the fire of anti-immigration and anti-globalization backlashes in recent years, threatening a retreat of the decades-long progress made on trade and capital market liberalization worldwide.

It should be noted that the labor share and income inequality are inextricably linked. Indeed, the labor share is frequently used as a measure of income inequality itself (for example, Alesina and Rodrik, 1994). Understanding the forces that determine the labor share has been a singularly important aspect of the landscape of economic development. Indeed, this quest has guided trade and development economics research for decades, during which time the forces of globalization and its many nuanced impacts on the labor share have been fleshed out (Bardhan, 2006; Bourguignon, 2017).

Yet, there are good reasons to take the view that canonical economic models often do not offer predictions consistent with the current pattern of labor share decline in the global economy. Notably, behind the veil of global labor share decline is in fact a tremendous amount of underlying diversity in the direction of change of the labor share at the country level, with emerging and advanced economies at both ends of the spectrum (Karababounis and Neiman, 2013). Such observations are contrary to the canonical prediction of economic models based on the assumptions of constant technologies, perfect competition, and no market imperfections. Guided by these assumptions, the standard prediction is that workers in relatively labor abundant countries should strictly benefit from exposure to world trade in both absolute terms and relative to owners of other inputs of production. In stark contrast, however, after taking on the role as the world’s largest factory, China has experienced one of the most significant rates of decline in labor share since 1993 (IMF, 2017).

A search for additional forces that may be in play is clearly warranted . 2   To this end, the trajectory of the global labor share sits at the confluence of three major shifts in the defining features of developing and developed economies. These include: (i) the adoption of labor-saving technological change; (ii) the shift in importance of employer market power; and (iii) the growing prevalence of alternative modes of employment in the labor market.

Labor-saving technological change is a key driver in the recent global labor share decline (IMF, 2017). The reasons for firms and producers to embrace such a change are many, including a reduction in the price of investment goods and informational technology investment (Karababounis and Neiman, 2013), and the advent of robotics in the manufacturing process (Acemoglu and Restrepo, 2018), for example. Already, advanced economies do not have a monopoly over the adoption of labor-saving technological change. Indeed, China has put in place more robots in manufacturing than any other country according to recent estimates (Bloomberg News, 2017). The implication of labor-saving technological change on labor income is not obvious, however, as it juxtaposes the overall productivity gains that arise from the use of labor-saving technical change, with its potential adverse consequences on unemployment. In the end, whether workers benefit from labor-saving technological change will depend on how quickly productivity gains translate into wage gains (Acemoglu and Autor, 2011; Acemoglu and Restrepo, 2018; Chau and Kanbur, 2018).

An important problem arose in the 1980s: the worldwide decline in the workers’ payment as a share of gross national product on a national level, or as a share of total revenue at the firm level

It is here that additional research can potentially reap significant dividends in furthering our understanding of how developing country markets function and how they respond to shocks. Some important mediating factors have already been identified. These include existing labor market distortions that may skew decision-making about technological change (Acemoglu and Restrepo, 2018), and search friction in the labor market and the resulting possibility of complex distributional responses to technological change (Chau and Kanbur, 2018). Further, policy responses to labor-saving technical change need to be developed and implemented, including perhaps public investment in research into developing efficient labor using technology (Atkinson, 2016; Kanbur, 2018).

In addition to national- or market-level differences in the labor share, recent firm-level evidence has inspired a surge in studies showing that employer market power can give rise to systematic differences in the labor share across firms with heterogeneous productivity levels (for example, Melitz and Ottaviano, 2008). It is by now well known that globalization disproportionately favors high-productivity firms. The ascendance of superstar firms in recent years in the US, with their demonstrably higher propensities to adopt labor-saving technologies, provides an excellent example of how industrial organizational changes can impact the overall labor share (Autor et al., 2017). Employer market power has become a fact of life in emerging markets as well (for example, Brandt et al., 2017). In the course of economic development, does the shift in importance of large firms disproportionately favor the adoption of labor-saving technologies (Zhang, 2013)? Or do they, in fact, value worker morale and pay higher wages (Basu, Chau, and Soundararajan, 2018)? These are critical questions that can inform a host of policy issues going forward, from the desirability of minimum wages to facilitate better wage bargains to be struck for workers, to the use of competition policies as a tool for economic development, for example.

Compounding these shifts in technologies and industrial organization, labor market institutions in emerging markets have also seen significant developments. Present-day labor contracts no longer resemble the textbook single employer single worker setting that forms the basis for many policy prescriptions. Instead, workers often confront wage bargains constrained by fixed-term, or temporary contracts. Alternatively, labor contracts are increasingly mired in the ambiguities created in multi-employer relationships, where workers must answer to their factory supervisors in addition to layers of middleman subcontractors. These developments have created wage inequities within establishments, where fixed-term and subcontracted workers face a significant wage discount relative to regular workers, with little access to non-wage benefits. Strikingly, rising employment opportunities can now generate little or even negative wage gains, as the contractual composition of workers changes with employment growth. The result can be a downward spiral in worker morale (Basu, Chau, and Soundararajan, 2018). These developments suggest that a decline in labor share generated by contractual shifts in the labor market can ultimately have adverse consequences on the pace of overall economic progress. Attempts to address wage inequities between workers within establishments is a nascent research area (Freeman, 2014; Basu, Chau, and Soundararajan, 2018), and what is intriguing here is the possibility that we now have a set of circumstances under which inequality mitigating policies, by raising worker morale, may end up improving overall efficiency as well.

The ascendence of superstar firms with a propensity to adopt labor-saving technologies provides an excellent example of how industrial organizational changes can impact labor’s overall share of the GNP

We began this chapter by emphasizing the joint importance of overall economic progress and income inequality as metrics of development. Our brief look at the future of the economic development landscape sheds light on the critical importance of bringing together multiple perspectives in our understanding of how these two metrics of development are codetermined. Doing so opens up new policy tools (for example, competition policies and technology policies), new reasons for (non-)intervention (for example, workers’ morale consequences of wage inequities), and, perhaps equally important, new policy settings where equity and efficiency are no longer substitutes for each other.

Looking back over the past seven decades since the end of World War II, economic development presents us with a string of contradictions. There have been unprecedented rises in per capita income, with many large developing countries crossing the threshold from low-income to middle-income status. These income increases have been accompanied by equally unprecedented improvements in income poverty and in education and health indicators.

But at the same time there is palpable anxiety about the development process, its sustainability, and its implications for the global economy. Despite the fast increases in income in poorer countries, gaps between them and rich countries remain large. Together with conflict and environmental stress, this has led to migration pressures, particularly for richer countries but also for better-off developing countries. The combination of migration pressures and rising inequality has led to the toxic rise of illiberal populist politics which is threatening postwar democratic gains.

While environmental and climate change, and rising inequality in general, have been much discussed, we have highlighted a particular source of rising inequality as an ongoing threat to economic development. The falling share of labor in the economy is set to continue and unless counteracted by strong policy measures will threaten inclusive development in the coming decades.

We have also highlighted how thinking in economics has responded to the underlying forces of change. There has been a broadening of the concept of development beyond the narrowly economic. The roots of the great financial crisis of the end of the first decade of the new millennium have also been scrutinized and, hopefully, some lessons have been learned. And attention is turning to understanding the inexorable decline in labor’s share. Whether all this adds up to a New Enlightenment in economic thinking is something the next decades of development will reveal.

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—Kanbur, Ravi. 2016. “The end of laissez faire, the end of history and the structure of scientific revolutions.”  Challenge  59(1): 35–46.

—Kanbur, Ravi. 2018. “Inequality and the openness of borders.” Cornell University, Dyson Working Paper 2018–10.

—Kanbur, Ravi, Patel, Ebrahim, and Stiglitz, Joseph. 2018. “Sustainable development goals and measurement of economic and social progress.” Cornell University, Dyson Working Paper 2018–12.

—Kanbur, Ravi, and Shue, Henry (eds.). 2018.  Climate Justice: Integrating Economics and Philosophy . Oxford: Oxford University Press.

—Kanbur, Ravi, and Sumner, Andy. 2012. “Poor countries or poor people? Development Assistance and the New Geography of Global Poverty.”  Journal of International Development 24(6): 686–695.

—Karabarbounis, Loukas, and Neiman, Brent. 2013. “The global decline of the labor share.”  Quarterly Journal of Economics  129: 61–103.

—Lakner, Christoph, and Milanovic, Branko. 2016. “Global income distribution: from the fall of the Berlin Wall to the great recession.”  The World Bank Economic Review  30(2): pp. 203–232.  https://doi.org/10.1093/wber/lhv039  (accessed on September 19, 2018).

—Melitz, Marc J., and Ottaviano, Gianmarco I. P. 2008. “Market size, trade and productivity.”  Review of Economic Studies  75: 295–316.

—Zhang, Hongsong, 2013. “Biased technology and contribution of technological change to economic growth: Firm-level evidence.” 2013 Annual Meeting, August 4–6, 2013, Washington, DC. 150225, Agricultural and Applied Economics Association.

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UC Berkeley

Essays on Economic Development

• Leone, Samuel
• Advisor(s): Finan, Frederico

The mission of development economics is, fundamentally, to explain why some communities are wealthier than others. This dissertation is a collection of two essays that make progress towards fitting together key pieces of the puzzle. My hope is that the findings will inform, not only researchers, but policymakers working to accelerate economic development.

To that end, the essays make three thematic contributions. First, they leverage data and experiments from the Middle East and North Africa (MENA). While MENA’s relevance to global markets is self-evident, to date economists have paid it less attention than other low- and middle-income regions. Second, the results advance the economic geography of development by exploring trade and forced migration. Third, the results advance the political economy of development by exploring corruption and the victims of conflict. These geographic and political factors are among the most important drivers of structural transformation, productivity growth, and poverty reduction.

In Chapter 1, joint with Nate Grubman and Jawaher Mbarek, I investigate corruption dynamics in international trade. Every year emerging markets import goods valued at more than $7 trillion, and in many countries shipments have to pass through corrupt customs administrations. Given these high stakes, policymakers require a deep understanding of both the causes and the effects of customs fraud. In addition, trade corruption can serve as a laboratory to study corruption writ large. One previously unexplored complexity is that bribe payers and bribe receivers often have repeated interactions. Given corruption’s characteristic counterparty risks and information asymmetries (not to mention the impossibility of contract enforcement), these long-running relationships likely matter for a wide variety of outcomes across a wide variety of contexts.

To pursue these general learning objectives, we overcome the data and identification challenges inherent to investigating bribery: we build an original dataset on Tunisian customs transactions using an audit study to directly observe bribes, and we leverage a natural experiment in which a computer algorithm randomly assigns customs officials to import shipments. There are three sets of results. First, we show that bribery and tax evasion are widespread, that bribery is collusive (not coercive), and that age (but not gender) predicts officials’ corruptibility. Second, in line with a straightforward Nash Bargaining model, we show that the length of official/trader relationships increases tax evasion but decreases bribe amounts. Third, we zoom out to consider the larger macroeconomic implications and show that, in terms of lost tax revenue, bribery costs the Tunisian government 0.7% of GDP or $80 per citizen.

In Chapter 2, joint with Edward Miguel, Sandra V. Rozo, Emma Smith, and Sarah Stillman, I investigate affordable housing for forced migrants. There are 82 million forced migrants in the world today, and the vast majority reside in “host communities:” they live, work, and attend school in the same neighborhoods as the citizens of their host country. As both a cause and an effect of this arrangement, many governments, IGOs, and NGOs support these refugees’ shelter through either direct provision or rental assistance. However, the evidence on the welfare implications of housing subsidies is inconclusive for refugees in particular and for high-poverty populations in general. On the one hand, studies have shown that shelter assistance has the potential to provide, not just a roof overhead, but a number of downstream benefits. On the other hand, some studies have found null or even negative results, and it is often unclear whether the positive results are due to direct housing-quality effects or indirect neighborhood effects.

To fill this knowledge gap, we ran a randomized controlled trial (RCT) testing a program that provides housing support to Jordan’s Syrian refugees. The subsidies are large (approximately $190 per month) and are not vouchers; households can only use them for their current housing, allowing us to be among the first to identify housing-quality effects absent confounding neighborhood effects. There are three sets of results. First, we estimate the positive impacts of the program. Recipients experience improvements in their living situations, as well as better education and credit-market outcomes. Second, we observe that, while the program does not cause movement of households, it does cause movement between households. Recipients welcome new individuals into their homes, likely so that family, friends, and neighbors can take advantage of the upgraded housing. Third, we estimate the negative impacts of the program and argue that these unintended consequences likely follow from the endogenous household formation. For example, recipients are less food secure, consistent with having more mouths to feed.

Together, these studies have generalizable, actionable insights. Knowing that dynamics matter for corruption can help reform-minded governments decide which levers to pull as they attempt to enhance transparency. And the large economic cost of trade corruption implies a high return on investment for the governments that succeed. Our RCT reveals both the upside potential and the downside risk of large-scale affordable-housing interventions. By refining their design, implementation, and cost-effectiveness, policymakers could improve these programs and the lives of the vulnerable communities they serve.

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Essay on Economic Development and Underdevelopment

Essay on Economic Development and Underdevelopment!

To analyses the economies of developing countries, we need to study economic development in historical perspective. The story of growth is important as it helps determine whether socie­ties can meet basic needs of food, clothing, housing, health and literacy, and widen human choice to enable people to control their environment, enjoy greater leisure, acquire learning and use more resources for aesthetics and humanistic endeavors.

Capitalism rose in the West from the 15th to 18th centuries with the decline of feudalism, the breakdown of church, authority, strong nation-states supporting free trade, a liberal ideol­ogy tailor-made for the bourgeois, a price (market) revolution that speeded capital accumula­tion, advances in science and technology, and a spirit of rationalism. In the last 150 years, sustained economic growth occurred primarily in the capitalist West and Japan. But the devel­opment of underdeveloped countries was held in check by colonisation.

It started as a form of economic exploitation and has distorted the economic structure of the Third World countries from the very beginning. The underdeveloped countries were forced to become suppliers of raw materials to industrial countries. This unhealthy development effectively blocked indus­trial development in the primary producing countries.

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The foreign domination of these coun­tries has limited the growth of the domestic market and the establishment of basic national industries for widespread development throughout the whole economy.

Thus the gap between developed and developing countries of Asia and Africa and Latin America has increased greatly over the years. A study of economic history reveals the following basic differences in the historical processes of development between developed and developing countries.

1. Peripheral Capitalism:

According to Celso Furtado, since the 18th century, global changes in demand resulted in a new international division of labour in which the peripheral countries of Asia, Africa and Latin America specialised in the production and export of primary products in an enclave controlled by foreigners while, at the same time, importing consumer goods that were the result of techno­logical progress in the central countries of the West.

The increased productivity and new con­sumption patterns in peripheral countries benefited a small ruling class and its allies, who cooperated with the developed countries to achieve modernisation (economic development among a modernising minority). The result is peripheral capitalism, capitalism unable to generate innovation and dependent for transformation upon decisions from the external world.

2. Adoption of Western Economic and Political Systems:

According to A.G. Frank, contemporary underdeveloped countries (UDCs) do not reassemble the earlier stages of now-developed countries. To him and many others modernisation in UDCs is simply the adoption of economic and political systems developed in Western Europe and North America.

3. The Creation of Underdevelopment :

For Frank, the presently developed countries were never underdeveloped, although they may have been underdeveloped. In his view, underdevelopment does not mean traditional that is non-modern economic, political and social institution but subjection of UDCs to colonial rule as also imperialism, i.e., imperial domination of foreign powers.

Frank sees underdevelopment as the effect of the penetration of modern capitalism into the archaic economic structures of the Third World countries. In his view the deindustrialization of India during the British period and the disruption of African societies by the slave trade and subsequent colonialism are examples of creation of underdevelopment.

4. Ancillary Development :

Simply put, the economic development of the rich countries lead to the underdevelopment of the poor. Development in an LDC is neither self-generating nor autonomous, but ancillary. The LDCs are economic satellites of the highly developed regions of North America and Western Europe in the international capitalist system.

Thus Afro-Asian and Latin American countries which were the least integrated into the system tend to be highly developed. For Frank, Japa­nese economic development after the 1860s is the classic case illustrating Frank’s theory. Ja­pan’s industrial growth remains unmatched. The reason is that, Japan, unlike most of the Asian countries, was never a capitalist satellite.

5. Satellite Relationship and Underdevelopment :

Brazil perhaps best illustrates the connection between the satellite relationship and underdevel­opment. Since the 19th century, the growth of its major cities has been satellite development — largely dependent on outside capitalist powers, specially Britain and the USA. Consequently some regions in interior Brazil have become satellites of these two countries and, through them, of the Western capitalist countries.

Frank suggests that satellite countries experience their greatest economic development when they are least dependent on the world capitalist system. Thus, Argentina, Brazil, Mexico and Chile grew most rapidly during World War I (1914 -18), the Great Depression (1929-33) and World War II (1939-45), when their trade and financial relations with the major capitalist countries were the weakest. Interestingly enough and significantly, too, the most underde­veloped regions today are those that have had the closest ties to Western capitalism in the past.

They were the greatest exporters of primary products, and the biggest sources of capital for developed countries and were abandoned by them when—for one reason or another — business fell off. Frank gives examples of undivided Bengal, the one-time sugar-exporting West Indies, and Northeastern Brazil, the defunct mining areas of Brazil, highland Peru and Bolivia; and the former silver regions of Mexico in this context.

He contends that even the large plantations that had contributed much to underdevelopment in Latin America, origi­nated as a commercial, capitalist enterprise, not a feudal institution. This very fact contra­dicts the generally held thesis that a region is underdeveloped because it is isolated and pre capitalist.

Causes of Underdevelopment :

According to Frank the following economic activities have contributed to underdevelopment, not development:

1. Replacing indigenous enterprises with technologically more advanced, global, subsidi­ary companies.

2. Forming an unskilled labour force to work in factories and mines and on plantations.

3. Workers migrating from villages to foreign-dominated urban complexes.

4. Opening the economy to trade with, and investment from, developed countries.

According to dependency theorists, the causes of underdevelopment are not to be found in national systems alone but must be sought in the pattern of economic relations between hegemonic, or dominant, powers and their client states.

Secondly, both within and among states, the unfettered forces of the market-place tend to exacerbate rather than to mitigate existing inequalities. The dominant foreign power benefits at the expense of its client states and the clientele class benefits at the expense of other classes.

For these two reasons development does not take place through the trickle-down of wealth or through the gradual diffusion of modern attitudes and modern technology and thus the up­ward mobility of individuals expressed by their gradual absorption into the modern sector is no solution to the problem of the impoverishment of the masses.

To dependency theorists, foreign investment and aid did not promote development in the Third World, but were used as a means of exploitation, that is, of extracting capital from client states. Even where such transfers from the developed states generated economic growth de­pendency, theorists would expect it to be a distorted pattern of growth that exacerbated in­equalities among classes as well as among regions within client states.

6. Unequal Exchange:

Dependency based on the international division of labour led to unequal exchange relation between the rich and the poor. The terms of trade of LDCs deteriorated because LDCs had to pay high prices for developmental imports and received less prices for their exports. So their balance of trade position deteriorated.

According to Frank, a Third-World economy can developed only by withdrawing from the world capitalist system. However, this implies a large reduction in trade, aid, investment and technology from the developed capitalist countries.

In the post Second World War (1939 – 45) period, developing countries grew much faster than they did earlier. Yet, the post War growth of such countries has not been no faster than that of developed countries. Whether this means convergence or divergence depends on time, scope and definitions.

Although conditions in the poor countries are for different from those in the advanced capi­talist nations, the mainstream of development thought has still been rooted in traditional neo­classical economies. Despite the earlier anticipation of some development economists, however, an entirely new sub-discipline of development economies has not arisen. On the contrary, devel­opment economists have come to rely more and more on conventional principles of price analysis and the market mechanism.

Even the revision of development strategies during 1970s has been dominated by interna­tional trade liberalisation. It is believed that there are mutual gains from trade to be realised by both rich and poor countries alike if they liberalise their foreign trade regimes. Foreign invest­ment from rich country to a poor country yields some gains both to lender and borrower. The promotion of a liberal international economic order should yield a positive sum game – not a North-South confrontation.

Conflict of Interests :

But the orthodox liberal ideology is not true in the real sense. The rich, capitalist developed nations gain from trade liberalisation at the expense of poor countries. In an earlier period, Lenin’s warnings of imperialism contradicted Ricardo’s mutual gains from trade as a result of free trade. In recent decades, parallel to the rise of the new development economies and the revision of development strategies, there have been a number of dissenters who propound a radical critique of mainstream development thinking.

There are many proponents of “Conflict of Interests”. They are Rail Prebisch, former head of Argentine central bank and first Executive Director for the U.N. Economic Commis­sion for Latin America (ECLA); Gunnar Myrdal, Secretary of the European Economic Com­mission and author of the American Dilemma; and Hans Singer, an economist who had studied the “depressed areas” of Britain and joined the United Nations as early as 1946. Unlike Marx­ists who concentrate on the unfavourable effects of imperialism or colonialism, these crities did not base their critique on any notion of “deliberate exploitation” by the advanced capital­ist nations.

A. Myrdal’s View:

As he argued that “Market forces will tend cumulatively to accentu­ate international inequalities, [and] a quite normal result of unhampered trade between two countries, of which one is industrial and the other underdeveloped, is the initiation of a cumulative process toward the impoverishment and stagnation of the latter.”

Myrdal based his argument on the possibility that the factors that made for increasing dis­parity between rich and poor countries – what he called “backwash effects” – could out weight the factors that made for the spread of prosperity from rich to poor countries – what he called the “spread effects”.

By backwash effects Myrdal refers the destruction of local handicrafts and small scale industry by cheap imports from the industrialised countries, the drain of spilled labour force from the less developed countries, and the biasing of the economy toward en­claves that produce primary product exports.

Believing that trade in primary products will only produce a polarisation effect that is stronger than the spread effect, Myrdal argues that “economic development has to be brought about by policy interferences” instead of through a dependence on international markets that “strengthen the forces maintaining stagnation or regression.”

B. Prebisch-Singer Thesis:

Raul Prebisch and Hans Singer are the main critics of this ideology. The found that after opening up trade the terms of trade of the developing nations have fallen. This occurs because the technological innovations take place in the highly industr­ialised developed nations. They export manufactured goods and increase their relative terms of trade.

Prebisch-Singer have found out that if the income of a particular individual increases, then he prefers manufactured goods than primary products. As the income levels of developed na­tions are very high compared to the developing ones, the normal residents of those countries prefer manufactured goods.

They also support Myrdal’s view of deindustrialisation and economic drain. They also sup­ported Myrdal’s view that cheap foreign goods destroy the domestic industries of underdevel­oped nations. This is nothing but “backwash effects”.

Industrialisation based on import substitution is, therefore, advocated to protect the one-sided gains from trade. Tariff protection and quotas on industrial imports are believed capable of forestalling a further deteriorations in the terms of trade, avoiding BOP fluctuates which check growth when export prices fall and promoting the absorption of the labour surplus in industry.

In their advocacy of industrialisation protection, and planning, Myrdal, Prebisch, Singer influenced the early tenets of the new development economies. Their argument had consider­able appeal to the newly emerging countries, especially when they were combined with Rostow’s “stages” and Rosenstein-Rodan’s “big push”.

By the 1960s, however, the new development economies were subject to criticism from two divergent streams of thought – neoclassical eco­nomics, which underlay the revision of development strategies and the dependency school.

Dependency :

During the 1960s, a number of writers went beyond the formulation of disequalising forces as examined by Prebisch, Singer, Myrdal, to a more vigorous interpretation of external depend­ency. Most prominent were the dependencies in Latin America and the New World Group in the Caribbean.

Not “development economies” but “dependency economies” became their con­cern. They argued that conditions of dependency in world markets of commodities, capital, and labour power are unequal and combine to transfer resources from dependent countries to domi­nant countries in the international system.

1. Marx and Baran Theses:

In an earlier period, Lenin, and Marx warned about the orthodox liberal ideology which contradicted Ricardo’s mutual gains from trade as a result of free trade.

And, from a Marxsist perspective, Stanford Probessor Paul Baran had written: “what is decisive is that economic development in underdeveloped countries is profoundly inimical to the dominant interests in the advanced capitalist countries. The backward world has always represented the indispensable hinterland of the highly developed capitalist West”.

2. The New School of Dependency:

The new school of dependency differs from the disequalising forces approach and the Marxian view. Being heavily represented by sociologists and political factors neglected by economists, dependency theorists argued that the developing countries are nothing but the periphery after trade opens up.

After industrialisation the develop­ing country remains a periphery. Because the rich nations have monopoly power in R and D and are the home of multinational corporations (mines). The quality of technology used in production differs in a developing country from a highly capitalist developed one.

3. Trank’s Thesis:

As a Marxist analyst of Latin American affairs, Andre Gunder Trank states: “It is capitalism, world and national, which produced under development in the past and still generates underdevelopment in the present.” Underdevelopment, according to Trank, is not simply non-development but a unique type of socioeconomic structure that results from the dependency of the underdevelopment country on advanced capitalist coun­tries. This results from foreign capital removing a surplus from the dependent economy to the advanced country by structuring the underdeveloped economy in an “external orientation.”

4. Unequal Exchange:

Centre-periphery trade is also characterised by “unequal exchange”. This refers to deterioration in the peripheral country’s terms of trade. It may also refer to un­equal bargaining power in investment, transfer of technology, taxation, and relations with mul­tinational corporations.

Let us take into consideration the relationship between MNCs and the host country. MNCs siphon off surplus from this country, use inappropriate capital intensive technology, alter con­sumers’ tastes and preferences and even reduce the ability of the government to control the economy.

5. Samir Amin’s Thesis:

A more Marxist analysis of unequal exchange has been presented by Samir Amin, an Egyptian economist who has specialised on African economics. Amin also analyses world capitalism in terms of two categories – centre and periphery. The economy of the periphery is distorted by outward effects. Hence they are affected adversely by rich, capital­ist, developed countries.

By “unequal exchange” Amin means “the exchange of products whose production in­volves wage differentials greater than those of productivity”. He assumes that the tech­niques of production used in those sectors of the periphery dominated by international capital are similar to those used at the centre.

But since wage rates are much lower in the periphery than at the centre, unequal exchange results. Thus, “unequal exchange means that the prob­lem of the class struggle must necessarily be considered on the world scale”.

Conclusion :

If we study the history of centre and periphery argument then we see that the developing na­tions are affected from time to time. If industrialisation in the developing nation takes place; then the quality of the product produced in those countries are backdated than those produced in developed nations.

So the price of the commodities produced from developing countries not only deteriorates terms of trade but also the quality of the product. This is Sarkar-Singer’s “Double Jeopardy Theory” (1991).

If protection takes place then the respective infant industry in present becomes more infant in the future and requires more protection. If export promotion takes place then the respective country may prosper in the future.

But for the case of large internal economies like India and China (which have large internal markets), import substitution is more preferable than export promotion. Economists are yet to reach a consensus about which policy is more attractive. So we are not able to reach a clear conclusion about the policy choice of the developing countries in the long run.

Related Articles:

• Role of Government in Economic Development
• International Trade & Economic Development of a Country
• Difference between Economic Growth and Economic Development
• To What Extent, Smith’s Theory of Development is Applicable to UDC?

Essay on Economic Growth And Development

Students are often asked to write an essay on Economic Growth And Development in their schools and colleges. And if you’re also looking for the same, we have created 100-word, 250-word, and 500-word essays on the topic.

Let’s take a look…

100 Words Essay on Economic Growth And Development

What is economic growth.

Economic growth means that a country is making more goods and services than before. This is often measured by looking at the Gross Domestic Product (GDP), which adds up the value of everything produced in a country. When GDP goes up, it usually means more jobs and money for people.

What is Economic Development?

Economic development is different. It’s not just about making more things; it’s about improving people’s lives. This includes better education, healthcare, and housing. It also means having a cleaner environment and making sure that everyone has a chance to succeed.

Why Are They Important?

Growth and development are important because they can make people’s lives better. When an economy grows, there are usually more jobs, which means people can earn more money to buy what they need and want. Development makes sure that this money also leads to a better quality of life.

250 Words Essay on Economic Growth And Development

Understanding economic growth.

Economic growth means that a country is making more goods and services than before. Think of it like a lemonade stand. If you sell more lemonade this year than last year, your stand has grown. For a whole country, we measure this growth by looking at something called the Gross Domestic Product, or GDP for short. This is like adding up all the money made from lemonade and everything else sold in the country.

The Meaning of Economic Development

Why growth and development matter.

When countries grow and develop, people usually have more money and better lives. Parents can buy more things for their kids, like books or toys. They can also take better care of their families, with better food and medicine. Countries can also take care of the planet by keeping the air and water clean.

Challenges on the Way

Sometimes, making more money can hurt the environment or make some people very rich while others stay poor. So, leaders must make smart choices to ensure that growth helps everyone and doesn’t harm our planet.

In short, economic growth and development are about making more and living better. Just like a lemonade stand, a country works to sell more and also to improve the stand and the neighborhood. This way, everyone can enjoy a sweeter sip of success.

500 Words Essay on Economic Growth And Development

Economic growth is like a country’s scorecard. It tells us how much more goods and services a country is making this year compared to last year. Imagine you have a lemonade stand. If you sell more cups of lemonade this summer than you did last summer, that’s growth. Countries measure their economic growth by calculating something called the Gross Domestic Product, or GDP for short. It’s like adding up all the money made from every lemonade stand and every other business in the country.

Why Economic Growth Matters

Why should we care about a country growing economically? Because it’s a sign that things are going well. When a country’s economy grows, it means more jobs for people, better salaries, and more money to spend on important things like schools, hospitals, and roads. It’s like if your lemonade stand makes more money, you can buy more lemons and sugar, make your stand look nicer, and maybe even hire your friends to help you.

Difference Between Growth and Development

Challenges on the road to development.

Even though growth and development sound great, they’re not easy to achieve. Some countries have a hard time growing because they lack resources or technology. Others grow quickly but don’t make sure the benefits reach everyone. Imagine if you made lots of money at your lemonade stand but didn’t share with your helpers or didn’t make your stand safe and clean. That wouldn’t be fair, right?

How to Achieve Sustainable Development

To make sure a country develops in a good way, growth needs to be sustainable. This means taking care of the environment and making sure we don’t use up all the resources. It’s like using eco-friendly cups and not wasting lemons at your stand. Also, everyone in the country should be included in the growth. It’s important to help people who are poor or live in places where it’s harder to get good jobs.

The Role of Education

In conclusion, economic growth and development are about making more money and making life better for everyone in a country. It’s like running a successful lemonade stand that not only sells a lot of lemonades but also takes good care of its workers, customers, and the environment. When a country focuses on both growth and development, it’s on the path to becoming a happier, healthier place for all its people.

That’s it! I hope the essay helped you.

Happy studying!

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Essay: Economic development

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Economic development is a fairly new idea that arose during the early twentieth century. Many theorists attempted to define economic development and to differentiate it from the concept of economic growth.According to economists, Gerald Meier and Dudley Seers, these two concepts are different from each other and they stressed that economic development cannot be equated with economic growth. They both agreed that economic development is a more complicated and dynamic process than economic growth but both are no doubt interrelated.

Economic growth is defined as an increase in a country’s ability to produce goods and services, in other words, increase of per capita gross domestic Product (GDP) or other measure of aggregate income. Economic Growth is the optimum utilisation and development of under-utilised resources of developed countries and brings significant changes in the economy. This growth is associated with a steady, general and gradual increase in the rate of savings, output and investment in the economy. Several economists have come to the conlclusion that productivity gains, ie increases in efficiency was a major factor in China’s immensely fast economic growth. Economic reforms which included the decentralization of economic production, led to substantial growth in Chinese household savings. http://www.fas.org

Economic development, on the other hand is an increase in the economic standard of living of a countrys population with constant growth from a stagnant state to a higher level of equilbrium. It implies changes in income, saving and investment along with accelerating changes in socio- economic structure of a country. Economic Development is concerned with whole changes in the economy and brings both qualitative and quantitative changes and mainly refers to the problem of developing countries. It relates to the utilisation and development of unused resources in underdevloped countries. After the mid-1980s India began opening up its market slowly through economic liberalization and this policy played a huge impact on the economic development of India. The Indian economic development got a boost through its economic reform in 1991 and again through its renewal in the 2000s. Since then, the whole scenario of economic development of India has changed dramatically. http://www.business.mapsofindia.com

Economic growth is a narrower concept than economic development. As earlier we stated, its termed as an increase in the real level of national output but this can only be caused by an increase in quality of resources, such as education, increase in quantity of resources and improvements in technology or increase in the value of goods and services produced by every sector of the economy.In Malaysia for example, Prime Minister Abdullah, after coming to power in 2003, has tried to develop economy of this south Asian country by introducing value added production. He took a number of measures to introduce hi-tech technologies and urged investments in high technology industries, medical technology and pharmaceuticals. www.economywatch.com

Economic development is a normative concept. According to Michael P. Todaro,an American economist, economic development is an increase in living standards, improvement in self-esteem needs and freedom from oppression . http://www.diffen.com/. Malaysia economic development is one of fastest and steady in global economic scenario. Malaysia GDP per capita has been estimated to be $14,700 in fiscal year 2009. https://www.cia.gov/. This is a clear indication of tremendous economic development in Malaysia. The most precise method of measuring development is the Human Development Index which takes literacy rates and life expectany into account which affects productivity and could lead to economic growth. Creation of more opportunities in sectors of education, healthcare, employment and conservation of environment can be opened up.

Economic growth does not take into account the external costs of an economy such as the depletion of natural resources which leads to pollution, diseases and congestion. Development is concerned with sustainability , ie, it meets the needs of the present without compromising future needs. These environmental affects have increased pressure on the Governements in general and have a become a massive problem for them due to global warming. The New York Times in 2007 published an article named , ” As China Roars, Pollution Reaches Deadly Extremes” in which is stated the pollution crisis in China . http://www.nytimes.com/2007/08/26/world/asia/26china.html . Economic Growth also does not also take the size of the informal economy into account. This informal economy also known as the black economy is an unrecorded economic activity.Development lessens people from low standards of living into proper employment with suitable shelter. Economic growth is essential but is not a sufficient condition of economic development

Economic development refers to social and technological progress. It shows change in the way goods and services are produced but on the other hand economic growth only indicates an increase in significant output, it may or may not involve development. Local and provincial governments in China were allowed to establish andoperate various enterprises on market principles, without interference from the central government. In addition, foreign direct investment (FDI) in China brought with it new

technology and processes that boosted efficiency.Economic development involves improvements in a variety of indicators such as literacy rates, life expectancy, and poverty rates but econommic growth does not take into account other aspects such as leisure time, environmental quality, freedom, or social justice.A country’s economic development is linked to its human development, which is surrounded among other things such as health and education. According to the World Bank, for a better economic development, India needs to give due priorities in various issues like infrastructure, public sector reform, agricultural and rural development, reforms in underdeveloped states, removal of labor regulations and HIV/AIDS.

Amartya Sen, a nobel memorial prize winner in economic sciences, http://en.wikipedia.org/wiki/Amartya_Sen, defined economic development in terms of personal freedom, freedom to choose from a variety of options. Economic growth may lead to an increase in the purchasing power of people but if the economy is repressed then there is lack ot choice and thus personal freedom is restricted. This clearly implies that growth has taken place without any development. Taking another example into consideration, increase in defence output of a nation accounts for an increased GDP but does not contribute to economic development. When we measure economic growth we are limited to increases in national income or per capita but when we measure economic development factors such as GDP, per capita income, poverty, life expectancy, infant mortality, etc is all taken into consideration. While economic growth may lead to improvements in the standard of living of a relatively small proprotion of population whilst the majority of the population remains poor. It is how the economic growth is spread among the population that determines the level of development.

Economic development involves a more complex process than economic growth. According to economist, Gerald Meier, economic growth remains an important signal of the achievement of development, in agreement with certain other stipulated outcomes. The concept of economic development differs from economic growth and has eventually more dimensions. Thus after reaching to a conclusion, economic growth and economic development are interrelated. Economic development may be considered our short term goal towards the achievement of an ideal life in the long run, and economic growth is one of the important factors necessary for bringing about economic development. It is a much broader term concerned with a lot more than just the monetary aspect of development. Hence it is true and it can be said that ‘Economic growth is a necessary but not sufficient condition of economic development.’

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Development economics - new essays for practice

Last updated 16 Jan 2020

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I've put together some new practice essay questions for students covering economic development. Here they are.

• Foreign direct investment

Foreign direct investment (FDI) inflows to developing countries in Asia rose by 3.9% to US$512 billion in 2018, according to UNCTAD’s World Investment Report 2019. Growth occurred mainly in China, Hong Kong (China), Singapore, Indonesia and other countries that belong to the Association of Southeast Asian Nations, as well as India and Turkey. The region remained the world’s largest FDI recipient, absorbing 39% of global inflows in 2018, up from 33% in 2017. Asia also hosts more than 4,000 special economic zones - three quarters of the world total.

Question: With reference to examples of specific developing countries, evaluate the potential benefits of inward foreign direct investment.

Our study resources on the economics of foreign direct investment can be found here

• Remittances

The money workers send home to their families from abroad has become a critical part of many economies around the world. The World Bank estimates that global remittances reached a total of $689 billion in 2018, up from $633 billion in 2017. In 2018, Mexico received over $35 billion in remittances as migrant workers sent money home. India is the highest remittance recipient, the World Bank revealed that the country got $79 billion in remittances in 2018.

Question: With reference to examples of specific countries, evaluate the potential benefits of remittances for economic development.

Our study resources on the economics of remittances can be found here

Overseas aid

A long-standing United Nations target is that developed countries should devote 0.7% of their gross national income to ODA. For some countries such as Rwanda (13% of GDP), Malawi (24% of GDP) and Samoa (16%) overseas aid is a very high percentage of their annual GDP.

Question: With reference to examples of specific countries, evaluate the potential benefits of inflows of overseas aid to promote economic development.

Our study resources on the economics of overseas aid can be found here

Poverty reduction

More than a third of the world lived in extreme poverty 30 years ago. Today, less than 10% of people live on $1.90 a day or less (PPP). Between 2000 and 2015, 15 countries lifted 802.1 million people out of extreme poverty, according to a new analysis of World Bank poverty data. Half of the world’s 736 million extremely poor people lived in just 5 countries in 2015: India, Nigeria, Democratic Republic of Congo, Ethiopia, and Bangladesh, according to the most recent data available.

Question: With reference to examples of specific countries, assess two policies that might be effective in achieving a reduction in extreme poverty.

Our study resources on the economics of poverty reduction can be found here

Total emerging and developing economy debt reached almost 170% of gross domestic product in 2018 – or $55tn – an increase of 54 percentage points of GDP since 2010. China accounted for the bulk of the increase – in part due to its size – but the build-up was broad-based, and included other big emerging economies such as Brazil. The World Bank fears that high levels of debt can make developing economies vulnerable to large depreciations and capital outflows, particularly when it is financed from abroad.

Question: With reference to examples of specific countries, evaluate the potential benefits of developing nations borrowing to accelerate their economic growth and development.

Our study resources on the economics of debt can be found here

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--> 02/21/2012 All three core areas rely significantly on transit. Muscovites use the Metro at about the same rate as New Yorkers use the subway, taking about 200 trips each year. Tokyo citizens use their two Metro systems at nearly 1.5 times the rate used in Moscow. But there are important differences. Moscow officials indicate that approximately two-thirds of Moscow's employment is in the central area. This is a much higher figure than in the world’s two largest central business districts -- Tokyo's Yamanote Loop and Manhattan -- each with quarter or less of their metropolitan employment. Both New York City and Tokyo's 23 wards have extensive freeway lengths in their cores, which help to make their traffic congestion more tolerable. Moscow's arterial street pattern was clearly designed with the assumption that the dominant travel pattern would be into the core. Major streets either radiate from the core, or form circles or partial circles at varying distances from it. In New York City and Tokyo's  23 wards there are radial arterials, but,the major streets generally form a grid, which is more conducive to the cross-town traffic and the more random trip patterns that have emerged in the automobile age. Moscow has become much, more reliant on cars,  following the examples of metropolitan areas across Europe. The old outer circular road, which encloses nearly all of the central municipality, was long ago upgraded to the MKAD, a 10 lane freeway as long as Washington's I-495 Capital Beltway (65 miles or 110 kilometers). The MKAD has become a primary commercial corridor, with large shopping centers and three nearby IKEAs. It is not surprising, therefore, that traffic congestion and air pollution became serious problems in Moscow. The road system that had been adequate when only the rich had cars was no longer sufficient. The "cookie-cutter" apartment blocks, which had served Iron Curtain poverty, had become obsolete. The continued densification of an already very dense core city led to an of intensification of traffic congestion and air pollution. Transit-oriented Moscow was not working, nor could "walkability" make much difference. In such a large urban area, it is inevitable that average travel distances, especially to work, will be long. Geographically large employment markets are the very foundation of major metropolitan areas. If too many jobs are concentrated in one area, then the traffic becomes unbearable, as many become able to afford cars and use them. Traffic congestion was poised to make Moscow dysfunctional. The leadership of both the Russian Federation and the city of Moscow chose an unusual path, in light of currently fashionable urban planning dogma. Rather than making promises they could not keep about how higher densities or more transit could make the unworkable city more livable, they chose the practical, though in urban planning circles, the "politically incorrect" solution:  deconcentrating the city and its traffic. Last year, Russian President Dmitry Medvedev proposed that Moscow be expanded to a land area 2.3 times as large. Local officials and parliament were quickly brought on board. The expanded land area is nearly double that of New York's suburban Nassau County, and is largely rural (Note 2). Virtually all of the expansion will be south of the MKAD. The plan is to create a much larger, automobile-oriented municipality, with large portions of the Russian government to be moved to the expanded area. Employment will be decentralized, given the hardening of the transport arterials that makes the monocentric employment pattern unsustainable. Early plans call for commercial construction more than four times that of Chicago's loop. At the same time, the leadership does not intend to abandon the older, transit-oriented part of the municipality. Mayor Sergei Sobyanin has voiced plans to , adding that there will be the opportunity to build underground parking facilities as refurbishments proceed. Moscow appears to be preparing to offer its citizens both an automobile-oriented lifestyle and a transit-oriented one. The reduced commercial traffic should also make central Moscow a more attractive environment for tourists, who spend too much time traveling between their hotels and historic sites, such as the Kremlin and St. Basil's. As Moscow expands, the national leadership also wants the Russian family to expand. Russia has been losing population for more than 20 years. Since 1989, the population of the Russian Federation has dropped by 4.5 million residents. When the increase of 3.0 million in the Moscow area is considered, the rest of the nation has lost approximately 7.5 million since 1989. Between the 2002 and the 2010 censuses, Russia lost 2.2 million people and dropped into a population of 142.9 million. Russia's population losses are pervasive. Out of the 83 federal regions, 66 lost population during the last census. Continued population losses could significantly impair national economic growth. The projected smaller number of working age residents will produce less income, while a growing elderly population will need more financial support. This is not just a Russian problem, but Russia is the first of the world's largest nations to face the issue while undergoing a significant population loss. The government is planning strong measures to counter the demographic decline, increase the birth rate, and create a home ownership-based "Russian Dream". Families having three or more children will be across the nation., including plots of up to nearly one-third of an acre ( ).  Many of these houses could be built in Moscow's new automobile- oriented two-thirds, as well as in the extensive suburbs on the other three sides of the core municipality. While population decline is the rule across the Russian Federation, the Moscow urban area has experienced strong growth. Between 2002 and 2010, the Moscow urban area grew from 14.6 million to 16.1 million residents (Note 3). This 1.3 percent annual rate of increase  exceeds the recently the recently announced growth in Canada (1.2 percent). This rate of increase exceeds that of all but 8 of the 51 major metropolitan areas (Note 4) in the United States between 2000 and 2010. While the core district grew 6 percent  and added 41,000 residents, growth was strongest outside the core, which accommodated 97 percent of the new residents (See Table). Moscow's outer districts grew by nearly 1.1 million residents, an 11 percent increase, and its suburbs continued to expand, adding 400,000 residents, an increase of 10  percent. These areas have much lower densities than the city, with many single-family houses. Table Moscow Urban Area Population 2002 2010 Change % Change Share of Growth Inner Moscow 701,000 743,000 41,000 5.9% 2.7% Outer Moscow 9,681,000 10,772,000 1,090,000 11.3% 70.3% Suburban 4,198,000 4,617,000 420,000 10.0% 27.0% Total 14,581,000 16,132,000 1,551,000 10.6% 100.0% Note: Suburban population includes the total population of each district and city that is at least partially in the urban area. Moscow, like other international urban areas , is decentralizing, despite considerable barriers. The expansion will lead to even more decentralization, which is likely to lead to less time "stuck in traffic" and more comfortable lifestyles. Let's hope that Russia's urban development policies, along with its plans to restore population growth, will lead to higher household incomes and much improved economic performance. Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “ War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life ” Note 1: The 23 ward (ku) area of Tokyo is the geography of the former city of Tokyo, which was abolished in the 1940s. There is considerable confusion about the geography of Tokyo. For example, the 23 ward area is a part of the prefecture of Tokyo, which is also called the Tokyo Metropolis, which has led some analysts to think of it as the Tokyo metropolitan area (labor market area). In fact, the Tokyo metropolitan area, variously defined, includes, at a minimum the prefectures of Tokyo, Kanagawa, Chiba and Saitama with some municipalities in Gunma, Ibaraki and Tochigi. The metropolitan area contains nearly three times the population of the "Tokyo Metropolis." Note 2: The expansion area (556 square miles or 1,440 square kilometers) has a current population of 250,000. Note 3: Includes all residents in suburban districts with at least part of their population in the urban area. Note 4: Urban area data not yet available. Photo: St. Basil's Cathedral (all photos by author) Login to post comments Evolving Urban Form: Development Profiles of World Urban Areas Transportation Comment viewing options Road in city area. The roads and ways of the city areas are very clumsy and many accidents are happening due to the short road. But you need to maintain the driving properly otherwise you may face accident. So now the government decided to expand the road which may put the positive effect on automobile sector. I think it is a helpful service for the society people. If you have a BMW car and you have faced any problem then better to repair it at BMW Repair Spring, TX for the best service. Transit & transportation Transit and transportation services are quite impressive in most of the urban cities; therefore people were getting better benefits from suitable transportation service. Urban cities like Moscow, Washington, New York and Tokyo; we have found high margin of transportation system that helps to build a better communication network in these cities. I hope through the help of modern transportation system we are able to bring revolutionary change in automobile industries; in this above article we have also found the same concepts to develop transportation system. Mercedes repair in Torrance Moscow is bursting Noblesse Moscow is bursting Noblesse at the seams. The core city covers more than 420 square miles (1,090 kilometers), and has a population of approximately 11.5 million people. With 27,300 residents per square mile (10,500 per square kilometer), Moscow is one percent more dense than the bleach anime watch city of New York, though Moscow covers 30 percent more land. The 23 ward area of Tokyo (see Note) is at least a third more dense, though Moscow's land area is at least half again as large as Tokyo. All three core areas rely Belgravia Villas is a new Belgravia Villas is a new and upcoming cluster housing located in the Ang Mo Kio area, nested right in the Ang Mo Kio landed area. It is within a short drive to Little India, Orchard and city area. With expected completion in mid 2016, it comprises of 118 units in total with 100 units of terrace and 18 units of Semi-D. belgravia villas Russians seeing the light while Western elites are bickering? What an extremely interesting analysis - well done, Wendell. It is also extremely interesting that the Russian leadership is reasonably pragmatic about urban form, in contrast to the "planners" of the post-rational West. An acquaintance recently sent me an article from "The New Yorker", re Moscow's traffic problems. The article "abstract" is HERE (but access to the full article requires subscription) http://www.newyorker.com/reporting/2010/08/02/100802fa_fact_gessen One classic quote worth taking from it, is: "People will endure all manner of humiliation to keep driving". I do find it odd that the "New Yorker" article author says nothing at all about the rail transit system Moscow had, on which everyone was obliged to travel, under Communism. It can't surely have vaporised into thin air? Moscow is a classic illustration of just how outmoded rails are, and how important "automobility" is, when the auto supplants rails so rapidly than even when everybody did travel on rails up to a certain date, and the road network dates to that era, when nobody was allowed to own a car; an article written just 2 decades later does not even mention the rail transit system, other than to criticise the mayor for "failing to invest in a transit system".......!!!!!!!! This is also a give-away of "The New Yorker's" inability to shake off the modern PC ideology on rails vs cars. Subscribe to NG Articles Get new posts by email:, connect with us:. 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More from this author Largest World Cities: 2014 Largest Cities in the World: 2016 World Urban Areas Population and Density: A 2012 Update Largest 1,000 Cities on Earth: World Urban Areas: 2015 Edition The Evolving Urban Form: Rio de Janeiro Recommended Books Blogroll and partner sites. Burgh Diaspora Center for Economic Research and Forecasting China Urban Development Blog Chris Bradford - Austin Contrarian Houston Strategies LA Observed Multiplier Effect: Levy Economics Institute The Rural Blog The Urbanophile Request new password © 2024 New Geography CONTRIBUTORS : PRIVACY POLICY Stay up to date: Tourism and economic development Essay To find inspiration for your paper and overcome writer’s block As a source of information (ensure proper referencing) As a template for you assignment Introduction How tourism translates into economic development, economic development leads to tourism, inequality: who really benefits, some unwanted economic effects, works cited. The paper looks at the relationship between tourism and economic development through a holistic lens. It was found that tourism leads to economic development in host nations through job creation, the multiplier effect, infrastructure development and improvement of business conditions. In certain circumstances, however, tourism may undermine economic development through tax increments, inequality, inflation pressure and environmental problems. Economic development also sustains tourism by taming foreign exchange fluctuations, enhancing the cost of living, creating a sustainable business environment and offering high quality goods and services for tourists. Since tourism and economic development are codependent, it was suggested that governments should promote tourism in order to foster economic development. Investors and government bodies should also work on their economies in order to create a sustainable business environment for tourism. Tourism contributes to the GDP of developing and developed nations tremendously. Stakeholders need to know how this occurs in order to increase its effects. On the flipside, the success of tourist activities also depends on the economic situation of a country, so governments need to work on this aspect, as well. Tourism increases revenues earned in a country. For instance, if a country receives approximately 1000 tourists who spend $ 100 daily, then the country could enjoy $100,000 increases in daily revenue. If the country can sustain that expenditure over 3 months, then it can enjoy approximately $9,000,000 worth of revenue over that period. Consequently, retail centers, amusement parts, hotels and other recreational industries will enjoy part of that 9 million. However, since businesses need to purchase imported supplies then perhaps 30% of those earnings would be used to offset that income. The remaining percentage remains in the country and facilitates creation of tourism jobs or profits enjoyed by entrepreneurs. Therefore, a country would develop its economy if it invested in the tourism industry (Stynes 3). Aside from direct revenues, there is multiplier effect that arises from tourism as an economic activity. After receiving the above mentioned amount of revenue, tourist employees in the concerned country will use the amount they earned from wages and salaries to purchase services and goods. As a consequence, more businesses in the nation will benefit from the tourist activities. Jobs will also be created for those individuals selling goods and services to employees in the tourist industry. Therefore, one dollar earned in revenue from tourism leads to a multiplier effect of more jobs and sales in other industries. UNEP (421) explain that tourism allows countries to harness their cultural heritage, natural landscape, and biodiversity in order facilitate development. It is through this platform that countries can convert what they are endowed with into tangible employment opportunities. Since tourism relies on labor quite intensively, then this can provide an opportunity for disadvantaged groups or the unemployed to become entrepreneurs. This is an industry in which micro enterprises thrive; making handicrafts, jewelry and other small commodities is synonymous with it. Products of tourism span across a wide array of industries ranging from transport, infrastructure, agriculture, energy to art. Consequently, financial benefits can spread across different areas of the economy. Tourism also manifests itself in the form of improved investment in facilities like roads, energy and water supply. Before tourists can visit any nation, they need access to it through airports. Tourist-dependent nations often have many air transport hubs. Furthermore, those visitors will expect to enjoy certain basic comforts such as street lights, good sever systems, and good roads. While these amenities may be prevalent in developed nations, the same is not true for underdeveloped ones. Countries interested in growing their tourism industry will need to build their infrastructure. The effects of these endeavors will trickle down to other members of the society. Whole populations can utilize these facilities and thus improve their quality of life. With regard to the poverty cycle, this industry employs the youth and women in large numbers thus fostering independence. In fact, many households are able to break out of the poverty cycle owing to their participation in tourism. Several authors have carried out case studies on the benefits of tourism in the economy by analyzing their effects on particular countries. Proenca and Soukiazis (200) did an investigation in Portugal concerning the relationship between bed capacity and regional economic growth. Here, it was assumed that bed capacity was indicative of the intensity of tourism in a region. The researchers found that for every percentage increase in accommodation capacity, regions experienced a 0.01% in their per capita income. Therefore, the authors proved that tourism does indeed translate into greater economic growth. Conversely, one can prove that tourism enhances economic development by analyzing the rate at which countries depend on tourism over other areas of the economy. Lanza and Pigliaru (12) showed that countries with many natural resources and a sizable labor force gave them a comparative advantage in tourism over others that did not have these resources. When one contrasts countries that have these features and focus on tourism to countries that specialize in manufacturing, it is evident that the former countries grow their economies at a faster rate than the former ones. Therefore, tourism performs better than other conventional industries with regard to its capacity to grow economies. The same pattern is repeated when one compares small nations that depend on oil production with large ones that depend on tourism. Most of the oil-producing nations come from large economies; small countries often record low levels of growth, but when this is combined with specialization in tourism, one is likely to record higher levels of GDP growth. Therefore, tourism facilitates greater levels of economic growth for small economies (Ivanovi and Webster 22). The same observation is not prevalent in large economies that are already developed even though tourism thrives there. Therefore, several factors that demonstrate the existence of a robust tourism industry eventually lead to higher economic growth. The prevalence of higher economic growth amongst these small, tourism-dependant nations stems from their use of foreign exchange earnings to offset their balance of payment. They also use the same revenue for management of their national debt. It is easy to translate these payments into sizable economic returns because the economies of scale are small for such nations. It is also easy for these countries to take some of their foreign exchange and use it to import resources and capital. As a result, net increases in their economies will be high. Tourists require certain goods when they visit target countries. Sometimes this may lead to an increase in the choices available to local consumers. If the goods happen to be of a high quality, then local producers may be prompted to enhance production. Higher competition increases economic outcomes and thus prosperity in the country. It is possible for taxes to reduce owing to tourist activities. If a country or region heavily depends on tourism, it may tax tourism-dependent businesses heavily and reduce the amount it expects to get from other local businesses. As a result, local communities may benefit from the development of roads or schools without necessarily paying a high amount of tax. It should, however, be noted that sometimes the reverse may occur. If infrastructural needs required to cater for tourism are excessive, then locals may experience greater taxation. Regardless of the latter, one can still acknowledge that tourism may benefit an economy by improving the tax rates (Stynes 4). Generally, one may understand the effect of tourism on the economy through a theoretical model known as the export-led growth hypothesis. In this theory, economies of nations grow as a result of increased export, capital and labor within a country. Exports are particularly useful to countries interested in growing because they allow them to take advantage of economies of scale (Lim 70). International businesses do not have to depend on local communities for production as they can distribute production across a myriad of regions. This leads to cost savings and greater profitability. Export expansion also leads to greater economic development through technical knowledge diffusion. Those concerned will get access to greater expertise and this promotes the growth of economic activities. It is likely that when a country does more exporting than importing, then chances are that there will be greater competition among those concerned. Since tourism is a form of export, then this explains why the activity fosters economic growth (Risso and Brida 178). Not only does tourism lead to economic development but the reverse may also be true; economic development fosters tourism. As an industry, tourism is unique from conventional understandings of what an industry is. In economics, for an activity to become an industry, it must employ the factors of production, such as land, labor, and capital, in order to make products. It must also use certain variables in order to participate in the production process. The major problem with this approach is that it does not factor in service-oriented sectors, of which tourism belongs. The latter industry heavily relies on labor and offers services to a number of foreign and domestic economies. Tourism incorporates the use of goods and services in order to meet needs of clients. Nonetheless, production and consumption still occur when participating in tourism. Visitors who enter a certain country will do so for business or pleasure. Those who come for leisure will solely consume while those who visit a country for business will consume as well as produce. Therefore, one cannot classify tourism as an explicit production or consumption good. Another feature that distinguishes tourism from other sectors is the fact that consumers must transport themselves to the concerned location and not the other way around. Conventional sectors like manufacturing often involve taking conventional products to consumers. This means that it can be regarded as an import in certain dimensions. However, because of the foreign exchange earned, the industry is also an export one. All these differences in tourism as an industry imply that its contribution to the economy of a country or region is quite multifaceted. Regardless of how one looks at the industry, it still depends on economic development as a prerequisite to success (Vanegas and Croes 960). Globalization has infiltrated almost all industries and tourism is no exception. Since transportation cost is an important consideration for most visitors who are thinking about entering a country, then they must incorporate the amount of expenditure that is required to get to a host country. This means that if the income of potential tourists is low, then chances are that less travelling will occur. For an economy to grow in a country that depends on tourism, it must depend on visitors from countries with relatively stable income streams. Therefore, economic development in target countries (nations that act as consumers) can foster tourism. Unlike certain consumer goods that can be sold in any country regardless of its income, tourism will sell greatly in economically developed nations as these consumers have the financing needed to enjoy tourist activities. Additionally, because the industry is perceived as a luxury in certain respects, then the concerned entities must be able to afford luxurious items. This further proves that economic development affects tourism because consuming countries must be economically prosperous (Ghartey 5). Prices of commodities and services in a host country affect how many visitors it gets. Additionally, even the cost of living in a country will alter the number of people who come to visit. Economic difficulties will usually manifest themselves in terms of a high cost of living. Additionally foreign exchange rates will also demonstrate how economically prosperous the country is. Potential tourists will consider these factors before choosing to visit it. Consequently, not only is economic development a prerequisite to success in tourism in countries that supply the visitors, but it also matters in the host country. Certain services are just easier to provide if the economic situation in the tourist country is tenable. As explained earlier some travelers may visit a host country for business while others may do it for pleasure. Those who target a country for its business prospects will often end up using various businesses in the tourism industry. International trade is becoming a reality especially in emerging economies such as China and India. The need to transact with these countries fosters business travel and foreign exchange earnings. Therefore, countries with a robust trading platform have high numbers of business travelers and high earnings in tourism. Such nations will usually report positive economic figures and balance of payments. As a result, one may say that economic development, as seen through high rates of international trade, leads to a thriving tourism industry (Fayissa et al. 18). The sustainability of tourism is highly dependent on investment in economic activities. Pro development tourism is an approach to tourism that entails securing economic development for locals in order to make tourism sustainable. In order to prosper in any industry, businesses have to engage in practices that attract consumers. The same fact is true for tourism and potential visitors. This industry is highly dependent on employees that are highly educated. It also thrives in areas that have convenient access to health services as well as a sound energy, transport, communications and water networks. Not only do tourists expect to enjoy these benefits but locals also stand to gain from them. Developers, operators, hotel owners and investors need to embrace the fact that risks and opportunities abound in tourism, and investment in the economy will lead to greater prosperity within the chosen country. If these business players respond to the economic needs of the local community then they will continually meet tourist expectations about the condition of their locations. As a result, such companies can enjoy repeat business and long term success (Goodwin et al. 6). Working on the economic situation of a certain locality works for investors in tourism because it will improve the business environment. If all the business stakeholders in a tourist destination work together in order to boost economic development, then they will minimize the cost of doing business in that destination. These stakeholders will gain access to benefits that they initially would have foregone if they were acting alone. Business entities can also benefit from sustainable tourism if they invest in the economy of the host nation by creating a standard that they abide by. These individuals will have compliance guidelines that will assist in maintaining high industry standards and eventually greater returns. Industry stakeholders who take charge of their economic environment will also minimize the risk of legislations and interventions by national bodies that may disrupt or run them out of business. As a result, one can assert that tourism is dependent on economic development owing to the business environment created and the prospects for sustainability (Kim et al. 920). Investing in regional or local economies through infrastructure, local sourcing and employment opportunities enhances the image or brand value of a certain organization. The concept of reputation risk is closely associated with the latter statement. Reputational risk management involves providing consumers with more than tangible aspects of business. For instance the experience of most tourists is much richer than what can be offered as transport, accommodation or even sightseeing. Further, products obtained by tourist players go beyond what businesses manage within the supply chain. As a consequence, tourist investors can increase their brand image or minimize business risk by improving economic conditions in their localities. Fostering local economies by businesses also makes the tourist landscape work well for stakeholders because it fosters goodwill among the masses. When locals enjoy a greater livelihood as a result of investment by tourism stakeholders then they will support the very existence of the business. Thriving tourist businesses cannot exist in environments where local communities are resentful against them (Dritsakis 310). It is quite expensive to work in a place where protests and demonstrations against a certain institution are common. Businesses can prevent the occurrence of this situation by working on the local economies of their tourist locations. Tourism is dependent on economic development because the industry will have a stable pool of employees from which to hire their staff. Good economies tend to have highly motivated workers who go out of their way to educate themselves and enhance their skills. Consequently, companies that work on the economies of their local operations will benefit from it by having high quality staff to select. They will also reduce costs in continually hiring and training new staff. Although economic development is highly likely amongst countries that have a thriving tourism industry, there are certain situations in which economic development may not be felt by all concerned parties. For instance, hotel owners benefit greatly from tourism activities because most accommodation businesses are created for these entrepreneurs. In a country such as Malaysia where tourism contributes a large share of the GDP, only 11% of the earnings from this sector reach locals and small businesses. Additionally, crafts artisans only access 5% of those earnings. Most of the income goes to large hotel owners and similar entrepreneurs (TPRG 12). Cases of inequality or poor distribution of wealth depend on the nature of the economy in a certain country as well as its business structure. For instance, a country such as Tanzania has more imports than exports. Therefore, even a smaller portion of income from tourism is enjoyed by locals compared to Malaysia. 10.2 % of all earnings generated in tourism are captured by members of this demographic group. Tanzania mostly gets its tourism supplies externally; additionally, quality staff members also come from other countries. This prevents locals from participating in creation of wealth. In contrast to the above mentioned examples, a country such as Panama manifests a very different pattern. About 56% of all earnings from tourism in this country are enjoyed by locals with moderate means. However, the proportion of the people who enjoy it are those who come from tourism-dependent regions. Poor people in Bocas del Toro enjoy about 43% of the income because this a tourist region. However only 19% of the income earned from tourism in Chriqui province goes to the poor because the economy of that region does not depend on it. Therefore, the case for economic equality from tourism in many developing nations depends on a series of factors. First, supply chains need to incorporate the locals. Further, skill levels and the composition of the labor market will determine whether tourism would lead to greater benefit among the poor than among other groups. Additionally, one must consider the composition of the entrepreneurial sector; if microenterprises thrive in a certain country then chances are that locals will also benefit (Mitchell and Ashley 77). While tourism may cause increases in the rate of consumption of goods, sometimes this may lead to unwanted effects. For instance, external sourcing of supplies needed for use in the tourism industry may lead to an imbalance in the imports and exports of a country. Nations that lack the resources necessary to support visitors may witness higher levels of importation occurring due to an increase in tourism. Earnings from tourism activities may not be enough to offset the imbalance in trade that has arisen from the purchase of imported commodities. Additionally, when excessive numbers of tourists are reported within a certain country, then a country’s tour operators or other related businesses may not be able to meet the demand for services and goods from them. The overall result is high inflation pressure, which may persist over the years. Economies of these countries may become casualties of unmet demand in tourism (Ghartey 8). Inflationary pressures may also manifest in the housing industry through fluctuating prices seasonally. The challenge of tourism in economic development may also be manifested through taxation. In developing economies, where infrastructural challenges are many, governments may need to invest in construction of roads and the like in order to promote the tourism industry. The process of carrying out these activities may result in greater levels of taxation during construction. In developed nations, high infrastructural costs may stem from greater taxation needed to cover the service costs of maintaining these amenities. Therefore, sometimes greater tourism levels may undermine economic performance within a certain country owing to taxation increments (Stynes 5). Environmental issues have also been cited as another unwanted effect of tourism. This may often result in the underdevelopment of other industries that depend on the same natural resources. As a consequence, economic development may be impeded. Most tourism activities occur in coastal areas where freshwater is absent or the facilities needed to provide them are lacking. Since tourist businesses cannot compromise on the availability of water, many of them may secure it through any means necessary. This may result in appropriation of water needed for agricultural use. A case in point was golf tourism in a Mediterranean Island. The concerned industry needed water for irrigation of the courses. Since water was scarce in the location, it was necessary to transport it in. Estimates indicate that the golf course used seventeen times as much water as regular users. After the owners of the golf courses decided to expand the facility, it was necessary to construct them over agricultural land. This was done in order to place desalination plants, which convert salty water into freshwater. Therefore, the growth of tourism in the Island came at a price; agriculture was undermined in the area and this offset the economic benefits of the gold course. One can thus assert that the unwanted environmental of tourism weaken critical economic activities. The economic sustainability of tourism may thus be questioned (UNEP 417). Tourism and economic development are intertwined as they each depend on each other for survival. Tourism can lead to economic development through direct and indirect effects. Direct effects include revenue generation and foreign exchange in a tourist-dependent country. These effects also include creation of business opportunities that thrive on money earned from tourism or local sourcing of supplies. Indirect effects include better taxation, employment opportunities, improved infrastructure and better quality of goods. On the other hand, tourism may undermine economic development by creating environmental problems, higher taxation in infrastructure construction and inequality in income distribution. Economic development also leads to success in tourism by proving better quality goods, improving foreign exchange rate conditions and promoting the sustainability of business in that location. These results indicate that government bodies as well as tourist stakeholders need to work on economic development in order to foster long term success. Conversely, governments need to encourage tourism in order to boost economic development. Dritsakis, Nick. “Tourism as a long-run economic growth factor: An empirical investigation for Greece using causality analysis.” Tourism Economics 10.3(2004): 305-316. Print. Ghartey, Edward. Tourism Economic Growth and Monetary Policy in Jamaica. SALISES Annual Conference Port of Spain: Trinidad and Tobago, 2010. Print. Goodwin, Harold, Stuart Robson, Sam Highton. Tourism and Local Economic Development, 2008. Web. Fayissa, Bichaka, Christian Nsiah & Tadasse Badassa. “The Impact of Tourism On Economic Growth and Development In Africa.” Department of Economic and Finance Working Paper Series , 2007: 1-21. Print. Ivanovi, Stanislav and Craig Webster. Measuring the Impact of Tourism on Economic Growth , 2006. Web. Kim, Hyun, Chen Ming-Hsiang & Jang SooCheong. “Tourism , Expansion and Economic Development: The Case of Taiwan.” Tourism Management 27.5(2006): 925-933. Print. Lanza, A. and F. Pigliaru. Why are Tourism Countries Small and Fast Growing? Centro Ricerche Economiche no. 99-106, Crenos: Cyprus Publishing, 1999. Print. Lim, C. “An econometric classification and Review of International Tourism Demand Models.” Tourism Economics 3.1(1997): 69-81. Print. Mitchell, Jason and C. Ashley. “Can Tourism Offer Pro-poor Pathways to prosperity? Examining Evidence on the Impact of Tourism on Poverty.” Briefing Paper 2007: 60-88. Print. Proenca, S and Soukiazis. Tourism as an Alternative Source of Regional Growth in Portugal 2005. Web. Risso, Wiston & Juan Brida. “The Contribution of Tourism to Economic Growth: An Empirical Analysis for the Case of Chile.” European Journal of Tourism Research 2.2(2009): 178-185. Print. Stynes, Daniel. Economic Impacts of Tourism, 2000. Web. TPRG. The Application of Value Chain Analysis to Measure Economic Benefits at Tanjong Piai, Pontian and Johar . Malaysia: Universiti Teknologi Malaysia, 2009. Print. UNEP. Tourism: Investing in Energy and Resource Efficiency, 2011. Web. Vanegas, Margaret and R. Croes. “Evaluation of Demand: US Tourists to Aruba.” Annals of Tourism Research 27.4(2000): 946-963. Print. Japan: Politics, Economy, and Law Enforcement Presentation of the Article, Can Europe be Saved Tourism Planning and Tourist Agencies Benefits of Tourism Economic Impacts of Tourism Syria as a Developing Country Binding Price Ceiling and Non-price Allocation Global Financial Crisis Causes and Impacts History of Urbanization in Brazil in 1980 International Public Goods Chicago (A-D) Chicago (N-B) IvyPanda. (2019, April 11). Tourism and economic development. https://ivypanda.com/essays/tourism-and-economic-development/ "Tourism and economic development." IvyPanda , 11 Apr. 2019, ivypanda.com/essays/tourism-and-economic-development/. IvyPanda . (2019) 'Tourism and economic development'. 11 April. IvyPanda . 2019. "Tourism and economic development." April 11, 2019. https://ivypanda.com/essays/tourism-and-economic-development/. 1. IvyPanda . "Tourism and economic development." April 11, 2019. https://ivypanda.com/essays/tourism-and-economic-development/. Bibliography IvyPanda . "Tourism and economic development." April 11, 2019. https://ivypanda.com/essays/tourism-and-economic-development/. Studies on Russian Economic Development Provides up-to-date information on socioeconomic problems in Russia and the Commonwealth of Independent States countries. Offers a vast collection of papers examining short-, mid-, and long-term forecasts of the Russian economy and its individual sectors. Welcomes submissions in English from all countries. Boris N. Porfiriev Societies and partnerships Latest issue Volume 35, Issue 4 Latest articles The role of small research and service companies as a new subject of innovation ecosystems. A. A. Alekseev Prospects of Car Sharing in Moscow: Analysis and Forecast through Social Practice Theory S. R. Milyakin N. D. Skubachevskaya On the Development Strategy for the Production of Organic Products in the Russian Federation Until 2030 D. A. Polzikov V. V. Aleshchenko Low Emission Transformation of Waste Sector in Russia A. Yu. Kolpakov E. A. Lazeeva Assessment of Capital Formation Centers Based on Metal Consumption Data I. A. Budanov Journal information Google Scholar OCLC WorldCat Discovery Service TD Net Discovery Service UGC-CARE List (India) Rights and permissions Editorial policies © Pleiades Publishing, Ltd. 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The Communist International Culture and religion under communism Foreign policy The communist regime in crisis: 1920–21 Lenin’s disillusionment The struggle for succession The NEP and the defeat of the Left Toward the “second Revolution”: 1927–30 The Party versus the peasants Industrialization, 1929–34 Internal, 1930–37 Foreign policy, 1928–40. Into the war: 1940–45 The transition The 20th Party Congress and after Nationality policy The cultural Thaw Economic problems Khrushchev’s fall Collective leadership Economic policy Cultural retrenchment The Interregnum: Andropov and Chernenko Gorbachev’s succession Economic and social reforms Political restructuring The attempted coup What was the cause of World War II? What were the turning points of World War II? How did World War II end? How many people died during World War II? Industrialization , 1929–34 Our editors will review what you’ve submitted and determine whether to revise the article. CRW Flags - Flag of Soviet Union The History Learning Site - Life in USSR under Stalin Seventeen Moments in Soviet History - The End of the Soviet Union GlobalSecurity.org - Soviet Union United States Holocaust Memorial Museum - Holocaust Encyclopedia - The Soviet Union and the Eastern Front The YIVO Encyclopedia of Jews in Eastern Europe - Union of Soviet Socialist Republics Live Science - Soviet Union: History, leaders and legacy Alpha History - Communist Russia Union of Soviet Socialist Republics - Children's Encyclopedia (Ages 8-11) Union of Soviet Socialist Republics - Student Encyclopedia (Ages 11 and up) Table Of Contents On the industrial side the 1930s were to be a period of Sturm und Drang . A planned economy was to be introduced with, as its first task, the direction of all possible resources into intensive industrialization . This was to be supported by a socialized agriculture. Recent News The Five-Year Plan had not been finalized by the time it was announced in April–May 1929, though it had been expected to come into operation six months earlier. In its initial form it prescribed goals for 50 industries and for agriculture and provided some relation between resources and possibilities, but over the period that followed it was treated mainly as a set of figures to be scaled upward. The industrial growth rate originally laid down was 18–20 percent (in fact, this had already been achieved, at least on paper). Later in the year Stalin insisted on nearly doubling this rate. The plan was thereafter a permanent feature of Soviet life; the First Five-Year Plan was followed by a series of others. The plan may be considered in two main aspects. It was, or was the basis of, a set of real governmental and economic actions. And it was a concept—organizational, ideological, inspirational, and, it might almost be said, transcendental. Understanding of the economic side of the industrialization drive of the 1930s was long confused by two factors. The first was the claim by the communists that they were implementing a rational and fulfillable plan. The second, which came later, was the claim that they had in fact secured unprecedented increases in production. The primary task, as to an only slightly lesser degree throughout the Stalin epoch and even later, was the buildup of heavy industry. At the end of 1932 it was announced that the First Five-Year Plan had been successfully completed. In fact none of the targets had been reached, or even approached. Extravagant claims were made and continued to be issued until the late 1980s. It was only then revealed by Soviet economists that the true rate of growth in production over the period (including that of the Second Five-Year Plan, slightly less strongly stressing heavy industry, which now followed) was only about 3.5 percent per annum, about the same as that of Germany over the same span of time. Nevertheless, during this period a number of important industrial enterprises were completed, though there was much waste as well. The Syrtsov group (see below) held the new industries to be “eyewash,” and there was certainly great emphasis on the propaganda side. Some undertakings were ill-considered: the Baltic–White Sea Canal , supposedly completed in 1933, employed some 200,000–300,000 forced labourers but proved almost useless. On the other hand, the great Dneproges dam was a generally successful hydroelectric project on the largest scale. The same can be said of the Magnitogorsk foundries and other great factories. The characteristic fault was “giantism”—the party’s inclination to build on the largest and most ostentatious scale. One result was that there were continual organizational problems. More crucial was that the main concern was that production figures always be at, or beyond, the limits of capacity, so that maintenance and infrastructure were neglected, with deleterious long-term results. There was a movement of population from the country to the towns. Between 1929 and 1932, some 12.5 million new hands were reported to have entered urban work, 8.5 million of them from the countryside (though it was ruled that kulaks should not be given jobs in the factories). These are striking figures, though they did not change the U.S.S.R. into an urbanized country in the Western sense. Even in 1940 just over two-thirds of the population was classified as rural and just under one-third as urban. It was not until the early 1960s that the population became equally urban and rural. Even if the crash programs had been intrinsically sound, the party had not had time to prepare adequate technical and managerial staff or to educate the new industrial proletariat. And few genuine economic incentives were available: in 1933 worker’s real wages were about one-tenth of what they had been in 1926–27. Hence, everything had to be handled on the basis of myth and coercion rather than through rationality and cooperation. It is impossible to estimate such intangibles as the level of genuine enthusiasm among the Komsomols sent into the industrial plants or how long such enthusiasm lasted. But there was certainly an important element of genuine enthusiasts, and the remainder were at least obliged to behave as such. In October 1930 the first decree was issued forbidding the free movement of labour , followed two months later by one that forbade factories to employ people who had left their previous place of work without permission. At the same time unemployment relief was abolished on the grounds that there was “no more unemployment.” In January 1931 came the first law introducing prison sentences for violation of labour discipline—confined for the time being to railwaymen. February brought the compulsory Labour Books for all industrial and transport workers. In March punitive measures against negligence were announced, followed by a decree holding workers responsible for damage done to instruments or materials. July 1932 saw the abrogation of Article 37 of the 1922 Labour Code, under which the transfer of a worker from one enterprise to another could be effected only with his consent. On August 7, 1932, the death penalty was introduced for theft of state or collective property ; this law was immediately applied on a large scale. From November 1932 a single day’s unauthorized absence from work became punishable by instant dismissal. Finally, on December 27, 1932, came the reintroduction of the internal passport, denounced by Lenin as one of the worst stigmas of tsarist backwardness and despotism. At the same time, pay and rations were linked to productivity. Preferential rations for “shock brigades” were introduced, and in 1932 the then very short food supplies were put under the direct control of the factory managers through the introduction of a kind of truck-system for allocation to workers on the basis of their performance. This culminated in the much publicized Stakhanovite movement. It was announced that Aleksey Stakhanov , a miner, had devised a method for immensely increasing productivity. The method as stated was no more than a rationalization (in the Taylorian or Fordian sense) of the arrangements for clearing debris, keeping machines ready, and so on, and in fact it involved a large effort by a support team of de-emphasized assistants. A vast publicity campaign ensued, and Stakhanovites emerged everywhere. In fact, as more recent Soviet analyses have made clear, the whole thing was little more than a publicity gimmick. But it was linked with the policy of payment by piecework, intended to set the individual worker’s targets in industry higher than was normally possible, and was highly unpopular. This unpopularity could not be expressed in a normal fashion, but there were many press reports of sabotage of, or assaults on, Stakhanovites by “backward” workers. Meanwhile, not only in the U.S.S.R. but in the communist movement the world over, “Stakhanovite” became the favourite word for a “shock worker” in any economic—or political—field. The new workers’ stratum, given much money and prestige , reflected the increasingly caste-oriented nature of Stalinist society, of which the bureaucracy-intelligentsia was the most notable feature. These years had in fact seen the establishment of a new social and economic system . Thereafter there were no substantial changes. In the Communist Party the Stalinist grip had become complete in 1930 with the expulsion of Bukharin, Tomsky, and Rykov from the Politburo and Rykov’s replacement as chairman of the Council of People’s Commissars (the leading group of government administrators). The 16th Party Congress signaled the end of the Right “deviation” as the 15th Congress had marked that of the Left. As a result of the 16th Congress, held in June–July 1930, and a plenum of the Central Committee in December of that year, the Politburo consisted solely of Stalinists: Stalin, Kliment Voroshilov, Lazar Kaganovich, Mikhail Kalinin, Kirov, Stanislav Kossior, Valerian Kuybyshev, Molotov, Sergo (Grigory) Ordzhonikidze, and Yan Rudzutak, with Anastas Mikoyan, Vlas Chubar, and Grigory Petrovsky as candidate members, while Andrey Andreyev was head of the Central Control Commission, the party’s disciplinary body. (It should be noted that from 1926 to 1934 the chairman of this commission did not serve in the Politburo : Ordzhonikidze 1926–30; Andreyev 1930–31; Rudzutak from 1931.) Over the next few years opposition was reduced to a few party groups who clandestinely discussed the removal of Stalin and the reversal of the disastrous economic policies: Sergey Syrtsov (candidate member of the Politburo), Besso Lominadze, and others in 1930; Mikhail Ryutin and other Rightists in 1931–32; Aleksandr Smirnov and others in 1932–33. These were all fruitless, being exposed and denounced on short order. Their political effect was different. In the two latter cases (and in certain others) Stalin sought to have the offenders executed and was thwarted by a Politburo majority. And there were, from Stalin’s point of view, further signs of insubordination . The struggles of the past few years over collectivization had been won, and a feeling had developed, even in high levels of the victorious Stalin apparat, that some degree of civil relaxation could now take place. The 17th Party Congress, assembling in January 1934, was described as the Congress of Victors. As Stalin noted, no deviations remained to be combated. The former oppositionists had been, in the case of most of the Leftists, readmitted to the party; the Rightists had never been expelled. Members of both groups held minor posts of varying importance. And Stalin, who had appeared indispensable during the crisis, now seemed to many to be unsuited to leadership in a more peaceable era. A group of important figures debated replacing him as general secretary by Kirov, while retaining him in some more honorary post. Some 166 delegates (out of 1,225) actually crossed Stalin’s name out in the balloting for the new Central Committee. Stalin went on record in favour of the concessions to the more moderate policy proposed at the Congress. And there was a noticeable, if not a major, thaw, including the end of bread rationing in 1935. In literature the dogmatic RAPPists were discredited, and a new Union of Soviet Writers held its first Congress in 1934 under the new doctrine of “ Socialist Realism .” Although the new policy was less overtly restrictive of the arts, this too was used for the rest of the Stalin period as a criterion for silencing or purging independent voices. Of the 700 writers attending the Congress, only about 50 survived to see the Second Congress in 1954, though the average age in 1934 was under 40. It is now clear, in any case, that Stalin, if not in his public stance, felt threatened by any substantial relaxation and hampered by his inadequately obedient subordinates. At the end of 1934, on December 1, came an event that was to be crucial to the final establishment of the Stalinist system. On that date Kirov was assassinated in the Smolny building at Leningrad, ostensibly by a disgruntled communist, whose access to his victim had been arranged by senior local officials of the NKVD (People’s Commissariat of Internal Affairs), as the secret police , reorganized in 1934 under Genrikh Yagoda, was now called. There is little doubt that Stalin sponsored this murder through Yagoda. Kirov’s death was followed at once by a decree on the summary trial of terrorists. It was charged that the assassin was a member of a Zinovyevite terrorist group in Leningrad , all of whom were promptly shot. Zinovyev , Kamenev , and several score of their followers were arrested and sentenced in closed court to jail terms as having “political responsibility” for (though not yet direct involvement in) the murder. Stalin’s agent Andrey Zhdanov took control of Leningrad, and from 1935 to 1939 almost all Kirov’s following was extirpated. Over the next four years the centre of political life in the U.S.S.R. was the exposure and suppression of ever-increasing circles of alleged plotters against the regime , all of them linked in one way or another with the Kirov case. The country was submitted to an intensive campaign against hidden “enemies of the people.” This manifested itself both in a series of public, or publicized, trials , and in a massive terror operation against the population as a whole. There had been show trials even in early Soviet times, including that of the Socialist Revolutionaries in 1922 and the Shakhty case in 1928. During the early 1930s several more were mounted, notably the “Metro-Vic” case, involving British and Soviet engineers, in April 1933, following the “Menshevik Trial” in March 1931. Both cases were mainly concerned with sabotage. (The Mensheviks were almost all economists and specialists accused of trying to establish Five-Year Plan figures lower than the country’s capability—though in fact they had tended to err on the optimistic side.) But while these trials received considerable publicity they were not made the central feature of Soviet politics. In August 1936 the NKVD set up the Zinovyev-Kamenev trial (to be followed by two similar trials in 1937 and 1938). And these cases were presented as the crucial element in the country’s public life. Zinovyev, Kamenev, and 14 others confessed to terrorist plots in conjunction with Trotsky and were shot. In September the NKVD chief, Yagoda, was replaced by Nikolay Yezhov , from whom the Yezhovshchina , the worst phase of the terror in 1937–38, took its name. A new group, headed by Grigory (Yury) Pyatakov , was now arrested, figuring in the second great trial in January 1937. This time the charges included espionage , sabotage , and treason , in addition to terrorism . On February 18, 1937, Stalin’s old ally and Politburo colleague Ordzhonikidze committed suicide . He was reported to have planned to criticize the new repressions at what came to be known as the “February–March” 1937 plenum of the Central Committee . The plenum’s main decision was the arrest of Bukharin and Rykov. At the same time Stalin, Molotov, Yezhov, and others called for great vigilance in the struggle against hostile elements in the party and outside it. In 1936 a new constitution (often called the Stalin constitution) came into effect, guaranteeing all manner of human rights . It had no effect, and in the spurious elections called under its articles in December 1937 there was only one candidate for each seat. At this time a further social and economic component of the Stalinist system became very important. There had been a number of concentration camps from 1918 on, and 65 existed in 1922. During the NEP there was a reduction in the number of prisoners , who probably only numbered some tens of thousands at the end of the decade. But a decision was then taken to systematically utilize their labour. By 1932 there seem to have been at least one million such prisoners, and by 1935 there were more than two million, with camps located largely in the Arctic (such as Kolyma and Vorkuta) but also in Kazakhstan and elsewhere. The system expanded further and became a regular feature of Soviet life. During 1937 and 1938 the terror reached its climax. Starting in March it rapidly developed a mass character. To cope with the large-scale arrests, special extra-legal tribunals were set up, in particular the notorious NKVD “ troikas ,” which sentenced hundreds of thousands of people to death in their absence. The mass graves of the victims remained secret until the late 1980s. The Communist Party itself was ruthlessly purged. Of the 139 full and candidate members of the Central Committee elected at the 17th Congress in 1934, 115 were arrested, and of the 1,966 delegates to that Congress, 1,108 were arrested. The local leaderships in Leningrad , in Ukraine , and elsewhere were almost annihilated . In the republics the charges in many cases were now dealt with in secret, and the main themes of intensive public propaganda invariably included “bourgeois nationalist” plotting. The local party and cultural leaderships perished. At the lower level, of the 2.3 million people who had been party members in 1935, just under half went to execution or died in labour camps. At the centre People’s Commissariats and Party departments were likewise devastated. The industrial, engineering, and economic cadres, including those of the railways , were heavily purged. The army also suffered heavy losses. In May 1937 eight senior generals, headed by Marshal Mikhail Tukhachevsky , were arrested, tortured, and, on June 11, shot on the usual charges. Their trial, held in secret, was publicly announced, but this was the exception. Over the next two years almost all their senior colleagues were arrested, tried in secret, and executed: 3 of the 5 marshals, 13 of the 15 army commanders, 50 of the 57 corps commanders, and 6 of the 7 fleet admirals and admirals grade I. The officer corps as a whole lost about half its members. The cultural world also suffered: several hundred writers were executed or died in camps, including such figures as Osip Mandelshtam , Boris Pilnyak , and Isaak Babel . The same applied in all the professions. Plots were discovered in the State Hermitage Museum, the Pulkovo Astronomical Observatory, and throughout academe. The purge also involved large numbers of the general public. In all not fewer than some 5 million people were arrested, of whom no more than 10 percent survived. During the Yezhovshchina, the U.S.S.R. was in fact submitted to one of the most brutal terrors in recorded history. The effects were long-lasting. In March 1938 came the third Moscow Trial. Bukharin , Rykov , and others, among them the former police commissar Yagoda , confessed to several murders , including those of Kirov and the writer Maxim Gorky , as well as to treason , espionage , and so on. Bukharin was accused of planning to murder Lenin in 1918, though he denied this particular slander . After the executions the only survivors of Lenin’s last Politburo were Stalin and Trotsky , the latter in exile in Mexico . (Trotsky was killed by an NKVD agent in 1940.) By the autumn of 1938 it had become clear that the terror was dislocating the entire life of the country, including the economy—production actually declined in 1938–39. In December Yezhov was removed from his police post, to be arrested in 1939 and shot in 1940. Lavrenty Beria took on the NKVD leadership and supervised a considerable reduction in the tempo of the purge. The system became institutionalized. The major factions opposing Stalin had been defeated by 1930. The early months of 1937 had seen the defeat of the last attempt to restrain Stalin. The 18th Party Congress in March 1939 marked the final transformation of Soviet politics. All independence of mind on the part of any of the Stalinist leadership had effectively vanished. Thereafter the history of the U.S.S.R. until 1953 was, generally speaking, confined to Stalin’s decisions and the attempts of his subordinates to gain his confidence. The removal of all alternative political figures was matched by what was later called “the cult of personality” of Stalin. History was falsified on a massive scale to give him a major role in the Bolshevik underground, the Revolution, and the Civil War —in particular in the new “Short Course” Communist Party history, which became the basic text of Stalinism and sold 40 million copies throughout the world. The country was blanketed in extremes of adulation . From 1928, in harmony with the increasing shift to the left at home, foreign and Comintern policy once again became radicalized, with the emphasis on the treason of the Social Democrats of the West. From 1933 to 1934 the context changed abruptly. Hitler ’s accession to power in Germany had been facilitated by Moscow ’s refusal to let the German Communist Party cooperate against him with the Social Democrats and others. In fact, Nazi rule was at first interpreted as a victory for the communists, in that capitalism had been driven to its last resource, of naked force, and must soon collapse. By mid-1934 it had become obvious that the whole conception was wrong. A new Comintern policy emerged, to be formalized at that body’s Seventh Congress in July–August 1935: to work toward a United Front of Communists and Socialists, soon broadened to a People’s Front of all “left” parties. At the same time in foreign policy Stalin turned to the bourgeois democracies as a counterweight to Germany . In September 1934 the U.S.S.R. joined the League of Nations . In May 1935 a Franco-Soviet treaty of mutual assistance was signed, and a Soviet-Czechoslovak treaty followed a few weeks later, though this treaty was only to take effect if France also came to the aid of the country under attack. In July 1936 came the outbreak of the Spanish Civil War against insurgents led by General Francisco Franco and heavily supported by Germany and Italy . The Soviets provided a few hundred tanks and aircraft and a few thousand military specialists, and in addition as many as 42,000 volunteers of the International Brigades were largely raised by the Comintern. Stalin’s followers also progressively took over the Spanish government, especially concerning themselves with hunting down local Trotskyites. When it was clear that the war was lost, Soviet support was withdrawn. But meanwhile the U.S.S.R. had established a further claim to the allegiance of the European left. This was enhanced when, in the autumn of 1938, France and Britain were instrumental in having Czechoslovakia accept the Munich Agreement , the first step to that country’s disintegration and annexation, while the U.S.S.R. appeared to be the sole, though cheated, defender of collective security . This was a misapprehension. It is now clear that Stalin had no intention of becoming involved militarily. And he had, in any case, for several years been sounding out the possibility of an alternative policy based on accommodation with Hitler . At first these approaches bore no fruit, but in his policy speech to the 18th Party Congress in March 1939, Stalin announced that the U.S.S.R. would not help “warmongers” who wanted others to “pull their chestnuts out of the fire,” and Maksim Litvinov , the spokesman for collective security, was removed as People’s Commissar for Foreign Affairs a few weeks later. Hitler, planning his attack on Poland , understood these signals and initiated serious contacts with Moscow . At the same time France and Britain had belatedly seen that the only effective policy against German expansion was as strong an alliance as possible, and they too now sought Soviet support. There was justifiable mistrust on both sides, and the Western powers handled the negotiations reluctantly and clumsily. But in any case the West was offering a pact that might or might not deter Hitler and that might lead to Soviet involvement in an uncertain war if it did not; whereas Hitler’s offer was of a great increase in Soviet territory and, at least for the present, peace. The German foreign minister, Joachim von Ribbentrop , arrived in Moscow on August 23, 1939, and the Nazi-Soviet Nonaggression Pact was signed that evening. The Germans invaded Poland on September 1, and Soviet troops entered the eastern part of that country on September 17. Under the Secret Protocols of the Pact (as amended later in the month) the Soviet Union received western Ukraine and western Belorussia , together with the three Baltic states, Estonia , Latvia , and Lithuania . Heavy pressure was now put on these latter three, and they were forced to accept Soviet garrisons under treaties signed in September and October. The treaties guaranteed that there would be no interference in their internal politics. A similar ultimatum was issued to Finland , but the talks broke down, and on November 30, 1939, the U.S.S.R. attacked the country and immediately set up a Democratic Republic of Finland , headed by the communist Otto Kuusinen . But militarily the “Winter War,” as the Russo-Finnish War of 1939–40 was called, started with a series of humiliating defeats for the U.S.S.R., and it was only in March that the sheer weight of numbers broke Finnish resistance. Even then, fearing Allied involvement, Stalin granted terms little worse than those offered in 1939 and dropped the Kuusinen “ government .” The U.S.S.R. gained the Karelian Isthmus , certain border changes in the north, and a base on the Gulf of Finland . Source: K. Marx, A Contribution to the Critique of Political Economy , Progress Publishers, Moscow, 1977, with some notes by R. Rojas. The economic conditions of existence of the three great classes into which modern bourgeois society is divided are analysed under the first three headings; the interconnection of the other three headings is self-evident. The first part of the first book, dealing with Capital, comprises the following chapters: 1. The commodity, 2. Money or simple circulation; 3. Capital in general. The present part consists of the first two chapters. The entire material lies before me in the form of monographs, which were written not for publication but for self-clarification at widely separated periods; their remoulding into an integrated whole according to the plan I have indicated will depend upon circumstances. A general introduction, which I had drafted, is omitted, since on further consideration it seems to me confusing to anticipate results which still have to be substantiated, and the reader who really wishes to follow me will have to decide to advance from the particular to the general. A few brief remarks regarding the course of my study of political economy are appropriate here. Although I studied jurisprudence, I pursued it as a subject subordinated to philosophy and history. In the year 1842-43, as editor of the Rheinische Zeitung, I first found myself in the embarrassing position of having to discuss what is known as material interests. The deliberations of the Rhenish Landtag on forest thefts and the division of landed property; the official polemic started by Herr von Schaper, then Oberprasident of the Rhine Province, against the Rheinische Zeitung about the condition of the Moselle peasantry, and finally the debates on free trade and protective tariffs caused me in the first instance to turn my attention to economic questions. On the other hand, at that time when good intentions “to push forward” often took the place of factual knowledge, an echo of French socialism and communism, slightly tinged by philosophy, was noticeable in the Rheinische Zeitung. I objected to this dilettantism, but at the same time frankly admitted in a controversy with the Allgemeine Augsburger Zeitung that my previous studies did not allow me to express any opinion on the content of the French theories. When the publishers of the Rheinische Zeitung conceived the illusion that by a more compliant policy on the part of the paper it might be possible to secure the abrogation of the death sentence passed upon it, I eagerly grasped the opportunity to withdraw from the public stage to my study. The first work which I undertook to dispel the doubts assailing me was a critical re-examination of the Hegelian philosophy of law; the introduction to this work being published in the Deutsch-Franzosische Jahrbucher issued in Paris in 1844. My inquiry led me to the conclusion that neither legal relations nor political forms could be comprehended whether by themselves or on the basis of a so-called general development of the human mind, but that on the contrary they originate in the material conditions of life, the totality of which Hegel, following the example of English and French thinkers of the eighteenth century, embraces within the term “civil society”; that the anatomy of this civil society, however, has to be sought in political economy. The study of this, which I began in Paris, I continued in Brussels, where I moved owing to an expulsion order issued by M. Guizot. The general conclusion at which I arrived and which, once reached, became the guiding principle of my studies can be summarised as follows. In the social production of their existence, men inevitably enter into definite relations, which are independent of their will, namely relations of production appropriate to a given stage in the development of their material forces of production. The totality of these relations of production constitutes the economic structure of society, the real foundation, on which arises a legal and political superstructure and to which correspond definite forms of social consciousness. The mode of production of material life conditions the general process of social, political and intellectual life. It is not the consciousness of men that determines their existence, but their social existence that determines their consciousness. At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or – this merely expresses the same thing in legal terms – with the property relations within the framework of which they have operated hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution. The changes in the economic foundation lead sooner or later to the transformation of the whole immense superstructure. In studying such transformations it is always necessary to distinguish between the material transformation of the economic conditions of production, which can be determined with the precision of natural science, and the legal, political, religious, artistic or philosophic – in short, ideological forms in which men become conscious of this conflict and fight it out. Just as one does not judge an individual by what he thinks about himself, so one cannot judge such a period of transformation by its consciousness, but, on the contrary, this consciousness must be explained from the contradictions of material life, from the conflict existing between the social forces of production and the relations of production. No social order is ever destroyed before all the productive forces for which it is sufficient have been developed, and new superior relations of production never replace older ones before the material conditions for their existence have matured within the framework of the old society. Mankind thus inevitably sets itself only such tasks as it is able to solve, since closer examination will always show that the problem itself arises only when the material conditions for its solution are already present or at least in the course of formation. In broad outline, the Asiatic, ancient, [A] feudal and modern bourgeois modes of production may be designated as epochs marking progress in the economic development of society. The bourgeois mode of production is the last antagonistic form of the social process of production – antagonistic not in the sense of individual antagonism but of an antagonism that emanates from the individuals' social conditions of existence – but the productive forces developing within bourgeois society create also the material conditions for a solution of this antagonism. The prehistory of human society accordingly closes with this social formation. Frederick Engels, with whom I maintained a constant exchange of ideas by correspondence since the publication of his brilliant essay on the critique of economic categories (printed in the Deutsch-Franz�sische Jahrb�cher, arrived by another road (compare his Lage der arbeitenden Klasse in England ) at the same result as I, and when in the spring of 1845 he too came to live in Brussels, we decided to set forth together our conception as opposed to the ideological one of German philosophy, in fact to settle accounts with our former philosophical conscience. The intention was carried out in the form of a critique of post-Hegelian philosophy. The manuscript [The German Ideology], two large octavo volumes, had long ago reached the publishers in Westphalia when we were informed that owing to changed circumstances it could not be printed. We abandoned the manuscript to the gnawing criticism of the mice all the more willingly since we had achieved our main purpose – self-clarification. Of the scattered works in which at that time we presented one or another aspect of our views to the public, I shall mention only the Manifesto of the Communist Party, jointly written by Engels and myself, and a Discours sur le libre echange, which I myself published. The salient points of our conception were first outlined in an academic, although polemical, form in my Misere de la philosophie ..., this book which was aimed at Proudhon appeared in 1847. The publication of an essay on Wage-Labour [Wage-Labor and Capital] written in German in which I combined the lectures I had held on this subject at the German Workers' Association in Brussels, was interrupted by the February Revolution and my forcible removal from Belgium in consequence. The publication of the Neue Rheinische Zeitung in 1848 and 1849 and subsequent events cut short my economic studies, which I could only resume in London in 1850. The enormous amount of material relating to the history of political economy assembled in the British Museum, the fact that London is a convenient vantage point for the observation of bourgeois society, and finally the new stage of development which this society seemed to have entered with the discovery of gold in California and Australia, induced me to start again from the very beginning and to work carefully through the new material. These studies led partly of their own accord to apparently quite remote subjects on which I had to spend a certain amount of time. But it was in particular the imperative necessity of earning my living which reduced the time at my disposal. My collaboration, continued now for eight years, with the New York Tribune, the leading Anglo-American newspaper, necessitated an excessive fragmentation of my studies, for I wrote only exceptionally newspaper correspondence in the strict sense. Since a considerable part of my contributions consisted of articles dealing with important economic events in Britain and on the continent, I was compelled to become conversant with practical detail which, strictly speaking, lie outside the sphere of political economy. This sketch of the course of my studies in the domain of political economy is intended merely to show that my views – no matter how they may be judged and how little they conform to the interested prejudices of the ruling classes – are the outcome of conscientious research carried on over many years. At the entrance to science, as at the entrance to hell, the demand must be made: Qui si convien lasciare ogni sospetto Ogni vilta convien che qui sia morta. A. As a second footnote to the Communist Manifesto, Engels wrote in 1888: In 1847, the pre-history of society, the social organization existing previous to recorded history, [was] all but unknown. Since then, August von Haxthausen (1792-1866) discovered common ownership of land in Russia, Georg Ludwig von Maurer proved it to be the social foundation from which all Teutonic races started in history, and, by and by, village communities were found to be, or to have been, the primitive form of society everywhere from India to Ireland. The inner organization of this primitive communistic society was laid bare, in its typical form, by Lewis Henry Morgan's (1818-1861) crowning discovery of the true nature of the gens and its relation to the tribe. With the dissolution of the primeval communities, society begins to be differentiated into separate and finally antagonistic classes. I have attempted to retrace this dissolution in The Origin of the Family, Private Property, and the State , second edition, Stuttgart, 1886. Thus, as the science of understanding pre-history progressed (pre-history being that time before written records of human civilization exist), Marx & Engels changed their understanding and descriptions accordingly. In the above text, Marx mentions “Asiatic” modes of production. In the idea of an Asiatic mode of production, Marx and Engels were following Hegel’s schema, see: The Oriental Realm ). They later dropped the idea of a distinctive Asiatic mode of production, and kept four basic forms: tribal, ancient, feudal, and capitalist. Next: I. The Commodity 353 COMMENTS Essay on the Economic Development of a Country Essay # 2. Determinants of Economic Development: By economic development we mean attainment of higher level of productivity in almost all the sectors and a better level of living for the general masses. The path of economic development in an underdeveloped economy is full of hurdles or impediments. 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