Economic Development: Indicator, Goals, Institutional Arrangements, Differences, Problems

This document discusses various aspects of economic development, including the indicator of per capita GDP, the Millennium Development Goals and the new Sustainable Development Goals, the role of institutional arrangements, and the differences between the economies of Latin America and Africa. It also explores the problems with development planning and government failure in economic development.

Economic Development
Students Name
Institution

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1. Are per capita increases in GDP (gross domestic product) a good indicator of
economic development? Explain your answer.
Essentially, GDP per capita is an illustrator of development in the economy.
Primarily, GDP per capita aids in the comparison of living standards. However, Gdp per capita
fails to measure personal income (Focus Economics N.d).In my view, an increase in per capita
GDP is an indicator of economic growth or development. This is because per capita GDP is
calculated by dividing the Gross domestic product value with the population of a given country.
The fact that GDP is an indicator of the economic activity of a country over a given period of
time, Per capita statistics provides an in-depth evaluation of the economic activities of the
country over time hence the assertion that an increase in per capita is proof of economic
prosperity. Basically, economic growth or development refers to an increase in the value of
goods and services over a given period of time. In the event of an increase in Per capita income,
the economy is believed to be growing.
However, the existence of other measures of economic growth for improved living
standards such as the human development index cast doubt on the sufficiency of the per capita
GDP in measuring the economic rate of growth. The fact that economic growth is supported by
the low inflation rate, currency appreciation, increase in employment opportunities, stable
interest rates promotes the assertion that the economy is growing. Overall, increased per capita
GDP is a sign of positive economic growth.

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2. What are the Millennium Development Goals? In what respects are the new
Sustainable Development Goals expected to be transformative shifts from the
Millennium Development Goals?
Notably, millennium development goals were established in the year 2000 with
the aim of eradicating poverty and promoting equity by the year 2015. Primarily, the
goals were eight in number. Specifically, the goals were to fight extreme hunger and
poverty(MDG1,Universal primary forms of education(MDG2),Gender equality/women
empowerment(MDG3),Reduction of child mortality rate(MDG4),better maternal
healthcare(MDG 5),combating diseases such as HIV/Aids and malaria(MDG
6),environmental sustainability(MDG 7) and global development partnership (MDG 8)
(UNDP,N .d).By extension, SDGs are more in number than the MDGs.Whereas the
MDGs came into effect in the year 2000, the SDGs was formulated in the year 2017.
Undoubtedly, there is a difference between MDGs and SDGs such as the fact that
SDGS separates poverty from hunger, unlike the MDGs.Whereas MDGs were eight in
number, SDGs are fifteen in number. In a way, the SDGS complement the MDGs.
Specifically, the SDG has introduced newer goals such as Goal, 8, 911, 12 among other
goals. Worth noting is the fact that unlike MDGs, SDG’s came into force due to the
democratic process of participation. the formulation of SDGs involved the participation
of countries representatives. Mainly, the formulation of the MDGs did not involve the
input of many nations. Unlike MDGs which were enabled by donations, SDGs encourage
national revenue generation (Honniball & Spijkers, 2014). Overall, SDGS is an extension
of the MDGs.

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What are institutional arrangements, and why might they have a crucial role to play in
determining a nation’s development prospects? Illustrate your answer by referring
to the experience of one country.
Noteworthy, institutional arrangements refer to formal and informal policies,
system or processes used to legislate, manage or plan their actions to fulfill their mandate.
The mandate of institutional arrangements is crucial to national development due to the
irreplaceable role of implementation and enforcement of national development policies.
Through such arrangements, stability is established. Primarily, institutional arrangement
minimizes the costs of development due to the establishment of stable systems and
structures on economic dynamics. Imperatively, for economic development to flourish it
is important that institutional framework in countries are efficient. According to most
economists, development failure is caused by poor and weak institutional frameworks
thus asserting the importance of institutions to the enforcement of developmental goals in
the economy.
For the Canadian institutional framework the research, strategic bodies,
oversight bodies, auditing, advisory council among other bodies are some of the
institutional frameworks responsible for the implementation of development goals in
Canada(Banks,2015). It is imperative that the fragmentation of institutional frameworks
does not happen. The collective responsibility of institutional structures has been
instrumental in the implementation of Canadian developmental goals. For instance, the
Australian Productivity Commission has been instrumental in the overseeing of the

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industrial performance of different sectors of the economy. Through the Productivity
Commission reports, solutions and sector recommendations are made to improve
respective economic sector performance.
4. What are the four major differences between the economies of Latin America and
those of Africa?
Whereas there are similarities between Africa and Latin America, there are several
differences between the two economies. Compared to the Latin America infrastructure, access to
electricity, Africa has less access to infrastructure and electricity. In addition, Africa is a much
complex environment to do business as contrasted to most of the Latin American countries.
While African nations offer more foreign investment opportunities, Latin American nations have
fewer investment opportunities for outside investment enterprises (ISI Consultants, 2016). Worth
noting, African economies have different macroeconomic policies from those implemented in
Latin American countries. Notably, African and Latin American countries have different labor
force dynamics. Primarily, the Colombian economy is largely informal whereas the South
African economy has higher unemployment rates.
Worth noting is that while some African countries have central banks as the main financial
regulatory, most Latin American countries have federal reserve banks. Also, both continents
exercise different interest rates and have different inflation target rates. For most African
countries English is a common mode of communication in doing business unlike in Latin
America where Spanish is among the top ranking languages, unlike most African countries.

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5. What are the problems with development planning? What is meant by government
failure in the context of economic development, and why might it occur?
Basically, Government failure implies a situation whereby the intervention of government
into an industry or sector of the economy causing more damage than good (Cunningham, 2011).
Usually, government failure might be occasioned due to poor resource management of common
resources. For maximized economic development and social welfare, it is imperative that
common resources be managed effectively. Ineffective management of demand and supply side
factors of the economy might occasion a development failure. Underutilization and
overutilization of common pool resources might lead to development failure. In addition, the
planning of unreachable development objectives might lead to development failure in the
economic sense in the sense that there is a lack of financial and institutional framework needed
for the implementation of development goals. Due to rent-seeking, public welfare might be lost
hence causing an economic failure in development.
Also, in the event that development goals are set unrealistically, there is bound to be
development failure. This is because development goals must be planned with regard to available
resources and capacities for effective implementations. In the event that the government makes
development plans with no definite source of funding or technical capacity to execute the
development plans causes a failure on the part of the planning government body.

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References
Banks, G. (2015). Institutions to promote pro-productivity policies: Logic and lessons. Retrieved
from https://www.oecd.org/economy/Institutions-to-promote-pro-productivity-policies-
OECD-productivity-working-papers.pdf
Cunningham, S. (2011).Understanding market failures in an economic development context.
Retrieved from https://beamexchange.org/uploads/filer_public/f3/6e/f36ebd33-
73d6-41fa-b261-c83261b66ba7/372_mm04_market_failure_final.pdf
Ella Network. (N. d). How do you compare latin american and african development
experiences?. Retrieved from http://ella.practicalaction.org/programmenews/how-do-
you-compare-latin-american-and-african-development-experiences/
Focus in Economics. (N. d).What is GDP Per Capita?. Retrieved from https://www.focus-
economics.com/economic-indicator/gdp-per-capita
Global Advocacy. (2014).MDGs to SDGs: Top differences. Retrieved from
https://advocacy.thp.org/2014/08/08/mdgs-to-sdgs/
Honniball, A & Spijkers, O. (2014).MDGs and SDGs. Lessons learned from global public
participation in the drafting of the UN Development Goals. Retrieved
from
https://dgvn.de/fileadmin/publications/PDFs/Zeitschrift_VN/VN_2014
/Heft_6_2014/Spijkers_Honniball_VN_6-14_eng_FINAL2.pdf

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ISI Consultants. (2016).Doing business in Latin America vs, Africa: How do they compare?.
Retrieved from https://www.isi-consultants.com/news-
insights1/2016/1/17/africa-vs-latin-america-how-do-they-compare-as-
investment-destinations
UNDP. (2019).Millennium Development Goals. Retrieved from
https://www.undp.org/content/undp/en/home/sdgoverview/mdg_goals.
html