1 Education and Economic Development
1.1 Development Performances of Developing Countries
When countries in Asia, Africa and Latin-America obtained independence in the late 1940s and early 1950s, they were given little chance of improving their economies. Past economic performances were poor, population growth rates high, and terms of trade for primary products, their main source of employment and income, were said to be in secular decline. For many, their colonial masters had left them, after long years of exploitation, with poor physical, social and economic infrastructures, including a labour force that was poorly educated.
Even the terms used to describe the countries were foreboding of economic doom. First, they were condescendingly called backward, which implied a sense of economic hopelessness. Then they became underdeveloped, an equally pessimistic term, with its overtone of under-performance. After this, some called them Third World, after the First World of rich and largely industrial Western countries, and the Second World of the Soviet-bloc countries. This was inappropriate because many Second World countries did not enjoy a much better standard of living than many Third World countries. It was also pessimistic because it still implied a third-class economic performance. Eventually and perhaps begrudgingly, they became developing countries, possibly in recognition of the economic progress made and the need to be more politically correct.
In fact, much to everyone’s surprise, the development performances of developing countries in the period after independence surpassed anything that was thought possible. Real output grew much faster than population to produce significant increases in income per head. Table 1.1 shows that in the 25 years after 1950 their real output grew by an average of 3.4 per cent a year, compared to the 3.2 per cent registered by developed countries. The forecast by Rosenstein-Rodan (1961) that no developing country would achieve a growth rate in per capita income of more than 3 per cent turned out to be way off the mark.
Difficult international economic conditions in the 1980s slowed the rate of economic growth in developing countries after 1975. However, Table 1.2 shows that the growth rate in income per head of 2.5 per cent over the period 1965–90 still exceeded, or kept pace with, the 2.4 per cent recorded by developed nations.
Table 1.1 GNP per capita and its annual growth rate, 1950–75
| Population | GNP per head |
Region | 1975 (millions) | 1950 | 1975 (1974 US$) | Annual growth rate 1950–75 (%) |
South Asia | 830 | 85 | 132 | 1.7 |
Africa | 924 | 170 | 308 | 2.4 |
Latin America | 304 | 495 | 944 | 2.6 |
East Asia | 312 | 130 | 341 | 3.9 |
China | 820 | 113 | 320 | 4.2 |
Middle East | 81 | 460 | 1,660 | 5.2 |
Developing countries | 2,732 | 160 | 375 | 3.4 |
Developed countries | 654 | 2,378 | 5,238 | 3.2 |
Source: Morawetz (1977, p. 13).
Tables 1.3 and 1.4 take the story of growth performances up to 1998. Again, difficult international economic conditions in the 1990s led to a further slowing down of the growth rate in the per capita income of all countries. For the first time, the growth rate of developing countries (1.6 per cent) fell below that of developed countries (2.2 per cent).
Then, in July 1997, the currencies of many Asian countries, starting with that of Thailand, came under sustained attack. The subsequent drastic fall in the values of the currencies of many of these countries, particularly Thailand, Indonesia, South Korea and Malaysia, reduced very significantly their economic growth rates. The GNP per capita for East Asia and the Pacific fell by 2.2 per cent over the 1997–98 period (Table 1.4). In the early days of the crisis, the most frequently heard reasons for the worst affected East Asian countries were economic mismanagement, and cronyism and nepotism of a high order. Later, it was argued that speculators played a part, because the extent of the economic mismanagement could not justify the extent of the fall in the value of the currencies. Probably a case can be made that the role of the speculation varies directly with the extent to which the economy was mismanaged. Thus, the currencies of Singapore and Taiwan were the least affected, probably because the two countries have the most efficiently run economies in East Asia.
Table 1.2 GNP per capita and its annual growth rate, 1965–90
| Population | GNP per head |
Region | 1990 (millions) (US$) | 1990 (%) | Annual growth rate 1965–90 |
Sub-Saharan Africa | 495 | 340 | 0.2 |
East Asia and Pacific | 1,577 | 600 | 5.3 |
South Asia | 1,148 | 330 | 1.9 |
Europe | 200 | 2,400 | – |
Middle East and North Africa | 256 | 1,790 | 1.8 |
Latin America and the Caribbean | 433 | 2,180 | 1.8 |
Developing countries | 4,146 | 840 | 2.5 |
Developed countries | 816 | 19,590 | 2.4 |
Note: – not available.
Source: World Bank (1992, p. 219).
The East Asian countries affected are largely on the road to economic recovery. For example, the estimated 1999 growth rate for Thailand, which has the assistance of International Monetary Fund, is 5.0 per cent, compared to the −10.4 per cent for 1998. The estimate for Malaysia, which has acted on its own with unorthodox capital control measures, is 5.4 per cent, compared to the −7.5 per cent for 1998. Even for Indonesia, the worst affected economically, socially and politically, the estimated growth rate is 0.1 per cent, compared to −13.2 per cent for the previous year.
In summary, in the first twenty-five years of development, 1950–75, the growth rates in the per capita income of developing countries were unexpectedly high and exceeded those registered by developed countries. Another notable achievement is the significant reduction in the incidence of poverty (i.e., the percentage of the population living below the poverty line) in many countries (Morawetz, 1977, p. 40). On the other hand, Table 1.5 shows that income inequality, as measured by the Gini coefficient, worsened over the period 1960–80 for developing countries as a whole and for two of the three sub-groups (low-income and oil-exporting). This was due to a worsening in income distribution between different countries and within individual countries.
Table 1.3 GNP per capita and its annual growth rate, 1965–96
| Population | GNP per capita |
Region | 1996 (millions) | 1996 (US$) | Annual growth rate 1965–96 (%) |
Sub-Saharan Africa | 596 | 490 | −0.2 |
East Asia and Pacific | 1,732 | 890 | 5.5 |
South Asia | 1,266 | 380 | 2.2 |
Europe and Central Asia | 478 | 2,200 | −1.3 |
Middle East and North Africa | 276 | 2,070 | −1.8 |
Latin America and the Caribbean | 486 | 3,710 | 1.1 |
Developing countries | 4,834 | 1,190 | 1.6 |
Developed countries | 919 | 2... |