Transcript Chapter 16-Web - McGraw Hill Higher Education

Chapter 25W
The Economics of Developing
Countries
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Classifications
• Industrially advanced countries
• High income nations
• Well-developed market economies
• Per capita income $38,745 in 2010
• Developing countries
• Middle income nations
• Low income nations
• Wide variation in income per capita
LO1
LO1
25W-2
Comparisons
• U.S. GDP $14.6 trillion
• Combined GDP of DVCs $20 trillion
• U.S. has 4.5% of population but produces
23.1% of world’s output
• U.S. per capita GDP is 127 times that of
Democratic Republic of the Congo
• Walmart’s annual revenue is greater than all
but 23 nations’ GDP
LO1
LO1
25W-3
Growth, Decline and Income Gaps
• Some developing countries have grown
considerably
• China, Malaysia, Chile, Thailand
• Some developing countries have become highincome
• Singapore, Greece, Hong Kong
• Income gap has widened
• Developing countries must grow faster to
reduce the gap
LO1
LO1
25W-4
Human Realities of Poverty
Selected Socioeconomic Indicators of Development
LO1
LO2
25W-5
Obstacles to Development
• The path to economic development
• Use existing resources more efficiently
• Expand available supplies of resources
• Simple generalizations are not possible
• Natural Resources
• Shortage of land, resources, power
• Tropical climates hinder labor, lead to
disease
• Difficult to solve
LO2
LO2
25W-6
Obstacles to Development
• Human resources
• Large populations
• Reduced standard of living
• Less saving and investment
• Lower productivity
• Overuse of land resources
• Urban problems
• Qualifications
• Unemployment and underemployment
LO2
LO2
25W-7
Obstacles to Development
• Capital accumulation
• This is key for economic development
• Domestic capital formation
• Savings potential
• Capital flight
• Investment obstacles
• Lack of infrastructure
LO2
LO2
25W-8
Obstacles to Development
• Technological advance
• Borrowed technology
• Socio-cultural obstacles
• Institutional obstacles
• Land reform
LO2
LO2
25W-9
The Vicious Circle of Poverty
LOW
PER CAPITA
INCOME
LOW
PRODUCTIVITY
RAPID
POPULATION
GROWTH
LOW LEVEL
OF SAVING
LOW LEVEL
OF DEMAND
LOW LEVELS OF
INVESTMENT IN
PHYSICAL AND
HUMAN CAPITAL
LO3
LO3
25W-10
Role of Government
LO4
LO4
• A positive role
• Establishing the rule of law
• Building infrastructure
• Embracing globalization
• Building human capital
• Promoting entrepreneurship
• Developing credit systems
• Controlling population growth
• Making peace with neighbors
25W-11
Role of Government
• Public sector problems
• Misadministration
• Bribery
• Corruption
LO4
LO4
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Role of Advanced Nations
•
•
•
•
LO5
LO5
Expanding trade
Admitting temporary workers
Discouraging arms sales
Foreign aid
• Direct aid
• The World Bank group
25W-13
Role of Advanced Nations
• Foreign harm?
• Dependency and incentives
• Bureaucracy and centralized government
• Corruption and misuse
• Current level of foreign aid
• Flows of private capital
LO5
LO5
25W-14
Famine in Africa
•
•
•
•
•
•
•
LO5
Root causes – natural and human
Droughts – Lack of rainfall
Civil strife – Rebellions and civil wars
Population growth
Ecological degradation
Public policies
External debt
25W-15