Transcript Economics for Today 2008, 5th ed

Growth and the
Less-Developed
Countries
1
What is one way to
compare the well-being
of one country to
another?
GDP per capita
2
What is GDP per capita?
The value of final goods
produced (GDP) divided
by the total population
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita
3
What are industrially
advanced countries (IACs)?
High-income nations that
have market economies
with technologically
advanced capital and
well-educated labor
AKA – MDCs (Most
4
Who are the advanced
countries?
http://en.wikipedia.org/wiki/Develope
5
What are lessdeveloped countries
(LDCs) ?
Economies based on
agriculture which are
lacking in technology,
advanced capital and
well-educated labor
6
Developed and Developing
Countries
7
Who are the LDCs?
Most countries of Africa,
Asia, and Latin America
8
Who is a problem?
LDC’s per capita is subject
to greater measurement
errors than for IAC’s
9
What are problems
in comparing GDP
per capita?
• measurement errors
• income distribution
• fluctuations in exchange rates
• differences in living standards
10
Is GDP per capita
correlated with other
measures of quality of life?
Yes
11
What are quality of
life indicators?
• life expectancy
• adult literacy
• daily calorie supply
• energy consumption per
capita
12
$34,799
$3,810
IAC’s
Europe &
Central Asia
$3,666
$1,823
Latin Am & Middle East &
Caribbean
N. America
$1,080
$721
East Asia & SubPacific Saharan
Africa
$629
S. Asia
13
What factors come
together to produce a
country’s growth?
• natural resources
• investment in capital
• investment in human capital
(education & job training)
• low population growth
• infrastructure
14
What is infrastructure?
Capital goods usually
provided by the
government, including
highways, bridges,
waste and water
systems, and airports
15
What is a major
problem for LDCs?
They find themselves in a
vicious cycle of poverty
16
What is the vicious
circle of poverty?
The trap in which countries
are poor because they
cannot afford to save and
invest, but they cannot
save and invest because
they are poor
17
18
What are the political
factors favorable for
economic growth?
• Gov’t stability (law and
order)
• infrastructure
• international trade
19
Economic growth and development
Natural
resources
endowment
Human
resources
development
Capital
investment
Technological
progress
Political
environment
20
What is foreign aid?
The transfer of money or
resources from one
government to another
for which no repayment
is required
21
In fiscal year 2011, the U.S.
government allocated the following
amounts for aid:
• Total economic and military assistance:
$49.5 B ($52.7 B in 2010)
– Total military assistance: $17.8 B ($15 B)
– Total eco. assist:
$37.7 B ($37.7 B)
• of which, USAID assist: $14.1 B ($14.1 B)
http://en.wikipedia.org/wiki/United_States_foreign_aid
22
What is the Agency for
International
Development?
AID is the agency of
the U.S. State
Department that is
in charge of U.S.
aid to foreign
countries
23
What is the World Bank?
The lending
agency that
makes long-term
low-interest loans
and provides
technical
assistance to
less-developed
countries
24
What is the International
Monetary Fund (IMF)?
The lending
agency that
makes shortterm conditional
low-interest
loans to
developing
countries
25
What is the New International
Economic Order (NIEO)?
A series of proposals
made by LDCs in
1974, calling for
changes that would
accelerate the
economic growth and
26
What is a conclusion?
There is no single
strategy for
economic growth
and development
27
END
28