Transcript Development PPT TO PRINT FOR NOTES-Ch 9

Chapter 9
Development
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KI #1 Why Does Development Vary among
Countries?
 United Nations (UN) developed a metric to measure the level of
development of every country called the Human Development Index
(HDI). The highest possible HDI is 1.0 or 100%.
 Currently the highest HDI is Norway’s at 0.971 (in 2009) and the
lowest is Niger with an HDI of 0.34
 It is based on three factors:
1.
Economic Indicators
2.
Social Indicators
3.
Demographic Indicators
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Economic Indicators of Development
 A Decent Standard of Living
 UN measures standard of living based on two functions:
1. Gross national income (GNI)
 Value of the output of goods and services produced in a country annually,
including money that leaves and enters the country.
o Gross domestic product (GDP) is similar except it doesn’t account for money
entering and leaving the country.
 Per capita GNI measures average (mean) wealth, not its distribution among
citizens.
2. Purchasing power parity (PPP)
 Cost of living adjustment made to the GNI.
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Why Does Development Vary
Among Countries?
 Economic indicators of development
 Types of jobs
 Primary sector – directly extract materials from earth
 Secondary sector – manufacturing of products
 Tertiary sector – provision of goods and services
 Quartenary sector-Information, research and management
 Quinary sector-Executive decision makers
 Productivity
 Measured by the value added per capita (the gross value of the product
minus the costs of raw materials and energy)
 MDCs are more productive than LDCs
 Consumer goods
 3 consumer goods considered to be particularly good indicators of
development: cars, telephones and computers
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Social Indicators of Development
 Education and Literacy
 Student/Teacher ratio
 Literacy rate
 Health and Welfare
 Daily caloric intake
 Total expenditures on healthcare
 Access to healthcare (physicians/1000)
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© 2014 Pearson Education, Inc.
Why Does Development Vary among
Countries?
 Access to Knowledge
 UN considers years of schooling to be the most critical measure
of the ability of an individual to gain access to knowledge needed
for development.
 Quantity of Schooling


Average Years of schooling
o Global: 7 years
o Developing: 6 years
o Developed: 11 years
Expected years of schooling
o Developed: 16 years
o Developing: 11 years
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Demographic Indicators of Development
MDC
LDC
Life Expectancy
70s
60s
Infant Mortality Rate
99.5%
94%
Natural Increase Rate
0.2% NIR
1.5% NIR
Crude Birth Rate
12/1,000
23/1,000
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© 2014 Pearson Education, Inc.
Demographic, Social, and Economic Indicators of
Development
LDC
MDC
 Crude Birth Rate = high
 Crude Birth Rate = low
 Crude Death Rate = low
 Infant Mortality Rate = high
 Literacy Rate = low
 School Enrollment = low
 Total Fertility Rate =high
 Total % of pop under 15 =high
 Life Expectancy = low
 Natural Increase Rate = high
 GDP per Capita = low
 Primary Economic Activities= high
 Service Economic Activities =low
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 Crude Death Rate =low
 Infant Mortality Rate = low
 Literacy Rate = high
 School Enrollment = high
 Total Fertility Rate = low
 Total % of pop under 15 = low
 Life Expectancy = high
 Natural Increase Rate = low
 GDP per Capita = high
 Primary Economic Activities =low
 Service Economic Activities = high
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Look at your Key Issue 9-2 Questions
for MDC vs. LDC regions of the world
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North-South Divide
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Inequality Indexes
 Economic Disparity
The Gini coefficient is a measure of statistical dispersion
intended to represent the income distribution of a nation's
residents, and is the most commonly used measure of
inequality. When you look up economic statistics about
inequality, you often see it measured with a Gini coefficient.
0=Perfect Equality; 1=100% Inequality
 Gender Inequality is based on the Gender Development
Index
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© 2014 Pearson Education, Inc.
Gender Related Development Index
(GDI)
 GDI is based on economic, social and demographic indicators
as it compares the situation of women to that of men
 Economic Indicators-per capital income
 Social Indicators-# of females enrolled in school and % of
literacy
 Demographic Indicators-life expectancy
 Highest GDI
 U.S., Canada, W. Europe, Australia, Japan, S. Korea
 Lowest GDI
 Sub-Saharan Africa,Yemen
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© 2014 Pearson Education, Inc.
KI #2 Why Does Development Vary by Gender?
 Gender Inequality Measures
 UN created the Gender Inequality Index (GII) that is based on multiple
metrics.
 Gender Empowerment Measure (GEM)

Every country has a lower GEM than GDI b/c women possess a greater
share of a country’s resources than they do power over allocations of those
resources.

Defined: Ability of women to achieve improvements in status.
o Percentage of seats held by women in the national legislature.
o Percentage of women who have completed high school.
 Labor Force
 Female labor force participation rate defined as percentage of women holding full-time jobs
outside the home.
o Highest in developed countries.
 Reproductive Health
 Maternal mortality ratio
 Adolescent fertility rate
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Why Does Development Vary by Gender?
 Gender Inequality Trends
 UN asserts gender inequality has declined in nearly every country since
the 1990s.
 Greatest improvements in Southwest Asia and North Africa.
 U.S. is one of few developed countries where the GII has increased.
 Reproductive rights much lower in U.S. compared to other very high HDI countries.
 Percentage of women in the national legislature is relatively lower than other high
HDI countries.
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Why LDCs Face Obstacles to Development
 Two Paths to Development
 Developing countries chose of of two models to promote development:
1. Self-sufficiency
 Countries encourage domestic production of goods, discourage foreign ownership
of businesses and resources, and protect their businesses form international
competition.
 Most popular for most of 20th century
2. International trade
 Countries open themselves to foreign investment and international markets.
 Became more popular beginning in the late 20th century
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Self-Sufficiency Model
 Elements of the Self-Sufficiency Model
 Balanced growth
 country spreads investment as equally as possible across all
sectors of the economy and regions
 pace of development is modest
 Incomes in the countryside are consistent with the cities
 Isolates and helps weak businesses from competitors
 Limits imports and sets high taxes
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Self-Sufficiency Model (cont.)
 Problems and Criticisms
 Protects inefficient businesses (little incentive to improve
quality, lower production costs, etc.)
 Needs a large bureaucracy (has led to corruption and a black
market-informal sector)
 Examples
 India (in order for foreign countries to import into India, they
must get a license from the government with several dozen
agencies approving, pay heavy taxes, govt. restricts the quantity
to be sold in India, Indian money could not be converted to
other currencies to discourage Indian countries from exporting)
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Models of Development
Rostow: International Trade Approach
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Rostow: International Trade Model
 International Trade Path
 Rostow Model (LDCs=Stages 1-3)
1.
Traditional Society
o Not started the development process yet. Marked by a very high percentage of
people engaged in agriculture and a high percentage of national wealth
allocated to “nonproductive” activities. e.g. military or religion.
2.
Preconditions for Takeoff
o Elite group initiates innovative economic activities that ultimately stimulate an
increase in productivity. Country starts to invest in new technology and
infrastructure
3.
Takeoff
o Rapid growth is generated in a limited number of economic activities. e.g.
textiles or food production; other sectors still dominated by traditional
practices
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Rostow Model (cont.)
 Two Paths to Development
 Rostow Model (MDCs=Stages 4-5)
Drive to Maturity
o Modern technology diffuses from the few takeoff industries to other economic
sectors, thus sparking rapid growth. Workers become skilled and specialized
5.
Age of Mass Consumption
o Marked by a shift from heavy industry, such as steel, to consumer goods like
cars and refrigerators.
4.
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Rostow Model (cont.)
 Problems and Criticisms of Rostow
 Uneven resource distribution

When LDCs depend on the sale of one commodity and that prices goes down
 Increased dependence on MDCs
 LDCs need MDCs to invest during take-off
 Market decline
 Developing countries have found increased difficulty selling their manufactured goods
in a world market that has recently declined for many products.
 Examples
 Arabian Peninsula
 Petroleum sales finance housing, highways, airports, etc.
 Four Asian Dragons
 Lack natural resources, but promote development by producing textiles and
electronics with low labor costs
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Why Do Countries Face Obstacles to
Development?
 Financing Development
 Finance comes from two primary sources:
1. Direct investment by transnational corporations
2. Loans from banks and international organizations
 Foreign Direct Investment (FDI)

Defined: Investment made by a foreign company in the economy of another
country.

FDI grew from $130 billion in 1990s to $1.5 in 2000 and 2010.

In 2010, only 2/5 went from developed to developing

Major source of FDI are transnational corporations
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Why Do Countries Face Obstacles to
Development?
 Financing Development
 Loans
 Two major lenders to developing countries:
1.
World Bank
o Includes the International Bank for Reconstruction and Development (IBRD)
and International Development Association (IDA).
o IBRD provides loans to countries to reform public administration and legal
institutions, develop and strengthen financial institutions, and implement
transportation and social service projects.
o IDA provides support to countries considered too risky to receive loans from
IBRD.
© 2014 Pearson Education, Inc.
Why Do Countries Face Obstacles to
Development?
 Financing Development
 Loans
 Two major lenders to developing countries:
2.
International Monetary Fund (IMF)
o IMF provides loans to countries experiencing balance-of-payments problems
that threaten expansion of international trade.
o IMF assistance designed to help a country rebuild international reserves,
stabilize currency exchange rates, and pay for imports without the imposition
of harsh trade restrictions or capital controls that could hamper the growth of
world trade.
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Why Do Countries Face Obstacles to
Development?
 Financing Challenges in Developing and Developed Countries
 Developing Countries
 IMF, World Bank, and developed countries fear that granting, canceling, or
refinancing debts without strings attached will perpetuate bad habits in developing
countries.
 Developing countries required to prepare a Policy Framework Paper outlining a
structural adjust program, which includes economic goals, strategies for achieving the
objectives, and external financing requirements.
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Why Do Countries Face Obstacles to
Development?
 Financing Challenges in Developing and Developed Countries
 Developed Countries
 Heart of the global economic crisis in developed countries was the poor
condition of many banks and other financial institutions.
 Bad loans were especially widespread in housing, which led to the housing
bubble- a rapid increase in the value of houses following by a sharp decline
in their value.

Bubble burst because of relaxation of long-standing restrictions on the ability of
individuals to purchase houses and higher-income people took advantage of lowinterest loans to buy additional houses.
© 2014 Pearson Education, Inc.
Why Do Countries Face Obstacles to
Development?
 Making Progress in Development
 Fair Trade
 Defined: Commerce in which products are made and traded according to
standards that protect workers and small businesses in developing
countries.

Ex. In North America, Ten Thousand Villages is the largest fair trade organization in
North America.
 Because fair trade organizations bypass distributors, a greater percentage
of the retail price makes it way back directly to the producers.
 Fair Trade requires employers to pay workers fair wages, permit union
organizing, and comply with minimum environmental and safety
standards.
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Why Do Countries Face Obstacles to
Development?
 Making Progress in Development
 Immanuel Wallerstein, a U.S. social scientist, posited a world-systems
analysis that unified the world economy with developed countries
forming an inner core area, whereas developing countries occupy
peripheral locations.
 Developing countries in the periphery have less access to the world
center of consumption, communications, wealth, and power, which are
clustered in the core.
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Wallerstein’s World System Analysis
Core: Dominates Global Economy
High – Income, use of technology, % of
tertiary activities, levels of Education
by the majority of the population.
OECD countries G8
Semi-Periphery: Increased economic
development. BRICS, 4 Dragons,
Middle East, Eastern Europe
Periphery: Dependent on Core as
markets for raw materials and sources
of technology
Low Income, Low use of technology,
High % of primary activities, Low
levels of education by the majority of
the population
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Core
Processes that incorporate
higher levels of education,
higher salaries, and more
technology
* Generate more wealth in the
world economy
Periphery
Processes that incorporate
lower levels of education,
lower salaries, and less
technology
* Generate less wealth in the
world economy
Semi-periphery
Places where core and periphery
processes are both occurring. Places
that are exploited by the core but then
exploit the periphery.
* Serves as a buffer between core and
periphery
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© 2014 Pearson Education, Inc.
Dependency Theory
• Dependency Theory
Political & economic
relationships between
nations & regions limit the
development of the less
developed areas
• Colonial dependencies are
still in place from long ago.
• Dependency theory sees
little hope for economic
prosperity in some
traditional parts of the
world
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Why Do Countries Face Obstacles to
Development?
 Making Progress in Development
 Closing the Gap
 Progress in reducing the gap in level of development between developed and developing
countries varies depending on the variable:
 Infant Mortality Rate
o Gap has narrowed from 17 to 6 (per 1,000) in developed countries and from 107
to 44 developing countries.
 Life Expectancy
o Gap has not narrowed.
 GNI Per Capita
o Gap in wealth between developed and developing countries has widened.
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