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Issues of Economic Development


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Title: Issues of Economic Development

Issues of Economic Development
Chapter 18 Issues of Economic Development
  • A transitional economy is a country that has
    moved (or is moving) from a command economy to a
    market economy.
  • Promoting development also promotes good
    government and economic opportunity in less
    developed countries.

3 Major Levels of Development
  • Developed Nations
  • Developed nations have market economies with
    high standard of living
  • high GDP, industrialization, property ownership,
    stable governments
  • U.S., Canada, Western Europe, Australia, New
    Zealand, Japan, South Korea
  • Most people healthy, educated, with comfortable
    lives, urban jobs
  • Few agricultural workers produce food surplus
    through technology

3 Major Levels of Development
  • Developing Economies
  • Transitional economycountry moving from command
    to market economy
  • China, Russia, various Eastern European countries

3 Major Levels of Development
  • Less Developed Countries
  • Less developed countrylower GDP, less industry,
    lower living standard
  • often ineffective or corrupt governments do not
    protect property rights
  • Middle-income Brazil, Thailand low-income
    Mozambique, Cambodia
  • Low-income lack infrastructurebasic support
    systems of an economy
  • people have little education, poor sanitation,
    little political freedom

Standards of Economic Development
  • Per Capita Gross Domestic Product
  • Per capita gross domestic productGDP divided by
    total population
  • most popular measure of economic development
  • to compare nations, figures adjusted for
    difference in cost of products

Standards of Economic Development
  • Health
  • Health and health care statistics help determine
    level of development
  • Infant mortality ratebabies who die in first
    year per 1,000 births
  • low rate is result of good sanitation, health
    care, nutrition
  • Life expectancynumber of years person likely to

Standards of Economic Development
  • Education
  • Literacy ratepercent of people over 15 who can
    read and write
  • Percentage of school-age children actually
    enrolled an important statistic
  • Human development index (HDI)combines various
  • real GDP per capita, life expectancy, literacy
    rate, student enrollment

Standards of Economic Development
  • Consumption of Goods and Services
  • How people spend income after food and shelter
    indicates development
  • Increasing consumption of big-ticket items shows
    economy growing
  • also rising living standards
  • Less developed nations have more growth potential
    for consumer consumption
  • Today North America, Western Europe 12
    population, 60 consumption

Standards of Economic Development
  • Energy Use
  • Electricity, energy contribute to economic
  • Average global electricity consumption 2,744
    kilowatt-hours per capita per year
  • developed nations use over 7,000 less developed
    use 750
  • Energy used for commerce correlates to technology
    use, other measures
  • Projection to 2025 LDC energy use will rise far
    more than developed

Standards of Economic Development
  • Labor Force
  • All economically active people between 15 and 65,
    employed or not
  • More developed nations have
  • fewer agricultural workers, more manufacturing
    and service workers

Reviewing Key Concepts
  • Explain the relationship between the terms in
    each of these pairs
  • developed nations and less developed countries
  • human development index and infant mortality rate

A Framework for Economic Development Objectives
  • Fertile farmland and appropriate climate help
  • Natural resources help
  • Also must invest in human and physical capital
    for economic expansion

  • High Levels of Human Capital
  • People most valuable resource in a market economy
  • Commitment to education major element of growing
    market economy
  • Educated citizens can make informed decisions for
    themselves and children
  • get health care, vote, take part in civic
    affairs, avoid poverty

  • High Levels of Physical Capital
  • Physical capital, including technology, makes
    people more productive
  • Technology always being refined in developed
  • LDCs can copy or import
  • Copying requires trained people importing
    requires foreign investment
  • investors prefer LDC with human capital

Financing Development
  • International Help Agencies
  • World Bankprovides loans, policy advice,
    technical assistance
  • United Nations Development Program (UNDP)fights
  • in 2006 had active programs in 174 nations

Financing Development
  • International Help Agencies
  • International Monetary Fund (IMF)international
  • promotes monetary cooperation, fosters economic
  • also gives temporary assistance to ease balance
    of payments adjustment
  • Helps with debt restructuringaltering debt
    agreements for advantage
  • Stabilization programsreforms required of
    economy likely to default

Financing Development
  • Loans and Aid
  • External debtmoney borrowed from foreign banks
    or governments
  • has become problem in some countries in South
    America, Africa
  • Defaultnations inability to pay interest or
    principle on a loan
  • Nations may also seek foreign aidmoney from
    other nations