Issues of Economic Development

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Issues of Economic Development
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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.

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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

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3 Major Levels of Development

• Developing Economies
• Transitional economycountry moving from command
  to market economy
• China, Russia, various Eastern European countries

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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

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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

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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
  live

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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
  measures
• real GDP per capita, life expectancy, literacy
  rate, student enrollment

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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

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Standards of Economic Development

• Energy Use
• Electricity, energy contribute to economic
  development
• 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

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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

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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

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Resources
A Framework for Economic Development Objectives

• Fertile farmland and appropriate climate help
  development
• Natural resources help
• Also must invest in human and physical capital
  for economic expansion

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Resources

• 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

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Resources

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

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Financing Development

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

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Financing Development

• International Help Agencies
• International Monetary Fund (IMF)international
  organization
• promotes monetary cooperation, fosters economic
  growth
• 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

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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