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Economics > 4.3 Emerging and Developing Economies > Flashcards

4.3 Emerging and Developing Economies Flashcards

1
Q

what is economic development

A

improvements in living standards.

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2
Q

developed country

A
  • One with a high GDP per head and tends to be thought of as Western.
  • high levels of education healthcare, reliable and safe transport, high productivity and investment
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3
Q

developing country

A
  • one with low GDP per head low levels of physical and human capital and high levels of unemployment and underemployment.
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4
Q

what is Human Development index

A

A measure of economic development calculated by the UN. It is a composite index
based on three factors:
- health
- education
- income

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5
Q

how is health measured in HDI?

A

measured by life expectancy at birth

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6
Q

how is education measured in HDI?

A

measured by the mean years of schooling of adults aged 25+ and the expected years of schooling of a current 5-year-old over their lives

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7
Q

how is income measured in HDI?

A

measured by real GNI per capita at purchasing power parity.

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8
Q

how is HDI calculated

A

Each of the three indicators is given equal weighting and a mean is taken to give a figure
between 0 and 1. The higher the number, the greater the level of development.

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9
Q

Advantages of HDI

A
  • takes into account three key factors
  • relativelt easy to calculate
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10
Q

disadvantages of HDI

A
  • issues with the figures
  • equality of income
  • there are other factors whcih affect development
  • only an indicator
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11
Q

Inequality-adjusted Human Development Index (IHDI)ai

A
  • This is an adjustment of HDI which includes a fourth indicator of development:
    inequality.
  • The Atkinson Index adjusts measures for education, health and income
    according to the level of inequality.
  • It is broader than HDI but can still be criticised
    for not taking into account more measures and quality.
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12
Q

The multidimensional poverty index

A
  • measures the precentage of the population that is multidimensional poor
  • focuses on povery
  • cannot cover all countries as data is not always avalible
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13
Q

The Genuine Progress Indicator

A
  • calcualted from 26 different indicators mainly economic, envirnoment and social.
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14
Q

economic factors influencing growth and development

A
  • Primary product dependency
  • volatility of commodiry prices
  • savings gap
  • foreign currency gap
  • capital flight
  • demographic factors
  • debt
  • access to credit and banking
  • infrastructure
  • education and skills
  • absence of property rights
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15
Q

non-economic factors influencing growth and development

A
  • corruption
  • high levels of bureaucracy
  • dieseases
  • poor climates and geographical terrain
  • civil wars
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16
Q

primary product dependency

A

when a country is over dependent on the production and export of a primary sector product

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17
Q

advantages of PPD

A
  • provides extensive revenue
  • local production can save money
  • afordable industry can create jobs in other industries
  • trade deficit savings
  • attracts FDI
  • source of growth
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18
Q

disadvantages of PPD

A
  • prices are volatile
  • supply can be volatile
  • limited resources
  • discourages investment in other industries
  • dutch disease
  • inflation
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19
Q

volatility of commodity prices

A
  • price changes means that producer’s income and the country’s earning are fluctuating making it difficult to plan and carry out long
    term investment as well as meaning that producers can see their income fall very
    rapidly, causing poverty.
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20
Q

savings gap

A

the difference between actual savings and the level of savings needed to achieve a higher growth rate.

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21
Q

Harod-Domar model

A
  • Suggests savings provide the funds which are borrowed
    for investment purposes and that growth rates depend on the level of saving and the
    productivity of investment.
  • It concludes that economic growth depends on the amount of labour and capital and that developing countries have a vast labour supply, so
    their problems are caused by capital.
  • In order to improve capital, investment is necessary and investment requires savings.
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22
Q

problems with harod-domar

A
  • economic growth isnt the same as economic development
  • investment could be wasted
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23
Q

foreign currecny gap

A

when exports from a developing country are too low compared to imports to finance the purchase of investment or other goods from overseas required for
faster economic growth.

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24
Q

capital flight

A

Large amounts of money are taken out of the country, rather than being left there
for people to borrow and invest. If money was placed in banks within the country,
then credit could be created by banks for consumers and businesses to spend.

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25
Q

demographic factors

A

Developing countries tend to have higher population growth, which limits
development. If population grows by 5%, the economy needs to grow by 5% to even
maintain living standards. This means developing countries need to have higher
rates of growth to develop than more developed countries would do.

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26
Q

debt

A

they suffer from high levels of interest repayment;
sometimes even higher than the loans and aid they receive from developed countries, meaning money is flowing from developing to developed countries.

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27
Q

access to credit and banking

A
  • limited access to credit and banking
  • cannot access funds for investment
  • struggel to save for the future
28
Q

infrastructure

A
  • hard for business to trade and set up within the country
  • however can be expensive and environmetnal goals
29
Q

education and skills

A
  • low levels of productivity
  • however which type of education and problems concerning over education
30
Q

absence of property rights

A
  • cannot use the law to protect their assets
31
Q

strategies influencing growth and development - market orientatated

A
  • trade liberalisation
  • promotion of FDI
  • removal of government subsidies
  • floating exchange rate systems
  • microfinance schemes
  • privatisation
32
Q

strategies influencing growth and development - interventionist

A
  • development of human capital
  • protectionism
  • managed exchange rates
  • infrastructure development
  • promoting joint ventures with global companies
  • buffer stock schemes
33
Q

strategies influencing growth and development - other strategies

A
  • industrialisation: the Lewis model
  • development of tourism
  • development of primary industries
  • Fairtrade schemes
  • aid
  • debt relief
34
Q

trade liberalisation - market based strategy

A
  • Countries can aim for export led-growth.
  • Removing trade barriers will mean that domestic industries either close or are forced
    to become as efficient as other world producers. Resources will be allocated to their best use where the country has a comparative advantage.
35
Q

Promotion of FDI - market based strategy

A
  • Firms tend to undertake FDI because production costs are lower in developing
    countries and because it enables them access to a new market.
  • transfer of knowledge
  • creates jobs and will lead to the multiplier
  • fill the savings gap
36
Q

FDI

A

Investment by one private sector company in one country into another private sector company in another.

37
Q

eval promotion of FDI - market based strategy

A
  • repatriations of profits and developing countries may
    find the company exploits them, by offering lower wages and poorer conditions than
    they would in a developed country
  • country may lose sovereignty
  • environmental damage and exploitation of natural resources
38
Q

removal of government subsidies - market based strategy

A

They can be an effective way of minimising absolute poverty and ensuring a minimum
standard of living but they create many problems.
can also allow for inflant industry to grow

39
Q

eval of government subsidies - market based strategy

A
  • poorly targeted
  • can lead to inefficiency
  • represent a large proportion of government spending
  • can cause problems of corruption
  • politically unpopular
40
Q

privatisation - market based strategy

A
  • end the corruption within a firm who is owned by the state, as well as encouraging them to be more efficient by increasing competition.
  • improve government finanaces and reduce the levels of debt
41
Q

eval of privatisation - market based strategy

A
  • can be associated with corruption
  • monopoly
42
Q

development of human capital - interventionist based strategy

A
  • provides workers with skills and training and thus help them to be more efficent and improve productivity
43
Q

protectionism - interventionist based strategy

A
  • allows domestic industries to grow
  • policy of import substitution
44
Q

eval protectionism - interventionist based strategy

A
  • countries lose out from the benefits of specialisation and comparative advantage
  • could cause inefficiency
  • retaliation
45
Q

managed exchange rates - interventionist based strategy

A
  • The currency could be fixed against a number of different exchange rates.
  • high exchange rate for essential products will mean that the price within the country is low, which helps to reduce poverty if the goods are consumer goods and encourages investment if they are capital goods.
  • often fail to work in
    practice
  • governments can manage a single exchange rate which will reduce volatility
46
Q

infrastructure development - interventionist based strategy

A
  • Infrastructure is essential for development
  • Infrastructure tends to suffer from the free rider problem and has very high capital costs
  • It has many positive social
    benefits
47
Q

infrastructure development - interventionist based strategy eval

A
  • government may not have the funds
  • inefficient
  • bribery and corruption, cause environmental damage
48
Q

promoting joint ventures with global companies - interventionist based strategy

A
  • reduce the exploitation of countries
  • profits generated within the country can be used for investment
49
Q

buffer stocks scheme - interventionist based strategy

A
  • It should be self-financing: money is raised when selling the products, which allows the government to buy the next lot of stocks.
  • used on commoditites
  • stabilises prices
  • can solve PPP
50
Q

buffer stocks scheme - interventionist based strategy

A
  • requires stocks to go up and down
  • huge start-up costs
  • inefficient
  • government finances
51
Q

Other strategies - industrialisation

A
  • lewis model
  • modern industrial sector would attract workers
  • high incomes so more savings for investment
  • savings and investment were the key to growth
52
Q

Other strategies - industrialisation eval

A
  • requires vast amount of labour
  • those with higher wages will save and invest
  • migration to urban poverty
  • improvements in technology reduces demand for labour
  • Industrialisation is a result of development
  • not all countries will develop in the same way.
53
Q

other strategies - development of tourism

A
  • provides them with funds to develop their economy
  • The income elastic nature of tourism means that as the global economy grows,
    demand for the industry will increase even further, allowing the developing country to
    continue development.
  • fills currency gap as represent as foreign currency
  • improvements in infrastructure
  • jobs created
  • higher taxe revenues
54
Q

other strategies - development of tourism eval

A
  • industry is seasonal
  • involves low skilled, low paid jobs
  • trends in tourism
  • TNCs repatriate their profits
  • externalities
55
Q

other strategies - development of primary issues

A
  • The development of a primary industry provides funds to allow a country to diversify as well as allowing
    infrastructure development and better education.
56
Q

other strategies - development of primary issues eval

A
  • PPP
  • corruption
57
Q

other strategies - fair trade schemes

A
  • A fair price, community development, fair working conditions and protecting the environment.
  • stability and raises their income.
  • child labour won’t be used
  • does not take place at the expense of environmental degradation
  • higher income and satisfaction for those apart
58
Q

other strategies - Aid

A
  • reduce absolute poverty
  • fill the savings gap
  • fill the foreign currency
  • increased globalisation and trade
59
Q

other strategies - debt relief

A
  • high interest repayments
  • It will ease government finances and allow more money to be spent on provision of services and infrastructure to aid development.
60
Q

Different types of aid

A
  • tied aid is aid with conditions attached, such as economic or political reforms or a commitment to buy goods from the donor country
  • bilateral aid is directly from one country to another
  • multilateral aid is when countries give aid to an international organisation who
    distributes it to other countries.
  • concessional loans are loans given on lower, or no, interest rates
61
Q

aid eval

A
  • dependency culture
  • corruption
  • difficult to know the best place to spend the aid
62
Q

debt releif eval

A
  • moral hazard
  • eases pressure on weak govs
63
Q

what do the world bank aim for

A

It aims to bring about long-term development and a reduction in
poverty.

64
Q

what does the world bank provide

A
  • The IBRD and IDA provide financing, policy advice and technical assistance: IDA
    helps the poorest countries whilst IBRD helps middle income and creditworthy poorer countries.
  • IFC, MIGA and ICSID help strengthen the private sector in developing countries by providing them with finance, technical assistance, political risk insurance and settlement of disputes.
65
Q

world bank developments project

A
  • The World Bank has funded over 12,000 development projects since 1947 through
    interest free loans and grants and supports long term human and social
    development.
66
Q

IMF

A
  • ensure that exchange rate
    systems work well.
  • They provide loans to help countries when there are international exchange rate
    crises or when they cannot afford to pay off their international debt.
  • insists macroeconomic reforms
  • provides advice to economic stability and
    raise living standards and help countries to develop their economic institutions
67
Q

NGOs

A
  • non-profit organisations that are run independently from the government.
  • direct assistance to countries
  • can act as pressure groups
  • they alone can never solve the problem

Economics (21 decks)

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