4.3 Emerging and developing economies Flashcards
Economic Development
Long run improvements in income per capita, education and health outcomes and reductions in extreme poverty & hardship. A broader measure of progress than just economic growth.
Human Development Index (HDI)
Development measure. Tries to reflect a broader measure of a country’s development of by combining: 1) GDP per capita (wealth); 2) literacy rates (education); and 3) life expectancy (Health) in a single number.
Measured from 0 to 100. Higher = more developed.
Multivariable Poverty Index (MPI)
Qualitative measure of poverty and development using many specfifc factors and measures such as access to running water, electricity, phones etc.
Primary Product Dependency
An economy dependent on primary products for most of its GDP and its potential export earnings. Leads to unstable prices/incomes.
Subsistence
Making just enough to survive/feed yourself. Means there is nothing left over to exchange, trade or even save.
Savings Gap
Country has lots of subsistence farming and therefore it cannot put aside enough savings to fund significant investment.
Dutch Disease
Economy is dominated by one lucrative export (like oil) – leading to too much focus on this resource (rent-seeking), conflict and an artificially strong exchange rate. Holds back the rest of the economy.
Foreign exchange gap
A country with low/cheap exports may not earn much ‘hard’ foreign currency. Makes it harder to purchase key goods/invest.
Capital flight
When international investors pull ‘hot’ money or investment out of a country extremely quickly, causing the collapse of currencies.
Lack of property rights
A country that cannot protect property rights through the law. Undermines the ability of entrepreneurs to keep profits & invest.
Harrod-Domar
Growth and development are driven by investment and capital accumulation.
Lewis Model
Development is driven by transferring labour and resources from a traditional unproductive sector (like farming) into a modern productive sector like industry in the cities.
Rostow Model
Development progresses in stages and becomes self-sustaining when the economy reaches ‘take off’ and people can afford consumer goods.
Marxist dependency theory
Developing countries in the ‘third world’ have been/are exploited by western colonial powers. Development has been limited as resources have been stolen and economies held back.
Washington consensus
Views of the world bank/IMF in the 1980s-early 2000s. Development best promoted by free markets, international trade, opening domestic economies to FDI and tight macro policies to control inflation.
