Chapter 6 - Development Flashcards
BRIC
Brazil, Russia, India, China
Developed countries
High income countries
Developing countries
Middle and low income countries
Economic development
Improvement over time of a wide range of economic indicators
Emerging countries
Middle income countries which could become high income countries over the 20/30 years
Tiger economy
An economy which undergoes rapid economic growth
Human Development Index
Health: life expectancy at birth
Education: mean years of schooling of adults aged +25 and the expected years of schooling of a 5 year old
Income: real GNI/capita at purchasing power parity
Advantages of HDI
Easy to calculate
Takes into account 3 factors - multi factor index
Disadvantages of HDI
Health doesn’t include quality of life
Education doesn’t include quality and success
Doesn’t include equality of income
Other factors affect development
Other measures of economic development
- The percentage of adult male labour in agriculture
- Access to clean water
- Energy consumption
- Access to internet/thousand of the population
- Access to mobile phones/thousand of the population
- Access to doctors/thousand of the population
Comodities and volatile prices (Constraints on growth and development - Impact of economic factors in countries)
Inelastic in demand and supply
Developed countries import them
Fluctuations make it hard to predict SR + LR revenues
Discourages investment
Makes GDP change drastically
Primary product dependency
(Constraints on growth and development - Impact of economic factors in countries)
Prebish-Singer hypothesis: in the long run, the price of commodities will fall
Developing depend on primary sector
Commodities - inferior goods while manufactured are normal goods - unable to develop
Eval: dutch disease
- discover natural resource, increase its demand and thus its price, increase currency demand
- appreciation, export price rise, decrease competitiveness
BUT: essential good - increase export revenue, increase investment, increase development
Subeval: premature industrialisation
Savings Gap (Constraints on growth and development - Impact of economic factors in countries)
Harrod - Domar model states investment, savings and technology changes are key in economic growth
Harrod Domar model
Increase national savings
Increase investment
Larger capital stock available
Increase productivity
Increase in real GDP/GNI
Increase income/capita
Repeat
Foreign currency gap (Constraints on growth and development - Impact of economic factors in countries)
Exports from a developing country are too low compared to imports
The country doesn’t have foreign currency to pay for imports
Capital flight (Constraints on growth and development - Impact of economic factors in countries)
Take money, assets, and investments out of the country
Reduced domestic investment
Weakened domestic currency
Loss of tax revenue
Higher borrowing costs
Debt (Constraints on growth and development - Impact of economic factors in countries)
Money that a country owes to foreign creditors
- occurs when a country borrows funds
- loans, bonds etc
Demographic factors (Constraints on growth and development - Impact of economic factors in countries)
Ageing population = harder to generate output
Infrastructure (Constraints on growth and development - Impact of economic factors in countries)
Developed = increase the value of infrastructure
Developing: Deters FDI and Reduces output
Education and skills (Constraints on growth and development - Impact of economic factors in countries)
Developed = increased quality
EVAL: structural unemployment increases in developed due to technical advances
Non economic factors which deter development
Corruption
Poor governance - no property rights = decrease investment
Civil wars
Migration
Terrorism
Measures to promote growth + development
Market orientated: rely upon free markets to deliver economic development
Interventionist: governments play a leading role, regulating and manipulating markets
Trade liberalisation (market orientated)
Removal of trade barriers - free trade - tariff graph
Benefit:
- export led growth - rise in AD
- specialisation
Eval:
- not protecting domestic industries and infant industries - due to increased international competitiveness
Promotion of FDI (market orientated)
FDI: investment from abroad
Investment increase AD
- harrod domar model
Eval: not protecting local businesses or labour
Removal of government subsidies (market orientated)
Subsidies - increase investment and output and productivity etc
Eval: dependence and might be poorly targeted
Microfinance schemes (KIVA)- (market orientated)
Schemes in which individuals (or businesses) can lend small amount of revenue to developing countries (with no interest) for investment
Benefit:
- access to finance for investment
Eval:
- dependency
- finance not used for investment - unsustainable?
Protectionism (interventionist orientated)
Adding tariffs - graph
Increase cost of importing
Protect infant industries
Eval: retaliation
Promoting joint ventures with TNCs (interventionist orientated)
Increase jobs and decrease unemployment
Spreads risk
Eval: poor working conditions
Buffer stock schemes (interventionist orientated)
Government buys when excess and sells when shortage
Keeps prices stable - not volatile
GRAPH
Eval: moral hazard
Industrialisation (other strategies)
Lewis model
Developing countries focus on agriculture and could move towards manufacturing
Development of tourism (other strategies)
Tourism causes jobs and can help reduce unemployment
- dependency on primary product reduced
The role of international institutions
World Bank - loan funds to member countries
- Aim: promote economic and social progress
IMF: promote monetary cooperation + help free trade
NGO: aim to raise the voices of ordinary citizens
- Health care, human rights or environment
