Development economics Flashcards
Absolute poverty
ABSOLUTE POVERTY: a state when basic necessities needed to sustain life cannot be accessed.
Relative poverty
RELATIVE POVERTY: a state when living standards are well below an observed average in an economy.
HDI
HDI is an index cretated by the UN to measure countries’ economic and social development.
Components:
- Life expectancy at birth
- Education enrollment rate
- Living standards (GNI adjusted for PPP)
Millenium Development Goals (MDGs)
- universal primary education
- gender quality, women’s empowerment
- combating HIV/AIDS, malaria
- eradicate extreme poverty, hunger
- reduce child mortality
- environmental sustainability
- improve maternal health
Economic growth
ECONOMIC GROWTH: increase in the real GDP over a period of time
Define economic development
ECONOMIC DEVELOPMENT: improvement in standards of living: reducing poverty, improving public provision of education, healthcare and maintanance of infrastructure
Define tied aid
TIED AID: grants or loans given to a developing country but only on condition that the funds will be used to buy goods and services from the donor country
Define infrastruture
INFRASTRUCTURE: the essential facilities and services such as roads, airports, sewage treatment, water systems, railways, telephone and other utilities that are necessary for economic activity
Define aid/foreign aid
AID/FOREIGN AID: any assitance that is given to a country that would not have been provided through normal market forces
Reasons for aid
- help overcome natural disaster
- help achieve economic development
- political alliances/strategies
- encourage investment
- improve human resources in developing countries
- improve technology levels
- fund development projects
Define official development assitance (ODA) (2 def)
ODA: aid that is organised by a government or an official government agency of a donor country and unofficial aid which is organised by non-government organisations (NGO)
or
flows to developing countries and multilateral institutions provided by official agencies, including state and local govs, or by their executive agencies when each transaction meets the following:
- administered with promotion of development and welfare
- concessional (lengvatinis) in character and contains a grant element of at least 25%
Types of aid
- Humanitarian
- Development
Define humanitarian aid
HUMANITARIAN AID: aid given to ease short-term suffering, which may be caused by wars or natural disasters
Define grant aid
GRANT AID: short-term aid provided as a gift and does not have to be paid back
Main forms of grant aid
- Food aid: provision of food or money for food, includes transportation, storage, distribution
- Medical aid: provision of medical services or money for medical services
- Emergency aid: provision of emergency supplies including temporary shelters, tents, clothing, fuel, heating, lighting
Define devlopment aid
DEVELOPMENT AID: aid given in order to ease poverty in the long run and improve the welfare of individuals
Types of development aid
- Long-term loans: repayable over 10-20 years, consessional/soft loans, repayed in both foreign and domestic currency, can be both official, unofficial
- Tied aid: grants or loans given to a developing country on teh condition that the money will be used to purchase goods and services from the donor country
- Project aid: for a specific project, often in grant aid - no repayment, usually to improve infrastructure, common donor - World Bank
- Technical assitance aid: may be included in project aid, two aims: raise level of techno/raise quality of human capital, sometimes provided in foreign scholarships - study abroad
- Commodity aid: to increase productivity, funds to purchase commodities (edible oils, seeds, fertilisers, chemicals, cement, steel)
- Bilateral aid: official aid, given directly from one country to another
- Multilateral aid: official aid, given by rich countries to international agencies (World Bank, UN, International Monetary Fund), distributed by agencies
Why is tied aid not as effective as untied aid
Because:
- recipient country cannot look for chepaest products but has to buy the donor’s
- does not create employment or extra output
- imports may replace domestic products - harm domestic industries
- politically motivated - wants to use
Why continued dependency on aid is harmful
- little incentive to be innovtive
- welfare mentality - feel that aid will always be there
- aid focused on industrializtion - may create huge gaps between industry and agriculture
- might lead to indebtedness of developing countries
Define non-governmental organisation (NGO)
NGO: organisations that are not controlled by the government that promote economic development, humanitarian ideals and sustainable development in developing countries
Examples: Oxfam, CARE, Doctors without borders
Two main activities carried out by NGOs
- plan and implement specific projects
- try to influence public policy in areas such as human rights, poverty reduction, workers’ rights, the environment
What are the structural adjustment policies
- encouraging trade liberalisation
- devalueing the currency
- encouraging FDI
- privatisation of nationalised industries
- charging for basic services (education, healthcare)
- Reducing corruption
What is International Monetary Fund (IMF)
INTERNATIONAL MONETARY FUND: organisation of 184 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sutainable economic growth
Three parts: surveillance (discussing exchange rates and growth), technical assitance (free trainig) and financial assitance (can lend to balance payments) - orginially Structural Adjustment Polices (SAPs) - critised by economists
Each members deposits quotas - size depends on economic terms of the member
Responsibilities of IMF
- promote international monetary cooperation
- facilitating expansion of international trade
- promoting exchange stability
- assiting in establishment of multilateral systems
- makking its resources available for members whi are experiencing difficulties in balancing their payments
