Economic Factors Flashcards
Access to resources
Different countries have different supplies of natural resources. Having access to valuable resources is considered necessary for economic development. allows for economic growth since typically exported to larger markets abroad.
How can access to resources promote development?
help states advance in Rostow’s model of development, as developing states can export these natural resources and branch out into different sectors.
to create wealth you must first have something to sell. Different countries have different things for sale depending on what they have access to.
How can access to resources inhibit development?
depending too much on exports can cause a country to be vulnerable to changes in the global economy. If prices of a country’s exports drop they may experience an economic recession. (oilin Venezuela)
Foreign Direct Investment (FDI)
an investment in the form of controlling ownership in a business in one country by an entity based in another country.
How can FDI promote development?
Developing countries can be rich in resources, but lack the needed infrastructure and technology to take advantage of them. These resources can bring about much needed revenue for the government to invest in education, healthcare and other services to improve the quality of life.
How can FDI inhibit development?
Much of the revenue they earn from extraction of resources is not invested in the developing country, but shared with stockholders back home.
MNCs can face accusations of human rights abuses and other abuses of their power.
Access to capital, credit and aid
Capital could be defined as a stock of wealth used to produce goods and services (physical, natural, human). Credit is an agreement under which a borrower receives something of value in the present and has to repay the same (with interest).
How can access to capital, credit and aid promote development?
External assistance in areas critical to human development (i.e food, education, health).
Aid is required to ensure relief and stability for stuggling countries
Aid in areas such as the establishment of infrastructure can help establish a solid foundation for industrialization and growth
Japanese Official Development Assistance (ODA)
How can access to capital, credit and aid inhibit development?
Aid could promote the tendency for states and governments to develop a pattern of reliance
Aid can prove to be harmful when combined with poor governance – corruption and a lack of transparency. A corrupt government could swindle aid for private gain and become even stronger at the expense of the poor population
