Theme 4.3 - Emerging and developing economies Flashcards
4.3.2 - What are the economic factors influencing growth and development?
- Primary product dependency
- Volatility of commodity prices
- Demographic factors
- Debt
- Access to credit and banking
- Education/skills
- Foregin currency gap
- Capital flight
- Savings gap: Harrod-Domar model
- Infrastructure
- Absence of property rights
4.3.2 - How does access to credit and banking, education/skills, infrastructure and demographic factors infleunce growth and development?
A to c+b - developing=limited, struggle to save, loan sharks - permeant in debt
E/S - poor ed=low levels of productivity
I - low levels-harder for firm to trade-less reliable service - can be expensive
Demo - higher pop growth - higher rates of growth for country to develop - dependents high = strain on education system + youth unemployment
4.3.2 - How does the absence of property rights and the savings gap infleunce growth?
Savings gap - Harrod-Domar model - different between actual savings and level of savings needed to achieve a higher growth rate - suggests savings provide funds for investment = growth rates depends on amount of labour and capital - econ growth not same as development
A of PR - lack of rights - cannot use law to protect assets reduced investment - loss of property rights in Zimbabwe led to economic collapse
4.3.2 - How does foregin currency gap and capital flight infleunce growth and development?
FCG - exports from developing country too low compared to imports to finance purchase of investment or other goods from overseas required for faster growth
CF - large amounts of money taken out of country - occur due to lack of confidence, hide from gov authorities or profit repatriation - caused Argentine economic crisis in 2001
4.3.2 - How does debt and volatility of commodity prices influence growth + development?
Debt - during 1970s/80s developing countries received vast loans, Now suffer from high levels of interest repayment - less money to spend on services - may need to raise tax - Nigeria’s debt is 52% of GDP
V of CP - primary products tend to have inelastic demand and supply curves
small changes in D or S = huge fluctuations in price = producers income and countries earnings rapidly fluctuate, makes it difficult to plan and carry out long term investment - cause poverty fall rapidly
4.3.2 - How does primary product dependency influence growth and development?
a large amount of most developing country’s economic activity is based on primary products
Natural disasters can wipe out production - farmers left with no income
Low-income elasticity of demand
Prebisch Singer Hypothesis suggests the long run price of primary goods declines in proportion to manufactured goods
Dutch disease - country becomes a significant commodity producer in a short time = increase in demand for the currency = increases export prices + reduces competitiveness
Not all primary products have a low income elasticity of demand eg diamonds
4.3.2 - What are the non-economic factors influencing growth and development?
- many developing suffer from corruption
- high levels of bureaucracy - linked to corruption - costly + time-consuming
- diseases such as HIV/AIDS and malaria = negative impact on growth
- poor climates and geo terrain may suffer from natural disasters
- civil wars eg Syria and Iraq - high levels of poverty and destroys infrastructure
4.3.2 - Synoptic point?
- some factors which limit development are micro factors eg inelasticity of demand and supply for commodities whilst others are macro factors eg high levels of debt
- however all have macro impacts eg limiting growth and development
4.3.3 - What are some market-oriented strategies for influencing growth and development?
- Trade liberalisation
- Promotion of FDI
- Removal of gov subsidies
- Floating exchange rate systems
- Microfinance schemes
- Privatisation
4.3.3 - How does trade liberalisation, the promotion of FDI and the removal of gov subsidies infleunce g+d?
TL - export led-growth - domestic industries forced to become effective - comparative advantage
FDI - jobs=effect of multiplier - productivity increase, wages higher - transfer of knowledge - can be exploited
R of GS - often poorly targeted + tend to=inefficiency - large amount of gov spending - removal can be politically unpopular
4.3.3 - How does floating exchange rate, microfinance schemes and privatisation infleunce g+d?
FER - market determine currecny - can be volatile - difficult to make decisions on future - large changes in macro variables
MFS - aim to give poor and near poor permanent access to range of financial services - little to no collateral - group lending - South Africa shown problems - method of financing consumption spending and unemployment
P - end corruption within firm owned by state - encourage efficiency by increasing comp - improv gov finances + reduce debt
4.3.3 - What are interventionist strategies to infleunce growth and development?
- Development of human capital
- Protectionism
- Managed exchange rates
- Infrastructure development
- Promoting joint ventures with global companies
- Buffer stock schemes
4.3.3 - How does the develop of human capital, protectionism and managed exchange rates infleunce g+d?
D of HC - provides skills and training - productive high - develop from primary to manufacturing sector - improves quality of life
P - domestic industries to grow - jobs in short run - countries lose out from benefits of specialisation and comp advantage - inefficiencies
MER - introduce high er for import of essential products + lower er for others - reduce poverty if goods are consumer goods + invest if capital goods - often fails to work - black market + corruption issues
4.3.3 - How does infrastructure development, promotion of joint ventures and buffer stock schemes infleunce g+d?
ID - essential - believe gov should provide these systems - tends to suffer from free rider problem - very high capital costs - many positive social benefits
PJV - reduce exploitation of countries as a result of FDI - firms find local partner to create jointly owned company - helps some profits within country
BSS - where gov imposes both a max and mini price for goods, buying up stocks when excess and selling when excess demand - used on commodities that are non-perishable - prevents harp fall in price - requires stocks to go up and down - huge costs
4.3.3 - What are other strategies to influence growth and development?
- development of tourism
- development of primary industries
- Fairtrade schemes
- aid
- debt relief
