Economic Development and Transition

Chapter 18

Levels of Development Developed Nations

– Northern countries– Industrial countries– First and Second World

Less Development Nations– Southern countries– Agricultural / Mixed Economy– Third and Fourth World

Measuring Development Life expectancy Diet Access to health care Literacy Energy consumption GDP Per capital GDP

Industrialization Subsistence

agriculture Labor force Consumer goods Infant mortality rate infrastructure

Characteristics of Development Countries

High per capita GDP Higher economic / political freedom Higher degree of consumer spending High agricultural output literacy

Characteristics of Less Developed Countries

Low per capita GDP Low levels of consumption Less economic / political freedom Low levels of agriculture output Less literacy

Levels of Development Primitive equilibrium Transition Takeoff Semi-development Highly development Newly Industrial Countries (NICs)

– Mexico, Brazil, Malaysia, Thailand, Singapore, Hong Kong, South Korea, Taiwan

Issues in Development

Rapid Population Growth Factors of Production Physical Capital Human Capital

– Health / Nutrition (malnutrition)– Education / Training– Brain drain

Issues in Development Political Factors

– Colonial dependency– Central planning– Government corruption– Political instability

Debt– Debt + interest– Structural adjustment program (SAP)

Financing Development

Investment– Internal financing– Foreign financing– Foreign direct investment (enterprises by

foreigners)– Foreign portfolio investment

Foreign Aid

Government to government aid NGO to governments 1947: Marshall Plan (Secretary of State

George C. Marshall)

International Institutions

World Bank: development projects International Monetary Fund: currency

stabilization; debt management United Nations Development Program:

dedicated to the elimination of poverty

Transition to Free Enterprise

Central Planning to Free Enterprise– Privatization– Protecting property rights– Work ethic

Transition in Russia

Communism in Russia 1917 - 1980s Glasnost and Perestroika

– Glasnost: policy of political openness– Perestroika:plan for restructuring the economy

• Oil industry• Freedom of the press• Multiparty system

Transition in China Great Leap Forward: 1958, Mao Cultural Revolution: 1960, Red Guards, 1976: Deng Xiaoping - more power to local

governments– Four Modernizations

• Improve agriculture• Industry• Science• technology

Industry China: light industry Economic zones

coastal areatax incentivesforeign companiesindigenous private companies

Patent violations -copyright lawsexpanding middle class

Three Gorges Dam

China / Russia /India

Growth of middle class Labor: skills, education, cost Demand for consumer goods Demand for resources

– Oil– Gas