Ch18 Economic Development and Transition

• Three billion people in the world live in poverty. Of those three billion, one billion live on less than $1 a day. About 40% of those are children.

• Developed countries, those with high standards of living, are countries like the U.S., Britain, Japan, South Korea, Australia, France, Germany, and several others. These countries are considered the most developed countries (MDC). On the other side are less developed countries (LDC) like Bangladesh, Nepal, Albania, Bolivia, and many others. In the middle are developing countries, like China, Vietnam, Egypt, Mexico.

• The way these countries are set apart has nothing to do with the relative value of the culture, but simply with the level of industrialization and wealth per person (per capita GDP).

• Several factors are included in the assessment of the development of a country, including life expectancy, diet, access to clean water and health care, energy consumption, productivity, infant mortality, literacy, and consumer goods.

Levels of Development• Primitive equilibrium – Traditional style economy• Transition – Investment into industry, can be

traumatic• Takeoff – Reinvestment into industry, workers are

more productive• Semi-development – Expansion, entering the

world markets• Highly developed – Very productive, consumer

based economy

Consequences of Population Growth• Many developing countries still have many

attributes of a less developed country, in that large families are necessary to maintain the family. Because of this, when the benefits of industrialization increase the average life spans of the population, this leads to a rapid population boom. Many developed countries actually have negative birth rates as a consequence of development.

• Many problems exist because the less developed countries have less arable land than the more developed countries. This is because the more developed countries took early advantage of the food available, which gave them time to concentrate on industry. Because industry has now been introduced into less developed countries, they are experiencing population pressures because of better nutrition, cleaner water, vaccines, and better health care.

Debt in LDCs

• Investing in infrastructure and industry has caused LDCs to experience a large amount of debt to the MDCs. This debt can even be larger than these countries GPDs.

Aid and Loans to LDCs• While an amount of aid is certainly available, it is

not enough to truly help many of these countries. Aid may come from MDCs, but for the most part, LDCs have to turn to the World Bank, and the International Monetary Fund for assistance. As often as not, the “aid” received actually makes conditions worse in these countries, as they are forced to privatize national industries (which they took so long building), and they still have to pay the money back to the WB and IMF.

Transitions to Free Enterprise• Moving toward a market economy can be

difficult for a LDC. Some of the values that the WB and IMF, not to mention the WTO, call for privatization of national resources, protection of private property (the landlords), and for government to support businesses.

• We have seen two basic transitions. One is the crash program, which usually decimates an economy, driving many out of work, reducing wages, breaking unions, and opening up the market to subsidized foreign goods that can destroy a local economy. The other way is to have strong trade barriers, subsidize their own industries until they are ready to compete.

Life Expectancy