Chapter 9.1: Why Does Development Vary Among Countries?

• Development is the division of the world into relatively wealthy regions and relatively poor ones.

• More Developed Countries (MDCs): also known as developed nations

• Less Developed Countries (LDCs): also known as developing nations

• A countries level of development is based on economic, social, and demographic factors

Economic Indicators of Development

• There are five indicators that are used to measure economic development

• Gross Domestic Product Per Capita– Gross Domestic Product-

value of total output of goods and services produced in a year

– Divide GDP by total population ($10 trillion/290 million= $34,000 in US)

– Annual GDP exceeds $20,000 in MDCs while it is about $1,000 in LDCs

• Types of Jobs– Jobs fall into three sectors:

1. Primary: directly extract materials from earth (mining, farming)

2. Secondary: manufacturing materials into products

3. Tertiary: providing goods and services for payment

– In LDCs most workers fall in the Primary sector, in MDCs most fall in the Tertiary

• Productivity– The value of a product

compared to the amount of labor needed to make it

– Workers in MDCs are much more productive due to technology

• Raw Materials– MDCs need a great deal of

raw materials, often importing them from LDCs

– LDCs with energy and other resources have a much better chance of developing

• Consumer Goods– Buying luxury goods

further improves a nation’s wealth

– Cars, telephones and TVs are major indicators of development (1:1 ratio in MDCs)

– These items are not as important in LDCs (1:100 ratio)

Social Indicators

• MDCs can afford better education and health care

• Education– In general, the higher the level of

development, the greater the quality and quantity of education

– Teacher-pupil ratio and literacy rate are used to measure development

– 95% literacy in MDCs vs. 33% in LDCs

– MDCs also produce more books, magazines and newspapers

• Health and Welfare– In MDCs health care is often

a public service at little or no cost (except US)

– People in MDCs receive far more calories and proteins

– MDCs also provide help to those who are physically unable to work

Demographic Indicators• Life Expectancy

– Better health and welfare makes for greater life expectancy in MDCs

– Mid 70’s in MDCs vs. Mid 40’s in LDCs

• Infant Mortality Rate– About 90 percent of infants

survive in LDCs vs. 99 percent in MDCs

– Poor medical practices, lack of nutrition, lack of medicine

• Natural Increase Rate– More than 2 percent in LDCs vs.

less than 1 percent in MDCs• Crude Birth Rates

– About 40/1000 in LDCs vs. 15/1000 in MDCs

Chapter 9.2: Where are MDCs and LDCs Distributed?

• The world can be split into 9 regions according to level of development.

• Nearly all MDCs are north of 30N and almost all LDCs are south of this line.

More Developed Regions

• Three of the nine regions are considered more developed (Anglo America, Europe, Japan/South Pacific)

• Anglo America– Language and religion is less diverse in this region:

90 percent speak English and belong to Christianity– Used to be the world leader in manufacturing, has

now shifted to technology, information, sports, entertainment, etc.

– The world’s most important food exporter and has plenty of room to expand

• Europe– Western Europe

• Displays cultural unity, but diversity of individual languages and religion cause conflict

• The level of development is the world’s highest in parts of Germany, France, Italy, Belgium, etc.

• Import food, energy and minerals to keep pace

• Provide high valued goods and services like insurance, banking, luxury cars

• Elimination of economic barriers makes them world’s largest and richest market

– Eastern Europe• In the early 1990’s they

were keeping pace with Western Europe in HDI

• With fall of communism it has dropped to the level of Latin America (LDC)

• Countries are slowly adjusting and anticipated to turn things around

• Japan– Success is surprising due

to ratio of population to raw materials

– Gained a foothold by providing very cheap but hardworking labor

– Now specialize in high quality and high value products (electronics, cameras, cars)

– South Pacific• New Zealand and

Australia are MDCs as well but are not central to the global economy due to small populations

Less Developed Regions• Latin America

– Highest HDI among LDCs– Primarily speak Spanish or

Portuguese and predominantly Roman Catholic

– Very dense urban populations and development along the South Atlantic Coast is relatively high

– Development is hindered by distribution of income.

– A handful of wealthy families control most of the land and rent it to tenant farmers

• East Asia– China is the largest country in

East Asia but ranks among world’s poorest

– In a few years China will be the world’s largest economy

– Communism limited growth, but the government is loosening some controls on property

– Agriculture in the country is still mostly intensive subsistence

• Southeast Asia– Includes Indonesia, Philippines,

Vietnam– Suffered from numerous wars

and colonialism– Tropical climate limits the farming

of grains, focus on rice– Economy has grown due to

cheap manufacturing, but slowed when governments stopped regulating business

• Middle East– Largely desert and most products

must be imported– Large petroleum supplies give the

Middle East a major source of wealth (though not all nations)

– Increased wealth and economic development have clashed with traditional values causing major problems

• South Asia– Includes India, Pakistan,

Bangladesh– World’s second highest population

and second lowest per capita income

– India has resources and agriculture, but is hindered by a huge population

• Sub-Saharan Africa– Countries north of the Sahara

are part of the Middle East– SS Africa has the lowest

prospect for development– Poor education, health, and

high poverty levels– Many problems stem from the

colonization of Africa including the stripping of natural resources

– Political fights and wars have further hindered development

– Population keeps increasing while the land cannot support more agriculture

Chapter 9.3: Why Does Development Vary by Gender?

• According to the United Nations, no nation in the world treats women as complete equals

• Two measures:1. Gender-Related

Development Index (GDI): compares the level of development of women to men

2. Gender Empowerment Measure (GEM): compares the ability of women and men to participate in economic and political decision making

Gender-Related Development Index

• Uses the same indicators as the HDI, but compares differences between men and women for each

• Penalizes a country for having a large disparity in the well-being of women vs. men

• A 1.0 indicates equality… Norway is the highest at .94 (Most MDCs above .90)

Gender-Related Development Index (GDI)

Fig. 9-10: The GDI combines four measures of development, reduced by the degree of disparity between males and females.

• Economic differences– Average income of men and women is

compared– An income gap of more than $15,000 is

typical in MDCs– In the US (2001), the difference was

$43,000 (men) vs. $26,000 (females)– The gaps are similar in LDCs though the

numbers are far lower• Social Differences

– Women are much less likely to attend schools in LDCs

– Ratio of high school enrollment: 99/100 in MDC 60/100 LDC

• Demographics– In MDCs, women outlive men by a

significant number of years (4+)– In LDCs, women only live a year or two

more or might not even live longer• The hazards of giving birth in LDCs plus high

birth rates account for this disparity

Female–Male Income Differences

Fig. 9-11: Women’s income is lower than men’s in all countries, but the gender gap is especially high in parts of the Middle East, South Asia, and Latin America.

Gender Differences in School Enrollment

Fig. 9-12: As many or more girls than boys are enrolled in school in more developed countries, but fewer girls than boys are enrolled in many LDCs.

Gender Empowerment

• In every country of the world, women hold fewer positions of economic and political power

• GEM takes economic indicators and political indicators into consideration

• 1.0 would be total equality… MDCs are the highest .70+

• Economic Indicators– Percentage of women holding

professional jobs and technical jobs

– More than half of the women in Europe and N. America hold these jobs

• Political Indicators– Percentage of women holding

administrative and managerial jobs

– North America and Europe lead this category with over 1/3

– The other indicator is percentage of women elected to public office

Gender Empowerment Measure (GEM)

Fig. 9-15: The GEM combines two measures of economic power and two of political power by women. (Little data are available for LDCs.)

Chapter 9.4: Why Do LDCs Face Obstacles to Development?

• LDCs are trying to improve their way of life, but the gap between LDCs and MDCs is widening.

• Americans spend more per year on cosmetics ($8 billion) than the cost of providing schools for the 2 billion people that need them ($6 billion)

• LDCs face two major obstacles when trying to encourage development– Adopting policies that work– Finding funds to pay for development

Development Through Self-sufficiency

• Also known as balanced growth, has been adopted by India and China

• A country should spread investment as equally as possible across all regions and sectors of economy

• Incomes in the country keep pace with urban incomes

• Set trade barriers to protect local businesses and keep MDCs from dominating them

• India: Example of self-sufficiency– Government severely limits licenses and amount of foreign production in

the nation– Indian companies were discourage from exporting as well, all goods

should be kept in country– Businesses need government permission to create new products,

hire/fire workers, set prices– Government subsidized losses of private companies that did not

succeed• Problems

– Inefficiency: government control created very poorly run industries. – No incentive to improve products, reduce costs, increase production– Bureaucracy: created so many rules and regulations that everything is

slow and there is massive corruption

Development Though International Trade

• Calls for a country to identify its unique economic assets and focus on them

• A country should concentrate its scarce resources on expansion of those industries to generate wealth

Core and Periphery in World Economy

Fig. 9-22: This north polar projection of the world shows that most of the MDCs are in a core area north of 30° N latitude. The LDCs are mostly on the periphery of this map.

• Rostow’s Development Model:

– Traditional Society: has not started the process of development, high percentage of people in agriculture and large amount of wealth tied into nonproductive activities like military and religion

– Preconditions for Takeoff: An elite group initiates innovative economic activities. Starts to invest in technology and infrastructure, these projects stimulate an increase in productivity

– Takeoff: Rapid growth takes place in a few industries such as textiles or food. These takeoff industries become productive while other sectors of the economy remain traditional

– Drive to Maturity: Modern technology which was limited to takeoff sectors now diffuses to other industries which now grow rapidly. Workers become more skilled and specialized

– Age of Mass Consumption: Economy shifts from heavy industry (steel/energy) to consumer goods

• MDCs are in the last two stages and each MDC has been through the first stages as well

• Countries that take part in international trade benefit from exposure to other countries

• Gain technology and forced to be competitive• Examples

– Oil-rich gulf states• Saudi Arabia, Kuwait, Bahrain, UAE• Use oil revenue to build airports, schools, etc• Import consumer goods from Western nations• These influences have created a great deal of friction with religion in these

nations– Asia

• South Korea, Singapore, Taiwan, Hong Kong• Focus on cheap manufacturing to achieve takeoff

• Problems:1. Uneven resource Distribution: if the

price of the items you focus on drops you might be in trouble

2. Market Stagnation: MDCs grow slowly, so sometimes demand may level off (cheap clothing)

3. Dependence on MDCs: focusing on selling to MDCs might slow production of those things for your own people. • Then you are forced to spend money

to supply them (food, clothes, etc.)• In spite of problems with international trade,

many countries believe this is the best route towards development

• India recently dismantled its barriers to foreign trade believing that it will create more wealth

• The World Trade Organization (WTO) was also formed in 1997 to eliminate barriers to trade

Financing Development• Whichever way they try to develop,

LDCs need money from MDCs to do so• Funds come from two sources: loans

from banks and direct investment by transnational corporations

• Loans– Often provided by the World Bank

and the International Monetary Fund (IMF)

– Borrow money to build infrastructure and improve businesses, this in turn provides more tax money to the LDC

– Total value of all outstanding loans in 1996: $2.1 trillion

– Due to many failures on expensive projects, many MDCs are much more cautious about loans to LDCs today

• Transnational Corporations– Operates in countries other than the one in which

its headquarters is located– Countries invest in other countries by setting up

factories or providing goods/services in LDCs– By 2001 the total amount of international

investments was roughly $735 billion– Only ¼ of foreign investments were made to LDCs

however (the rest was MDC to MDC)