Chapter 9 Study Guide: DevelopmentEconomic development is the development of economic wealth of countries or regions for the well-being of their inhabitants.

Can be defined as efforts that seek to improve the economic well-being and quality of life for a community by creating and retaining jobs and increasing the tax base.

Why give to the poorest people in the world?___________

Why shouldn’t we give to the poor?___________

What could be the consequences of not helping poor countries?

________

Geography’s Slogan: Where? Why there? Why Care?

A failed (failing) state common characteristics:

• a central government so weak or ineffective that it has little practical control over much of its territory

• an inability to provide reasonable public services

• widespread corruption and criminality

• refugees and involuntary movement of populations

• sharp economic decline

• the inability to interact with other states as a full member of the international community.

The term 'failed state' is a term of imprecise quantitative definition which is often used by political commentators and journalists

http://www.fundforpeace.org/global/?q=fsi2012

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Development geography is the study of the Earth's geography with reference to the standard of living and quality of life of its human inhabitants.

Geographically, the single most important feature of economic development is that it is uneven.

High-speed rail in Europe

Inequality in economic development often has a regional dimension

For example China has huge disparities of wealth between the rich coastal provinces and the poor interior.

The Brandt Line is a visual depiction of the North-South divide, proposed by German Chancellor Willy Brandt in the 1970s. It approximately encircles the world at a latitude of 30° N, but dipping south so as to include Australia and New Zealand in the "Rich North".

The North-South Divide is the socio-economic and political division that exists between the wealthy, known collectively as "the North", and the poorer countries or "the South.“

G8

Although most nations comprising the "North" are in fact located in the Northern Hemisphere, the divide is not primarily defined by geography.

CIA

The global digital divide is often characterized as corresponding to the North-South divide.

Economic StructureThe three-sector hypothesis is an economic theory which divides economies into three

sectors of activity:

primary sector: economic activities that are concerned directly with natural resources of any kind (agriculture, mining, fishing, and forestry)

 

secondary sector: Manufacturing (construction) activities that transform raw materials into more

usable forms. They add value by making wheat into flour, copper ore into wire, and silicon into computer chips, and by assembling sophisticated components

into computers, airplanes, and cars.

tertiary sector: economic activities involving the sale and exchange of goods and services.

(Post Industrial Society)

Show bill

retail, banking, law, education, government, insurance, health care, tourism, accounting, advertising, and entertainment

Primary Activities– Brown Collar

Secondary Activities– Blue Collar

Tertiary Activities– White Collar

Quaternary Activities– Gold Collar

3 Phases of developmentFirst phase: Traditional civilizations (or

pre-industrial)Workforce quotas:• Primary sector: 70%• Secondary sector: 20%• Tertiary sector: 10%This phase represents a society which is

scientifically not yet very developed, with a negligible use of machinery. The state of development corresponds to that of European countries in the early Middle Ages, or that of a modern-day developing country.

Second phase: Industrialization• Workforce quotas:

• Primary sector: 20%

• Secondary sector: 50%

• Tertiary sector: 30%

More machinery is deployed in the primary sector, which reduces the number of workers needed.

Third phase: Post-Industrial• Workforce quotas:

• Primary sector: 10%

• Secondary sector: 20%

• Tertiary sector: 70%

The primary and secondary sectors are increasingly dominated by automation, and the demand for workforce numbers falls in these sectors.

The economic structure of the economy is the percentage of

each sector.

The United States economic structure is something close to the following

• primary sector less than 4% of the labor force

• secondary sector about 22%

• tertiary sector just over 74%

Structure of China’s economy(2008):

• agriculture (39.5%)

• industry (27.2%)

• services (33.2%)

Quantitative (numerical) indicators of development: social, demographic, and

economic

Social Indicators: Development indicators based on a country’s success in meeting the basic needs of its citizens.

This includes: Education often measured by literacy (% of people who can read and write) and number of school years attended.

Health: nutrition (calories per day, calories from protein, percentage of population with malnutrition), population per doctor etc

Welfare: government assistance to the unemployed, veterans, elderly, poor, disabled orphaned, access to clean water and sanitation etc.

Demographic indicators (characteristics of a human

population) include life expectancy, number of children,

population growth,

And infant mortality rate: the annual number of deaths of infants less than one year of age per 1,000 live births may be the best single index

Reveals: nutrition, education, sanitation, health

Demographic data is used to distinguish MDCs and LDCs.

Economic Indicators:Development indicators based on a country’s economic production (how much), what it produces, and how it produces. 5 indicators especially useful in distinguishing between MDCs and LDCs are GDP per capita, economic structure (% in primary, secondary or tertiary), worker productivity, access to raw materials, and availability of consumer good (all explained in textbook)

GDP (gross domestic product) is, the total market value of goods and services produced within the borders of a country, regardless of the nationality of those who produce them.

GNP (gross national product) is the total market value of goods and services produced by the residents of a country, even if they’re living abroad.

So if a U.S. resident earns money from an investment overseas, that value would be included in GNP (but not GDP). And the value of goods produced by foreign-owned businesses on U.S. land would be part of GDP (Toyota).

In geography the difference between the two is not important. Both are used to compare countries.

The overall GDP or GNP of a country is not very useful because countries have such different populations. Therefore we divide the overall GDP/GNP by the population and get a per person number which is called per capita. This makes it much easier to compare how well people are doing in different parts of the world.

Total GDP

However, using GDP/GNP per capita also has many problems.

• It does not take into account the distribution of the money which can often be extremely unequal as in the Brunei where oil money has been collected by the monarchy and has not flowed to the people of the country.

• GNP does not measure whether the money produced is actually improving people's lives

Gini coefficient is commonly used as a measure of inequality of income or wealth

• The figure rarely takes into account the unofficial economy, which includes subsistence agriculture and cash-in-hand or unpaid work (Informal sector), which is often substantial in LEDCs.

• In LEDCs it is often too expensive to accurately collect this data and some governments intentionally or unintentionally release inaccurate figures.

• The figure is usually given in US dollars which due to changing currency exchange rates can distort the money's true street value

Therefore, GDP/GNP is often converted using purchasing power parity (PPP) in which the actual comparative purchasing power of the money in the country is calculated.

This purchasing power exchange rate equalizes the purchasing power of different currencies in their home countries for a given basket of goods. Using a PPP basis is arguably more useful when comparing differences in living standards on the whole between countries because PPP takes into account the relative cost of living, rather than just a GDP/GNP comparison.

ppp

Correlating economic, demographic and social indicators show that different indicators of development are associated with each other TQ

A major health care problem for people in Africa and Asia low literacy rates. TQ

Composite or qualitative indicators combine several quantitative indicators into one figure and generally provide a more balanced view of a country. Usually they include one economic, one social and one demographic indicator.

The Human Development Index (HDI) is an index combining measures of:

• life expectancy

• literacy

• educational attainment

• GDP per capita

The basic use of HDI is to rank countries(0-1)

A HDI between

• 1 and 0.8 is considered high (good)

• 0.8 and 0.6 is considered medium

• 0.6 to 0.4 is considered low.

Pattern

Gender Empowerment Index

1. women’s incomes

Why do women make less than men in the US?

Gender Differences in School Enrollment

2. participation in the labor force as administrators, managers, and professional and technical positions

3. % of parliamentary seats held by women.

• Boardrooms in emerging markets are increasingly populated by women. In China, women account for 32 percent of senior managers, compared with 23 percent in the U.S. and 19 percent in Britain. In India, 11 percent of CEOs are women, compared with 3 percent of Fortune 500 bosses in the US.

Women in the US Congress

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36 women have been or are currently serving as the governor of a U.S. state. 7 are currently

Take home FRs

Forces affecting the rate of economic development

The factors affecting the rate of economic development may be political, social, physical or historical.

Another way to look at the forces affecting economic development is to consider external forces, which are forces affecting the country from elsewhere, and internal forces, which are factors operating from within the country.

External forces affecting the rate of economic development:

• culture contact played a significant role in economic development. For countries that were colonized by European powers, colonization brought mixed blessings. On one hand, many resources were exported at very low prices with few direct benefits for the colony. On the other hand, transport and other infrastructure were often built. Of course, the infrastructure was designed to help the colonial power rather than the local population, and so railways (to take one example) were often built to the sites of mines or other resources rather than to centers of population. Notwithstanding these problems, culture contact inevitably brings new ideas to a country, some of which may be beneficial in speeding economic development.

• Trade between countries allows countries to exchange resources and products it has in abundance for other goods that it lacks. In this way, trade helps most countries to advance, presuming the terms of trade are negotiated fairly for all parties.

• Japan lacks most natural resources, but through trade it has overcome these shortcomings and has developed economically to a very high level.

• Financial flows into a country can help economic development by providing funds for investment that the country itself lacks. These funds allow factories to be built and resources to be developed, providing employment and taxation revenue for the government that can be used to provide services and build infrastructure elsewhere in the country. Of course, unless the financial flow is a gift in the form of aid, overseas investors always demand a profit on their investments, so the other side of financial flows is the outflow of profits and interest payments. By the early 2000s, the need to repay debt on borrowings and the profits on investments meant that the net flow of money in the world was from LEDCs to MEDCs.

• When foreign investment occurs in a country, it is often accompanied by an inflow of new technology, leading to technological change, new techniques and ways of doing things. Provided that the technology is appropriate for the country, this usually helps to encourage economic development.

• technology which is suitable for an MEDC, such as a labor saving machine, will not be appropriate for an LEDC, which would have to find scarce money to buy a machine to replace labor, which is abundant.

• Appropriate technology for an LEDC will therefore be cheap, and will allow production processes to remain fairly labor intensive.

• Transnational corporations can play an important role in LEDCs these days. Like colonization, they can be a mixed blessing for LEDCs, and indeed some people believe that transnational corporations are a new form of colonialism in which corporations rather than countries oppress less powerful groups of people, but do so economically rather than politically. Benefits that transnational corporations can bring to LEDCs include the investment funds and the new technology.

• Bilateral (between two countries) and multilateral (between several countries) trade agreements can assist the economic development of countries within the agreement, but may slow the economic development for countries outside the agreement.

• One of the most successful multilateral agreements for promoting economic development has been the formation of the European Union. The European Union has resulted from a series of multilateral agreements over a period of more than half a century.

• Other significant multilateral agreements include NAFTA (the North American Free Trade Association) and ASEAN (the Association of South East Asian Nations).

Internal forces affecting the rate of economic development:

• Infrastructure refers to the services and facilities needed to support productive activities, and as well as transport, examples include telecommunications, electricity, water, port facilities and other public services. It is a general principle that countries with a high level of infrastructure will develop more rapidly than countries that do not have these facilities, everything else (such as political systems, levels of corruption etc) being equal.

• The political systems and planning mechanisms in a country also influence the rate of economic development. As a generalization, economies with open policies towards trade and investment (such as Hong Kong, South Korea, the United States and Australia) have faster and more stable economic growth than economies with closed or less transparent political systems (such as North Korea, Russia and Saudi Arabia).

• Rapid population growth is considered by some people to slow down economic development, although opinions differ on this point. Malthusians (believe there are too many people) argue that each extra person is a consumer, taking a share from a fixed pool of resources.

• On the other hand, some argue that each extra person is a productive resource that produces more than it consumes.

• There is no clear correlation between the rate of population growth and the rate of economic development.

• At first sight, we would expect that availability of natural resources would significantly affect the rate of economic development. We would expect that the more natural resources a country possesses, the faster would be its rate of economic growth. In fact, there are examples of wealthy countries with very few natural resources (such as Japan, Hong Kong and the Netherlands) as well as wealthy countries with abundant resources (such as USA, Germany, Canada and Australia).

• Similarly, there are poor countries with abundant natural resources, such as Papua New Guinea, Myanmar, Venezuela and Nigeria — such countries either do not have the finance to develop the resources or corruption is so great that the rate of economic development is impeded.

• Internal capital formation means the ability of a country to find its own funds to invest in development projects. People in LEDCs typically earn low incomes, forcing them to spend a large proportion of their income on basic necessities such as food, clothing and shelter. This leaves very little surplus for savings, and therefore banks have very little funds available for investment.

• This creates a cycle of impoverishment, known as the Vicious Cycle of Poverty. In summary, low incomes lead to low investment, which lead to low levels of savings, which lead to low levels of productivity, which perpetuate low incomes. Unless some way can be found to break the vicious cycle of poverty, it becomes self-perpetuating.

• In cases where the vicious cycle of poverty is broken successfully, the foundation of sustainable economic development is usually agriculture.

• In LEDCs, a large proportion of the population are farmers. Therefore, if development is to have an impact on most of the population, it must have an impact on the agricultural sector of the economy.

A sound farming sector is needed:• to provide a food surplus to feed city dwellers• to provide surplus labor for growing manufacturing and

service sectors of the economy• to enlarge exports

What are LEDCs like?

Every Less Economically Developed Country is unique. Nonetheless, LEDCs do share some common characteristics, which may include some or all of the points listed below.

• A very high proportion of the population is involved in agriculture, usually about 70% to 90%.

• People are often underemployed and/ or involved in the informal sector.

• There is little income per person, and so many people exist near the subsistence level. The major proportion of people's expenditure, therefore, is on food and necessities. Savings are low, which means that investment in new equipment and infrastructure is also low. In severe cases, malnutrition may result at a personal level.

• Most exports comprise a narrow range of primary products (agriculture and mining products, obtained directly from the ground), such as foodstuffs and minerals. Examples include sugar, cocoa, timber, rubber and tin. This causes long-term problems as the prices of primary products have tended to fall when measured against imports of secondary (manufactured) and tertiary (services) products. Over-dependence on one or two primary product exports makes LEDCs vulnerable to shifts in the global economy.

• Housing and other services, such as education, sanitation and transport are inadequate

• Levels of technology are low, tools and equipment are limited, simple and expensive (unless hand made using traditional technology and local materials). There is an emphasis on animate energy — animals and people — rather than inanimate energy, based on energy sources such as oil or electricity.

• Many farms are very small in area and dispersed, as holdings are continually sub-divided as population increases. This makes the use of machinery almost impossible.

• Depending on the stage of the demographic transition model reached, birth rates tend to be high, and if death rates have fallen with medical advances, population growth rates may be high also.

• There is overcrowding in many rural areas.

• There is high illiteracy and use of child labor

• Governments are often unstable, coups are relatively common, especially in South America and to some extent Africa, and quite a number of LEDCs are controlled by military governments.

• People are very dependent on their natural environment. People tend to live within the confines of their environment as they have limited means to change their surroundings.