1

Growth and the Less-Developed

Countries

2

What is one way to compare the well-being

of one country to another?

GDP per capita

3

What is GDP per capita?

The value of final goods produced

(GDP) divided by the total population

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita

4

What are industrially advanced countries

(IACs)?High-income nations

that have market economies with technologically

advanced capital and well-educated laborAKA – MDCs (Most

Developed Countries)

5

Who are the advanced countries?

http://en.wikipedia.org/wiki/Developed_country

6

What are less-developed countries

(LDCs) ?Economies based on agriculture which are

lacking in technology,

advanced capital and well-educated labor

7

Developed and Developing Countries

8

Who are the LDCs?

Most countries of Africa, Asia, and Latin America

9

Who is a problem?LDC’s per capita is subject to greater

measurement errors than for IAC’s

10

What are problems in comparing GDP

per capita?•measurement errors•income distribution•fluctuations in exchange rates

•differences in living standards

11

Is GDP per capita correlated with other

measures of quality of life?

Yes

12

What are quality of life indicators?

•life expectancy•adult literacy•daily calorie supply•energy consumption per capita

13

Latin Am & Caribbean

S. AsiaMiddle East & N. America

Sub-Saharan

Africa

Europe & Central Asia

East Asia & Pacific

IAC’s

$34,799

$3,810$3,666 $1,823

$1,080 $721 $629

14

What factors come together to produce a

country’s growth?•natural resources•investment in capital•investment in human capital (education & job training)

•low population growth•infrastructure

15

What is infrastructure?Capital goods

usually provided by the government,

including highways, bridges, waste and water systems, and

airports

16

What is a major problem for LDCs?

They find themselves in a vicious cycle of

poverty

17

What is the vicious circle of poverty?The trap in which countries are poor

because they cannot afford to save and

invest, but they cannot save and invest

because they are poor

18

19

What are the political factors favorable for economic growth?

•Gov’t stability (law and order)

•infrastructure•international trade

20

Economic growth and development

Natural resources

endowment

Human resources

development

Capital investment

Technological progress

Political environment

21

What is foreign aid?The transfer of money or resources from one

government to another for which no

repayment is required

22

In fiscal year 2011, the U.S. government allocated the following

amounts for aid:

• Total economic and military assistance: $49.5 B ($52.7 B in 2010)– Total military assistance: $17.8 B ($15 B)

– Total eco. assist: $37.7 B ($37.7 B)• of which, USAID assist: $14.1 B ($14.1 B)

http://en.wikipedia.org/wiki/United_States_foreign_aid

23

What is the Agency for International

Development?

AID is the agency of the U.S. State Department that

is in charge of U.S. aid to

foreign countries

24

What is the World Bank?The lending agency that makes long-

term low-interest loans and provides

technical assistance to

less-developed countries

25

What is the International Monetary Fund (IMF)?

The lending agency that makes short-

term conditional low-interest

loans to developing countries

26

What is the New International Economic Order (NIEO)?

A series of proposals made by LDCs in 1974,

calling for changes that

would accelerate the economic growth and

development of the LDCs

27

What is a conclusion?

There is no single strategy for

economic growth and

development

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END