DevelopmentDevelopmentKey Issue 1: Why Does Development

Vary Among Countries?

Human Development Index (HDI)Human Development Index (HDI)

Created by the United NationsRecognizes that a country’s level of

development is a function of economic, social, and demographic factors

Economic Factor = GDP per capitaSocial Factors = literacy rate and amount

of educationDemographic factor = life expectancy

HDI rankingsHDI rankings

Highest possible = 1.0 (100%)Highest – Norway .963 in 2005Lowest – Niger .281 in 2005The U.S. has never been first, but is

usually in the top dozenThe lowest dozen are usually in sub-

Saharan AfricaHDI rankings

Economic Indicators of Economic Indicators of DevelopmentDevelopment

GDP per capitaTypes of jobsProductivity

Raw materialsConsumer goods

Gross Domestic Product (GDP) Per Gross Domestic Product (GDP) Per CapitaCapita

On average, workers in PED countries make $15/hour compared to $2/hour in PINGs

PEDs usually mandate a minimum wageGross Domestic Product – the value of

the total output of goods and services produced in a country

GDP divided by population measures the amount that an individual makes toward generating a country’s wealth in a year

GDP Per Capita cont…GDP Per Capita cont…

Gross National Product (GNP) – similar to GDP, but it includes income people earn abroad

Annual GDP per capita average (2005):

◦ $27,000 in PEDs◦ $4,000 in PINGs

The Gap is widening! Also, per capita GDP measures

average wealth, not distribution

Types of JobsTypes of Jobs

Primary – agriculture, extract materials directly from the earth (fishing, mining,etc…)

Secondary – manufacturers that transform raw materials into useful products

Tertiary – involves the provision of goods and services to people in exchange for payment (education, government)

The distribution of the types of The distribution of the types of jobs varies between PEDs and jobs varies between PEDs and PINGsPINGs

Agriculture:◦At least 60% of people in PINGs work

in agriculture◦The high number means that most

are subsistence farmers◦Only 5% in PEDs

Within PEDs, the primary and secondary sectors have decreased, while tertiary has increased

ProductivityProductivity

Productivity = the value of a particular product compared to the amount of labor needed to make it

Productivity can be measured by the value added per worker

In manufacturing, P = the value of the product – the costs raw materials and energy

Productivity cont…Productivity cont…

The value added per manufacturing worker:◦$80,000 in the U.S.◦$70,000 in Japan◦$1000 in China◦$500 in India

Why the differences?◦Workers in PEDs are more productive than in

PINGs because workers in PEDs have access to more machines and equipment and are therefore able to produce more with less effort.

Raw MaterialsRaw Materials

Raw materials and energy sources are essential to development!

The U.S. and USSR had them in the Cold War

In the 19th century, European countries established colonies as they ran short of raw materials at home

Consumer GoodsConsumer Goods

Part of the wealth generated in PEDs goes towards buying essentials (food, clothing, shelter)

The rest of our wealth goes towards consumer goods and services (cars, phones, entertainment, computers)

The wealth spent on nonessentials helps to expand manufacturing and wealth in the country

Cars per 1000 people (2002) Cars per 1000 people (2002) Where did Africa go?Where did Africa go?

Consumer Goods as a Measure of Consumer Goods as a Measure of DevelopmentDevelopment

Three particular items: motor vehicles, telephones, and TV sets

In PEDs, the ratio is approaching 1:1 (one car per person, etc…)

In PINGs, these products do not play a role in the daily lives of most people

Social Indicators of DevelopmentSocial Indicators of Development

PEDs – wealth is used for schools, hospitals, and welfare services

This means that the people are better educated, healthier, and more prepared for hardships

What does this mean for the economy?◦The population can be even more economically

productive

Education and LiteracyEducation and Literacy

The higher level of Development: the better the quantity and quality of education

One measure: The number of school years attended◦PEDs – about 10 years◦PINGs – a couple of years

The measure of the quality of education◦Student teacher ratio◦Literacy rate

Health and WelfareHealth and Welfare

When people get sick – PEDs have the wealth and resources to care for them

In many PEDs, health care is a public service

Also, PEDs often care for people who are unable to work

Demographic Indicators of Demographic Indicators of DevelopmentDevelopment

Life ExpectancyInfant Mortality Rate

Natural Increase RateCrude Birth Rate

Life ExpectancyLife Expectancy

Life expectancy = the number of years a newborn infant can expect to live at current mortality levels

In PEDs, life expectancy is in the mid-70sIn PINGs, life expectancy is in the mid-40s

Infant Mortality RateInfant Mortality Rate

Infant mortality rate = the death rate during the first year of life

In PEDs, 99.5% liveIn PINGs, 94% live

◦Babies die from malnutrition, lack of medicine, or poor medical practices resulting from a lack of education

Natural Increase RateNatural Increase Rate

NIR = averages 1.5% in PINGsNIR = less than .1% in PEDsHigher NIR strains a country’s ability to

provide schools, hospitals, jobs, and other services

Natural Increase RateNatural Increase Rate

Crude Birth RateCrude Birth Rate

PINGs have higher NIR because they have higher crude birth rates

Women in PEDs choose to have fewer children for economic and social reasons, and they have access to birth control