Development: The BasicsDevelopment: The Basics

Remember: Most heavily weighted Remember: Most heavily weighted portion of the syllabus and IB Examportion of the syllabus and IB Exam

Development vs. GrowthDevelopment vs. Growth

Growth: QUANTITATIVE – Growth: QUANTITATIVE – Increase in Real GDP/CapitaIncrease in Real GDP/Capita

Development: QUALITATIVE –Development: QUALITATIVE – Improvement in people’s quality of life, Improvement in people’s quality of life, More subjective, Measured by More subjective, Measured by HHumanuman

DDevelopmentevelopment IIndexndex

HDI: 3 componentsHDI: 3 components

Standard of living – Real GDP/capitaStandard of living – Real GDP/capita Health – Life expectancyHealth – Life expectancy Education – Literacy rateEducation – Literacy rate

LDCs: Less Developed CountriesLDCs: Less Developed Countries

Most in Sub-Saharan Africa, also AsiaMost in Sub-Saharan Africa, also Asia Low income – Less than $3000 GDP/capitaLow income – Less than $3000 GDP/capita Poor infrastructure, education, health care, Poor infrastructure, education, health care,

human rightshuman rights High corruption, population growth, High corruption, population growth,

unemployment, environmental damageunemployment, environmental damage Mostly primary products Mostly primary products (farming, fishing, etc)(farming, fishing, etc)

Other categoriesOther categories MDCs MDCs – – More Developed CountriesMore Developed Countries

a.k.a Developed, Rich, Industrializeda.k.a Developed, Rich, Industrialized

> $20,000 GDP/capita, Europe, US, Japan, etc.> $20,000 GDP/capita, Europe, US, Japan, etc.• Middle countriesMiddle countries - - $3000-$20,000 GDP/capita$3000-$20,000 GDP/capita

Mexico, China, most of S. America & AsiaMexico, China, most of S. America & Asia• NICs NICs – – Newly Industrialized CountriesNewly Industrialized Countries

China, India, Brazil, etc.China, India, Brazil, etc.• TransitionalTransitional – From central planning to – From central planning to

market system, e.g. Russia, Polandmarket system, e.g. Russia, Poland

Cycle of Poverty: Cycle of Poverty: How to break it?How to break it?

Low productivity/ low paying

jobs

Low education/ skills

Low income

Low savings

Low investments

Low/ no growth

Development strategiesDevelopment strategies

AID AID – Loans – Loans Tied - often “soft”Tied - often “soft” Untied - often “hard”Untied - often “hard” Bilateral – one country loaning to anotherBilateral – one country loaning to another Multilateral – a group of countries or an Multilateral – a group of countries or an

international agency loaning to one countryinternational agency loaning to one country Grants - not really a loan; just a freebieGrants - not really a loan; just a freebie

Development strategiesDevelopment strategies

TRADETRADE Specialization & Comparative advantageSpecialization & Comparative advantage Focus on what you produce the best, trade that to Focus on what you produce the best, trade that to

others for what they produce bestothers for what they produce best

Export promotion vs. Import substitutionExport promotion vs. Import substitution

Development StrategiesDevelopment Strategies

Foreign Direct Investment (FDI)Foreign Direct Investment (FDI) Attract foreign companies to build factories, Attract foreign companies to build factories,

stores, etc. in your countrystores, etc. in your country

Development StrategiesDevelopment Strategies

Micro-credit schemesMicro-credit schemes Very small loans to help people start or Very small loans to help people start or

expand their own little businessexpand their own little business

Development StrategiesDevelopment Strategies

Dual sector modelDual sector model Improve productivityImprove productivity in existing areas of in existing areas of

specialization,specialization,

Use increased profits to Use increased profits to gradually industrializegradually industrialize

and move into service sectorand move into service sector

Sustainable developmentSustainable development

The ideal goalThe ideal goal Improving the quality of life today and Improving the quality of life today and

for generations to comefor generations to come Improving the quality of life without Improving the quality of life without

damaging the environment damaging the environment