2. 39 - 1 Copyright McGraw-Hill/Irwin, 2002 The Rich and the Poor Growth, Decline, and Income Gaps Overpopulation Impact Upon Development Capital Accumulation Vicious Cycle of Poverty Role of Government Role of Advanced Nations Where From Here? Key Terms Previous Slide Next Slide End Show THE ECONOMICS OF DEVELOPING COUNTRIES 39 C H A P T E R

3. 39 - 2 Copyright McGraw-Hill/Irwin, 2002 The Rich and the Poor Growth, Decline, and Income Gaps Overpopulation Impact Upon Development Capital Accumulation Vicious Cycle of Poverty Role of Government Role of Advanced Nations Where From Here? Key Terms Previous Slide Next Slide End Show THE RICH AND THE POOR IACs Industrially Advanced Countries DVCs Developing Countries Global Income Disparity World populationPercentage of world income Richest 20% Poorest 20% Poorest 60% Greater than 80% Less than 2% Less than 6%

4. 39 - 3 Copyright McGraw-Hill/Irwin, 2002 The Rich and the Poor Growth, Decline, and Income Gaps Overpopulation Impact Upon Development Capital Accumulation Vicious Cycle of Poverty Role of Government Role of Advanced Nations Where From Here? Key Terms Previous Slide Next Slide End Show GROWTH, DECLINE, & INCOME GAPS Differences in Ability Widening Income Gap Obstacles to Economic Development Greater Efficiency Expand Resources Natural Resources Human Resources

5. 39 - 4 Copyright McGraw-Hill/Irwin, 2002 The Rich and the Poor Growth, Decline, and Income Gaps Overpopulation Impact Upon Development Capital Accumulation Vicious Cycle of Poverty Role of Government Role of Advanced Nations Where From Here? Key Terms Previous Slide Next Slide End Show GROWTH, DECLINE, & INCOME GAPS Poorest DVCs Overpopulated Unemployment and Underemployment Widespread Labor Productivity is Low Standard Of Living Consumer Goods (Food) Production Population =

6. 39 - 5 Copyright McGraw-Hill/Irwin, 2002 The Rich and the Poor Growth, Decline, and Income Gaps Overpopulation Impact Upon Development Capital Accumulation Vicious Cycle of Poverty Role of Government Role of Advanced Nations Where From Here? Key Terms Previous Slide Next Slide End Show OVERPOPULATION IMAPCT UPON DEVELOPMENT Saving and Investment Productivity Resource Overuse Urban Problems Demographic Transition View Underemployment Low Labor Productivity Brain Drain

7. 39 - 6 Copyright McGraw-Hill/Irwin, 2002 The Rich and the Poor Growth, Decline, and Income Gaps Overpopulation Impact Upon Development Capital Accumulation Vicious Cycle of Poverty Role of Government Role of Advanced Nations Where From Here? Key Terms Previous Slide Next Slide End Show CAPITAL ACCUMULATION DVC Capital Goods Shortages Domestic Capital Formation Savings Potential Capital Flight Investment Obstacles Infrastructure

8. 39 - 7 Copyright McGraw-Hill/Irwin, 2002 The Rich and the Poor Growth, Decline, and Income Gaps Overpopulation Impact Upon Development Capital Accumulation Vicious Cycle of Poverty Role of Government Role of Advanced Nations Where From Here? Key Terms Previous Slide Next Slide End Show CAPITAL ACCUMULATION Technological Advance Sociocultural & Institutional Factors Capital-Saving Technology Capital-Using Technology The Will to Develop Capricious Universe View Land Reform

9. 39 - 8 Copyright McGraw-Hill/Irwin, 2002 The Rich and the Poor Growth, Decline, and Income Gaps Overpopulation Impact Upon Development Capital Accumulation Vicious Cycle of Poverty Role of Government Role of Advanced Nations Where From Here? Key Terms Previous Slide Next Slide End Show

10. 39 - 9 Copyright McGraw-Hill/Irwin, 2002 The Rich and the Poor Growth, Decline, and Income Gaps Overpopulation Impact Upon Development Capital Accumulation Vicious Cycle of Poverty Role of Government Role of Advanced Nations Where From Here? Key Terms Previous Slide Next Slide End Show ROLE OF GOVERNMENT A Positive Role Law and Order Lack of Entrepreneurship Infrastructure Forced Saving and Investment Social-Institutional Problems Public Sector Problems Corruption

11. 39 - 10 Copyright McGraw-Hill/Irwin, 2002 The Rich and the Poor Growth, Decline, and Income Gaps Overpopulation Impact Upon Development Capital Accumulation Vicious Cycle of Poverty Role of Government Role of Advanced Nations Where From Here? Key Terms Previous Slide Next Slide End Show ROLE OF ADVANCED NATIONS Expanding Trade Foreign Aid Public Loans and Grants Direct Aid The World Bank Group

12. 39 - 11 Copyright McGraw-Hill/Irwin, 2002 The Rich and the Poor Growth, Decline, and Income Gaps Overpopulation Impact Upon Development Capital Accumulation Vicious Cycle of Poverty Role of Government Role of Advanced Nations Where From Here? Key Terms Previous Slide Next Slide End Show ROLE OF ADVANCED NATIONS Foreign Harm? Dependency and Incentives Bureaucracy & Centralized Government Corruption & Misuse The Decline of Foreign Aid Flows of Private Capital

13. 39 - 12 Copyright McGraw-Hill/Irwin, 2002 The Rich and the Poor Growth, Decline, and Income Gaps Overpopulation Impact Upon Development Capital Accumulation Vicious Cycle of Poverty Role of Government Role of Advanced Nations Where From Here? Key Terms Previous Slide Next Slide End Show WHERE FROM HERE? DVC Policy For Promoting Growth Establishing the Rule of Law Opening to International Trade Controlling Population Growth Encouraging Foreign Direct Investment Building Human Capital Making Peace with Neighbors Establishing Independent Central Banks Realistic Exchange-Rates Privatizing State Industries

14. 39 - 13 Copyright McGraw-Hill/Irwin, 2002 The Rich and the Poor Growth, Decline, and Income Gaps Overpopulation Impact Upon Development Capital Accumulation Vicious Cycle of Poverty Role of Government Role of Advanced Nations Where From Here? Key Terms Previous Slide Next Slide End Show WHERE FROM HERE? IAC Policies For Fostering DVC Growth Directing Foreign Aid to the Poorest DVCs Reducing Tariffs and Import Quotas Debt Forgiveness to the Poorest DVCs Admitting in Temporary Workers and Discouraged Brain Drains Discouraging Arms Sales to DVCs

15. 39 - 14 Copyright McGraw-Hill/Irwin, 2002 The Rich and the Poor Growth, Decline, and Income Gaps Overpopulation Impact Upon Development Capital Accumulation Vicious Cycle of Poverty Role of Government Role of Advanced Nations Where From Here? Key Terms Previous Slide Next Slide End Show WHERE FROM HERE? IAC Policies For Fostering DVC Growth Directing Foreign Aid to the Poorest DVCs Reducing Tariffs and Import Quotas Debt Forgiveness to the Poorest DVCs Admitting in Temporary Workers and Discouraged Brain Drains Discouraging Arms Sales to DVCs Chapter Conclusions

16. industrially advanced countries (IACs) developing countries (DVCs) demographic transition view underemployment brain drain capital flight infrastructure capital-saving technology capital-using technology the will to develop capricious universe view land reform vicious circle of poverty corruption World Bank direct foreign investment ENDBACK Copyright McGraw-Hill/Irwin 2002

17. 39 - 16 Copyright McGraw-Hill/Irwin, 2002 The Rich and the Poor Growth, Decline, and Income Gaps Overpopulation Impact Upon Development Capital Accumulation Vicious Cycle of Poverty Role of Government Role of Advanced Nations Where From Here? Key Terms Previous Slide Next Slide End Show Next: Web Chapter Transition Economies: RUSSIA & CHINA