WORLD ISSUES Economic Development

What is an Economy? A social system of any given city, area, country, or people, that involves Production of G and S Distribution of G and S Exchange of G and S Consumption of G and S

What is an Economy? (cont) Any economy is shaped by the following factors Technology Natural resources Societal structures government, or lack thereof Banks, unions, etc Geography

Modern Economies Usually have 3 elements called “sectors” Primary sector Secondary sector Tertiary sector Quaternary sector

Primary Sector Involves the extraction and production of raw materials Changing natural resources into primary resources Most products from this sector are considered raw materials for other industries General rule More developed nations have less people in primary sector More developed nations invest in high tech machinery

Secondary Sector Involves the transformation of raw materials into goods i.e. : manufacturing steel into cars or textiles into clothes Creation of finished and usable products i.e. : computers, televisions, hockey sticks, etc Nation who export manufactures goods tend to have higher GDP growth Divided into heavy and light industry This sector is by nature very pollutant

Tertiary Sector Activities that are not primary nor secondary Think intangible goods i.e. Entertainment, transportation, financial advising Involves providing services to consumers and businesses Often called the service sector. Insurance, banking, tourism, education, retail

Quarternary An offshoot of the tertiary sector principally concerns the intellectual services information generation, information sharing, consultation,

What is Development? Common indicators used to measure economic development G.D.P. (total or per capita) : the market value of all final goods and services produced in a nation in a given year G.P.I: Takes into account costs of uneconomic growth. Cost of resource depletion, crime, ozone depletion family breakdown, pollution(air, water, and noise), loss of farm and loss of wetlands

More development Indicators H.D.I : Human Development Index 3 dimensions life expectancy, knowledge: literacy rates, educational attainment, Standard of living GDP per capita. Canada has ranked #1 in 8 different years since 1990. Current top 5 Iceland, Norway, Canada, Australia, Ireland

GDP per Capita: World Map

GDP growth per country

Rostow’s Economic Stages of Development (page 170) Stage 1 : Traditional Society Stage 2: Establishing the Preconditions for take off Stage 3: Economic Takeoff Stage 4: The Drive to Maturity Stage 5: High Mass Consumption

Rostow Stage 1 : Traditional Society Economy dominated by subsistence agriculture. You produce what you consume Very low economic and population growth Progress limited by natural disasters Floods, plagues, droughts, etc Government usually autocratic Dictatorships, Monarchies

Rostow Stage 2: Preconditions for Takeoff. Society capable of achieving surplus wealth (savings) Surplus wealth invested in vital areas of economy Transportation, communication, etc Government more responsive and effective Strong central governments National sense of purpose

Rostow Stage 3: Economic Takeoff Dramatic economic change due to technology Agriculture from subsistence to commercial Manufacturing sector grows and leads development Tertiary sector of the economy grows Growth of cities + payed workers = more customers

Rostow Stage 4: Drive to Maturity Per capita wealth increases Result of sustained economic growth Diversification of economy Continued manufacturing expansion Modern & efficient production methods are adopted Variety of services are available Increasing % of national wealth is invested back into the economy

Rostow Stage 5: High Mass Consumptiom Citizen incomes greater than basic needs cost Demand for consumer goods and services increases 2 cars in the driveway, a P3 and a Wii in the living room Society wealthy enough to provide social services Health care, welfare, quality education, etc

Criticism of Rostow’s Model Developed during the Cold War western capitalism is in essence stage 5 or modernity Stages do not take into account external factors of underdevelopment (ie:Colonialism) Implies a top to bottom approach to development.

Measuring Inequality GINI Index Represented by a decimal number from 0 to 1 (or 0 to 10 or 0 to 100) 0.4 over 1 = 4 over 10 = 40 over 100 0 means the country’s income wealth is evenly distributed amongst all citizens 1 (or 10 or 100) means the country’s income wealth is concentrated in 1 citizen.

Gini Index: Countries with greatest inequality Country Gini Index Poorest 20% Richest 20% Sierra Leone 62.9 1.1% 63% C. A. R 61.3 2% 65% Swaziland 60.9 Brazil 60.7 2.2% 64.1% Nicaragua 60.3 2.3% 63.6% South Africa 59.3 2.9% 64.8% Paraguay 57.7 1.9% 60.7% Colombia 57.1 3% 60.9% Chile 56.7 3.3% 61% Honduras 56.3 59.4%

Gini index: Countries with greatest equality Country Gini index Poorest 20% Richest 20% Slovakia 19.5 11.9% 31.4% Belarus 21.7 11.4% 33.3% Hungary 24.4 10% 34.4% Denmark 24.7 9.6% 34.5% Japan 24.9 10.6% 35.7% Sweden 25 Czech Rep. 25.4 10.3% 35.9% Finland 25.6 35.8% Norway 25.8 9.7% Bulgaria 26.4 10.1% 36.8%

More Gini Numbers Country Gini Index Canada 31.5 U.S.A 45 England 34 France 28 Switzerland 34.7

Questions to ponder In what regions do we see the most inequality? In what region do we see the most equality? What is the relation between GDP growth and equality?