Chapter 9.1: Why Does Development Vary Among Countries?

Development is the division of the world into relatively wealthy regions and relatively poor ones. More Developed Countries (MDCs): also known as developed nations Less Developed Countries (LDCs): also known as developing nations A countries level of development is based on economic, social, and demographic factors

Economic Indicators of Development There are five indicators that are used to measure economic development Gross Domestic Product Per Capita Gross Domestic Product- value of total output of goods and services produced in a year Divide GDP by total population ($10 trillion/290 million= $34,000 in US) Annual GDP exceeds $20,000 in MDCs while it is about $1,000 in LDCs

Types of Jobs Jobs fall into three sectors: Primary: directly extract materials from earth (mining, farming) Secondary: manufacturing materials into products Tertiary: providing goods and services for payment In LDCs most workers fall in the Primary sector, in MDCs most fall in the Tertiary

Productivity Raw Materials The value of a product compared to the amount of labor needed to make it Workers in MDCs are much more productive due to technology Raw Materials MDCs need a great deal of raw materials, often importing them from LDCs LDCs with energy and other resources have a much better chance of developing

Consumer Goods Buying luxury goods further improves a nation’s wealth Cars, telephones and TVs are major indicators of development (1:1 ratio in MDCs) These items are not as important in LDCs (1:100 ratio)

Social Indicators MDCs can afford better education and health care In general, the higher the level of development, the greater the quality and quantity of education Teacher-pupil ratio and literacy rate are used to measure development 95% literacy in MDCs vs. 33% in LDCs MDCs also produce more books, magazines and newspapers

Health and Welfare In MDCs health care is often a public service at little or no cost (except US) People in MDCs receive far more calories and proteins MDCs also provide help to those who are physically unable to work

Demographic Indicators Life Expectancy Better health and welfare makes for greater life expectancy in MDCs Mid 70’s in MDCs vs. Mid 40’s in LDCs Infant Mortality Rate About 90 percent of infants survive in LDCs vs. 99 percent in MDCs Poor medical practices, lack of nutrition, lack of medicine Natural Increase Rate More than 2 percent in LDCs vs. less than 1 percent in MDCs Crude Birth Rates About 40/1000 in LDCs vs. 15/1000 in MDCs

Chapter 9.2: Where are MDCs and LDCs Distributed?

The world can be split into 9 regions according to level of development. Nearly all MDCs are north of 30N and almost all LDCs are south of this line.

More Developed Regions Three of the nine regions are considered more developed (Anglo America, Europe, Japan/South Pacific) Anglo America Language and religion is less diverse in this region: 90 percent speak English and belong to Christianity Used to be the world leader in manufacturing, has now shifted to technology, information, sports, entertainment, etc. The world’s most important food exporter and has plenty of room to expand

Europe Western Europe Displays cultural unity, but diversity of individual languages and religion cause conflict The level of development is the world’s highest in parts of Germany, France, Italy, Belgium, etc. Import food, energy and minerals to keep pace Provide high valued goods and services like insurance, banking, luxury cars Elimination of economic barriers makes them world’s largest and richest market

Eastern Europe In the early 1990’s they were keeping pace with Western Europe in HDI With fall of communism it has dropped to the level of Latin America (LDC) Countries are slowly adjusting and anticipated to turn things around

Japan Success is surprising due to ratio of population to raw materials Gained a foothold by providing very cheap but hardworking labor Now specialize in high quality and high value products (electronics, cameras, cars) South Pacific New Zealand and Australia are MDCs as well but are not central to the global economy due to small populations

Less Developed Regions Latin America Highest HDI among LDCs Primarily speak Spanish or Portuguese and predominantly Roman Catholic Very dense urban populations and development along the South Atlantic Coast is relatively high Development is hindered by distribution of income. A handful of wealthy families control most of the land and rent it to tenant farmers

East Asia China is the largest country in East Asia but ranks among world’s poorest In a few years China will be the world’s largest economy Communism limited growth, but the government is loosening some controls on property Agriculture in the country is still mostly intensive subsistence Southeast Asia Includes Indonesia, Philippines, Vietnam Suffered from numerous wars and colonialism Tropical climate limits the farming of grains, focus on rice Economy has grown due to cheap manufacturing, but slowed when governments stopped regulating business

Middle East Largely desert and most products must be imported Large petroleum supplies give the Middle East a major source of wealth (though not all nations) Increased wealth and economic development have clashed with traditional values causing major problems South Asia Includes India, Pakistan, Bangladesh World’s second highest population and second lowest per capita income India has resources and agriculture, but is hindered by a huge population

Sub-Saharan Africa Countries north of the Sahara are part of the Middle East SS Africa has the lowest prospect for development Poor education, health, and high poverty levels Many problems stem from the colonization of Africa including the stripping of natural resources Political fights and wars have further hindered development Population keeps increasing while the land cannot support more agriculture

Chapter 9.3: Why Does Development Vary by Gender?

According to the United Nations, no nation in the world treats women as complete equals Two measures: Gender-Related Development Index (GDI): compares the level of development of women to men Gender Empowerment Measure (GEM): compares the ability of women and men to participate in economic and political decision making

Gender-Related Development Index Uses the same indicators as the HDI, but compares differences between men and women for each Penalizes a country for having a large disparity in the well-being of women vs. men A 1.0 indicates equality… Norway is the highest at .94 (Most MDCs above .90)

Gender-Related Development Index (GDI) Fig. 9-10: The GDI combines four measures of development, reduced by the degree of disparity between males and females.

Economic differences Average income of men and women is compared An income gap of more than $15,000 is typical in MDCs In the US (2001), the difference was $43,000 (men) vs. $26,000 (females) The gaps are similar in LDCs though the numbers are far lower Social Differences Women are much less likely to attend schools in LDCs Ratio of high school enrollment: 99/100 in MDC 60/100 LDC Demographics In MDCs, women outlive men by a significant number of years (4+) In LDCs, women only live a year or two more or might not even live longer The hazards of giving birth in LDCs plus high birth rates account for this disparity

Female–Male Income Differences Fig. 9-11: Women’s income is lower than men’s in all countries, but the gender gap is especially high in parts of the Middle East, South Asia, and Latin America.

Gender Differences in School Enrollment Fig. 9-12: As many or more girls than boys are enrolled in school in more developed countries, but fewer girls than boys are enrolled in many LDCs.

Gender Empowerment In every country of the world, women hold fewer positions of economic and political power GEM takes economic indicators and political indicators into consideration 1.0 would be total equality… MDCs are the highest .70+

Economic Indicators Political Indicators Percentage of women holding professional jobs and technical jobs More than half of the women in Europe and N. America hold these jobs Political Indicators Percentage of women holding administrative and managerial jobs North America and Europe lead this category with over 1/3 The other indicator is percentage of women elected to public office

Gender Empowerment Measure (GEM) Fig. 9-15: The GEM combines two measures of economic power and two of political power by women. (Little data are available for LDCs.)

Chapter 9.4: Why Do LDCs Face Obstacles to Development?

LDCs face two major obstacles when trying to encourage development LDCs are trying to improve their way of life, but the gap between LDCs and MDCs is widening. Americans spend more per year on cosmetics ($8 billion) than the cost of providing schools for the 2 billion people that need them ($6 billion) LDCs face two major obstacles when trying to encourage development Adopting policies that work Finding funds to pay for development

Development Through Self-sufficiency Also known as balanced growth, has been adopted by India and China A country should spread investment as equally as possible across all regions and sectors of economy Incomes in the country keep pace with urban incomes Set trade barriers to protect local businesses and keep MDCs from dominating them

India: Example of self-sufficiency Government severely limits licenses and amount of foreign production in the nation Indian companies were discourage from exporting as well, all goods should be kept in country Businesses need government permission to create new products, hire/fire workers, set prices Government subsidized losses of private companies that did not succeed Problems Inefficiency: government control created very poorly run industries. No incentive to improve products, reduce costs, increase production Bureaucracy: created so many rules and regulations that everything is slow and there is massive corruption

Development Though International Trade Calls for a country to identify its unique economic assets and focus on them A country should concentrate its scarce resources on expansion of those industries to generate wealth

Core and Periphery in World Economy Fig. 9-22: This north polar projection of the world shows that most of the MDCs are in a core area north of 30° N latitude. The LDCs are mostly on the periphery of this map.

Rostow’s Development Model: Traditional Society: has not started the process of development, high percentage of people in agriculture and large amount of wealth tied into nonproductive activities like military and religion Preconditions for Takeoff: An elite group initiates innovative economic activities. Starts to invest in technology and infrastructure, these projects stimulate an increase in productivity Takeoff: Rapid growth takes place in a few industries such as textiles or food. These takeoff industries become productive while other sectors of the economy remain traditional Drive to Maturity: Modern technology which was limited to takeoff sectors now diffuses to other industries which now grow rapidly. Workers become more skilled and specialized Age of Mass Consumption: Economy shifts from heavy industry (steel/energy) to consumer goods

Gain technology and forced to be competitive Examples MDCs are in the last two stages and each MDC has been through the first stages as well Countries that take part in international trade benefit from exposure to other countries Gain technology and forced to be competitive Examples Oil-rich gulf states Saudi Arabia, Kuwait, Bahrain, UAE Use oil revenue to build airports, schools, etc Import consumer goods from Western nations These influences have created a great deal of friction with religion in these nations Asia South Korea, Singapore, Taiwan, Hong Kong Focus on cheap manufacturing to achieve takeoff

Problems: Uneven resource Distribution: if the price of the items you focus on drops you might be in trouble Market Stagnation: MDCs grow slowly, so sometimes demand may level off (cheap clothing) Dependence on MDCs: focusing on selling to MDCs might slow production of those things for your own people. Then you are forced to spend money to supply them (food, clothes, etc.) In spite of problems with international trade, many countries believe this is the best route towards development India recently dismantled its barriers to foreign trade believing that it will create more wealth The World Trade Organization (WTO) was also formed in 1997 to eliminate barriers to trade

Financing Development Whichever way they try to develop, LDCs need money from MDCs to do so Funds come from two sources: loans from banks and direct investment by transnational corporations Loans Often provided by the World Bank and the International Monetary Fund (IMF) Borrow money to build infrastructure and improve businesses, this in turn provides more tax money to the LDC Total value of all outstanding loans in 1996: $2.1 trillion Due to many failures on expensive projects, many MDCs are much more cautious about loans to LDCs today

Transnational Corporations Operates in countries other than the one in which its headquarters is located Countries invest in other countries by setting up factories or providing goods/services in LDCs By 2001 the total amount of international investments was roughly $735 billion Only ¼ of foreign investments were made to LDCs however (the rest was MDC to MDC)