Development Unit 5

MDC LDC More Developed Country Developed Country A country that has progressed further along the development continuum Less Developed Country Developing Country A country in the earlier stage of development

Less Developed country More Developed country MDC LDC Crude Birth Rate = low Crude Death Rate =low Infant Mortality Rate = low Literacy Rate = high School Enrollment = high Total Fertility Rate = low Total % of pop under 15 = low Life Expectancy = high Natural Increase Rate = low GNP per Capita = high Primary Economic Activities =low Service Economic Activities = high % living in Rural Areas = low % living in Urban Areas =high Crude Birth Rate = high Crude Death Rate = low Infant Mortality Rate = high Literacy Rate = low School Enrollment = low Total Fertility Rate =high Total % of pop under 15 =high Life Expectancy = low Natural Increase Rate = high GNP per Capita = low Primary Economic Activities= high Service Economic Activities =low % living in Rural areas =high % living in Urban areas =low

Measuring Development Gross National Product (GNP) Measure of the total value of the officially recorded goods and services produced by the citizens and corporations of a country in a given year. Includes things produced inside and outside a country’s territory. Gross Domestic Product (GDP) Measure of the total value of the officially recorded goods and services produced by the citizens and corporations of a country in a given year. Gross National Income (GNI) Measure of the monetary worth of what is produced within a country plus income received from investments outside the country. ** Most common measurement used today.

Per Capita Used to indicate the average amount of something per person For Example the average individual earns $15 per hour in a MDC while the per capita earning LDC is $2

Human Development Index (HDI) Development – process of improving the material conditions of people through diffusion of knowledge and technology Human Development Index (HDI) Indicator of level of development for each country combining three factors (economic, social, and demographic) Highest possible HDI is 1.0 (100 percent) Norway has highest (.963) Niger has lowest (.281) Western European countries (and Canada) higher level Sub-Saharan African countries lowest level

Developed by the United Nations, the HDI combines several measures of development: life expectancy at birth, adjusted GDP per capita, and knowledge (schooling and literacy).

MDC LDC GDP All MDC average an annual GDP per capita of $27,000 In Luxembourg $60,000 This is reflected in the jobs typically done in MDC All LDC average an annual GDP per Capita of $4,400 This is reflected in the jobs typically done in LDC

Sectors of Economic Activity Primary Sector - Activity that directly extracts or harvests resources from Earth. Location partly dependent on where natural resources are. Secondary Sector - Activity that transforms raw materials into usable products, adding value in the process.

Sectors of Economic Activity Tertiary Sector - Activity that links primary & secondary sectors to consumers and other businesses by selling goods or performing services; includes both retail and business (producer) services Quaternary Sector - Highly skilled, information-based services; usually includes management

Employment Changes by Sector Your textbook combines tertiary quaternary and even quintary Fig. 9-3: Percentage employment in the primary, secondary, and tertiary sectors of MDCs has changed dramatically, but change has been slower in LDCs.

Structural Change in Economies Division of Labor Varies by Level of Economic Development Primary Tertiary Percentage of Work Force Quaternary Secondary Pre-Industrial Industrial Post-Industrial (LDCs) (NICs) (MDCs)

Calories per capita Fig. 9-9: Daily available calories per capita as percent of requirements, 2005. In MDCs, the average person consumes one-third or more over the required average minimum, while in LDCs, the average person gets only the minimum requirement or less.

Where are the LDC and MDC? Draw a line about 30 degrees North. Majority of those countries above that line are MDC Majority of those countries below that line are LDC World categorized into 9 major regions based on level of development and cultural characteristics.

Earth's six less developed regions are Latin America, Southeast Asia, Middle East, East Asia, South Asia, and sub-Saharan Africa. The world's more developed regions are Anglo-America, Western Europe, and Eastern Europe, plus Japan and the South Pacific.

HDI of 9 regions Anglo – America 0.94 Western Europe 0.93 Eastern Europe 0.80 Japan 0.94 Latin America 0.80 East Asia 0.76 Middle East 0.68 Southeast Asia 0.58 South Asia 0.58 Sub-Saharan Africa 0.51

1/5th of the world uses 5/6ths of the worlds goods

MDC SPENDS $$$ USA spends $8 billion a year on makeup Cost of providing 2 Billion children schooling $6 Billion European spent $11 Billion on ICE CREAM Cost of providing toilets to 2 billion people without working toilets = $9 Billion

What paths do LDC use to become MDC Development through Self-Sufficiency Development Through International Trade Financing Development Fair Trade

Development through Self-Sufficiency Improve income across the country to fight poverty instead of encouraging a few to become wealthy consumers Country places barriers to limit imports. Often in the form of Tariffs ( High Taxes on imports) Impact is that these tariffs made some consumer goods to expensive for the average consumer

Development through Self-Sufficiency Countries discourage exportation since the company is supposed to produce goods for consumption inside the country Private companies unable to make profit would get government help in subsidies like Cheap electricity or debt reduction

Development through Self-Sufficiency Problems with this approach Inefficiency: Lack of competition produced companies not driven to be effective Large Bureaucracy : large government involvement leads to abuse and corruption

Development Through International Trade Country Identifies a distinctive or unique economic assets Once that is figured out concentrate on trading that assets Example could be oil or vegetables or flowers

The Rostow Model The Rostow Model - The Stages of Economic Growth W. W. Rostow was American. He developed his model in 1960. It was based upon the study of 15 mainly European countries. He suggested that all countries had the potential to break the cycle of poverty and develop through 5 linear stages.

The Traditional Society A subsistence economy based on farming. Output is consumed by producers rather than traded. Trade is by barter where goods are exchanged or 'swapped‘. Agriculture is the most important industry and production is labor intensive, using only limited quantities of capital. There is very limited technology or capital to process raw materials or develop industries and services.

Pre-conditions for Take Off Surpluses for trading emerge supported by an emerging transport infrastructure. Agriculture becomes more commercialized and mechanized with technological improvements. Savings and investment grow. Entrepreneurs emerge. A single industry begins to dominate – often textiles.

Take Off Industrialization increases, with workers switching form the land to manufacturing. This may cause large scale rural-urban migration Growth is concentrated in a few regions of the country and in one or two industries. New political and social institutions are evolve to support industrialization. Airports, roads and railways are built.

The Drive to Maturity Growth is now diverse supported by technological innovation. It should be self sustaining. Economic development spreads to all parts. A more complex transport system develops. Increase in number and types of industry. Manufacturing expands as early industries decline. Continued rapid urbanization.

High Mass Consumption Rapid expansion of tertiary industry. Industry shifts to production of durable consumer goods.

4 Asian Dragons South Korea Singapore Taiwan Hong Kong These are the first countries to use this method

Problems with Development through international trade Uneven resource distribution Not all resources are equal Market stagnation World market slows Increased dependence on MDC If sales are good focus on just producing that which sells then nothing for the people in that country If MDC economy slows so do their purchases

WTO World Trade Organization Formed in 1995 Countries negotiate reduction or elimination of international trade barriers Created an agreement that creates cooperation among nations for trade

Financing Development This is a process where MDC lend money to LDC Often LDC are not able to repay the loans because their debt exceeds their income MDC then refuse to lend further monies Structural Adjustment program Requires a plan with repayment options and dictation of how money spent and usually includes governmental actions to assist in repaying loan

Fair Trade Products are made and traded according to standards that protect workers and small business Fair trade standards are set internationally http://www.wholefoodsmarket.com/wholetrademap/index.php