Economic Development and Transition Chapter 18

Levels of Development  Developed Nations –Northern countries –Industrial countries –First and Second World  Less Development Nations –Southern countries –Agricultural / Mixed Economy –Third and Fourth World

Measuring Development  Life expectancy  Diet  Access to health care  Literacy  Energy consumption  GDP  Per capital GDP  Industrialization  Subsistence agriculture  Labor force  Consumer goods  Infant mortality rate  infrastructure

Characteristics of Development Countries  High per capita GDP  Higher economic / political freedom  Higher degree of consumer spending  High agricultural output  literacy

Characteristics of Less Developed Countries  Low per capita GDP  Low levels of consumption  Less economic / political freedom  Low levels of agriculture output  Less literacy

Levels of Development  Primitive equilibrium  Transition  Takeoff  Semi-development  Highly development  Newly Industrial Countries (NICs) –Mexico, Brazil, Malaysia, Thailand, Singapore, Hong Kong, South Korea, Taiwan

Issues in Development  Rapid Population Growth  Factors of Production  Physical Capital  Human Capital –Health / Nutrition (malnutrition) –Education / Training –Brain drain

Issues in Development  Political Factors –Colonial dependency –Central planning –Government corruption –Political instability  Debt –Debt + interest –Structural adjustment program (SAP)

Financing Development  Investment –Internal financing –Foreign financing –Foreign direct investment (enterprises by foreigners) –Foreign portfolio investment

Foreign Aid  Government to government aid  NGO to governments  1947: Marshall Plan (Secretary of State George C. Marshall)

International Institutions  World Bank: development projects  International Monetary Fund: currency stabilization; debt management  United Nations Development Program: dedicated to the elimination of poverty

Transition to Free Enterprise  Central Planning to Free Enterprise –Privatization –Protecting property rights –Work ethic

Transition in Russia  Communism in Russia s  Glasnost and Perestroika –Glasnost: policy of political openness –Perestroika:plan for restructuring the economy Oil industry Freedom of the press Multiparty system

Transition in China  Great Leap Forward: 1958, Mao  Cultural Revolution: 1960, Red Guards,  1976: Deng Xiaoping - more power to local governments –Four Modernizations Improve agriculture Industry Science technology

Industry  China: light industry  Economic zones coastal area tax incentives foreign companies indigenous private companies Patent violations -copyright laws expanding middle class  Three Gorges Dam

China / Russia /India  Growth of middle class  Labor: skills, education, cost  Demand for consumer goods  Demand for resources –Oil –Gas