1. WORLD ISSUES
Economic Development

2. 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

3. 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

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

5. 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

6. 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

7. 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

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

9. 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

10. 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

11. GDP per Capita: World Map

12. GDP growth per country

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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.

20. 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.

21. 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%

22. 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%

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

24. 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?