1. Economic Development and Transition
Chapter 18 Section 1
Levels of Development

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Objectives:
*Understand what is meant by developed nations and less developed nations.
*Identify the tools used to measure levels of development.
*Describe the characteristics of developed nations and less developed countries.
*Understand how levels of development are ranked.

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Section Focus:
Nations throughout the world exhibit varying levels of economic well-being. Many tools are used to look at a nation’s level of development?

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Half of the world’s population – live in extreme poverty.
The United Nations estimates that 1 billion people live on less than $ 1.00/day.
Concern over these startling statistics has led to close examination of
the world’s economies.

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Social Scientists measure the economic well-being of a nation in terms of its level of development.
Development is the process by which a nation improves the economic, political, and social well-being of its people.

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Developed Nations and Less Developed Countries:
Some nations enjoy a high standard of living.
Wealthy nations – United States, Australia, Canada, New Zealand, Japan, and Western Europe called developed nations.
Developed Nations are those nations with a higher average level of material well-being.
Less Developed Countries (LDCs) are nations that have low levels of material well-being.
LDC’s have the world’s poorest countries – Bangladesh, Nepal, Albania, nations of Central and South America, Mexico, Saudi Arabia, former Soviet Union.

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Less Developed Countries

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Development refers to a nation’s material well-being.
Level of development refers to the ability of a nation to feed, clothe, and shelter its people.
It indicates how healthy people are, how well they are educated, and how productive they are.

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Measuring Development:
Life expectancy, diet, access to health care, literacy, energy consumption, and other factors are used to measure development.
The primary measure of a country’s development is the per capita Gross Domestic Product (per capita GDP)

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Per Capita GDP
Gross Domestic Product is the total market value of all the final goods and services produced within an economy in a given year.
Per Capita GDP – is a nation’s GDP divided by their total population.
Economists use Per Capita GDP because GDP is not an accurate tool to compare living standards.

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For Example:
Australia
* GDP of $390 billion
* Enjoys a very high
standard of living

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India
* GDP of $ 380 billion
* is very poor

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What accounts for this difference?
The answer is
population size

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Australia has a population of some 20 million people.
India has a population of 1 billion people.
This is the precise reason why Economist use the per capita GDP to compare levels of development.
Australia’s per capita GDP is $ 20,650
India’s per capita GDP is $ 380

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This single figure shows that Australia is more capable of meeting the basic needs of their people, India is not able to do this.
Within every nation, some people are wealthier than most, while others are poorer than most.
In many less developed countries, the gap between rich and poor is especially wide.

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Energy Consumption:
Energy consumption is another way to look at development.
The amount of fossil fuel, hydroelectricity, and nuclear energy a nation uses depends on its level of industrialization.
Industrialization – is the extensive organization of an economy for the purpose of manufacture.
Industrial processes generally require large amounts of energy.

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High levels of energy use tend to indicate high levels of industrial activity.
Developed nations in the world are highly industrialized.
Nations with low levels of per capita energy consumption tend to have little industry.
Most of the people in such nations are farmers working with simple tools and few machines.
Most of the population are engaged in subsistence farming – they are able to raise only enough food to feed their families.

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Labor Force:
If an economy has low industrialization, they mainly a labor force of farmers.
If most of the people are working simply to raise food for themselves, very few are available to work in industry.
So, as a result, they have very few opportunities to become specialized.

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Consumer Goods:
The quantity of consumer goods that a nation produces per capita can also indicate its level of development.
A large number of consumer goods in an economy means that people have enough money to meet their basic needs and still have some left over for nonessential goods.
Economists look to see how many people have televisions, automobiles, refrigerators, washing machines, or telephones.

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Literacy:
The more a country’s people attend school, the higher its level of development.
The greater the number of people that can read and write, the more productive a population can be at both industrial and agricultural jobs.
Literacy Rate – the proportion of the population over age 15 that can read and write.
A well-educated nation has a high literacy rate.

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Life Expectancy:
Life Expectancy is the average expected life span of an individual.
It indicates how an economy system supports life and fends off death.
A population that is well nourished and housed, as well as protected from disease, will have a long life expectancy.
A population that has a poor diet and shelter and that is exposed to poor sanitation and disease will have a shorter life expectancy.

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Infant Mortality Rate:
A country’s Infant Mortality Rate – indicates the number of deaths that occur in the first year of life per 1,000 births.
The United States has a IMR of 6.4
6.4 infants will die before they reach their first birthday.
Not all regions of a country
have the same IMR

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Characteristics of Developed Nations:
1. High per capita GDP
2. Majority of the population are neither very rich nor very poor
3. A higher degree of economic and political freedom
4. A high degree of consumer spending
5. Agricultural output is high, but very few people work on farms
6. Advanced techniques in fertilizers, pesticides, seed varieties, and heavy machines
7. Most of the labor force is available to work in industry and services.
8. Widespread use of technology in those countries
9. Nation is devoted to being healthy – long life expectancy
10. An urbanized area for most of the population.

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Infrastructure – the services and facilities necessary for an economy to function.
i.e. Transportation and Communication systems, roads, power plants, schools, and banks

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Characteristics of Less Developed Countries:
1. A very low per capita GDP
2. Low per capita energy consumption
3. Very few industries in the country
4. Many in the labor force work on their own farms and grow only enough food to feed themselves and their families
5. Unemployment rates are high – around 20%
6. Labor force is underemployed
7. They can not support themselves or their families
8. Literacy rates are very low (like 35%)
9. Housing is very poor at best
10. Diet is poor, lack of access to health care, and high infant mortality rates

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Levels of Development
1. Primitive Equilibrium
Economy has no formal economic organization or monetary system. It exits in equilibrium based on tradition
2. Transition
Cultural traditions begin to crumble and people adopt new living patterns
3. Takeoff
New industries grow and profits are reinvested

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Levels of Development
4. Semi-development
Economy expands significantly and enters the international market
5. Highly Developed
Basic human needs are met easily. Economy is focused on consumer goods and public services

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Newly Industrialized Countries (NICs)
Less developed country that has shown significant improvement in the measure of development.
Newly industrialized countries include
Mexico Brazil
Malaysia South Korea
Taiwan Singapore
Thailand Hong Kong
Most successful of those are …
Hong Kong, Singapore, Thailand, South Korea, and Taiwan – known as “the four Asian tigers”

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The World Bank is an international organization devoted to assisting development.
It uses per capita GNP (Gross National Product) to categorize nations as high income, middle income, or low income.
More money goes to low income countries

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REVIEW:
What is development?
Why are developed nations sometimes referred to as industrialized nations?
Why is per capita GDP a better measure of development than GDP?
What role does infrastructure play in a nation’s development?
List and describe three characteristics of developed nations and three characteristics of less developed countries.