DEVELOPMENT

The Human Development Index (HDI), created by the United Nations, recognizes that a country’s level of development is a function of all three of these factors.

Four factors that calculate HDI:

  • GDP (gross domestic product) per capita
  • Literacy rate
  • Amount of education
  • Life expectancy

Economic / Social / Demographic
Gross Domestic Product (GDP): value of the total output of goods and services produces in a country, normally during a year
•GDP per capita  Dividing GDP by total population measures contribution made by the average individual toward generating a country’s wealth / •level of development, the greater are both the quantity and quality of education
•Quantity: average number of school years attended
•Quality: student/teacher ratio and literacy rate
•Literacy rate: percentage of a country’s people who can read and write / •Life Expectancy: average number of years a newborn infant can be expected to live

Other factors the help determine development

Economic / Social / Demographic
  • Types of Jobs (primary, secondary, tertiary)
  • Productivity
  • Raw Materials
  • Consumer goods
/
  • Health and Welfare
/
  • Infant Mortality Rate
  • Natural Increase Rate
  • Crude birth rate

More and Less Developed Regions

More Developed Regions / Less Developed Regions
Anglo-America
Western Europe
Japan
South Pacific
Eastern Europe / Latin America
East Asia
Middle East
Southeast Asia
South Asia
Sub-Saharan Africa

Gender-Related Development Index (GDI): compares the level of development of women with that of both sexes

Uses the same indicators as HDI

  • Income
  • Literacy
  • Education
  • Life expectancy

High GDI means both men and women have achieved a high level of development

Low GDI means that women have a low level of development

Economic Indicator / Social Indicator / Demographic Indicator
Income
Average income for females is lower than males in every country in the world / Education & Literacy
Women less likely to attend schools in LDCs
Gap is especially high in secondary level
Women:Men 99:100 in MDCs, 60:100 LDCs
Sub-Saharan Africa & Middle East fewer than one-third of girls attend school
In Latin America and Asia, boys and girls are equally likely but attendance is much less than in MDCs / Life expectancy
Gender gap greater in MDCs than LDCs
Women expected to live longer in MDCs

Gender Empowerment Measure (GEM): Compares ability of women and men to participate in economic and political decision-making. GEM measures the ability of women to participate in the process of achieving those improvements

  • two indicators of economic power
  • income
  • professional jobs
  • two indicators of political power
  • managerial jobs
  • elected jobs

Countries with the highest GEMS are MDCs, especially in North America, Northern Europe and South Pacific

Obstacles for Development

To reduce disparities between rich and poor countries, LDCs must develop more rapidly

• Increasing per capita GDP more rapidly

• Using additional funds to make more rapid improvements in people’s social and economic conditions

Two Obstacles

  • Adopting policies that successfully promote development
  • Finding funds to pay for development

Promoting Development / Finding Funds
  • Self-Sufficiency
  • International Trade
/
  • Loans from Banks
  • Direct Investment

Details of Approach / Disadvantages / Example
SELF-SUFFICIENCY
  • a country should spread investments as equally as possible across all sectors of its economy and in all regions
  • Countries promote self-sufficiency by setting barriers that limit the import of goods from other places.
  • High tariffs (taxes) on imported goods to make them more expensive than domestic goods
  • Fixing quotas to limit the quantity of imported goods
  • Requiring licenses to restrict the number of legal importers
  • Restricts local businesses from exporting to other countries
/
  • Inefficiency
  • Large Bureaucracy
/ INDIA
INTERNATIONAL TRADE
Rostow’s Development Model
  • The Traditional Society: has not yet started a process of development. A traditional society contains a very high percentage of people engaged in agriculture and a high percentage of national wealth allocated to what Rostow called ‘nonproductive’ activities, such as the military and religion.
  • The preconditions for takeoff: development begins when an elite group initiates innovative economic activities. Under the influence of these well-educated leaders, the country starts to invest in new technology and infrastructure. These products will ultimately stimulate an increase in productivity.
  • The Takeoff: rapid growth is generated in a limited number of economic activities, such as textiles or food products. These few takeoff industries achieve technical advances and become productive, whereas other sectors of the economy remain dominated by traditional practices.
  • The Drive to Maturity: modern technology diffuses to a wide variety of industries, which tne experience rapid growth. Workers become more skilled and specialized.
  • The Age of Mass Consumption: the economy shifts from production of heavy industry to consumer goods, such as motor vehicles and refrigerators.
/
  • Uneven resource distribution
  • Market stagnation
  • Increased dependence on MDCs
/ FOUR ASIAN DRAGONS
South Korea, Singapore, Taiwan, Hong Kong
PETROLEUM-RICH ARABIAN PENINSULA STATES
Saudi Arabia, Kuwait, Bahrain, Oman, United Arab Emirates (UAE)

Loans

  • The World Bank
  • International Bank for Reconstruction and Development (IBRD): provides loans to countries to reform public administration and legal institutions, develop and strengthen financial institutions, and implement transportation and social service projects
  • International Development Association (IDA): provides support to poor countries considered too risky to qualify for IBRD loans.
  • International Monetary Fund (IMF)
  • Provides loans to countries experiencing blance0of-payments problems that threaten expansion of international trade.
  • Designed to help a country rebuild international reserves, stabilize currency exchange rates, and pay for imports without having to impose harsh trade restrictions or capital controls that could hamper the growth of world trade

 The Theory: Borrowing money for new roads and dams will make conditions more favorable for domestic and foreign businesses to open and expand

 Problem: many new infrastructure projects are expensive failures, and many LDCs have been unable to repay the interest on their loans.

Structural Adjustment Program: before granting debt relief, and LDC is required to prepare a Policy Framework Paper (PFP) outlining a structural adjustment program, which includes economic goals, strategies for achieving the objectives, and external financing requirements.