Development

1. Development

2. Development • Definition: • The process of improving the material condition of people through growth and diffusion of technology and knowledge • Every place, regardless of size, exists at some level of development • MDCs • More developed countries • On wealthier side of development spectrum • LDCs • Less developed countries • On the economically poorer side of the development spectrum

3. Measuring development • There are several ways to measure development • Different factors: • Gross Domestic Product (GDP) • Value of total outputs of goods and services produced in a country, usually over one year • Gross National Product (GNP) • Includes all goods and services owned and produced by a country overseas • Purchasing Power Parity (PPP) • Measurement tool for each currency to buy an equal amount of goods • Allows economists to make “apple to apple” comparisons • Informal Sector • Includes all business transactions that were not reported by the government • Not calculated in GDP • Exists for several reasons

4. Human Development Index • Formula used to measure a country’s development level and compare it to other regions and countries on the rank-ordered list of countries • Country’s level of development can be distinguished by three factors: • Economic • Social • Demographic • HDI examines all three factors • HDI created by United Nations • Created by selecting: • One economic factor (Gross Domestic Product) • Two social factors (literacy rate, education) • One demographic factor (life expectancy) • Highest HDI is a 1.000, or 100% • Lowest score is a 0.000, or 0%

5. Map of HDI

6. Economic Indicator: GDP • Gross Domestic Product per capita • GDP • Definition: • value of the total output of goods and services produced in a country, normally during a year • Divide GDP by total population to get the average contribution from individuals • For example: • The GDP for the U.S. in 2009 was $14 trillion • Divided by pop of 307 million= $46,600 • In MDCs GDP per capita exceeds $30,000 • In LDCs less than $3,000 • The higher the per capita GDP, the greater the potential for ensuring that all citizens enjoy comfortable life • GDP does not perfectly measure country’s development • GDP measures average (or mean) wealth, not its distribution

7. GDP per Capita

8. Three other Economic Indicators • The other economic indicators useful in distinguishing between MDCs and LDCs • Types of jobs • Worker productivity • Availability of consumer goods

9. Types of Jobs • Five categories • Primary • Directly extract resources from earth • Secondary • Manufacturing • Tertiary • Provision of goods and services • Quaternary • Creation and transfer of information • Quinary • Highest level decision making • Distribution of jobs among workers differs greatly between MDCs and LDCs • % of primary jobs in LDCs is 60%, MDCs is less than 5% • High agricultural % means people producing food for mainly survival, not sale

10. Productivity • Definition: • Value of a particular product compared to the amount of labor needed to make it • Workers in MDCs are more productive than LDCs • Productivity can be measured by the value added per capita • Value added: gross value of the product minus the costs of raw materials and energy • $5,000 in U.S., $7,000 in Japan • $500 in China, $100 in India • MDCs • Workers produce more with less effort due to technology (machines, tools, equipment) • LDCs rely solely on human labor and animal power • Larger per capita GDP in MDCs in part pays for the manufacture and purchase of machinery • Which in turn makes workers more productive and generate more wealth

11. Consumer Goods • Part of the wealth generated in MDCs is used to purchase goods and services • Especially important are goods and services related to transportation and communications • Including motor vehicles, telephones, and computers • Products that promote better transportation and communications are accessible to virtually all residents in MDCs • Vital to the economy’s function and growth • In LDCs, these products do not play a major role in daily life • LDCs, most people can not afford them • Most people familiar with goods, see them as symbol of development • Possession of consumer goods is not universal in LDCs • “haves” and “have-nots” • Technological change may help to reduce the gap in access to communications betweens MDCs and LDCs • Cell phone ownership rapidly expanding • Don’t require costly investment of installation of wires

12. Social Indicators of Development • MDCs use part of their wealth to provide schools, hospitals, and welfare services • Result= people are better educated, healthier, and better protected from hardships • Infants more likely to survive, adults live longer • In turn, well-educated, healthy, and secure population can be more economically productive • Social Indicators • Education/ Literacy • Health/ Welfare

13. Education and Literacy • In general: • Higher the level of development = greater quantity and quality of a country’s education • Quality of education is measured in two ways: • Student/teacher ratio • LDCs more students per teacher • = less personalized instruction • Literacy rate • Percentage of a country’s people who can read and write • 98% + in MDCs, 60% in LDCs

14. Health and Welfare • People are healthier in MDCs than LDCs • Health influenced by diet • MDCs: • eat more calories and protein • LDCs: • receive less than the daily minimum allowance of calories and proteins • MDCs health care is a public service • Available at little to no cost • Government programs pay for more than 70% of healthcare costs in European countries • Exception U.S. where private individuals are required to pay an average of 55% health care costs, more similar to LDCs • MDCs use part of their wealth to protect people that cannot work • Public assistance for sick, elderly, poor, disabled, orphaned, veterans of war, widows, unemployed, or single parents • Countries in NW Europe provide highest level of public-assistance • Denmark, Norway, Sweden • Today MDCs are having difficulty maintaining these programs

15. Demographic Indicators of Development • MDCs display demographic differences from LDCs • Demographic Indicators • Used by UN’s HDI: • Life expectancy • Other: • Infant mortality rate • Natural increase rate • Crude birth rates

16. Demographic Indicators • Life expectancy • Better healthcare and welfare in MDCs permit people to live longer • Babies born today can expect to live into their 60s in LDCs, 70s in MDCs • Gap in LE greater for females than males • Females – 13 years longer in MDCs • Males- 10 years longer in MDCs • MDCs have a higher % of older people • = high dependency ratio • Infant Mortality Rate • Better health allows more infants to survive in MDCs • 6% die in LDCs, less than 1% in MDCs • Greater in LDCs because: • Babies die from malnutrition, lack of medical attention, dehydration, poor medical practices • Natural Increase Rate • LDCs having more babies! • Averages 1.5% in LDCs • Averages 0.2% in MDCs • Natural increase strains a country’s ability to provide hospitals, schools, jobs, and other services make its people healthier and more productive • LDCs must allocate resources for expanding population rather than improve care for current population • Crude Birth Rate • LDCs have higher NIRs because they have a higher CBR • LDCs= 23 per 1,000 • MDCs= 12 per 1,000 • CBR does not indicate a society’s level of development • High # of old people in MDCs

17. Distribution of MDCs and LDCs • Countries of the world can be categorized into nine major regions according to their level of development • More Developed Regions • North America • Europe • Russia • Japan • Oceania • Less Developed Regions • Latin America • East Asia • Southwest Asia/ N. Africa • Southeast Asia • Central Asia • South Asia • Sub-Saharan Africa

18. The Development Gap • Definition: • Widening difference between development levels in MDCs and LDCs • MDCs are improving in their development levels faster than are LDCs • In the last decade, the GDP nearly tripled in MDCs but only doubled in LDCs • The rate of population increase fell by nearly 85% in MDCs, but by less than 5% in LDCs • North-South Gap • Refers to the pattern that MDCs are primarily located in the Northern Hemisphere • LDCs are mainly located in the Southern Hemisphere

19. Gender Inequality • A country’s overall level of development masks inequalities in the status of men and women • Gender inequality exists in every country of the world • No country in the world where women are treated as well as men • To measure extent of each country’s gender inequality the UN has created two indexes: • Gender-related development index (GDI) • Compares level of women’s development with that of both sexes • Gender Empowerment Measure (GEM) • Compares the ability of women and men to participate in economic and political decision making

20. Gender-Related Development Index (GDI) • Constructed similar to the HDI • Economic indicators • Per capita female income as a % of per capita male income • Social indicators • # of females enrolled in schools compared to # of males • % of literate females compare to males • Demographic indicators • LE of females compared to males • The GDI penalizes a country for having a large disparity between the well-being men and women • Example: Hungary and Saudi Arabia • A country with complete gender equality would have a GDI of 1.0 • A high GDI means that both men and women have achieved a high level of development • A low GDI means that women have a low level of development compared to men

21. Gender Empowerment Measure (GEM) • GEM measures the ability of women to participate in the process o achieving improvements in their status • Political and economic power • GEM is calculated using: • Economic • Per capita female income as a % of per capita male income • % of professional and technical jobs held by women • Political • % of administrative jobs held by women • % of members of the national parliament who are women • Highest score= 1.0 • Regions with highest GEMs are: • North America • Northern Europe • Oceania • Regions with lowest GEMS are: • Africa • Asia