economic development and transition chapter 18. levels of development chapter 18, section 1
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Levels of DevelopmentLevels of Development
½ the world lives in poverty½ the world lives in poverty Economic well being is measured in Economic well being is measured in
terms of terms of developmentdevelopment• the process by which a nation improves the process by which a nation improves
economic, political and social well being economic, political and social well being of its peopleof its people
Developed Nations and LDC’sDeveloped Nations and LDC’s
Developed nations are nations with a Developed nations are nations with a higher level of material well beinghigher level of material well being
LDC’s or Less Developed Nations are LDC’s or Less Developed Nations are nations with low economic well beingnations with low economic well being• Mexico, Nepal, Central and Southern Mexico, Nepal, Central and Southern
Africa, Republics of the former Soviet Africa, Republics of the former Soviet UnionUnion
Measuring DevelopmentMeasuring Development
Factors used in measuring developmentFactors used in measuring development• Life expectancyLife expectancy• Infant mortalityInfant mortality• Health careHealth care• LiteracyLiteracy• Labor forceLabor force• Consumer goodsConsumer goods• InfrastructureInfrastructure• Energy consumptionEnergy consumption• Per Capita GDPPer Capita GDP
Issues of DevelopmentIssues of Development
Population growthPopulation growth• Countries are increasing population without Countries are increasing population without
increasing their economy or developmentincreasing their economy or development Lack Factors of ProductionLack Factors of Production
• Land, Physical Capital, Human CapitalLand, Physical Capital, Human Capital Brain Drain…skilled people moved to more Brain Drain…skilled people moved to more
developed nationsdeveloped nations
Political FactorsPolitical Factors• Corrupt governments, instability, debtCorrupt governments, instability, debt
Developing Countries Need to Developing Countries Need to Raise FinancingRaise Financing
Internal financing…savings and Internal financing…savings and investing from within…investing from within…• LDC’s don’t have a lot of people who LDC’s don’t have a lot of people who
can do this.can do this. Foreign investmentForeign investment
• Foreign direct…building in the nation…Foreign direct…building in the nation…done by MNC’sdone by MNC’s
• Foreign portfolio…investing in stocks Foreign portfolio…investing in stocks and bonds of foreign countriesand bonds of foreign countries
Foreign AidForeign Aid
Some nations give aid (not loans) to LDC’s Some nations give aid (not loans) to LDC’s for varied reasonsfor varied reasons• Political Political • EconomicEconomic• Human compassionHuman compassion
World BankWorld Bank• Institution that raises money to distribute to Institution that raises money to distribute to
nations of neednations of need• Coordinates economic development Coordinates economic development
throughout the worldthroughout the world
International Monetary Fund (IMF)International Monetary Fund (IMF)
Aids desperate countries through Aids desperate countries through debt rescheduling and stabilization debt rescheduling and stabilization programsprograms• Conditions are set by the IMFConditions are set by the IMF
Transitions to Free Transitions to Free EnterpriseEnterprise
Chapter 18, Section 4Chapter 18, Section 4
Moving Towards a Market Moving Towards a Market EconomyEconomy
Privatization…sale and transfer of Privatization…sale and transfer of government owned businesses to government owned businesses to individualsindividuals
Property rights need to be protectedProperty rights need to be protected
Transitions in NationsTransitions in Nations Russia and GlasnostRussia and Glasnost
• Policy of political openness and reform that Policy of political openness and reform that encouraged citizens to say what they wished encouraged citizens to say what they wished without persecutionwithout persecution
• Perestroika…plan for transition from command Perestroika…plan for transition from command to free economyto free economy
China and the Great Leap ForwardChina and the Great Leap Forward• Plan for China to turn into an economic powerPlan for China to turn into an economic power• All land was taken over by the governmentAll land was taken over by the government• Huge disaster as there was no incentiveHuge disaster as there was no incentive
China now blends free markets and command ideals China now blends free markets and command ideals for their economic planfor their economic plan