economic problems of developing countries
TRANSCRIPT
Economic Problems ofEconomic Problems ofDeveloping CountriesDeveloping Countries
Economic Problems of Developing CountriesEconomic Problems of Developing Countries
The Problem of Underdevelopment
The Problem of Underdevelopment
THE PROBLEM OF UNDERDEVELOPMENTTHE PROBLEM OF UNDERDEVELOPMENT
The gulf between rich and poor countries
differences in GNY
The gulf between rich and poor countries
differences in GNY
1.3
1.9
2.3
5.7
68.7
71.4
72.9
73.0
74.9
77.2
88.6
100.0
10.2
11.5
13.8
49.4
24.4
23.4
21.4
7.0
0 10 20 30 40 50 60 70 80 90 100
Sierra Leone
Ethiopia
Nigeria
Pakistan
India
Jamaica
China
Peru
Brazil
Russia
Malaysia
Greece
UK
France
Singapore
Germany
Hong Kong
Japan
Switzerland
USA
GNY per head as % of US GNY per head: 2000 (using ppp exchange rates)GNY per head as % of US GNY per head: 2000 (using ppp exchange rates)
THE PROBLEM OF UNDERDEVELOPMENTTHE PROBLEM OF UNDERDEVELOPMENT
The gulf between rich and poor countries
differences in GNY
differences in mortality and health
The gulf between rich and poor countries
differences in GNY
differences in mortality and health
THE PROBLEM OF UNDERDEVELOPMENTTHE PROBLEM OF UNDERDEVELOPMENT
The gulf between rich and poor countries
differences in GNY
differences in mortality and health
other differences
The gulf between rich and poor countries
differences in GNY
differences in mortality and health
other differences
Selected world statisticsSelected world statistics
Selected world statisticsSelected world statistics
Selected world statisticsSelected world statistics
Selected world statisticsSelected world statistics
Selected world statisticsSelected world statistics
Selected world statisticsSelected world statistics
Selected world statisticsSelected world statistics
Selected world statisticsSelected world statistics
Selected world statisticsSelected world statistics
Selected world statisticsSelected world statistics
THE PROBLEM OF UNDERDEVELOPMENTTHE PROBLEM OF UNDERDEVELOPMENT
Differences between developing countries
resources and climate
infrastructure
cultural and social factors
degree of industrialisation
relations with developed world
Differences between developing countries
resources and climate
infrastructure
cultural and social factors
degree of industrialisation
relations with developed world
THE PROBLEM OF UNDERDEVELOPMENTTHE PROBLEM OF UNDERDEVELOPMENT
Measuring development
basic needs approach
advantages of this approach
disadvantages of this approach
using GNY statistics
advantages of this approach
disadvantages of this approach
the Human Development Index
Measuring development
basic needs approach
advantages of this approach
disadvantages of this approach
using GNY statistics
advantages of this approach
disadvantages of this approach
the Human Development Index
Human Development Index (HDI) for selected countries (1999)Human Development Index (HDI) for selected countries (1999)
Human Development Index (HDI) for selected countries (1999)Human Development Index (HDI) for selected countries (1999)
Human Development Index (HDI) for selected countries (1999)Human Development Index (HDI) for selected countries (1999)
Human Development Index (HDI) for selected countries (1999)Human Development Index (HDI) for selected countries (1999)
Human Development Index (HDI) for selected countries (1999)Human Development Index (HDI) for selected countries (1999)
Human Development Index (HDI) for selected countries (1999)Human Development Index (HDI) for selected countries (1999)
Human Development Index (HDI) for selected countries (1999)Human Development Index (HDI) for selected countries (1999)
Human Development Index (HDI) for selected countries (1999)Human Development Index (HDI) for selected countries (1999)
Human Development Index (HDI) for selected countries (1999)Human Development Index (HDI) for selected countries (1999)
Economic Problems of Developing CountriesEconomic Problems of Developing Countries
International Trade and Development
International Trade and Development
INTERNATIONAL TRADE AND DEVELOPMENTINTERNATIONAL TRADE AND DEVELOPMENT
Role of international trade in economic development
importance of trade
trade strategies
primary outward-looking strategy
secondary inward-looking strategy
• import-substituting industrialisation (ISI)
secondary outward-looking strategy
• exporting manufactures
Role of international trade in economic development
importance of trade
trade strategies
primary outward-looking strategy
secondary inward-looking strategy
• import-substituting industrialisation (ISI)
secondary outward-looking strategy
• exporting manufactures
INTERNATIONAL TRADE AND DEVELOPMENTINTERNATIONAL TRADE AND DEVELOPMENT
Primary outward-looking strategy importance of primary exports justification for exporting primaries
comparative advantage (Heckscher–Ohlin)vent for surplus; engine for growth
weakness of traditional trade theory problems for primary exporters: long term
slow growth in exports rapid growth in imports
problems for primary exporters: short termprice and output fluctuations
Primary outward-looking strategy importance of primary exports justification for exporting primaries
comparative advantage (Heckscher–Ohlin)vent for surplus; engine for growth
weakness of traditional trade theory problems for primary exporters: long term
slow growth in exports rapid growth in imports
problems for primary exporters: short termprice and output fluctuations
World primary commodity prices (1990 = 100)World primary commodity prices (1990 = 100)
World primary commodity prices (1990 = 100)World primary commodity prices (1990 = 100)
INTERNATIONAL TRADE AND DEVELOPMENTINTERNATIONAL TRADE AND DEVELOPMENT
Primary outward-looking strategy importance of primary exports justification for exporting primaries
comparative advantage (Heckscher–Ohlin)vent for surplus; engine for growth
weakness of traditional trade theory problems for primary exporters: long term
slow growth in exports rapid growth in imports
problems for primary exporters: short term
Primary outward-looking strategy importance of primary exports justification for exporting primaries
comparative advantage (Heckscher–Ohlin)vent for surplus; engine for growth
weakness of traditional trade theory problems for primary exporters: long term
slow growth in exports rapid growth in imports
problems for primary exporters: short term
INTERNATIONAL TRADE AND DEVELOPMENTINTERNATIONAL TRADE AND DEVELOPMENT
Primary outward-looking strategy importance of primary exports justification for exporting primaries
comparative advantage (Heckscher–Ohlin)vent for surplus; engine for growth
weakness of traditional trade theory problems for primary exporters: long term
slow growth in exports rapid growth in imports
problems for primary exporters: short termprice and output fluctuations
Primary outward-looking strategy importance of primary exports justification for exporting primaries
comparative advantage (Heckscher–Ohlin)vent for surplus; engine for growth
weakness of traditional trade theory problems for primary exporters: long term
slow growth in exports rapid growth in imports
problems for primary exporters: short termprice and output fluctuations
INTERNATIONAL TRADE AND DEVELOPMENTINTERNATIONAL TRADE AND DEVELOPMENT
Import-substituting industrialisation
the process of ISI
justification
problems of primary-outward looking policies
greater dynamic potential with industrial production
infant industries
Import-substituting industrialisation
the process of ISI
justification
problems of primary-outward looking policies
greater dynamic potential with industrial production
infant industries
INTERNATIONAL TRADE AND DEVELOPMENTINTERNATIONAL TRADE AND DEVELOPMENT
Import-substituting industrialisation
adverse effects
against comparative advantage
cushions inefficiency
urban bias
damages exports
wide variations in effective protection
social / cultural problems
environmental costs
Import-substituting industrialisation
adverse effects
against comparative advantage
cushions inefficiency
urban bias
damages exports
wide variations in effective protection
social / cultural problems
environmental costs
INTERNATIONAL TRADE AND DEVELOPMENTINTERNATIONAL TRADE AND DEVELOPMENT
Exporting manufactures Exporting manufactures
Growth rates and export performance ofselected secondary outward-looking countries
Growth rates and export performance ofselected secondary outward-looking countries
Growth rates and export performance ofselected secondary outward-looking countries
Growth rates and export performance ofselected secondary outward-looking countries
Growth rates and export performance ofselected secondary outward-looking countries
Growth rates and export performance ofselected secondary outward-looking countries
INTERNATIONAL TRADE AND DEVELOPMENTINTERNATIONAL TRADE AND DEVELOPMENT
Exporting manufactures
transition from inward-looking to outward-looking industrialisation
Exporting manufactures
transition from inward-looking to outward-looking industrialisation
INTERNATIONAL TRADE AND DEVELOPMENTINTERNATIONAL TRADE AND DEVELOPMENT
Exporting manufactures
transition from inward-looking to outward-looking industrialisation
benefits from a secondary outward-looking policy
Exporting manufactures
transition from inward-looking to outward-looking industrialisation
benefits from a secondary outward-looking policy
INTERNATIONAL TRADE AND DEVELOPMENTINTERNATIONAL TRADE AND DEVELOPMENT
Exporting manufactures
transition from inward-looking to outward-looking industrialisation
benefits from a secondary outward-looking policy
drawbacks of a secondary outward-looking policy
Exporting manufactures
transition from inward-looking to outward-looking industrialisation
benefits from a secondary outward-looking policy
drawbacks of a secondary outward-looking policy
Economic Problems of Developing CountriesEconomic Problems of Developing Countries
Structural Problems in Developing CountriesStructural Problems in Developing Countries
STRUCTURAL PROBLEMS IN DEVELOPING COUNTRIESSTRUCTURAL PROBLEMS IN DEVELOPING COUNTRIES
The neglect of agriculture
problems of urban bias
policies to promote agriculture
problems with these policies
Inappropriate technology
capital-intensity biases
arguments for capital-intensive technology
arguments for labour-intensive technology
The neglect of agriculture
problems of urban bias
policies to promote agriculture
problems with these policies
Inappropriate technology
capital-intensity biases
arguments for capital-intensive technology
arguments for labour-intensive technology
Unemployment rapid population growth
capital-intensity bias
Unemployment rapid population growth
capital-intensity bias
STRUCTURAL PROBLEMS IN DEVELOPING COUNTRIESSTRUCTURAL PROBLEMS IN DEVELOPING COUNTRIES
O
Ca
pita
l (K
)
Q1
Q1 Q2
Q2
Q3
Q3
Labour (L)
Limited choice of techniques: one technique onlyLimited choice of techniques: one technique only
O
Ca
pita
l (K
)
Q1
Q1 Q2
Q2
Q3
Q3
Expansion path
Labour (L)
K1
K2
K3
L1 L2 L3
a
b
c
Limited choice of techniques: one technique onlyLimited choice of techniques: one technique only
O
Ca
pita
l (K
)
Labour (L)
Q1
Q1 Q2
Q2
Q3
Q3
K
L
Assume that
total capital supply is K
total labour supply is L
Limited choice of techniques: one technique onlyLimited choice of techniques: one technique only
O
Ca
pita
l (K
)
Labour (L)
Q1
Q1 Q2
Q2
Q3
Q3
K
LL1
With K of capital, only Q2 can be
produced. Only L1 will be required
L L1 will be unemployed.
Limited choice of techniques: one technique onlyLimited choice of techniques: one technique only
O
Ca
pita
l (K
)
Labour (L)
K
L
Q1
Q2
Assume that
the total supply of capital is K, and
the total supply of labour is L.
Capital intensity biasCapital intensity bias
O
Ca
pita
l (K
)
Labour (L)
K
L
With competitively determined prices,the market will clear at point d
with output of Q1 and price ratio given by the slope of AB
Q1
Q2
A
B
d
Capital intensity biasCapital intensity bias
O
Ca
pita
l (K
)
Labour (L)
K
L
A
B
d
With a lower relative price of capital(given by slope of line CD)
or a bias in favour ofcapital-intensive techniques,
less labour will be employed (L1) andoutput will be lower (Q2).
Q1
Q2
C
DL1
Capital intensity biasCapital intensity bias
Unemployment rapid population growth
capital-intensity bias
rural–urban migration
Unemployment rapid population growth
capital-intensity bias
rural–urban migration
STRUCTURAL PROBLEMS IN DEVELOPING COUNTRIESSTRUCTURAL PROBLEMS IN DEVELOPING COUNTRIES
Unemployment rapid population growth
capital-intensity bias
rural–urban migration
external influences
Unemployment rapid population growth
capital-intensity bias
rural–urban migration
external influences
STRUCTURAL PROBLEMS IN DEVELOPING COUNTRIESSTRUCTURAL PROBLEMS IN DEVELOPING COUNTRIES
Unemployment rapid population growth
capital-intensity bias
rural–urban migration
external influences
Inflation
Unemployment rapid population growth
capital-intensity bias
rural–urban migration
external influences
Inflation
STRUCTURAL PROBLEMS IN DEVELOPING COUNTRIESSTRUCTURAL PROBLEMS IN DEVELOPING COUNTRIES
Unemployment rapid population growth
capital-intensity bias
rural–urban migration
external influences
Inflation problems of hyper-inflation
Unemployment rapid population growth
capital-intensity bias
rural–urban migration
external influences
Inflation problems of hyper-inflation
STRUCTURAL PROBLEMS IN DEVELOPING COUNTRIESSTRUCTURAL PROBLEMS IN DEVELOPING COUNTRIES
Unemployment rapid population growth
capital-intensity bias
rural–urban migration
external influences
Inflation problems of hyper-inflation
monetarist explanations
Unemployment rapid population growth
capital-intensity bias
rural–urban migration
external influences
Inflation problems of hyper-inflation
monetarist explanations
STRUCTURAL PROBLEMS IN DEVELOPING COUNTRIESSTRUCTURAL PROBLEMS IN DEVELOPING COUNTRIES
Unemployment rapid population growth
capital-intensity bias
rural–urban migration
external influences
Inflation problems of hyper-inflation
monetarist explanations
structuralist explanations
Unemployment rapid population growth
capital-intensity bias
rural–urban migration
external influences
Inflation problems of hyper-inflation
monetarist explanations
structuralist explanations
STRUCTURAL PROBLEMS IN DEVELOPING COUNTRIESSTRUCTURAL PROBLEMS IN DEVELOPING COUNTRIES
Economic Problems of Developing CountriesEconomic Problems of Developing Countries
The Problem of Debt
The Problem of Debt
Growth in debt of developing countries:(average annual)
Growth in debt of developing countries:(average annual)
Growth in debt of developing countries:(average annual)
Growth in debt of developing countries:(average annual)
Debt ratios and the growth of debt: (average of all developing countries)
Debt ratios and the growth of debt: (average of all developing countries)
Debt ratios and the growth of debt: (average of all developing countries)
Debt ratios and the growth of debt: (average of all developing countries)
Debt ratios and the growth of debt: (average of all developing countries)
Debt ratios and the growth of debt: (average of all developing countries)
THE PROBLEM OF DEBTTHE PROBLEM OF DEBT
Effects of the first oil shock 1971–78
Effects of the second oil shock 1979–84
deep world recession
decline in commodity prices
high interest rates
Effects of recessions in early 1990s and early 2000s
Effects of the first oil shock 1971–78
Effects of the second oil shock 1979–84
deep world recession
decline in commodity prices
high interest rates
Effects of recessions in early 1990s and early 2000s
The effects of the debt problem on developing countries
effects on growth
effects on poverty
Coping with debt crises: rescheduling
rescheduling official loans
rescheduling commercial loans
The effects of the debt problem on developing countries
effects on growth
effects on poverty
Coping with debt crises: rescheduling
rescheduling official loans
rescheduling commercial loans
THE PROBLEM OF DEBTTHE PROBLEM OF DEBT
Dealing with debt structural reform in developing countries
IMF policy recommendations interventionist solutions
debt swaps debt forgiveness
the HIPC initiativeJubilee 2000subsequent events
should all debt be cancelled and aid increased?
Dealing with debt structural reform in developing countries
IMF policy recommendations interventionist solutions
debt swaps debt forgiveness
the HIPC initiativeJubilee 2000subsequent events
should all debt be cancelled and aid increased?
THE PROBLEM OF DEBTTHE PROBLEM OF DEBT