development chapter 10. how do you define and measure development? gross national product (gnp)...

DEVELOPMENTChapter 10

How Do You Define and Measure Development?

Gross National Product (GNP)

Measure of the total value of the officially recorded goods and services produced by the citizens and corporations of a country in a given year, both inside and outside a country’s territory

Gross Domestic Product (GDP)

Measure of the total value of the officially recorded goods and services produced with a country by the citizens and corporations in a given year

Gross National Income (GNI)

Most common measurement used today

Measure of the monetary worth of what is produced within a country plus income received from investments outside the country

Issues with Measuring Economic Development

• Formal economy – The legal economy that governments tax and monitor

– Counted in all measures of economy

• Informal economy – The illegal or uncounted economy that governments do not tax or monitor

– Not included in measures of economy

Other Ways of Measuring Development

• Occupational structure of the labor force (employment in sectors of the economy)

• Productivity per worker (production divided by total labor force)

• Transportation and communications facilities per person (per capita index of transportation and communications per person)

• Dependency ratio (dependents, young and old, that each 100 workers must support)

Differences in

Communications

Connectivity Around the

World

A measure of the number of people under the age of 15 and over the age of 65 who depend on each working-age adult

Dependency Ratio, 2007

Models of Development

• How do countries develop?• If we can understand how development occurs, strategies can be adopted to help countries to develop

• Number of approaches:

Rostow - Stages of Growth

• The work of American Walt W. Rostow

• Rostow is an economic historian

• Countries can be placed in one of five categories in terms of its stage of growth:A child in Sierra Leone making breakfast.

Which stage would a country like Sierra Leone fit in?

Copyright: Dave Dyett, http://www.sxc.hu/

Rostow - Stages of Growth

1. Traditional Society

• Characterised by– subsistence

economy – output not traded or recorded

– existence of barter

– high levels of agriculture and labour intensive agriculture

Village in Lesotho. 86% of the resident workforce in Lesotho is engaged in subsistence agriculture.

Copyright: Tracy Wade, http://www.sxc.hu/

Rostow - Stages of Growth

2. Pre-conditions:– Development of mining industries

– Increase in capital use in agriculture

– Necessity of external funding

– Some growth in savings and investment

The use of some capital equipment can help increase productivity and generate small surpluses which can be traded.

Copyright: Tim & Annette, http://www.sxc.hu

Rostow - Stages of Growth

3. Take off:– Increasing industrialisation

– Further growth in savings and investment

– Some regional growth

– Number employed in agriculture declinesAt this stage, industrial growth may be linked to

primary industries. The level of technology required will be low.

Copyright: Ramon Venne, http://www.sxc.hu

Rostow - Stages of Growth

4. Drive to Maturity:– Growth becomes self-sustaining – wealth generation enables further investment in value adding industry and development

– Industry more diversified

– Increase in levels of technology utilised

As the economy matures, technology plays an increasing role in developing high value added products.

Copyright: Joao de Freitas, http://www.sxc.hu

Rostow - Stages of Growth

5. High mass consumption– High output levels

– Mass consumption of consumer durables

– High proportion of employment in service sectorService industry dominates the economy – banking,

insurance, finance, marketing, entertainment, leisure and so on.

Copyright: Elliott Tompkins, http://www.sxc.hu

Rostow’s Ladder of Development

How Does Geographical Situation Affect

Development?• Importance of context: What happens at state, local, global scale

• Colonialism– Diffusion of idea of the state– Dependence of colonies on rulers– Wealth to ruling countries

• Neo-colonialism: Continuation of economic dependency despite political independence

• Structuralist theory: Difficult-to-change, large-scale economic arrangements

Dependency Theory

• Development possibilities limited by– Political and economic relations between regions and countries

– Dependency of colonies on ruling countries

– Reinforcement of dependency despite political independence

• Dollarization: Replacing local currency with currency of a wealthy country

• Little hope for development in countries dominated by wealthy powers

World-Systems Theory: Three-Tier Structure

Core Processes that incorporate

higher levels of education, higher salaries, and more technology

Generate more wealth in the world economy Semi-periphery

Places where core and periphery processes are both occurring

Places that are exploited by the core but then exploit the periphery

Serves as a buffer between core and periphery

Periphery Processes that incorporate

lower levels of education, lower salaries, and less technology

Generate less wealth in the world economy

Three-Tier System

What Are the Barriers to and the Costs of

Development?Millennium Development Goals 1.Eliminate extreme poverty and hunger2.Achieve universal primary education3.Promote gender equality and empower women4.Reduce child mortality5.Improve maternal health6.Combat HIV/AIDS, malaria, and other diseases

7.Ensure environmental sustainability8.Develop a global partnership for development

Human Development Index, 2005

Barriers to Development

• Social conditions• Foreign debt and structural adjustment loans

• Political instability• Widespread disease (e.g., malaria)

Foreign Debt Obligations

Malaria Transmission Risk

Costs of Economic Development

• Industrialization– Air and surface water pollution– Export Processing Zones (EPZs) – Maquiladoras– Special economic zones (SEZs)– Locations geared to export markets

Export Processing Zones

Costs of Development

• Agriculture– Pesticides– Desertification– Production for export rather than local markets

• Tourism– Pollution– Narrow benefits– Damage to local cultures

Areas Threatened by Desertification

How Do Political and Economic Institutions

Influence Uneven Development Within

States?• Get involved in world markets• Price commodities• Affect whether core processes produce wealth

• Shape laws to affect production• Enter international organizations that affect trade

• Focus foreign investment in certain places

• Support large-scale projects

Islands of Development

• Government islands: Capital cities

• Corporate islands• Non-governmental organizations (NGOs)–Private, usually non-profit organizations

–Microcredit programs