Global Global Economic Economic

DevelopmentDevelopment

What is “development”?What is “development”? Development is the process by which a Development is the process by which a

nation improves the economic, political, and nation improves the economic, political, and social well-being of its people.social well-being of its people.

““Developed nations” – have a higher average Developed nations” – have a higher average level of material well-beinglevel of material well-being

Less Developed Countries – LDCs :Less Developed Countries – LDCs : nations with a low level of material well- nations with a low level of material well-

beingbeing

Measurements of developmentMeasurements of development GDP – Gross domestic Product – the value of GDP – Gross domestic Product – the value of

goods & services produced in a country in a goods & services produced in a country in a yearyear

**********Per capita GDP – divides the gdp by the Per capita GDP – divides the gdp by the

populationpopulation

-- better measure of standard of living-- better measure of standard of living

#1 – USA, #2 – China, #3 - Japan

What are some other measures of What are some other measures of development?development?

Energy consumption :Energy consumption :

- the amounts of fossil fuel, hydroelectricity,- the amounts of fossil fuel, hydroelectricity,

and nuclear energy a nation uses depends on and nuclear energy a nation uses depends on

its level of industrializationits level of industrialization

Labor force :Labor force : nations with little industrialization tend to nations with little industrialization tend to have most of labor force devoted to agriculture have most of labor force devoted to agriculture – subsistence farming – subsistence farming

Consumer goods :Consumer goods : a large number of consumer goods – people a large number of consumer goods – people

have basic needs met & money left over for have basic needs met & money left over for “wants”“wants”

Literacy rate :Literacy rate : - the portion of the population over age 15 that- the portion of the population over age 15 that can read & writecan read & write - more education = more productivity- more education = more productivity

Life expectancy :Life expectancy :

- the average expected life span of an individual- the average expected life span of an individual

- indicates quality of life – nutrition, sanitation, - indicates quality of life – nutrition, sanitation,

health care, etc.health care, etc.

Infant mortality rate :Infant mortality rate :

-the number of deaths in the first year of-the number of deaths in the first year of

life per 1000 live birthslife per 1000 live births

- indicator of nutrition, health care, sanitation- indicator of nutrition, health care, sanitation

Financing developmentFinancing development

Internal financing :Internal financing :

- from savings of citizens- from savings of citizens

- most people in LDCs don’t have enough $ to - most people in LDCs don’t have enough $ to save … & the wealthy often keep $ in foreign save … & the wealthy often keep $ in foreign banks and invest in foreign companiesbanks and invest in foreign companies

Foreign investmentForeign investment Foreign direct investment:Foreign direct investment:

- the establishment of an enterprise by a - the establishment of an enterprise by a foreignerforeigner

- ex : American company building a factory in - ex : American company building a factory in BrazilBrazil

Foreign portfolio investment :Foreign portfolio investment :

- foreigners making purchases in country’s - foreigners making purchases in country’s stocks and bonds marketstocks and bonds market

Foreign aidForeign aid loans and aid for development :loans and aid for development :

- humanitarian, military, political, economic- humanitarian, military, political, economic

International Economic InstitutionsInternational Economic Institutions World Bank :World Bank :

- founded 1940- founded 1940 – raises $ on financial markets & – raises $ on financial markets & contributions from wealthier member nationscontributions from wealthier member nations

- offers loans, advice & other resources to over - offers loans, advice & other resources to over 100 LDCs100 LDCs

International Monetary Fund:International Monetary Fund: - 1946 – originally to stabilize international - 1946 – originally to stabilize international

exchange ratesexchange rates - facilitates development through- facilitates development through debt debt

rescheduling, stabilization programsrescheduling, stabilization programs

United Nations Development Program –UNDPUnited Nations Development Program –UNDP

- funded by contributions of UN members- funded by contributions of UN members

- dedicated to the elimination of poverty through - dedicated to the elimination of poverty through developmentdevelopment

- 90% of its resources go to 66 low-income - 90% of its resources go to 66 low-income nations, where 90% world’s poorest people livenations, where 90% world’s poorest people live