Development: The Basics Remember: Most heavily weighted portion of the syllabus and IB Exam

Development vs. Growth Growth: QUANTITATIVE – Increase in Real GDP/Capita Development: QUALITATIVE – Improvement in people’s quality of life, More subjective, Measured by Human Development Index

HDI: 3 components Standard of living – Real GDP/capita Health – Life expectancy Education – Literacy rate

LDCs: Less Developed Countries Most in Sub-Saharan Africa, also Asia Low income – Less than $3000 GDP/capita Poor infrastructure, education, health care, human rights High corruption, population growth, unemployment, environmental damage Mostly primary products (farming, fishing, etc)

Other categories MDCs – More Developed Countries a.k.a Developed, Rich, Industrialized > $20,000 GDP/capita, Europe, US, Japan, etc. Middle countries - $3000-$20,000 GDP/capita Mexico, China, most of S. America & Asia NICs – Newly Industrialized Countries China, India, Brazil, etc. Transitional – From central planning to market system, e.g. Russia, Poland

Cycle of Poverty: How to break it?

Development strategies AID – Loans Tied - often “soft” Untied - often “hard” Bilateral – one country loaning to another Multilateral – a group of countries or an international agency loaning to one country Grants - not really a loan; just a freebie

Development strategies TRADE Specialization & Comparative advantage Focus on what you produce the best, trade that to others for what they produce best Export promotion vs. Import substitution

Development Strategies Foreign Direct Investment (FDI) Attract foreign companies to build factories, stores, etc. in your country

Development Strategies Micro-credit schemes Very small loans to help people start or expand their own little business

Development Strategies Dual sector model Improve productivity in existing areas of specialization, Use increased profits to gradually industrialize and move into service sector

Sustainable development The ideal goal Improving the quality of life today and for generations to come Improving the quality of life without damaging the environment