Universal Declaration of Human Rights Everyone has the right to a standard of living adequate for the health and well-being of him/(her)self and his/(her) family, including food, clothing, housing and medical care and necessary social services... Everyone has the right to education.

Why study the Third World? Interdependence and globalization It is most of the world – population – area It has most of the natural resources – raw materials and energy resources – Organization of Petroleum Exporting Countries

The Developing World The macroeconomic problems of the world’s developing countries affect the stability of the entire international economy. There has been greater economic dependency between developing and industrial countries since WWII.

Growth versus Development Economic growth: – A measure of the value of output of goods and services within a time period Economic Development: – A measure of the welfare of humans in a society

Development Development is not purely an economic phenomenon but rather a multi-dimensional process involving reorganization and reorientation of entire economic AND social system Development is process of improving the quality of all human lives with three equally important aspects. These are:

Objectives of Development Raising peoples’ living levels, i.e. incomes and consumption, levels of food, medical services, education through relevant growth processes Creating conditions conducive to the growth of peoples’ self-esteem through the establishment of social, political and economic systems and institutions which promote human dignity and respect Increasing peoples’ freedom to choose by enlarging the range of their choice variables, e.g. varieties of goods and services

Characteristics of Developing Nations GNP/capital less than $9,075 Unequal distribution of income Technological dualism Regional dualism Majority of population working in agricultural sector Disguised unemployment or underemployment High population growth High rate of illiteracy and insufficient educational facilities Widespread malnutrition and health problems Political instability High dependence on a few products Inhospitable topography Low savings rates and inadequate banking facilities

Diversity of Developing Economies Historical background Physical and human resources Ethnic and religious composition Balance of public and private sectors External dependence Political structure, power, & interest groups Industrial structure

Levels of Economic Development Developed  Classification for all industrialized nations, which are mostly technologically developed. Developing  Classification for world’s lower income nations, which are less technically developed. Newly Industrialzing Countries (NICs)  Fast-growing, middle-income or higher economies  Heavy concentration of foreign investment  Exported large quantities of manufactured goods, including high-tech products

Levels of Economic Development Emerging Market Economies – Chile, Malaysia, China, Thailand, Indonesia Transition Countries or Eastern Europe – Former communist countries

Levels of Economic Development Newly Industrialized Economies (NIEs) – Primarily used to refer to the four tigers Taiwan, Hong Kong, Singapore, South Korea IMF combines NIEs with Industrialized Nations to form “advanced economies”

Classifications of Developing Countries The UN’s System World Bank’s System The UNDP’s Human Development Index

The World Bank Classification System Based on GNP/per capita/p.a.  Low income ($735 or less)  Lower middle income ($736 - $2935)  Upper middle income ($2,936 - $9,075)  High income ($9,076 or more)

GNP/Per Capita/p.a. as an Indicator Concerns  GNP/Capital data does not include Underground Economy  Undeclared legal production  Production of illegal goods and services  Concealed income – barter  Underground Economy larger if » Higher level of taxation » Oppressive government red tape  Currency conversion Local currency converted to the dollar by using exchange rate Conversions do not reflect domestic purchasing powers of currencies, must use purchasing power parity (PPP) World Bank uses Atlas methodology

Human Needs Approach to Economic Development Defines economic development as the reduction of poverty, unemployment, and inequality in the distribution of income.  Less illiteracy, less malnutrition, less disease and early death, shift from agricultural to industrial production Human Development Index (HDI) based on – A long and healthy life – Ability to acquire knowledge – Access to resources for a decent standard of living – Measured by life expectancy, adult literacy, and GDP/capita adjusted for PPP

4.4 billion people live in developing countries Of these … Three-fifths lack basic sanitation Almost one third have no access to clean water A quarter do not have adequate housing A fifth have no access to modern health services

Comparisons In 1997 the richest fifth of the world’s population had 74 times the income of the poorest fifth. The top three billionaires have assets greater than the combined GNP of all least developed countries and their 600 million people.

Poverty Poverty is the lack of basic necessities that all human beings must have: food and water, shelter, education, medical care, security, etc. A multi-dimensional issue, poverty exceeds all social, economic, and political boundaries. As such, efforts to alleviate poverty must be informed of a variety of different factors.

Percentage of people living below the poverty line Europe and Central Asia 3.5% Latin America and Caribbean 23.5% Sub-Saharan Africa 38.5% Middle East and North Africa 4.1% South Asia 43.1%

Causes of third world poverty Trade Third world countries lose out through unfair trade agreements, lack of technology and investment, and rapidly changing prices for their goods.

Causes of third world poverty Work and globalisation Better communications and transport have led to a “globalised” economy. Companies look for low-cost countries to invest in. This can mean that, though there are jobs, they are low-paid.

Causes of third world poverty War or conflict When a country is at war (including civil war) basic services like education are disrupted. People leave their homes as refugees. Crops are destroyed.

Causes of third world poverty Debt Third world countries have to pay interest on their debts. This means they cannot afford to spend enough on basic services like health and education; nor on things like transport or communications that might attract investment.

Causes of third world poverty Land If you have land you can grow your own food. But many people in the Third World have had their land taken over by large businesses, often to grow crops for export.

Causes of third world poverty Health Affordable or free health care is necessary for development. In poor countries the percentage of children who die under the age of five is much higher than in rich countries. HIV/AIDS is having a devastating effect on the Third World.

Causes of third world poverty Food and education Affordable, secure food supplies are vital. Malnutrition causes severe health problems, and can also affect education. Without education it is difficult to escape from poverty. This becomes a vicious circle – people who live in poverty cannot afford to send their children to school.

Causes of third world poverty Gender When we measure poverty we find differences between the level experienced by men or boys, and women or girls. Women may be disadvantaged through lack of access to education; in some countries they are not allowed to own or inherit land; they are less well paid than men.

Causes of third world poverty Environment A child born in an industrialised country will add more to pollution over his or her lifetime than children born in the Third World. However, the third world child is likely to experience the consequences of pollution in a much more devastating way. For example, annual carbon dioxide emissions have quadrupled in the last 50 years. This contributes to global warming, leading to devastating changes in weather patterns. Bangladesh could lose up to 17% of its land area as water levels rise.

Theories of Development s- Keynesian growth theory -process of capital of formation is determined by savings and investment Domestic savings are channeled to productive investments such as manufacturing which result –usually-in high productivity Growth is market driven as income levels rise, savings rises and frees capital for alternative investment

Theories of Development Modernization Theory -as noted previously this theory suggests that economic dimension alone is insufficient and adds theories on institutional and social change Incorporates non-economic elements such as social practices, beliefs, values and customs (McClelland, Achieving Society) Diffusion and speed of change is critical as is removal of various cultural and social barriers Backward internal structures-rather than external factors-cause underdevelopment

Theories of Development NeoLiberal Development Theory- grew in the 1970s and designed to counteract impact of Keynesianism New emphasis on supply side factors in development- private initiatives and market led growth Move away from demand stimulation (interest rate manipulation), import substitution, state intervention and centralized planning Gradual industrialization with ‘trickle down’ of benefits to all social classes

Sustainable Development Defined as development that is likely to achieve lasting satisfaction of human needs and improvement of the quality of life and encompasses: Help for the very poorest who are left with no option but to destroy their environment to survive Idea of self-reliant development with natural resource constraints

Sustainable Development Cost effective development using different economic criteria to the traditional –i.e. development should not degrade environment Important issues of health control, appropriate technologies, food self-reliance, clean water and shelter for all People centered activities are necessary- human beings are the resources in the concept