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

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

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

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

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

Cycle of Poverty: How to break it? Low education/ skills Low productivity/ low paying jobs Low savings Low investments Low/ no growth Low income

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

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

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

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

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

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