THE ECONOMICS OF DEVELOPING COUNTRIES Pertemuan 14 Matakuliah: J0114-Teori Ekonomi Tahun: 2009

Bina Nusantara University 3 The Rich and the Poor Classifications –Industrially Advanced Countries (IACs) High Income Nations –Developing Countries (DVCs) Low Income Nations Middle Income Nations

Bina Nusantara University 4 The Rich and the Poor 2004 Comparisons: –U.S. GDP $12 Trillion –All DVCs $5.5 Trillion –U.S. has 5% of Population but Produces 31% of World’s Output –U.S. Per Capita GDP Many Times Greater than DVCs –Wal-Mart Sales Greater Than All But 19 Nations

Bina Nusantara University 5 The Rich and the Poor Growth, Decline, and Income Gaps –Differences in Ability to Improve Positions Over Time –Some Increase and Reach IAC Status –Some Decline –Income Gap is Widening Between Rich and Poor Human Realities of Poverty

Bina Nusantara University 6 Obstacles to Economic Development DVCs Must Use Existing Supplies of Resources More Efficiently DVCs Must Expand Their Available Supplies of Resources –Natural Resources –Human Resources

Bina Nusantara University 7 Obstacles to Economic Development Overpopulation Standard of Living –Saving and Investment –Productivity –Resource Overuse –Urban Problems Standard Of Living = Consumer Goods (Food) Production Population

Bina Nusantara University 8 Obstacles to Economic Development Qualifications –Demographic Transition View Unemployment Underemployment Low Labor Productivity Brain Drain

Bina Nusantara University 9 The Vicious Circle RAPID POPULATION GROWTH LOW LEVEL OF DEMAND LOW LEVEL OF SAVING LOW PRODUCTIVITY LOW LEVELS OF INVESTMENT IN PHYSICAL AND HUMAN CAPITAL LOW PER CAPITA INCOME The Vicious Circle of Poverty

Bina Nusantara University 10 Role of Government A Positive Role –Law and Order –Lack of Entrepreneurship –Infrastructure –Forced Saving and Investment –Social-Institutional Problems Public Sector Problems –Corruption