1. Chapter 18: Global Economic Development
Why is the economic health of all nations important in a global economy?
What are challenges associated with globalization?

2. Globalization
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3. The Importance and Process of Economic Growth Development
Economic growth has drastically reduced the number of people living in poverty in developing countries.
Concern for developing countries is due to humanitarianism, self-interest, and political considerations.
Economic development can be said to occur in stages: Primitive equilibrium, Transition, Takeoff, Semidevelopment, and High Development.

4. Obstacles to Development
Obstacles to economic development include:
Excessive population growth due to high birthrates and an increase in life expectancy.
Limited natural resources and a limited amount of land, or unproductive land.
Disease and substance abuse.
A lack of appropriate education and technology.
Too much borrowing from foreign banks and governments, which leads to a danger of defaulting on loans.
Corruption and war.
The export of a nation’s currency and foreign exchange (capital flight), whether legal or illegal.

5. Funding Economic Development
Internally generated funds are often the only source of capital for a developing country; this means the country must produce more than it consumes.
Microloans provide capital to the poorest of poor families.
The International Monetary Fund helps support currencies so that developing countries can compete in an open market and attract foreign investors.
The World Bank Group makes loans and provides financial assistance.
External funds may be borrowed from foreign governments, although most foreign aid is politically motivated.
Developing countries may attract private funds from foreign investors who are interested in the country’s natural resources.

6. Characteristics of Globalization
Many of the products we use today are made by multinationals that sell without regard to national boundaries.
Globalization results in the availability of standardized products all over the world.
Outsourcing is a controversial aspect of global production that involves hiring outside firms for non- core operations to reduce operating costs.
International organizations that promote trade between nations include GATT, WTO, IMF, the World Bank, and the United Nations.

7. Regional Economic Cooperation
Economic cooperation includes the formation of free-trade areas and customs unions.
The European Union (EU) has uniform tariffs for nonmembers; it is now the largest single unified market in the world.
ASEAN (Association for Southeast Asian Nations) is a 10-nation group working to promote regional peace, accelerate economic growth, and become a free-trade area.
NAFTA (North American Free Trade Agreement) has increased trade among Mexico, Canada, and the United States.
COMESA (Common Market for Eastern and Southern Africa) was modeled on the EU, but progress has been slow due to geography, lack of infrastructure, and regional wars.
OPEC (Organization of Petroleum Exporting Countries) formed in as a cartel to push up world oil prices; although successful, the OPEC nations have grown slowly.

8. Globalization Trends
Globalization is likely to enhance economic growth and political stability among all nations.
Global interdependence is growing as specialization and division of labor lead to higher levels of productivity.
Regional economic integration is growing around the world.
The weakness of interdependence is the possibility that a breakdown anywhere in the global system could affect everyone.
Many countries have concerns about global products and services.
Politics can play a role in hindering or helping globalization.
Perceived threats to culture, politics, or religion can slow or halt the process of globalization.

9. Global Population Growth
Thomas Malthus argued that population would grow faster than its ability to feed itself, eventually resulting in a condition of subsistence.
Population growth appears to be slowing worldwide.
Malthus’s predictions did not take into consideration advances in productivity and family choices to have fewer children.
Malthus’s predictions still have long-term consequences for all nations as industrialized countries try to deal with population pressures in developing countries.
In developing countries, where children are considered an asset rather than a cost, the economic incentive is to have more children, increasing population growth.

10. The Demand for Productive Resources
The two general types of resources are renewable and nonrenewable resources.
Renewable resources include hydropower, biomass, solar power, and wind power.
Nonrenewable resources include coal, petroleum, natural gas, and nuclear energy.
In the United States, petroleum is the largest component of energy consumed, with only a small component coming from nuclear power and renewable energy resources.
Nonmarket conservation efforts, such as appealing to a sense of civic responsibility, have largely failed.
High prices help conserve natural resources such as oil; unfortunately, when prices go down, so does the incentive to conserve resources.

11. Pollution and Economic Incentives
Pollution can be controlled through legal standards and by economic incentives.
Legislated standards specify minimum purity levels for air, water, and auto emissions; because these standards are inflexible, many firms lobby to exempt their industry from the standards.
Pollution fees are a market-based approach that charges firms in proportion to the amount of pollutants they release; although fees cannot remove all pollution, they can help reduce it.
Tradable pollution permits allow public utilities to release specific amounts of emissions into the air; utilities who do not use their total allowed emissions can sell the unused permit to another utility.
Most major economies are relatively free market capitalism, which makes for a smoother economic future.