the changing economic world. 1. key...

The Changing Economic World.1. Key Terms

What is development?

The progress of a country in terms of economic growth, the use of technology and human welfare.

What is a HIC?

A high income country.

What is an LIC?

A low income country.

What is an NEE?

A newly emerging economy. AQA definition?

Countries that have begun to experience higher rates of economic development, usually with higher levels of industrialisation. They differ from LICs in that they no longer rely primarily on agriculture, have made gains in infrastructure and industrial growth, and are experiencing increasing incomes and high levels of investment, eg Brazil, Russia, China and South Africa (the so-called BRICS countries).

The Changing Economic World.2. Ways of measuring development

GNI: Gross National Income

A measurement of economic activity that is calculated by dividing the gross (total) national income by the size of the population. GNI takes into account not just the value of goods and services, but also the income earned from investments overseas.

You would expect a high GNI to indicate a high level of development because it is a measure of wealth.

Birth rate:

The number of births in a year per 1000 of the total population.

You would expect a low birth rate to indicate a high level of development because of better health care and education and women want to focus on careers instead of having lots of children.

Death rate:

The number of deaths in a year per 1000 of the total population.

You would expect a low death rate to indicate a high level of development because of better medical care. However, very developed countries may see a rise in their death rate as the population gets older.

Infant mortality:

The average number of deaths of infants under 1 year of age, per 1000 live births, per year.

You would expect this to be low in more developed countries because of medical care.

The Changing Economic World.2. Ways of measuring development:

Life expectancy:

The average number of years a person might be expected to live.

You would expect a high life expectancy to indicate a high level of development because of medical care.

Literacy rates:

The percentage of people who have basic reading and writing skills.

You would expect this to be high in more developed countries because of better education.

People per doctor.

You would expect this to be low in a more developed country as there is better medical care.

Access to safe water.

You would expect this to be high is a more developed country because of better infrastructure.

HDI = Human Development Index:

A method of measuring development in which GDP per capita, life expectancy and adult literacy are combined to give an overview. This combined measure of development uses economic and social indicators to produce an index figure that allows comparison between countries.

The Changing Economic World.3. Limitations of economic and social measures.

Economic measures are those to do with wealth. An example is…

GNI.

Limitations with using just economic measures:

This does not mean that the quality of life will be higher as there may be social problems such as high crime rates within the country.

This is only an average figure so there may be huge inequalities within the country with relatively few people earning large amounts of money and many people living in poverty.

Many people in LICs work hard in subsistence farming but this economic activity is not counted in GNI figures.

Informal sector work is not included in the figures which also contributes greatly to the economy in LICs.

Social measures are those to do with education, health care, housing etc. Examples are…

Literacy rates, birth and death rates, life expectancy etc.

Limitations of these measures:

Data may be hard to collect in LICs due to conflict or lack of infrastructure.

In poorer countries deaths may not be registered, especially in more remote areas.

Social measures do not take into account wealth.

The Changing Economic World.4. HDI

There are obviously huge problems with using just economic or social measures or using just one factor to measure a countries level of development therefore combined measures such as the HDI which takes into account different things are really important.

The HDI combines:

• GDP (a measure of wealth)

• Life expectancy

• Adult literacy

To produce an overall idea of a countries level of development.

A formula is used to produce a number between 0 and 1.

The Changing Economic World.5. DTM (Demographic Transition Model)

See next slide for the model which shows how birth and death rates (and therefore population growth) changes over time.

Stages a country will go through over time are identified.

Stage 1:

High birth rate due to children being needed to work on the land, lack of contraception and high infant mortality meaning many children will die.

High death rate due to lack of medical care and access to clean water and food.

Level of development - very low. No countries remain at stage 1 today – just a few isolated rainforest tribes.

Stage 2:

Death rate falls due to improved medical care and access to food and clean water.

This results in rapid population growth due to high rates of natural increase (birth rates higher than death rates)

Level of development – Low – LICs such as Ethiopia

The Changing Economic World.

Stage 3:

Death rate continues to fall.

Birth rates start to fall due to better education and contraception. More people living in cities and working in factories sochildren are not needed to work the land.

Level of development – Improving – NEEs such as India, Nigeria

Stage 4:

Death rate and birth rate both low

Low birth rate because women now want to focus on careers rather than having lots of children. People understand the benefit of having less children.

Level of development – High – HICs e.g. UK

Stage 5:

Extremely low birth rate

Slightly higher death rate as there is an ageing population and more people are dying of old age. Highly developed countries such as France.

The Changing Economic World.Causes of uneven development:

Some countries are more developed than others due to a variety of reasons: This is called the development gap.

Developments gap: AQA definition:

The difference in standards of living and wellbeing between the world’s richest and poorest countries (between HICs and LICs).

Physical causes of uneven development:

• Some countries are landlocked which means that they don’t have access to a sea or ocean. This limits their trading options and hinders development. Most of the landlocked countries on Earth are in Africa.

• Climate – Where there is a tropical climate, there are more diseases and pests such as mosquitos which spread malaria. Disease is a big strain on resources and stops people from being healthy and working.

• However there are also rich desert countries such as Saudi Arabia

• Extreme weather events also often hit tropical regions such as tropical storms (e.g. typhoon Haiyan) and drought (e.g. The Horn of Africa 2011. Extreme weather can destroy infrastructure which hinders development.

• Tectonic hazards can also set back a countries level of development such as in Haiti however, again some of the most developed countries also suffer from earthquakes (Japan.)

The Changing Economic World.6. Causes of uneven development

Economic causes of uneven development:

• Most of the world’s trade is between richer countries which speeds up their development.

• These richer countries and big companies (TNCs) have a lot of power and they want to pay as little as possible for their raw materials which often come from LICs. Prices are kept low because of over supply.

• Processing (turning raw materials into higher value goods) takes place in richer countries so they can make the money out of the products. In this way the richer countries get richer and the poorer countries cannot develop.

• Prices are kept low because of reasons such as oversupply, corrupt leaders profiting personally from selling raw materials to rich countries at low prices.

• NEEs are now benefitting from trade as they expand their factories which means they are producing higher value products to sell.

• In order to develop, some LICS have borrowed heavily from HICs and now have to pay back debts instead of investing in economic development and infrastructure.

The Changing Economic World.6. Causes of uneven development

Historical causes of uneven development:

• Colonialism – this is where in the 1700s-1800s European nations such as Britain and France claimed land in South America, Asia and Africa and exploited their resources (minerals as well as slaves) to aid their own development. In doing so these regions were stopped from developing themselves.

• Historical conflicts - Colonialism ended in the twentieth century e.g. Nigeria gained independence in 1960, however, this brought its own problems such as power struggles within the countries. When Africa had been divided up, the country borders did not fit with ethnic groups therefore there have been many ethnic conflicts in the affected countries. 5million deaths have been linked with ethnic conflicts in Rwanda, DRC and Uganda in the 1990s. What is happening today in Syria is an up to date example.

• Conflicts always hold back development as money is spent on weapons instead of infrastructure and projects to help the country develop.

The Changing Economic World.7. Consequences of uneven development – disparities in health and wealth

Disparities = differences.

Disparities in Wealth: HICs = wealthiest. LICs = poorest

North America = 35% of total global wealth. Africa’s share = below 1%

This problem is becoming worse as LICS have become dependent on HICs for aid and loans to help them develop. This has led them getting into debt which makes the development gap between HICs and LICs worse.

There are also huge differences in wealth between countries.

E.g. Nigeria is now an NEE because of trading wealth from oil however increased wealth has not been spread equally among the population – Nigeria is now one of the most unequal societies on Earth.

Disparities in health:

LICS – 4 in 10 deaths are in children under 15 years (often caused by complications in childbirth). HICs – 1 in 100 deaths is in children under 15 years.

LICs – Infectious diseases (AIDS, Malaria) are the main cause of death. HICs – heart and lung disease, cancer, diabetes main causes of death.

Malaria – one child in Africa dies every minute despite the disease being preventable and curable. Wealthier and more developed African nations have fewer cases due to vaccination programmes.

The Changing Economic World.7. Consequences of uneven development – international migration

Voluntary migration – where people choose to move in search of a better life. (You can also refer to this as economic migration.)

Forced migration is where people have no choice but to move to escape war or persecution. They are called refugees.

International migration from poorer countries to richer countries is increasing all the time. In 2015, poverty and conflict in Syria and North Africa led to 14million people being forced from their homes.

In addition, due to technology, people in poorer countries are more aware of the life in other countries (in 2015 there were 7 mobile phones for every 10 people) and are now more likely to try to reach those nations in search of a better life.

Examples:

1. Forced migration - Middle East Refugee crisis 2015 – people coming to Europe from Syria, Afganistan, Iraq

4million people have fled Syria in search of safety and a better quality of life.

2. Economic migration from Poland to the UK – Since Poland joined the EU in 2004 – huge influx of Poles into the UK in search of jobs and better wages. Advantage – migrants pay taxes and fill gaps in the labour market such as skilled jobs such as doctors as well as jobs such as cleaning and labouring. Money is often sent back to improve lives in Poland.

Disadvantage – migrants put pressure on services such as schools and health care in the UK. Often skilled workers move which means Poland loses many of its graduates abroad, hindering its development.

The Changing Economic World.8. Strategies used to reduce the development gap.

1. Investment. What is it?

This is where HICs or TNCs (Trans-national Companies) put money into an LICs with the aim of making money out of it.

This could involve…

• The development of infrastructure such as water, roads and electricity.

• The construction of dams

• The development of new industries.

How does it help reduce the development gap?

This helps poorer countries develop by providing jobs and improving infrastructure. As economies grow, poverty decreases and education increases. People are more involved in politics improving the government and how the country is run.

E.g. Iphones are manufactured in China by skilled workers who earn good wages. This kind of employment has allowed the Chinese economy to grow rapidly.

More than 2000 Chinese companies have now invested in Africa e.g. power plant in Zimbabwe, railways in Sudan.

Problem

This is improving infrastructure and helping African nations to develop but some people suggest that China is exploiting African resources to further its own development.


2. Industrial development and tourism. What is it?

Traditionally LICs have traded in mainly raw materials (primary products which are low value.) Many countries are now developing their manufacturing (factories) and service industries (e.g. tourism) in order to develop.

How does it reduce the development gap?

Industrial development and tourism brings employment opportunities and creates taxes for the government.

This leads to money being invested in infrastructure, schools and health care.

This leads to the population becoming better educated and healthier.

Which leads to opportunities for new businesses and investments and the cycle starts again.

Examples: China and Malaysia since the 1980s are examples of countries that have focussed on increasing their manufacturing industry and as a result have rapidly developed seeing an increase in wealth and quality of life.

Problem?

There are downside to this development of industry such as increasing pollution and its impact on health. Tourism generates a lot of income but countries can become overdependent on it which makes them vulnerable e.g. in times of global recession. (an example is the Maldives.)

See also later notes on tourism.


3. Aid What is it?

This is when a country or non-governmental organisation (NGO) such as Oxfam gives resources to a country. In most cases aid does not have to be paid back.

How can it reduce the development gap?

In order to reduce the development gap, aid needs to be long term and freely given an can then be invested in development projects such as roads, electricity and water management. Locally it can improve quality of life if spent on health care, education and services.

Examples –

UK spends 0.7% of GDP on overseas aid – top 3 countries = Pakistan, Ethiopia and Bangladesh.

There is now an increasing trend of NEEs such as China and India supplying aid to African nations. India has spent $6billionon African education projects. China aid has funded railway projects across Africa.

Problem?

One problem with aid is that it can be tied so in return for aid, the country may have to buy products from the donor country for example.


4. Intermediate technology. What is it?

AQA definition:

The simple, easily learned and maintained technology used in a range of economic activities serving local needs in LICs.

How does it reduce the development gap?

This takes the form of small scale projects often associated with agriculture, water or health. They involve local communities and can make a real difference to quality of life.

Example:

Water Aid has supplied the Afridev hand pump to villages across Tanzania. This is a very simple pump that is simple to fix and maintain by the community.

These pumps have contributed to Tanzania’s long term development by increasing life expectancy due to less disease and education has improved as children are missing fewer days of school due to illness.


5. Fairtrade. What is it?

When producers in LICs are given a better price for the goods they produce. Often this is from farm products like cocoa, coffee or cotton. The better price improves income and reduces exploitation.

Prices are also guaranteed which protects farmers quality of life if the global price of the product collapses.

How does fair trade reduce the development gap?

As part of fair trade, investment is put into local projects improving infrastructure or healthcare schemes which encourages development and improves quality of life.

Problem:

The high price of fair trade products in HICs limits the amount can be sold therefore this limits the number of farmers that can benefit from the scheme.


6. Debt relief. What is it?

During the 1960s-1980s many HICs lent LICs and NEEs huge amounts of money to help develop their countries. In some cases this borrowing led to huge problems with countries unable to pay back the debts. In some countries such as Indonesia and Democratic Republic of Congo this was made worse by corrupt leaders using the money.

HIPCs are Highly Indebted Poor Countries – the 39 countries with the highest level of poverty and debt. They are unable to repay their debt and interest.

After a meeting in 2005 any of these counties debts were cancelled. They had to:

• Demonstrate they could manage their own finances

• Show there was no corruption

• Agree to spend the saved money on education, healthcare and reducing poverty.

Debt can also be written off through conservation swaps – where debts are written off in return for protection of the environment. This has happened in Indonesia with the protection of forests.

Example:

In Tanzania, free education is now available.

In Uganda, the government has used the money to provide safe drinking water to 2 million people.

Problems:

Corruption may mean money isn’t used as intended and countries may get into further debt expecting it to be written off.


7. Microfinance Loans: What are they?

Very small loans which are given to people in the LICs to help them start a small business.

How does this help reduce the development gap?

Individuals or families can set up small businesses which helps them become self sufficient. Ass businesses thrive, this creates jobs and income which can then be spent in other businesses and the economy can grow. Qulaity of life will improve.

Example:

Grameen Bank, Bangladesh- set up in 1976 gabe small loans to local people, often women to set up businesses. Loans are normally less than $100 with low interest. E.g. a woman uses her loan to a mobile phone which she then rents out to others as a business. She then pays the money back.

Problem:

Loan money still needs paying back which may be difficult if business does not succeed. Overall though these have proved a successful way of lifting people out of poverty.

The Changing Economic World.An example of how the growth of tourism in an LIC/NEE helps to reduce the development gap - Jamaica

Jamaica is an NEE but has suffered from slow growth, debt and high unemployment over a long period.

Tourism is one of the few growth sectors of the economy due to beautiful beaches, warm sunny climate and rich culture (e.g. Bob Marley and Reggae music)

Tourism contributes 24% of Jamaica’s GDP. Income is US$2billion each year. This is obviously good for Jamaica but can also make it vulnerable to problems e.g. if global recession prevents people taking holidays – this will hit the Jamaican economy badly as they don’t have other industries to fall back on.

How does tourism reduce the development gap?

1. Employment – tourism is the main source of jobs in Jamaica – 200,000 mainly in the big tourist areas such as Montego Bay. Jobs include those directly related to tourism such as in hotels and those indirectly related such as in shops. These provide income which can then be spent in other businesses. This is called the multiplier effect. People learn new skills which improve their prospects of better jobs in the future. The quality of life for many has improved.

Problems – Jobs are concentrated in the tourist resorts. More remote parts of the island have less opportunities and have not seen their lives improved by tourism so much although small scale community tourism projects are starting to reach these areas.. Some people learn new skills then migrate away from the island.

2. Quality of life – In the tourist areas such as Montego Bay, wealthy Jamaicans live in high quality housing with a good standard of living however, close by people live in poor quality housing with few prospects. Inequalities are large.

The Changing Economic World.Facts quiz

At what stage of the DTM would you find a) LICS? b) NEEs and c) HICs?

a) 2, b) 3, c) 4 and 5

Give an example of a drought

The Horn of Africa, 2011

Name a disease that only affects tropical climates.

Malaria

Give an example of an LIC prone to earthquakes.

Haiti.

Give an example of an HIC prone to earthquakes.

Japan.

When did Nigeria gain independent from Britain?

1960

How many deaths are associated with ethnic conflics in the 1990s in DRC, Rwand and Uganda?

5million.


What is Africa’s share of global wealth?

Under 1%

What is North America’s share of global wealth?

35%

Give an example of a forced migration.

Syria to Europe 2015

Give an example of a voluntary migration

Poland to the UK since 2004

How many Chinese companies ave invested in African nations?

Over 2000

Give an example of a country that has experienced rapid industrial development recently.

China or Malaysia

What % of its GDP does the UK donate as aid?

0.7%


Give an example of Intermediate technology.

The Afridev hand pump.

Name a country that has had its debts written off.

Tanzania, Uganda

Name a country that has had debts written off in conservation swaps.

Indonesia.

Give an example of an organisation giving out microfinance loans.

Grameen Bank, Bangladesh

The Changing Economic World.

the changing economic world. 1. key...

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