Unit 6

Development

The process of improving the conditions of people through diffusion of knowledge and technology

Countries negotiate reduction or elimination of international trade restrictions on manufactured goods, such as government subsidies for exports, quotas for imports, and tariffs on both imports and exports Reduced or eliminated are restrictions on the international movement of money by banks, corporations, and wealthy individuals

Two ways that the WTO works to reduce barriers to international trade:

2014 Per Capita GNI

$40,000 in developed countries and $10,000 in developing countries

Rostow Model

A five stage model that defines what stage a country is in development

South Pacific

A much less populous area than the nine development regions

HDI

A system created by the UN to measure the level of development of every country since 1980. The highest ranking is 1.0 or 100%

Stage 1: Traditional Society

A traditional society has not yet started a process of development. It contains a very high percentage of people engaged in agriculture and a high percentage of national wealth allocated to what Rostow called "nonproductive" activities, such as the military and religion

6.5%

After switching to international trade, India's GNI per capita increased on average ___ per year compared to 1.8% under self-sufficiency

The Four Asian Dragons International Trade

Among the first places to adopt the international trade path were South Korea, Singapore, Taiwan, and Hong Kong, known as the "four dragons." Singapore and Hong Kong, British colonies until 1965 and 1997, respectively, were large cities surrounded by very small amounts of rural land and had virtually no natural resources. Lacking many natural resources, the four dragons promoted development by concentrating on producing a handful of manufactured goods, especially clothing and electronics. Low labor costs enabled these countries to sell products inexpensively in developed countries

Purchasing Power Parity (PPP)

An adjustment made to the GNI to account for differences among countries in the cost of goods

Stage 5: Age of Mass Consumption

The economy shifts from production of heavy industry, such as steel and energy, to consumer goods, such as motor vehicles and refrigerators

The percentage of seats held by women in the national legislature The percentage of women who have completed some secondary (high) school

The empowerment dimension of GII is measured by these indicators: (two)

Value Added

The gross value of a product minus the costs of raw materials and energy

South Asia Sub-Saharan Africa Southwest Asia North Africa

The lowest GDI and highest GII scores are found in... (four areas)

Pupil/Teacher Ratio

The number of enrolled students divided by the number of teachers

Expected years of schooling for today's youth

The number of years that the UN forecasts an average 5 year old will spend in school. It is 16.3 years in developed countries (half will graduate college) compared to only 9.3 years in Sub-Saharan Africa and 10.2 years in South Asia

Years of schooling for today's adults

The number of years that the average person aged 25 or older in a country has spent in school. It is 11.5 years in developed countries compared to only 4.7 years in South Asia and Sub-Saharan Africa

6 times

The number of young people is ___________ higher than the number of old people in developing countries. The two numbers are nearly the same in developed countries

0.920

The overall GDI in the world is...

Literacy Rate

The percentage of a country's people who can read and write

Female Labor Force Participation Rate

The percentage of women holding full-time jobs outside the home

4%

Worldwide, GNI increased more than ___ annually in international trade countries compared to less than 1% in self-sufficiency countries

54%

Worldwide, ___ of women have completed some secondary (high) school, compared to 64% of men

51%

Worldwide, ___ of women work outside the home, compared to 77% of men

211 of 500

______ of the largest companies in the world had headquarters in developed countries in 2014

86 of 500

_______ of the largest companies in the world had headquarters in developing countries in 2014

32 of the 86

________________ largest companies in the world located in developing countries were located in China (including Hong Kong)

Reasons for the US's relatively low GII ranking

Compared with other very high HDI countries, the United States has a much higher birth rate among teenage women and a higher mortality rate among women during childbirth. The percentage of women in the national legislature is lower in the United States than in other high HDI countries

it can order changes in taxes and laws that it considers unfair trading practices

Conservative critics charge that the WTO compromises the power and sovereignty of individual countries because...

Self Sufficiency Path

Countries encourage domestic production of goods, discourage foreign ownership of businesses and resources, and protect their businesses from international competition. Was popular for most of the 20th century

Australia New Zealand

Countries in the South Pacific that are most developed. Other countries are classified as still developing

International Trade Path

Countries open themselves to foreign investment and international markets. Gained popularity starting in the late 20th century

Direct investment by transnational corporations Loans from banks and international organizations

Financing for developing countries economies comes from these primary sources:

GNI Per Capita

Found by dividing GNI by total population, shows the contribution made by the average individual toward generating a country's wealth in a year

Two developed regions Seven developing regions

Geographers divide the world into...

Since 1980

Inequality has increased in most developed countries, including the US and the UK

Foreign Direct Investment (FDI)

Investment made by a foreign company in the economy of another country. This has grown rapidly since the 1990s

Tertiary Job Sector

Involves the provision of goods and services to people in exchange for payment, such as retailing, banking, law, education, and government

Gender-Related Development Index (GDI)

Measures the gender gap in the level of achievement for three dimensions of the HDI: income, education, and life expectancy

Gender Inequality Index (GII)

Measures the gender gap in the level of achievement in three dimensions: reproductive health, empowerment, and the labor market

Stage 4: Drive to Maturity

Modern technology, previously confined to a few takeoff industries, diffuses to a wide variety of industries, which then experience rapid growth comparable to the growth of the takeoff industries. Workers become more skilled and specialized

average

Per capita GNI measures ________ wealth, not wealth distribution

India Self Sufficiency

Policies included limiting foreign companies from importing (licensing, taxing, maximum import restrictions, etc.) and excising strong control over companies operating within the country (government permission when selling a new product, subsidizing, more government control, etc.)

Variation in the US's per capita GNI

122% of the national average in the wealthiest region (New England) and 90% of the national average in the poorest region (Southeast)

Stage 2: Preconditions for Takeoff

An elite group initiates innovative economic activities. Under the influence of these well-educated leaders, the country starts to invest in new technology and infrastructure, such as water supplies and transportation systems. Support from international funding sources often emphasizes the importance of constructing new infrastructure. These projects will ultimately stimulate an increase in productivity

$270 billion

Around _______ worth of loans are outstanding from the US (14% to India, 5% to China, Mexico, Turkey, Brazil, Indonesia, Pakistan, Bangladesh, and Vietnam)

Key Elements of the Self-Sufficiency Path

Barriers limit the import of goods from other places. Three widely used barriers include setting high taxes (tariffs) on imported goods to make them more expensive than domestic goods, fixing quotas to limit the quantity of imported goods, and requiring licenses in order to restrict the number of legal importers. Fledgling businesses are nursed to success by being isolated from competition with large international corporations. Such insulation from the potentially adverse impacts of decisions made by businesses and governments in developed countries encourages a country's fragile businesses to achieve independence. Investment is spread as equally as possible across all sectors of a country's economy and in all regions. Incomes in the countryside keep pace with those in the city, and reducing poverty takes precedence over encouraging a few people to become wealthy consumers

Japan South Korea

Classified separately from the rest of East Asia because their level of development is much higher than that of their neighbors

Adopting policies that successfully promote development Finding funds to pay for development

Developing countries face these obstacles in trying to encourage more rapid development:

India International Trade

During the 1990s, India converted to international trade by dismantling these barriers: Foreign companies were allowed to set up factories and sell in India. Tariffs and restrictions on the import and export of goods were reduced or eliminated. Monopolies in communications, insurance, and other industries were eliminated

Maruti-Udyog Ltd.

During the self-sufficiency era, India's auto industry was dominated by this company that was controlled by the Indian government. However, in the international trade era, the government sold control of this company to a Japanese company

A decent standard of living A long and healthy life Access to knowledge

Each country's HDI score is based on these factors:

$16.4 trillion

FDI levels are up to _________ in 2013. They were $1.5 trillion in 2000 and $130 billion in 1990

Developing Country

Has made some progress toward development, though less than the developed countries

Developed Country

Has progressed further along the development continuum

CHINA Singapore Brazil Russia Mexico

In 2013, 2/3 of all FDI destined for developing countries went to... (five countries)

6%

In developing countries, ___ of infants die. The rate in developed countries in less than 0.5%

Primary Job Sector

Includes activities that directly extract materials from Earth though agriculture, mining, fishing, and forestry

Secondary Job Sector

Includes manufacturers that process, transform, and assemble raw materials into useful products as well as industries that fabricate manufactured goods into finished consumer goods

1/3

Only __ of FDI went to developing countries in 2013, while the rest went to developed countries

Developed countries in Europe and North America were joined by others in Southern and Eastern Europe and Japan during the second half of the twentieth century. If they could become more developed by following this model, why couldn't other countries? Developing countries contained an abundant supply of many raw materials sought by manufacturers and producers in developed countries. In the past, European colonial powers extracted many of these resources without paying compensation to the colonies. In a global economy, the sale of these raw materials could generate funds for developing countries with which they could promote development. A country that concentrates on international trade benefits from exposure to the demands, needs, and preferences of consumers in other countries. To remain competitive, the takeoff industries constantly evaluate changes in international consumer preferences, marketing strategies, production engineering, and design technologies. Concern for international competitiveness in the exporting takeoff industries can filter through other sectors of the economy

Optimism about the benefits of international trade was based on these observations:

Pupil/Teacher Ratio Literacy Rate

Other indicators used to measure regions variations in access to knowledge (two)

decisions made behind closed doors promote the interests of large corporations rather than poor people

Progressive critics label the WTO antidemocratic because...

International Monetary Fund (IMF)

Provides loans to countries experiencing balance-of-payments problems that threaten expansion of international trade. It is designed to help a country rebuild international reserves, stabilize currency exchange rates, and pay for imports without the imposition of harsh trade restrictions or capital controls that could hamper the growth of world trade. Funding of IMF is based on each member country's relative size in the world economy

International Bank for Reconstruction and Development (IBRD)

Provides loans to countries to reform public administration and legal institutions, develop and strengthen financial institutions, and implement transportation and social services projects. Lends money raised from sales of bonds to private investors

International Development Association (IDA)

Provides support to poor countries considered too risky to qualify for IBRD loans. Lends money from government contributions

Turkey

Ranked 69th out of 186 countries with HDI scores. However, it has a higher IHDI than Brazil meaning. Also, its wealth is concentrated in the Western part of the country, closest to Europe and much lower in the East home to the Kurds

Brazil

Ranked 79th out of 186 countries with HDI scores. However, it has a lower IHDI than Turkey. Also, its wealth is concentrated in the largest city: Sao Paulo

Stage 3: Takeoff

Rapid growth is generated in a limited number of economic activities, such as textiles or food products. These few takeoff industries achieve technical advances and become productive, whereas other sectors of the economy remain dominated by traditional practices

Sub-Saharan Africa South Asia

Regions with the lowest HDI scores (two)

Petroleum-Rich Arabian Peninsula States International Trade

The Arabian Peninsula includes Saudi Arabia, the region's largest and most populous country, as well as Kuwait, Bahrain, Oman, and the United Arab Emirates. Once among the world's least developed countries, they were transformed overnight into some of the wealthiest countries, thanks to escalating petroleum prices beginning in the 1970s. Arabian Peninsula countries used petroleum revenues to finance large-scale projects, such as housing, highways, hospitals, airports, universities, and telecommunications networks. Their steel, aluminum, and petrochemical factories competed on world markets with the help of government subsidies. The landscape of these countries has been further changed by the diffusion of consumer goods, such as motor vehicles and electronics. Supermarkets in Arabian Peninsula countries are stocked with food imported from Europe and North America

Years of schooling

The UN considers this to be the most critical measure of the ability of an individual to gain access to knowledge needed for development

High Medium Low

The UN divides developing countries into these categories

4

The UN has found that gender inequality has declined since the 1990s in all but _ of 138 countries

Southwest Asia North Africa

The UN lacks data from a number of these regions' countries in terms of IHDI (inequality)

Russia

The UN previously classified this country as developed, but because of its limited progress in development both under and since communism, it is now classified as a high developing country

47

The US ranks __ GII-wise

Apple Exxon Mobil Microsoft Alphabet (Google) Berkshire Hathaway Johnson & Johnson Wells Fargo General Electric

The US was home to these 8 largest companies in 2014 as well as 47 of the 100 largest and 203 of the 500 largest companies in the world

One country can bring to the WTO an accusation that another country has violated a WTO agreement and the WTO is authorized to rule on the validity of the charge and order remedies

The WTO enforces agreements by...

An individual or corporation can bring charges to the WTO that someone in another country has violated a copyright or patent and the WTO can order illegal actions to stop

The WTO protects intellectual property in the age of the internet by...

Empowerment

The ability of women to achieve improvements in their own stuff (to achieve economic and political power)

0.975

The average GDI in developed regions is...

0.904

The average GDI in developing regions is...

Life Expectancy at Birth

The average number of years a newborn infant can expect to live at current mortality levels. It is 71 worldwide, 80 in developed countries, and 57 in Sub-Saharan Africa

The contribution to GNI among different sectors varies between MDCs and LDCs

The share of GNI accounted for by the primary sector has decreased in developing countries, but it remains higher than in developed countries. The low share in developed countries indicates that a handful of farmers produce enough food for the rest of society. The share of GNI accounted for by the secondary sector has decreased sharply in developed countries and is now less than in developing countries. The share of GNI accounted for by the tertiary sector is relatively high in developed countries, and is now growing in developing countries.

World Bank International Monetary Fund

The two major lenders to developing countries

$16

The value added per capita in Mexico is around...

$67

The value added per capita in the US is around...

Productivity

The value of a particular product compared to the amount of labor needed to make it. Measured by the value added per capita

Gross National Income (GNI)

The value of the output of goods and services produced in a country in a year, including the money that leaves and enter the country

Gross Domestic Product (GDP)

The value of the output of goods and services produced in a country in a year. This does not account for money that leaves and enters the country

Telephones

These enhance interaction with providers of raw materials and customers for goods and services. The number of cell phones per 1,000 persons is approximately 800 in the world as a whole, 1,100 in developed countries and 700 in developing countries

Computers

These facilitate the sharing of information with other buyers and suppliers. The number of Internet users per 1,000 persons is approximately 300 in the world as a whole, 700 in developed countries and 200 in developing countries

Motor Vehicles

These provide individuals with access to jobs and services and permit businesses to distribute their products. The number of motor vehicles per 1,000 persons is approximately 170 in the world as a whole, 630 in developed countries and 80 in developing countries

World Bank

This includes the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA)

Inequality-adjusted Human Development Index (IHDI)

This modifies the HDI to account for inequality within a country. Under perfect equality, they would be the same

Years of schooling for today's adults and expected years of schooling for today's youth

To form the access to knowledge component of HDI, the U.N. combines these measures of years of schooling

Self Sufficiency International Trade

To promote development, developing countries choose of these models:

World Trade Organization (WTO)

To promote the international trade development model, countries representing 97% of world trade established this in 1995. This organization works to reduce barriers to international trade

Trade

What increased more rapidly than wealth during the late 20th century and early 21st century?