Bridging the Development Gap

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  • Created on: 30-05-16 14:53

Introduction - Economic Measures of Development

Development = implies change, growth or improvement over time. Initially it meant economic development, but in the 1980s there was more focus on social factors
Deveopment Gap = difference in income and quality of life between the richest and poorest countries of the world, can also occur within countries (urban / rural)

Economic measures of development - Energy consumption, PPP, GDP, GNI/GNP, employment structure
GDP - Gross Domestic Product - the total value of all goods produced and service provided in a country per year.
GDP per capita = to account for different total pop. size
PPP = Purchasing Power Parity - accounts for differing cost of living. For example, the cost of living in China is much lower than in the USA. Calculated using price comparisons of comparative goods in different countries - not all items can be matched around the world. 
GNI = Gross National Income - the same as GDP, except it includes taxes and income from overseas investments (shares and profits from overseas subsidiary companies/branches). Better than GDP for developed countries who earn a lot of wealth this way. Also useful for countries with a large number of nationals working abroad (e.g. oil rich states)

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Social Measures of Development

Measure = percentage of urban population, adult literacy, pop. growth rate, infant mortality, doctors per 100,000 people, calories per day, percentage in education, life expectancy

PQLI = Physical Quality of Life Index - uses life expectancy, literacy and infant mortality. Has been criticised as there is significant overlap between life expectancy and infant mortality. Only combines social indicators. 
HDI - Human Development Index - uses life expectancy, literacy and school enrolment and GDP per capita. Value are between 0 and 1 (1=highest). No measure of human rights.

Data Collection - development indicators are usually based on data from the UN Development Programme (UNDP) and the World Bank. Data is based on formal economy - it ignores informal, subsistence or unpaid work. Obtaining work is difficult, especiialy in developing countries. 

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Limits of Indicators

Development is a complex and wide ranging process involving cultural, economic, environmental, political, social and technological change. 

GNP - Gross National Product
use of money units to assess development is problematic, the real value of the unit of currency will change significantly over short periods of time, international exchange rates do not necessarily reflect the relative purchasing power of 1 currency to another, country's output (a large part of it) does not represent the domestic market prices - this is the reason why PPP was created, social problems with 2nd world countries (Russia) due to different definitions of national income, Russia also has variations that occur due to intensely cold winters leading to high expenditure on clothing and heating and size of country = more expenditure on transport and communication, GNP gives no indication of how national income is actually distributed, largely a calculation of the rate of growth of the incomes of the upper 40% of the population, can be very misleading index of the welfare of its poorest citizens

PQLI - different scaling for the 3 elementes (life expectancy, infant mortality, literacy rates), lag-time before improvement made in health and education take effect, lower GNP figures compared to PQLI due to GNP undervalues their level of developmnt in the basic essentials of a satisfactory QOL

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Limits of Indicators (2) and Positives

HDI - created by the UN, was partially politically motivated to specifically focus on health and development issues, good indicators but not ideal, nutritional index under 5 years old would be a more diagnostic indicator (data not available), National HDI can mask disparities from region to region (e.g. between urban/rural, whites/blacks), may be more than a profile of development, a relative index (not absolute development), if all countries develop at the same rate then the poorest countries will not get any credit for progress. 

GNP is nearly always calculated on a per capita basis so that differences in population are neutralised
PQLI - an avergage of social elements, whereas the others focus on economic
HDI - countries can be ranked into groups based on economic and social factors
IHSI (international human suffering index) - works using 10 variables so is a wide range of social and economic and political factors giving a more accurate show of more areas of development. 

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Theories - Rostow's Theory

Rostow's Theory 
- Based on the economic development experienced by Western Europe and North America
- argues that a country passes from under development to development through a series of stages of economic growth
- In 1960s Rostow believed capital should be transferred from developed to developing countries to assist development
- STAGES: 1) Traditional Society 2)Preconditions before Take Off 3) The Take Off 4) Drive to Maturity 5) High Mass Consumption

did not take into account non-economic factors such as political changes or high rates of population growth.
Eurocentric model - westernised, not always comparable to other countries. 

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Theories - Poverty Cycle

- Focuses on underdevelopment - social deprivation and poverty explaining the inequality between countries
- Less developed countries = trapped in a continuing cycle of poverty because of a lack of capital and low incomes
- Doesn't account for the emergence of countries such as China, India and S. Korea who managed to escape the circle
- Also assumes development takes place in isolation from other countries and is free of global interactions - INTERDEPENDANCE

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Theories - Dependency Theory

- Divides the world into an economically developed core and an underdeveloped periphery

- The capitalist core deliberately keeps the periphery in a state of underdevelopment (colonialism)

- The core does this by exploiting the periphery's cheap resources and labour and by selling manufactured goods made in the core. 

- However... TNCs through FDI improve the development 

- Developed by A.G. Frank

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Theories - Core-Periphery Theory

- Divides the world into economically developed core regions and less developed peripheral regions

- The process of development favours the core regions at the expense of the periphery, thus
widening the development gap

- E.G. North - South divide in the UK - Most realistic theory, wealth doesn't trickle down

- Developed by J. Friedmann

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Debt Crisis

- In last 50 years, many poor countries have accepted loans from rich countries
- Interest rates on the loans affect development as they put pressure on the already stretched financial situation of a country
- Loans and interest has to be repaid, but there are obviously strings attatched: e.g. developed countries give trade loans to enable poorer countries to buy their products and services
- Debt loans cause hardship to the people and prevent development gap closing - particularly an issue in Africa (DR Congo - 20-30% debt service as % of revenue)

Why / How was the debt crisis produced?
- Arab-Israeli war (1973-4) led to a sharp increase in oil prices
- Individuals and governments in oil-producing countries invested profit from oil sales in rich countries banks
- These banks offered loans at low interest. Poor countries were encouraged to borrow to fund development and pay back their loans from growing cash crops / raw materials 
- 1980s - Western countries experienced recession and inceased interest rates to combat rising inflation. At the same time, crop surpluses led to decline in prices. Demand for goods fell - left developing countries unable to pay interest on their debts.

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Debt Crisis (2

Why does it continue?

- High interest rates (10-25% higher for projects in developed countries

- Corruption within developing countries governments and companies 

- Political instability

- Trade barriers imposed by developed countries that make it hard for poorer countries to export goods

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HIPC - Highly Indebted Poor Countries

- The action of cancelling loans saved those countries $1.5 billion annually in debt repayments
- The government of each country had to demonstrate good financial management and a lack of corruption
- The money saved had to be spent on poverty reduction, education and healthcare
- By 2008 - 27/38 HIPCs had met the conditions for debt relief and recieved $85 billion in aid
- However, African countries still owe $300 billion, little chance they will be able to repay those debts. Debt campaigners believe that an additional 24 countries should be added to the original 38 (including Nigeria, India and Indonesia) 

Impacts of Debt Cancellation in Uganda: (cancelled $1.5 billion)
- Spending on public service has risen by 20% overall, 40% extra being spent on education and 70% on healthcare -  including the abolition of fees for basic healthcare
- Free primary education introduced - 5 million extra children have begun school.
- 2.2 million people (nearly 10% of pop) have gained access to clean water. Fetching water is usually the responsibilty of women and girls, often why they don't attend school. 
-> However...the HIPC has been criticised for imposing structural reforms such as privatisation of water and electricity

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- directly affects the development gap 
- North-South flows taditionally were focused on LEDCs / LDCs exporting primary products - limitations = LOW VALUE RAW MATERIALS, easily affected by natural disasters, no real added value
- In the last 20 years, developing countries are exporting manufactured goods (80% of exports)
- Manufactured goods are worth more than raw materials = higher profit
- TNCs set up branch plants and FDI has developed exports to manufactured goods
- Trade Surplus - exports exceed imports
- Trade Deficit - imports exceed exports - DEBT TRAP

Terms of Trade
- If countries rely on the export of low priced commodities and need to import high price items, they need to export in high quantities (and import low)
- Poor nations = primary product dependacy (rely on 1 or a small number of primary product to obtain foreign currency through export)
UGANDA: 3.8% growth in trade yet fall in development 
WHY? TNCs not developing with their profit // landlocked // primary product dependancy

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Trade Blocs

- Set up to decease development gap
- EXAMPLE: NAFTA - Mexico (71st HDI) USA (Top 10 HDI) and Canada = MUTUAL BENEFITS

Trade patterns in coffee:
- Second most actively traded commodity (oil = 1st) as a source of foreign earning
- Produced in tropical and subtropical climates (Latin America, Asia, Africa)
Producers->Collection centres/exporters->importers->roasters->suppliers->consumers
- Works against coffee farmers in developing countries (producers) who recieve fraction of final paid price by consumers
- TNCs dominate the industry (e.g. Nestle) - difficult for small farmers to negotiate better prices
- Coffee price fluctuates wildly - downward trend overall

- Farms abandoned, loss of jobs, reduced export earnings (Cameroon, Ethiopia, Central African Republic)
- Rural-Urban migration, less money for healthcare/education, increased poverty (Cameroon, C.A.R, Costa Rica)

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Impacts on the Poor

Different groups of countries:
- LDC experience the worst consequences
- Developing nations benefit from reduced poverty (comes at a price, social/political issues)
Different groups within a country:
- Rapid urbanisation causes megacities to grow
- Rural poverty -> urban slums
- Remote rural communities are the deepest in the cycle of poverty due to inability to grow food

POP living on less than $1 a day (1981 - 2004)
Sub-Saharan Africa: mostly landlocked, fluctuating slightly possibly due to export of raw materials and their price fluctuation trickling down.
East Asia: industrialisation and increase manufacturing meaning wealth can trickle down (TNC FDI)
Europe and Central Asia: rise (slightly) due to political issues
Middle East and North Africa: political issues cause decline

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Caste System, India and Gender Divide

  • Caste System
  • Social Impact - restrictions
  • Process of placing people in occupational groups 
  • Dictates the type of occupations a person can pursue
  • Based on the family you are born into
  • 4 main classes: Scriptual education (teaching), public service, businessmen, semi-unskilled labourers (untouchables)

Gender Divide
- women more likely to do unpaid / low status jobs and have lower earnings
- Limits participation in politics and government policy
- Female illiteracy is high even though its fundamental
- 57% of children who recieve no primary education are girls
- 1 in 6 die during pregnancy (LDCs it is 1 in 7)

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  • Population of over 10 million
  • EXAMPLE / CASE STUDY: Lagos, Nigeria (biggest city in Nigeria, 2nd largest in Africa), currently estimated to be the 2nd fastest growing in Africa
  • PUSH FACTORS: population pressure, poor infrastucture, inadequate job offer, bad educational prospects, poor health care, ecological problems, natural disasters, subsistence farming failure
  • PULL FACTORS: improved standard of living, varied employment opportunities, higher wages, quality of education
  • Slums are commonplace in megacities
  • Limited sanitation
  • Limited water supply
  • Poorly built
  • Informal / unreliable employment
  • disease and crime
  • Few services (education/healthcare)
  • EXAMPLE/CASE STUDY: Dharavi, Mumbai // Dhaka, Bangladesh
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Consequences of the Gap: Social Political Unrest

- Ethnic/religious minorities often suffer worse poverty than the wider poverty
- Such differences can result from subtle prejudice and direct discrimination and persecution
- a policy employed by the South African government between 1948 - 1990
- classified all south africans into one of 3 categories: white (european), black (african) or coloured (mixed descent) 
- black pop were stripped of voting rights (ciizenship)
- government segregated education, medical care, public services (inferior services for blacks)
- black people were settled into townships away from white people
- huge inequalitly 
- led to uprisings and protests
- Soweto 1976; black children protesting their educational ights
1990 - Apartheid ends: African National Congress have been elected to power 4 more times, after Nelson Mandela in 1994

CURENTLY: South Africa has the highest GDP in the continent, is a member of the BRICS, has a diverse industry: clothing, textile, fishing, vehicle manufacture, food processing, and a high HDI

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Problems of Economic Growth

  • Inreased consumerism = increased waste and decreased energy resources
  • Widening the development gap: slow economic growth, poverty, debt, no development
  • Uneven balance of bower: TNCs, sweatshops, unfair trade, trade blocs
  • Deindustrialisation in the North: decline of manufacturing employment, industrial restructuring
  • Environmental Degradation: overexploiation of resources/farming, soil erosion, cost cutting investment in LEDGS, loss of biodiversity, increased pollution, increased tourism but decreased environmental quality
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Consequences of Development

- mostly seen as a positive for a country but there are some negatives
- rich get richer, poor get poorer, typically the gap gets wider as a country deveops
- Migration: most countries that have ever developed experience increased migration flows - internal and international
- International migration is required to help counteract low literacy rate, also gives wide range of skills (technicians, businessmen)
- Internal migration normally rural -> urban or periphery of urban -> urban core

SOURCE: natural increase slows as young adults leave, less pressure on resources, remittances sent back, return migrants bring skills and money to invest
HOST: Declining pop boosted by migrants, human resources enhanced, labour force needs / unwanted jobs filled, higher pay for skilled workers who then pay taxes
SOURCE: pop becomes older, fewer people to develop country;s resoures, loss of skilled workers, westernisation of returnees, diminished cultural diversity
HOST: social tension, gender concentrations, increased pressure on resources, low pay/exploit

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- given mostly as money, but also comes in the following forms:
- food, low interest loans/grants, weapons, people/profesions, machinery
- mostly work positively but can be tied: something in return for AID, agreements tied in
Types of Aid:
- Development - addresses poverty in the long term
- Multilateral - money is given to a donor agency before its distributed
- Project - Large scale schemes usually construction
- Humanitarian - alleviated suffering after a disaster therefore often short term
- Bilateral - one to one relationship between donor and recipient
- Voluntary - comes from NGOs from developed countries supporting small scale projects

- Dependancy on aid
- Tied aid can cause further debt
- Corruption - aid is not invested where it is needed

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Reducing the Development Gap

Players: Private companies, public organisations (government), coluntary eople (charities)
BOTTOM UP and TOP DOWN approaches are both used -> All aim to reduce the gap between the rich and poor worldwide

1) Neoliberalism: driven by companies not the country, free market, privatisation of services, cut public spending, deregulation or trade success? E.G. NICs, China attracts FDI
2) Marxism: fairer distribution of wealth globally and nationally. Based around a centralised communist style approach favouring top down methods. Managing society for the good of all.
E.G. Developing nations utilise skills, resources and power to develop. 
3) World Systems Theory: developing netowrds of global interdependance; working with other countries, E.G. UN used this for the MDG
4)Post Development Theory: NGOs use approaches centred around sustainable development. Focus on small scale and local projects.

FACTORS INFLUENCING DEVELOPMENT:  EXTERNAL: trade links, land locked, FDI, trade, TNC locating there, labour rates, HIPC, fair/free trade, tourism, international corporations INTERNAL: political stability, megacities, industry type, climate, security, location, raw materials, disease, tax, employment in informal sector, clean water, access to food

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Top Down or Bottom Up Aid?

Aid 'Winners'
- Urban areas: most investment is funded into urban development as it will affect more people/companies than in rural areas
-Topical Issues (HIV/AIDS): highly published issues are more likely to recieve aid because of the increased notability whereas smaller, less well known diseases arent as notable
- Major disaster areas from short term aid: major disasters are larger scale and so recieve larger scale of response for aid. Therefore, they recieve more aid more quickly. 

Aid 'Losers'
- Countries dependant on long term aid: if countries build up a dependance on aid it makes development more difficult as they arent making sustainable changes to improve self-sufficient development in the long term
- Countries with corrupt governments: if a country has a corrupt government it means a large amount of the aid is misused. It ends up to be those really in need of aid recieving none or small amounts, or the money is invested to place it is not needed. 
- Rural Areas: don't tend to recieve much aid because it goes mainly to urban areas where there is a higher population and better industry

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Free Trade Negatives

  • Doesn't apply to / help out all farmers, only a few qualify for fair trade schemes and benefit from them
  • Not a lot of evidence of extra money going to farmers so unsure of the efficiency
  • Incentive to give poorer products to fair trade
  • Doesn't tackle the main poverty issues completely in LEDCs and LDCs like corruption health and eduation
  • Although free trade does provide postives, there are some negatives which have knock-on effects on the farmers. 
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Trade - Reducing the Development Gap

POSITIVES: Inestments from TNCs, FDI, free trade zones, NIC/MINT/BRICS
NEGATIVES: Developing countries miss out, LDC export low value goods, trade blocs restrict
SOLUTIONS? encourage trade between developed and developing, fairtrade, DOHA
FDI = a controlling ownership in a business enterprise in one country by an entity in another
- form of income for developing countries       - creates job - reduces unemployment, more tax
- improves trade links and infrastructure         - less chance of dependancy on aid in future
- developing countries share of trade tripled from 12% in 1995 to 36% in 2006
- half of developing country exports were to other developing countries
INFLUENCING IMPORTS: tariffs (itmes have taxes / levies meaking it less viable to import), import quotas (limit numbers), exchange rates, trade blocs, tight regulations (labelling)
INFLUENCING EXPORTS: incentives to export goods, export guarantees, free trade zones, embargoes, trade blocs, Special Economic Zones (offer incentives such as lower tax to foreign companies, including TNCs, to locate there. Host country gains income and skills, e.g. China) 
KEY PLAYER: World Trade Organisation - 148 members committed to increasing free trade, offer favour developed countries as they offer more money
PROBLEMS: rich countries control commodity prices and keep them low, patent rule - medicines are not affordable for LDCs, rich countries control markets through trade blocs, increases gap between rich and poor

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Free Trade or Fair Trade

- each country aims to have a trade surplus (export more than import)
- How can trade reduce the gap? Debt relief and aid cannot be seen as a long terms way of improving and sustaining a country, they need to be able to develop their industry and economy. A sustainable trading balance can generate wealth to invest in services.
FREE TRADE: no barriers between countries - prices paid are determined by balance of what producer wants and customer pays (LINK TO KENYA TRADE CASE STUDY)
FAIR TRADE: focuses on trading with poor producer groups to develop skills and sustainable livelihood, fair treatment, pays fair pices, premium can be paid for social development, provides credit for producers, develops long term trading relations, (LINK TO SENEGAL CASE STUDY)
TRAIDCRAFT: assisting small/medium sized producers to sell their produce for a fair price in overseas markets MAIN PRODUCERS: ASIA: bangladesh, india, nepal, philippines, thailand ARICA: Burkina Faso, Cameroon (LINK TO KENYA CASE STUDY)

Making Free Trade Fairer - agreements to improve trade and encourage it. The US Africa Growth and Opportunit Act (may 2000) encouraged trade between US and Africa. The USA is proposing a free trade agreement with 5 countries: Namibia, Botswana, Swaziland, Lesotho, South Africa

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Strategies to reduce the gap

Debt Cancellation
There has been attempts to reduce debt: "make poverty history" campaign in 2005, called fro cancellation of debt to poorests countries. 14 African HIPC hope to have debt written off. Other non-HIPCs with debt levels over the WB / IMF thresholds. 2006 - 26 countries with UK debt was written off by the UK government

Debt Reduction
Strengths: allows country's loans to be rescheduled to make them more manageable, often accompanied by a shift from domestic food cultivation to cash crops for export, boasts foreign exchange by promoting eports, economy more competitive
Weakness: privatisation of state bodies to cut govt. expenditure - results in assests being sold to TNCS, developed countries accused of protecting their own interests, increase pressure on countries to generate exports to pay debts - environmental damage

Many developing countries have environments and biodiversity that attracts long-haul tourism. Can lead to multiplier effect - money funds smaller business (accomodation, food, souvenirs) SMALL SCALE, LOCAL, BOTTOM-UP
CONCERNS: reliant on political stability, natural disasters, seasonal, degradation

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Strategies to reduce the gap

Ecotourism: tourism directed towards exotic natural environments, intended to support conservation efforts and observe wildlife
- small scale, EcoTourism in Kenya organisation

Technology: Digital Divide - uneven use of technology
- can help promote bottom-up, socio-economic development through spreading of information through digital communication
Mobile Phones - do not require same literacy levels as computer and are cheaper
- Africa = fastest growing mobile phone market - Kenya 2002 = 9% // 2014 = 82%
Negatives: doesn't tackle basic needs - healthcare, requires infrastructure, leap-frogged technology (missed out landlines, nothing to fall back on if failure)

South - South links:
- developing countries might find appropriate, low cost and sustainable solutions from other developing countries. (e.g. China and Africa)
- China increased aid to African governments, cancelled $10 billion of debt and offered further debt relief to 31 African countries
- China needs raw materias and new markets for manufactured goods
- Africa = 90% of worlds cobalt and platinum, 50% of its gold, rich in diamonds and has more oil reserves than N. America - China gets 1/3 oil from Africa, new oil field in Angola

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The Millennium Development Goals (MDGs)

- Started in 200, UN Millennium Summit and signing of the Millenium Declaration
- Signing committed to reducing poverty and setting out a series of time-bound targets - with a dead-line of 2015 - that have become know as the MDGs
- Every UN member state signed up - largest ever multi-national attempt to rid the world of extreme poverty
- Have become  framework for monitoring the development gap - they were measurable
1) Eradicate extreme poverty and hunger         2) Achieve universal primary education
3) Promote gender equality and empower women   4) Reduce chid mortality
5) Improve maternal health                            6) Combats HIV/AIDS, Malaria etc..
7) Ensure environmental sustainability            8) Global partnerships for development
-> they all are able to interlink

2007 Data:
-Thailand achieved 7/8 
- S. Africa is likely to achieve 5, and possible to achieve the remaining 3
- Kenya likely to achieve only 1 goal
- Thailand's HDI has increased (76 -> 92) so development hasnt been effective here
- Kenya's HDI has decreased (148 -> 128)
Needs time for effect of MDGs to occur, Pop boom dilutes efffects? 

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Sustainable Development Goals

MDG achievemnets by 2015
- Since 1990, the number of people living in extreme poverty has declined by more than half
- The proportion of undernourished people in the developing world has fallen by almost half
- The primary school education enrolment rate in developing regions has reached 91%, and many more girls are now in school compared to 15 years ago
- The under 5 mortality rate as declined by more than half
- Maternal mortality is down 45% worldwide
- Target met for halving the proportion of people who lack access to improved sources of water7

SDGs - 17 proposed new goals, to be completed by 2030
- no poverty                                         - peace, justice and strong institutions
- good health and well being                 - responsible consumption and production
- affordable and clean energy
- sustainable ciyies and communities
- life below water
- life on land
- climate action

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