Economic Development (4.1)

Revision cards for section 4.1 (chapter 27) in the International Baccalaureate economics course


Economic development and economic growth

Economic growth - when a country has the potential to increase their GDP. This is best measured in real level of output.

Economic development - the overall improvement of the peoples lives in the country. Economic development does not necessarily increase just because there is an increase in economic growth, the government needs to focus on preventing decrease in the standards of living within the country, rather than focusing on increasing industrial factors.

"if one or two of the central problems (poverty, unemployment or equality) have been growing worse, especially if all three have, it would be strange to call the result 'development' even if per capita income doubled" - Daudly Seers

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Sustainability - The ability of the environment to survive its use for economic development

If economic growth is to be sustainable, it must be neutral to the environment - hence all resources must be renewable and unharming to the environment.

To  have a sustainable economic growth, there need to be invested in recycling and renewable energy for instance

“We cannot hope to create a sustainable culture with any but sustainable souls” - Derrick Jensen

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Sources of economic growth

The sources of economic growth does not differ between a lesser developed country or a higher developed country. There are four main sources:

Natural factors - quality and quantity of land, minerals, fuels and climate

Human factors - supply and quantity of labor.

Physical capital and technological factors - quality and quantity of machinery factories and infrastructure

Institutional factors -  banking and legal systems. May also include developing factors such as a strong health care system

“Government is not the generator of economic growth; working people are” - Phil Gramm

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Does economic growth lead to economic development?

The book discusses five causes in which economic development reacts to economic growth

Higher incomes - this can increase the standards of living, as the people will be able to get better food, better clothes and even in some cases a better house

Improved economic indicators of welfare -  this includes average life expectancy, literacy rates and average years of schooling

Higher government revenues - a nation with a high government revenue will be able to provide its citizens with essential services such as education, health care and infrastructure

Creation of inequality - economic growth achieved through market based initiatives can lead to a larger GDP, and inequality as the rich gets richer and poor gets poorer

Negative externalities and lack of sustainability - as countries tries to increase their economic growth, they can create negative externalities due to a lack of sustainability

“Economic growth may one day turn out to be a curse rather than a good, and under no conditions can it either lead into freedom or constitute a proof for its existence - Hanna Arendt

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Characteristics of developing countries

Low standards of living - this is classified as low income, inequality, poor health and inadequate education

Low levels of productivity - this is often caused by poor health of workers, low education standards, lack of physical capital and lack of access to technology

High rates of population and dependency burdens

High and rising levels of unemployment and underemployment

Substantial dependency on agricultural products and primary product exports

Prevalence of imperfect markets and limited information - as developing countries have focused on a market-oriented approach to economic growth, they have been facing a rising level of imperfect markets. Some countries lacks the factors to enable a market to work

Dominance, dependence and vulnerability in international relations - developing countries are highly dependent on welfare from developed countries

"A multi-polar world can not exist without recognising the status and participation of developing countries" - Li Peng

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Diversity among developing countries

Despites most developing countries having similarities, it is important to remember their differences as no two snowflakes looks the same.

Resource endowment

Historical background - a country's current state is often defined by its past.

Geographic and demographic factors - most developing countries comes in different sizes and shapes. The level of population and size of the country can determine the country's fate

Ethnic and religious breakdown

The structure of industry - not all developing countries are dependent on export

Per capita income levels - how much does the individual person make

Political structure - democracy, monarchy, military rule, single party states, theocracies & transitional political systems

“In an underdeveloped country don't drink the water. In a developed country don't breathe the air” - Jonathan Raban

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International development goals

The millennium development goals (MDGs) were adopted by world leaders in 2000. The aim of the goals were to have them achieved by 2015. The goals are as follows:

Goal 1 - Eradicate extreme poverty and hunger

Goal 2 - Achieve universal primary education

Goal 3 - Promote gender equality and empower women

Goal 4 - Reduce child mortality

Goal 5 - Improve maternal health

Goal 6 - Combat HIV/AIDS, malaria and other diseases

Goal 7 - Ensure environmental sustainability

Goal 8 - Develop a Global Partnership for Development

"All that is valuable in human society depends upon the opportunity for development accorded the individual" - Albert Einstein

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