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Economic Development
Important Ideas
• A. Various indicators are used to determine
the level of development and standards of
living of a country, including Gross Domestic
Product (GDP) per capita, life expectancy,
infant mortality, and literacy rate.
• B. The type of economic activities in a country
influence its level of development.
Economic Development
• Economic development refers to how
advanced an economy is.
• More developed countries have advanced
economies.
• Less developed countries have lower
standards of living and less advanced
technologies.
• Nations moving from less to more developed
economies are known as developing, newly
industrialized, or emerging economies
Indicators of Development
• The Human Development Index developed in
1990 by the United Nations ranks countries
based on their economic development,
gender equality, social equality and quality of
life.
– Very High
– High
– Medium
– Low
Indicators of Development
• Other economists classify countries as:
– Less Developed
– Medium Developed or Newly Industrialized
– More Developed
Based on demographic, economic, social, and
political factors to determine their level of
economic development and standards of living.
Demographic Indicators
• Demographic Indicators relate to population.
• Life Expectancy – is the number of years an
individual is expected to live.
• Affected by:
– Level of poverty
– Diet
– Availability of medical care
– Infectious Diseases
Demographic Indicators cont’d
• Birth and Death Rates
– Death rate is known as the mortality rate.
– Countries with a high birth and death rates are
often less developed since these rates reflect
poverty and low quality of health care.
Demographic Indicators cont’d
• Infant Mortality Rate – is the number of
infants who die for every thousand births.
– Caused by level of medical care at birth.
– Common causes of infant deaths: dehydration,
diarrhea, malnutrition, and malaria.
Demographic Indicators Summary
• A more developed nation has a low birth rate,
a low mortality rate, a low infant mortality
rate, and a long life expectancy.
• A less developed nation has a high birth rate,
a high mortality rate, a high infant mortality
rate, and a short life expectancy
Economic Indicators
• Economic Indicators tell how well an economy
is performing.
– GDP or Gross Domestic Product is the total value
of all goods and services produced by a nation.
– GDP per capita is the value of goods and services
produced by an average citizen in a year.
– Other economic indicators include the average
number of automobiles, telephones, televisions,
or computers per person
Economic Indicators Summary
• A more developed nation has a high GDP per
capita; a high number of cars, doctors, and
telephones indicating a high standard of living;
and workers are more productive because of
advanced technology like computers, and
advanced machinery and tools.
Economic Indicators Summary Cont’d
• A less developed nation has a low GDP per
capita, concentrates on agriculture (usually
subsistence farming using primitive tools), lack
investment in technology and thus its workers
are less productive or competitive. Less
developed nations have less access to
healthcare.
Social Indicators
• More developed nations are typically wealthier
and able to provide better health care and
education to their citizens. This, in turn, makes
their citizens more productive than those in less
developed countries.
• Literacy rates (the percentage of citizens who
can read and write), the percentage of people
attending college, and the number of
professional people such as doctors and lawyers
are key social indicators of economic
development.
Social Indicators cont’d
• Some other Social Indicators are:
– Housing
– Water Supply
– Sanitation
Social Indicators Summary
• A more developed nation has a high literacy
rate, a high percentage of people attending
college, and a large number of doctors and
hospitals.
• A less developed nation has a lower literacy
rate, a lower percentage of college
attendance, and a small number of doctors
and hospitals.
Political Indicators
• Political indicators which determine the level
of development of a country include:
– Freedoms
– Degree of democracy and voting rights
– Human rights
– Government oppression
– Tolerance for different points of view
Relationship between Government
and Economic Development
• There is usually no relationship between a
nation’s system of government and its
economic development, but since the end of
the Cold War, most advanced economies have
adopted the Free Enterprise system.
– China – Communist, but possesses the world
fastest growing economy.
– Many of the newly industrialized economies have
some form of democratic government.
Relationship between Government
and Economic Development Cont’d.
• It is important to note, however, that
economic development is aided by freedom of
expression and free flow of information.
Types of Economic Activities
• Primary Production
– The most basic economic activity
– Involves the production of foods and the
extraction of resources
– Located at the site of the resource
– Examples:
•
•
•
•
Farmer
Miner
Logger
Fisherman
Types of Economic Activities
• Secondary Production
– The manufacture and production of goods
(turning raw materials into finished goods)
– Usually located near the raw materials or near the
market for the finished goods
– Examples:
• Factory worker
• Potter
• Cabinet maker
Types of Economic Activities
• Tertiary Production
– Performance of services rather than producing goods
– Involves the selling of goods from primary and
secondary production and the sale of services and
skills
– Usually located where services are required
– Examples:
•
•
•
•
•
Store clerk
Doctor
Lawyer
Teacher
Waiter/waitress
Types of Economic Activities
• Quaternary Production
– Produces new information, products, and ideas
through research and scientific discovery
– Information processing and management
– Can be located anywhere there is access to
reliable telecommunications. Not tied to
resources, the environment, or marketplace.
– Examples:
• Scientist
• Educational researcher
• Computer systems analyst
Connections between Level of
Development and Economic Activities
• In Less Developed Countries – most people
are engaged in Primary Production activities.
– Subsistence farming
– Commercial Agriculture of a key cash crop for sale
to other countries
– Mining of raw materials for sale to other countries
Connections between Level of
Development and Economic Activities
• In Newly Industrialized, or Medium
Developed, countries – large numbers of
people are engaged in Secondary Production
– Examples:
• China and Thailand
• Manufacturing of textiles or automobiles for export to
other countries
Connections between Level of
Development and Economic Activities
• In Highly Developed countries – most workers
are engaged in Tertiary or Quaternary
Production
– Examples
• USA and France
• Most workers are in service, or information processing
industries
• Many are engaged in university or scientific research