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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