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DEVELOPMENT The Human Development Index (HDI), created by the United Nations, recognizes that a country’s level of development is a function of all three of these factors. Four factors that calculate HDI: GDP (gross domestic product) per capita Literacy rate Amount of education Life expectancy Economic Gross Domestic Product (GDP): value of the total output of goods and services produces in a country, normally during a year •GDP per capita Dividing GDP by total population measures contribution made by the average individual toward generating a country’s wealth Social •level of development, the greater are both the quantity and quality of education Demographic •Life Expectancy: average number of years a newborn infant can be expected to live •Quantity: average number of school years attended •Quality: student/teacher ratio and literacy rate •Literacy rate: percentage of a country’s people who can read and write Other factors the help determine development Economic Types of Jobs (primary, secondary, tertiary) Productivity Raw Materials Consumer goods Social Health and Welfare Demographic Infant Mortality Rate Natural Increase Rate Crude birth rate More and Less Developed Regions More Developed Regions Anglo-America Western Europe Japan South Pacific Eastern Europe Less Developed Regions Latin America East Asia Middle East Southeast Asia South Asia Sub-Saharan Africa Gender-Related Development Index (GDI): compares the level of development of women with that of both sexes Uses the same indicators as HDI Income Literacy Education Life expectancy High GDI means both men and women have achieved a high level of development Low GDI means that women have a low level of development Economic Indicator Income Social Indicator Education & Literacy Demographic Indicator Life expectancy Average income for females is lower than males in every country in the world Women less likely to attend schools in LDCs Gender gap greater in MDCs than LDCs Gap is especially high in secondary level Women expected to live longer in MDCs Women:Men 99:100 in MDCs, 60:100 LDCs Sub-Saharan Africa & Middle East fewer than one-third of girls attend school In Latin America and Asia, boys and girls are equally likely but attendance is much less than in MDCs Gender Empowerment Measure (GEM): Compares ability of women and men to participate in economic and political decision-making. GEM measures the ability of women to participate in the process of achieving those improvements two indicators of economic power o income o professional jobs o two indicators of political power o managerial jobs o elected jobs Countries with the highest GEMS are MDCs, especially in North America, Northern Europe and South Pacific Obstacles for Development To reduce disparities between rich and poor countries, LDCs must develop more rapidly • Increasing per capita GDP more rapidly • Using additional funds to make more rapid improvements in people’s social and economic conditions Two Obstacles Adopting policies that successfully promote development Finding funds to pay for development Promoting Development o Self-Sufficiency o International Trade Finding Funds o Loans from Banks o Direct Investment Details of Approach Disadvantages SELF-SUFFICIENCY a country should spread investments as equally as Inefficiency possible across all sectors of its economy and in all Large regions Bureaucracy Countries promote self-sufficiency by setting barriers that limit the import of goods from other places. o High tariffs (taxes) on imported goods to make them more expensive than domestic goods o Fixing quotas to limit the quantity of imported goods o Requiring licenses to restrict the number of legal importers Restricts local businesses from exporting to other countries INTERNATIONAL TRADE Rostow’s Development Model The Traditional Society: has not yet started a process of development. A traditional society 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. The preconditions for takeoff: development begins when an elite group initiates innovative economic activities. Under the influence of these Uneven resource distribution Market stagnation Increased dependence on MDCs Example INDIA FOUR ASIAN DRAGONS South Korea, Singapore, Taiwan, Hong Kong PETROLEUMRICH ARABIAN PENINSULA STATES well-educated leaders, the country starts to invest in new technology and infrastructure. These products will ultimately stimulate an increase in productivity. The 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. The Drive to Maturity: modern technology diffuses to a wide variety of industries, which tne experience rapid growth. Workers become more skilled and specialized. The Age of Mass Consumption: the economy shifts from production of heavy industry to consumer goods, such as motor vehicles and refrigerators. Saudi Arabia, Kuwait, Bahrain, Oman, United Arab Emirates (UAE) Loans The World Bank o 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 service projects o International Development Association (IDA): provides support to poor countries considered too risky to qualify for IBRD loans. International Monetary Fund (IMF) o Provides loans to countries experiencing blance0of-payments problems that threaten expansion of international trade. o Designed to help a country rebuild international reserves, stabilize currency exchange rates, and pay for imports without having to impose harsh trade restrictions or capital controls that could hamper the growth of world trade The Theory: Borrowing money for new roads and dams will make conditions more favorable for domestic and foreign businesses to open and expand Problem: many new infrastructure projects are expensive failures, and many LDCs have been unable to repay the interest on their loans. Structural Adjustment Program: before granting debt relief, and LDC is required to prepare a Policy Framework Paper (PFP) outlining a structural adjustment program, which includes economic goals, strategies for achieving the objectives, and external financing requirements.