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Economic Development
and Transition
Chapter 18
Section 1
Levels of Development
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Objectives:
*Understand what is meant by developed
nations and less developed nations.
*Identify the tools used to measure levels
of development.
*Describe the characteristics of developed
nations and less developed countries.
*Understand how levels of development
are ranked.
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Section Focus:
Nations throughout the world exhibit
varying levels of economic well-being.
Many tools are used to look at a nation’s
level of development?
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Half of the world’s population – live in
extreme poverty.
 The United Nations estimates that 1 billion
people live on less than $ 1.00/day.
 Concern over these startling statistics has
led to close examination of
the world’s economies.

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Social Scientists measure the economic
well-being of a nation in terms of its
level of development.
 Development is the process by which a
nation improves the economic,
political, and social well-being of its
people.
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Developed Nations and Less Developed Countries:
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Some nations enjoy a high standard of living.
Wealthy nations – United States, Australia, Canada,
New Zealand, Japan, and Western Europe called
developed nations.
Developed Nations are those nations with a higher
average level of material well-being.
Less Developed Countries (LDCs) are nations that
have low levels of material well-being.
LDC’s have the world’s poorest countries –
Bangladesh, Nepal, Albania, nations of Central and
South America, Mexico, Saudi Arabia, former Soviet
Union.
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
Less Developed Countries
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Development refers to a nation’s material
well-being.
 Level of development refers to the ability
of a nation to feed, clothe, and shelter
its people.
 It indicates how healthy people are, how
well they are educated, and how
productive they are.
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Measuring Development:
Life expectancy, diet, access to health care,
literacy, energy consumption, and other
factors are used to measure development.
 The primary measure of a country’s
development is the per capita Gross Domestic
Product (per capita GDP)
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
Per Capita GDP
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Gross Domestic Product is the total market
value of all the final goods and services
produced within an economy in a given year.
Per Capita GDP – is a nation’s GDP divided
by their total population.
Economists use Per Capita GDP because GDP is
not an accurate tool to compare living
standards.
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
For Example:
Australia
* GDP of $390 billion
* Enjoys a very high
standard of living
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India
* GDP of $ 380 billion
* is very poor
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What accounts for this difference?
 The answer is

population size
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Australia has a population of some 20
million people.
 India has a population of 1 billion people.
 This is the precise reason why Economist
use the per capita GDP to compare
levels of development.
 Australia’s per capita GDP is $ 20,650
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India’s per capita GDP is
$ 380
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This single figure shows that Australia is
more capable of meeting the basic
needs of their people, India is not able
to do this.
 Within every nation, some people are
wealthier than most, while others are
poorer than most.
 In many less developed countries, the gap
between rich and poor is especially
wide.

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Energy Consumption:
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Energy consumption is another way to look at
development.
The amount of fossil fuel, hydroelectricity, and
nuclear energy a nation uses depends on its
level of industrialization.
Industrialization – is the extensive
organization of an economy for the purpose
of manufacture.
Industrial processes generally require large
amounts of energy.
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High levels of energy use tend to indicate high
levels of industrial activity.
Developed nations in the world are highly
industrialized.
Nations with low levels of per capita energy
consumption tend to have little industry.
Most of the people in such nations are farmers
working with simple tools and few machines.
Most of the population are engaged in
subsistence farming – they are able to
raise only enough food to feed their families.
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Labor Force:
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If an economy has low industrialization, they
mainly a labor force of farmers.
If most of the people are working simply to
raise food for themselves, very few are
available to work in industry.
So, as a result, they have very few
opportunities to become specialized.
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
Consumer Goods:
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The quantity of consumer goods that a nation
produces per capita can also indicate its level
of development.
A large number of consumer goods in an
economy means that people have enough
money to meet their basic needs and still
have some left over for nonessential goods.
Economists look to see how many people have
televisions, automobiles, refrigerators,
washing machines, or telephones.
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Literacy:
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The more a country’s people attend school, the
higher its level of development.
The greater the number of people that can
read and write, the more productive a
population can be at both industrial and
agricultural jobs.
Literacy Rate – the proportion of the
population over age 15 that can read and
write.
A well-educated nation has a high literacy rate.
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Life Expectancy:
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Life Expectancy is the average expected life
span of an individual.
It indicates how an economy system supports
life and fends off death.
A population that is well nourished and
housed, as well as protected from disease,
will have a long life expectancy.
A population that has a poor diet and shelter
and that is exposed to poor sanitation and
disease will have a shorter life expectancy.
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Infant Mortality Rate:
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A country’s Infant Mortality Rate – indicates
the number of deaths that occur in the first
year of life per 1,000 births.
The United States has a IMR of 6.4
6.4 infants will die before they reach their first
birthday.
Not all regions of a country
have the same IMR
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Characteristics of Developed Nations:
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1. High per capita GDP
2. Majority of the population are neither very
rich nor very poor
3. A higher degree of economic and political
freedom
4. A high degree of consumer spending
5. Agricultural output is high, but very few
people work on farms
6. Advanced techniques in fertilizers,
pesticides, seed varieties, and heavy
machines
7. Most of the labor force is available to work in industry
and services.
8. Widespread use of technology in those countries
9. Nation is devoted to being healthy – long life expectancy
10. An urbanized area for most of the population.
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Infrastructure – the services and
facilities necessary for an economy to
function.
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i.e. Transportation and Communication
systems, roads, power plants, schools, and
banks
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Characteristics of Less Developed Countries:
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1.
2.
3.
4.
A very low per capita GDP
Low per capita energy consumption
Very few industries in the country
Many in the labor force work on their own farms
and grow only enough food to feed
themselves and their families
5. Unemployment rates are high – around 20%
6. Labor force is underemployed
7. They can not support themselves or their
families
8. Literacy rates are very low (like 35%)
9. Housing is very poor at best
10. Diet is poor, lack of access to health care, and high
infant mortality rates
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Levels of Development
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1. Primitive Equilibrium
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2. Transition
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Economy has no formal economic organization or
monetary system. It exits in equilibrium based
on tradition
Cultural traditions begin to crumble and people adopt
new living patterns
3. Takeoff
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New industries grow and profits are reinvested
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Levels of Development
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4. Semi-development
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Economy expands significantly and enters the
international market
5. Highly Developed
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Basic human needs are met easily. Economy is
focused on consumer goods and public services
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Newly Industrialized Countries (NICs)
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Less developed country that has shown significant
improvement in the measure of
development.
Newly industrialized countries include
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Mexico
Malaysia
Taiwan
Thailand
Brazil
South Korea
Singapore
Hong Kong
Most successful of those are …
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Hong Kong, Singapore, Thailand, South Korea, and
Taiwan – known as “the four Asian tigers”
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The World Bank is an international
organization devoted to assisting
development.
 It uses per capita GNP (Gross National
Product) to categorize nations as high
income, middle income, or low income.
 More money goes to low income countries

Economic Development and Transition
REVIEW:
1. What is development?
2. Why are developed nations sometimes
referred to as industrialized nations?
3. Why is per capita GDP a better measure of
development than GDP?
4. What role does infrastructure play in a
nation’s development?
5. List and describe three characteristics of
developed nations and three characteristics of
less developed countries.