Download 13 Economic Development and Regeneration

13 Economic
Development and
Regeneration
© John Tribe
© John Tribe
Learning outcomes
• By studying this section students will be
able to:
–
–
–
–
define and explain economic growth
review critically the concept of economic growth
understand the determinants of economic growth
evaluate appropriate growth strategies for developed
and developing countries
– evaluate the role of the sector in regeneration
strategies
– evaluate the contribution of the sector to growth
© John Tribe
Meaning and measurement of
economic growth
• Economic growth is defined as the
increase in real output per capita of a
country.
• The most commonly used measure of
output is GNP.
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Growth Rates 1990 – 2001
(average % annual change in GNP)
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GNP per capita (1998, $)
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Problems of measurement
• First there are the problems associated with collecting
national income data.
• Second some apparent changes in growth may in fact
stem from currency movements against the dollar.
• Third, over a period of time the labour force may work
fewer hours in a week.
• Fourth, GNP per capita figures are an average. They
may disguise the fact that there are large differences in
incomes of the population.
• Finally, economic activity which contributes to GNP has
some unwanted side-effects in the form of pollution.
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The causes of economic growth
• Land
• Labour
– It is the quality of the labour force that is important in
increasing productivity
• Capital
– Investment in new plant, machines and other capital
enables labour productivity and GNP to rise.
• Technology
– Improved technology can increase growth by
reducing production costs and creating new
products for the market.
© John Tribe
Beijing, China, 1990
• Lack of capital
combined with large
population means that
labour force has low
productivity
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Promoting growth
– Interventionists believe the government should play a
key role in funding appropriate education and training,
R&D and investing in projects and infrastructure.
– Free marketeers advocate market liberalization and
‘supply side’ policies, e.g:
• reducing government expenditure to release resources for
the private sector
• reducing taxes to increase incentives
• reducing trade union power to encourage flexible labour
markets
• reducing welfare payments to encourage individual
enterprise
• encouraging risk and entrepreneurship and privatisation
• encouraging competition through deregulation
• reducing red tape
© John Tribe
Economic growth in developing
countries
• Stages of development
– Advanced Economies
– Countries in Transition
– Developing Countries
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Advanced Economies
• High income per head
• Highly formalised
markets
• Eg souvenir shops:
– Top picture in Capri,
Italy
– Bottom picture in
Nepal
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Countries in Transition
• Prague, Czech
Republic in transition
from communist to
market economy
• Considerable
investment in
increasing capacity at
Prague airport
• Importance of tourism
to prosperity of Prague
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Developing Countries
• Zimbabwe, 1998
• Subsistence
agriculture
• Low
mechanisation
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Characteristics
• The low standards of living enjoyed by
developing countries (DCs) are
characterized by low per capita GNP and
by a range of other indicators. These
include
– high levels of mortality
– low levels of literacy, medical care and food
consumption.
© John Tribe
Barriers to Growth
• high population growth
• low incomes: This leads to low
savings, leading to low
investment, leading to low
incomes (low rate of capital
formation)
• an undeveloped financial
sector.
• absence of welfare system:
This can lead to over
population where children are
seen as a financial insurance
for old age
• low levels of training and
education:
• existence of a large
subsistence sector: This can
mean that taxation is difficult.
• few resources
• dependence on raw material
exports
• employment centred on the
agricultural sector of economy
• traditional (nonentrepreneurial) culture
• foreign currency shortages
• poor terms of trade (exports
cheap, imports expensive)
• international debt
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Main sources of investment funds
• domestic savings (but these are often low
because of low incomes)
• government investment funded through
taxes or borrowing (but governments often
have a low tax base because of low
incomes and subsistence economies and
high foreign debt repayments
• private foreign investment
• overseas aid
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Strategies for development
• import substitution (producing goods that are
currently imported)
• export-led growth (producing goods and
services where a local cost or other advantage
can be established) – leisure and tourism can be
important elements in this strategy
• population control
• education and training projects
• infrastructure projects
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Export-led growth
• Tourist arrivals
to Koh Phi Phi,
Thailand
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International Tourism
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Regeneration
• Regeneration is the term used to describe
the process of economic redevelopment
generally in an area that has suffered
decline because of structural changes in
the economy.
– Urban Regeneration
– Rural Regeneration
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Local
Economic
Decline
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Rural regeneration
• Gites de France:
Bringing tourism to
rural areas of France
suffering from
depopulation
• Rural Diversification
in Finland: A farmer
provides boat trips for
tourists.
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Review of key terms 1
• Economic growth =
– the increase in real output per capita.
• Per capita =
– per person.
• Net investment =
– gross investment – depreciation.
• Productivity =
– output per employee.
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Review of key terms 2
• DC =
– developing country.
• Import substitution =
– producing goods that are currently imported.
• Infrastructure =
– social capital such as roads and railways.
• Joint venture =
– overseas and domestic investment
partnership.
© John Tribe
13 Economic
Development and
Regeneration:
The End
© John Tribe