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Economic Development
and Transition
Chapter 18
Levels of Development
Chapter 18, Section 1
Levels of Development
½ the world lives in poverty
 Economic well being is measured in
terms of development

• the process by which a nation improves
economic, political and social well being
of its people
Developed Nations and LDC’s
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Developed nations are nations with a
higher level of material well being
LDC’s or Less Developed Nations are
nations with low economic well being
• Mexico, Nepal, Central and Southern
Africa, Republics of the former Soviet
Union
Measuring Development

Factors used in measuring
development
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Life expectancy
Infant mortality
Health care
Literacy
Labor force
Consumer goods
Infrastructure
Energy consumption
Per Capita GDP
Issues of Development
Chapter 18, Section 2
Issues of Development

Population growth
• Countries are increasing population
without increasing their economy or
development

Lack Factors of Production
• Land, Physical Capital, Human Capital
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Brain Drain…skilled people moved to more
developed nations
Political Factors
• Corrupt governments, instability, debt
Financing Development
Chapter 18, Section 3
Developing Countries Need to
Raise Financing

Internal financing…savings and
investing from within…
• LDC’s don’t have a lot of people who
can do this.

Foreign investment
• Foreign direct…building in the
nation…done by MNC’s
• Foreign portfolio…investing in stocks
and bonds of foreign countries
Foreign Aid

Some nations give aid (not loans) to LDC’s
for varied reasons
• Political
• Economic
• Human compassion

World Bank
• Institution that raises money to distribute to
nations of need
• Coordinates economic development throughout
the world
International Monetary Fund (IMF)

Aids desperate countries through
debt rescheduling and stabilization
programs
• Conditions are set by the IMF
Transitions to Free
Enterprise
Chapter 18, Section 4
Moving Towards a Market
Economy
Privatization…sale and transfer of
government owned businesses to
individuals
 Property rights need to be protected

Transitions in Nations

Russia and Glasnost
• Policy of political openness and reform that
encouraged citizens to say what they wished
without persecution
• Perestroika…plan for transition from command
to free economy

China and the Great Leap Forward
• Plan for China to turn into an economic power
• All land was taken over by the government
• Huge disaster as there was no incentive

China now blends free markets and command ideals
for their economic plan