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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 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 • • • • • • • • • 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 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