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Development Key Issue 1: Why Does Development Vary Among Countries? Created by the United Nations Recognizes that a country’s level of development is a function of economic, social, and demographic factors Economic Factor = GDP per capita Social Factors = literacy rate and amount of education Demographic factor = life expectancy Human Development Index (HDI) Highest possible = 1.0 (100%) Highest – Norway .963 in 2005 Lowest – Niger .281 in 2005 The U.S. has never been first, but is usually in the top dozen The lowest dozen are usually in subSaharan Africa HDI rankings HDI rankings GDP per capita Types of jobs Productivity Raw materials Consumer goods Economic Indicators of Development On average, workers in PED countries make $15/hour compared to $2/hour in PINGs PEDs usually mandate a minimum wage Gross Domestic Product – the value of the total output of goods and services produced in a country GDP divided by population measures the amount that an individual makes toward generating a country’s wealth in a year Gross Domestic Product (GDP) Per Capita ◦ ◦ Gross National Product (GNP) – similar to GDP, but it includes income people earn abroad Annual GDP per capita average (2005): $27,000 in PEDs $4,000 in PINGs The Gap is widening! Also, per capita GDP measures average wealth, not distribution GDP Per Capita cont… Primary – agriculture, extract materials directly from the earth (fishing, mining,etc…) Secondary – manufacturers that transform raw materials into useful products Tertiary – involves the provision of goods and services to people in exchange for payment (education, government) Types of Jobs The distribution of the types of jobs varies between PEDs and PINGs Agriculture: ◦ At least 60% of people in PINGs work in agriculture ◦ The high number means that most are subsistence farmers ◦ Only 5% in PEDs Within PEDs, the primary and secondary sectors have decreased, while tertiary has increased Productivity = the value of a particular product compared to the amount of labor needed to make it Productivity can be measured by the value added per worker In manufacturing, P = the value of the product – the costs raw materials and energy Productivity The value added per manufacturing worker: ◦ ◦ ◦ ◦ $80,000 in the U.S. $70,000 in Japan $1000 in China $500 in India Why the differences? ◦ Workers in PEDs are more productive than in PINGs because workers in PEDs have access to more machines and equipment and are therefore able to produce more with less effort. Productivity cont… Raw materials and energy sources are essential to development! The U.S. and USSR had them in the Cold War In the 19th century, European countries established colonies as they ran short of raw materials at home Raw Materials Part of the wealth generated in PEDs goes towards buying essentials (food, clothing, shelter) The rest of our wealth goes towards consumer goods and services (cars, phones, entertainment, computers) The wealth spent on nonessentials helps to expand manufacturing and wealth in the country Consumer Goods Cars per 1000 people (2002) Where did Africa go? Three particular items: motor vehicles, telephones, and TV sets In PEDs, the ratio is approaching 1:1 (one car per person, etc…) In PINGs, these products do not play a role in the daily lives of most people Consumer Goods as a Measure of Development PEDs – wealth is used for schools, hospitals, and welfare services This means that the people are better educated, healthier, and more prepared for hardships What does this mean for the economy? ◦ The population can be even more economically productive Social Indicators of Development The higher level of Development: the better the quantity and quality of education One measure: The number of school years attended ◦ PEDs – about 10 years ◦ PINGs – a couple of years The measure of the quality of education ◦ Student teacher ratio ◦ Literacy rate Education and Literacy When people get sick – PEDs have the wealth and resources to care for them In many PEDs, health care is a public service Also, PEDs often care for people who are unable to work Health and Welfare Life Expectancy Infant Mortality Rate Natural Increase Rate Crude Birth Rate Demographic Indicators of Development Life expectancy = the number of years a newborn infant can expect to live at current mortality levels In PEDs, life expectancy is in the mid-70s In PINGs, life expectancy is in the mid40s Life Expectancy Infant mortality rate = the death rate during the first year of life In PEDs, 99.5% live In PINGs, 94% live ◦ Babies die from malnutrition, lack of medicine, or poor medical practices resulting from a lack of education Infant Mortality Rate NIR = averages 1.5% in PINGs NIR = less than .1% in PEDs Higher NIR strains a country’s ability to provide schools, hospitals, jobs, and other services Natural Increase Rate Natural Increase Rate PINGs have higher NIR because they have higher crude birth rates Women in PEDs choose to have fewer children for economic and social reasons, and they have access to birth control Crude Birth Rate