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Economic Development and Transition

Chapter 18 explores levels of economic development worldwide, highlighting that half of the global population lives in poverty. It distinguishes between developed nations with higher economic well-being and Less Developed Countries (LDCs), which struggle with low economic indicators. Key measures of development include life expectancy, infant mortality, healthcare access, and GDP. Factors hindering development include rapid population growth, lack of production resources, and political instability. The chapter also discusses financing options like foreign investment, foreign aid, and the roles of the World Bank and IMF in supporting LDCs toward improved economic conditions.

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Economic Development and Transition

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  1. Economic Development and Transition Chapter 18

  2. Levels of Development Chapter 18, Section 1

  3. 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

  4. 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

  5. Measuring Development • Factors used in measuring development • Life expectancy • Infant mortality • Health care • Literacy • Labor force • Consumer goods • Infrastructure • Energy consumption • Per Capita GDP

  6. Issues of Development Chapter 18, Section 2

  7. 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

  8. Financing Development Chapter 18, Section 3

  9. 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

  10. 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

  11. International Monetary Fund (IMF) • Aids desperate countries through debt rescheduling and stabilization programs • Conditions are set by the IMF

  12. Transitions to Free Enterprise Chapter 18, Section 4

  13. Moving Towards a Market Economy • Privatization…sale and transfer of government owned businesses to individuals • Property rights need to be protected

  14. 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

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