Economic Development and

Transition

Chapter 18 Section 1

Levels of Development

Economic Development and Transition

Objectives:*Understand what is meant by developed

nations and less developed nations.*Identify the tools used to measure levels

of development.*Describe the characteristics of developed

nations and less developed countries.*Understand how levels of development are ranked.

Economic Development and TransitionSection Focus:

Nations throughout the world exhibit varying levels of economic well-being. Many tools are used to look at a nation’s level of development?

Economic Development and Transition Half of the world’s population – live in

extreme poverty. The United Nations estimates that 1 billion

people live on less than $ 1.00/day. Concern over these startling statistics has

led to close examination of the world’s economies.

Economic Development and Transition Social Scientists measure the economic

well-being of a nation in terms of its level of development.

Development is the process by which a nation improves the economic,

political, and social well-being of its people.

Economic Development and Transition Developed Nations and Less Developed Countries:

Some nations enjoy a high standard of living. Wealthy nations – United States, Australia, Canada,

New Zealand, Japan, and Western Europe called developed nations.

Developed Nations are those nations with a higher average level of material well-being.

Less Developed Countries (LDCs) are nations that have low levels of material well-being.

LDC’s have the world’s poorest countries – Bangladesh, Nepal, Albania, nations of Central and

South America, Mexico, Saudi Arabia, former Soviet Union.

Economic Development and Transition Less Developed Countries

Economic Development and Transition Development refers to a nation’s material

well-being. Level of development refers to the ability

of a nation to feed, clothe, and shelter its people.

It indicates how healthy people are, how well they are educated, and how

productive they are.

Economic Development and Transition Measuring Development: Life expectancy, diet, access to health care,

literacy, energy consumption, and other factors are used to measure development. The primary measure of a country’s

development is the per capita Gross Domestic Product (per capita GDP)

Economic Development and Transition Per Capita GDP

Gross Domestic Product is the total market value of all the final goods and services produced within an economy in a given

year. Per Capita GDP – is a nation’s GDP divided

by their total population. Economists use Per Capita GDP because GDP is

not an accurate tool to compare living standards.

Economic Development and Transition For Example:

Australia

* GDP of $390 billion * Enjoys a very high

standard of living

Economic Development and Transition

India* GDP of $ 380 billion* is very poor

Economic Development and Transition What accounts for this difference? The answer is

population size

Economic Development and Transition Australia has a population of some 20

million people. India has a population of 1 billion people. This is the precise reason why Economist

use the per capita GDP to compare levels of development.

Australia’s per capita GDP is $ 20,650

India’s per capita GDP is $ 380

Economic Development and Transition This single figure shows that Australia is

more capable of meeting the basic needs of their people, India is not able to do this.

Within every nation, some people are wealthier than most, while others are poorer than most.

In many less developed countries, the gap between rich and poor is especially wide.

Economic Development and Transition Energy Consumption:

Energy consumption is another way to look at development.

The amount of fossil fuel, hydroelectricity, and nuclear energy a nation uses depends on

its level of industrialization. Industrialization – is the extensive

organization of an economy for the purpose of manufacture.

Industrial processes generally require large amounts of energy.

Economic Development and Transition High levels of energy use tend to indicate high

levels of industrial activity. Developed nations in the world are highly

industrialized. Nations with low levels of per capita energy

consumption tend to have little industry. Most of the people in such nations are farmers

working with simple tools and few machines. Most of the population are engaged in

subsistence farming – they are able to raise only enough food to feed their families.

Economic Development and Transition Labor Force:

If an economy has low industrialization, they mainly a labor force of farmers.

If most of the people are working simply to raise food for themselves, very few are available to work in industry.

So, as a result, they have very few opportunities to become specialized.

Economic Development and Transition Consumer Goods:

The quantity of consumer goods that a nation produces per capita can also indicate its level of development.

A large number of consumer goods in an economy means that people have enough money to meet their basic needs and still have some left over for nonessential goods.

Economists look to see how many people have televisions, automobiles, refrigerators, washing machines, or telephones.

Economic Development and Transition Literacy:

The more a country’s people attend school, the higher its level of development.

The greater the number of people that can read and write, the more productive a population can be at both industrial and

agricultural jobs. Literacy Rate – the proportion of the

population over age 15 that can read and write.

A well-educated nation has a high literacy rate.

Economic Development and Transition Life Expectancy:

Life Expectancy is the average expected life span of an individual.

It indicates how an economy system supports life and fends off death.

A population that is well nourished and housed, as well as protected from disease,will have a long life expectancy.

A population that has a poor diet and shelter and that is exposed to poor sanitation and disease will have a shorter life expectancy.

Economic Development and Transition Infant Mortality Rate:

A country’s Infant Mortality Rate – indicates the number of deaths that occur in the

first year of life per 1,000 births. The United States has a IMR of 6.4 6.4 infants will die before they reach their

first birthday. Not all regions of a country

have the same IMR

Economic Development and Transition Characteristics of Developed Nations:

1. High per capita GDP 2. Majority of the population are neither very

rich nor very poor 3. A higher degree of economic and political

freedom 4. A high degree of consumer spending 5. Agricultural output is high, but very few

people work on farms 6. Advanced techniques in fertilizers,

pesticides, seed varieties, and heavy machines

7. Most of the labor force is available to work in industry and services.

8. Widespread use of technology in those countries 9. Nation is devoted to being healthy – long life expectancy 10. An urbanized area for most of the population.

Economic Development and Transition Infrastructure – the services and

facilities necessary for an economy to function. i.e. Transportation and Communication

systems, roads, power plants, schools, and banks

Economic Development and Transition Characteristics of Less Developed Countries:

1. A very low per capita GDP 2. Low per capita energy consumption 3. Very few industries in the country 4. Many in the labor force work on their own farms

and grow only enough food to feed themselves and their families

5. Unemployment rates are high – around 20% 6. Labor force is underemployed 7. They can not support themselves or their

families 8. Literacy rates are very low (like 35%) 9. Housing is very poor at best 10. Diet is poor, lack of access to health care, and high

infant mortality rates

Economic Development and Transition Levels of Development

1. Primitive Equilibrium Economy has no formal economic organization or

monetary system. It exits in equilibrium based on tradition

2. Transition Cultural traditions begin to crumble and people adopt

new living patterns

3. Takeoff New industries grow and profits are reinvested

Economic Development and Transition Levels of Development

4. Semi-development Economy expands significantly and enters the

international market

5. Highly Developed Basic human needs are met easily. Economy is

focused on consumer goods and public services

Economic Development and Transition Newly Industrialized Countries (NICs)

Less developed country that has shown significant improvement in the measure of

development. Newly industrialized countries include

Mexico Brazil Malaysia South Korea Taiwan Singapore Thailand Hong Kong

Most successful of those are … Hong Kong, Singapore, Thailand, South Korea, and

Taiwan – known as “the four Asian tigers”

Economic Development and Transition The World Bank is an international

organization devoted to assisting development.

It uses per capita GNP (Gross National Product) to categorize nations as high income, middle income, or low income.

More money goes to low income countries

Economic Development and TransitionREVIEW:1. What is development?2. Why are developed nations sometimes

referred to as industrialized nations?3. Why is per capita GDP a better measure of

development than GDP?4. What role does infrastructure play in a

nation’s development?5. List and describe three characteristics of

developed nations and three characteristics of less developed countries.