Economic Development and Transition
Chapter 18
Levels of Development Developed Nations
– Northern countries– Industrial countries– First and Second World
Less Development Nations– Southern countries– Agricultural / Mixed Economy– Third and Fourth World
Measuring Development Life expectancy Diet Access to health care Literacy Energy consumption GDP Per capital GDP
Industrialization Subsistence
agriculture Labor force Consumer goods Infant mortality rate infrastructure
Characteristics of Development Countries
High per capita GDP Higher economic / political freedom Higher degree of consumer spending High agricultural output literacy
Characteristics of Less Developed Countries
Low per capita GDP Low levels of consumption Less economic / political freedom Low levels of agriculture output Less literacy
Levels of Development Primitive equilibrium Transition Takeoff Semi-development Highly development Newly Industrial Countries (NICs)
– Mexico, Brazil, Malaysia, Thailand, Singapore, Hong Kong, South Korea, Taiwan
Issues in Development
Rapid Population Growth Factors of Production Physical Capital Human Capital
– Health / Nutrition (malnutrition)– Education / Training– Brain drain
Issues in Development Political Factors
– Colonial dependency– Central planning– Government corruption– Political instability
Debt– Debt + interest– Structural adjustment program (SAP)
Financing Development
Investment– Internal financing– Foreign financing– Foreign direct investment (enterprises by
foreigners)– Foreign portfolio investment
Foreign Aid
Government to government aid NGO to governments 1947: Marshall Plan (Secretary of State
George C. Marshall)
International Institutions
World Bank: development projects International Monetary Fund: currency
stabilization; debt management United Nations Development Program:
dedicated to the elimination of poverty
Transition to Free Enterprise
Central Planning to Free Enterprise– Privatization– Protecting property rights– Work ethic
Transition in Russia
Communism in Russia 1917 - 1980s Glasnost and Perestroika
– Glasnost: policy of political openness– Perestroika:plan for restructuring the economy
• Oil industry• Freedom of the press• Multiparty system
Transition in China Great Leap Forward: 1958, Mao Cultural Revolution: 1960, Red Guards, 1976: Deng Xiaoping - more power to local
governments– Four Modernizations
• Improve agriculture• Industry• Science• technology
Industry China: light industry Economic zones
coastal areatax incentivesforeign companiesindigenous private companies
Patent violations -copyright lawsexpanding middle class
Three Gorges Dam
China / Russia /India
Growth of middle class Labor: skills, education, cost Demand for consumer goods Demand for resources
– Oil– Gas
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