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- Developed country: MDC, referred to UN as very high developed country that has
progressed further along the development continuum
- Developing country: LDC, made progress toward development but less than developed
countries
- HUMAN development Index (HDI): measure the level of development of every country
o Three factors: decent standard of living
o Long healthy life
o Access to knowledge
- World is divided into two developed regions and seven developing regions
o Sub-Saharan adrica and south asia have lowest scores
o Japan, south korea have much higher development than rest of asia
o South pacific is less populous compared to the nine regions, australia and new
Zealand are developed but others still developing
 o Russia used to be classified as developed country but bc of limited prohress in
development both under and since communism, UN now classidies Russia as high
developing country

GNI/gross national income: value of the output of goods and services produced in a country in a
year, including money that leaves and enters the country
- Monetary worth of what is produced within a country plus income received from
investments outside the country minus income payments to other countries.
- GDP+Income from abroad-Income to other countire=GNI
- This focuses on income not production like GDP or GNP
- Per capita GNI measures average wealth, not distribution of wealth
PPP/purchasing power parity: adjustment made to GNI to account for differences among
countries in the cost of goods
- For example: resident of country A has the same income as resident of country but must
pay more for a big mac or Starbucks, the resident of country b is better off
GDP/gross domestic product: value of the output of goods and services produced in a country in
a year, it does not account for money that leaves and enters the country

Economic structure:
- Primary: activities that extract materials from earth through agriculture and sometimes by
mining, fishing and forestry
 o Share of GNI accounted by primary decreased in developing but high in
developed (low share in developed countries indicated farmer produce enough
food for the rest of society)
- Secondary: manufactures that process, transform, and assemble raw materials into useful
products as well as industries that fabricate manufactured goods into finished consumer
goods
o The share of GNI accounted for decreased sharply in developed countries and
now less than in developing countries
- Tertiary: provision of goods and services to people in exchange for payment, such as
retailing, banking, law, education, gov
o High in developed, now growing in developing

Productivity
- Productivity: value of a particular product compared to amount of labor needed to make it
o Measured by the value added per capita
- Value added: in manufacturing is the gross value of a product minus the costs of raw
materials and energy

Access to knowledge
- In developed countries, adults have average of 11.5 years in school compared to only 4.7
years in south Asia and sub Saharan Africa
- Pupil/teacher ratio: number of enrolled students divided by the number of teachers; the
fewer pupils a teacher has, the more likely that each student will receive effective
instruction
- Literacy rate: percentage of a country’s people who can read and write

Inequality adjusted HDI

- Inequality adjusted human developed index (IHDI) modifies the HDI to account for
inequality within a country, under perfect equality, HDI and IHDI are the same
- Lowest scores are in sub-Saharan Africa and south asia

Gender related development index: measures the gender gap in the level of achievement for the
three dimensions of the human development index : income, education, life expectancy
Gender inequality index: measures gender gap in level of achievement in three dimensions;
reproductive health, empowerment, and the labor market
Female labor force participation rate: percentage of women holding full time jobs outside the
home, compared to 77 percent of men
- Women in developed countries are more likely than women in developing countries to
hold full time jobs outside the home
Maternal mortality rate: number of women who die giving birth per 100,000 births
Adolescent fertility rate: number of births per 1000 women ages 15-19
- Rate is 19 births per 1000 women ages 15-19 in developed countries and 53 in
developing countries
- The UN includes reproductive health as a contributor to GII because in countries where
effective control of reproduction in universal, women have fewer children and maternal
and child health improved

HDI and gender inequality

- HDI is measure of country’s level of development with a higher score indicating higher
level of development
- GII measures extent of a country’s gender equality, with a higher score indicating a
higher level on inequality

Core and periphery

- Relationship between developed countries and developing often described as north south
split
o Most developed countries are north of equator and developed are in south
- According to Wallerstein’s world systems theory, in an increasingly unified world
economy, developed countries form inner core area, whereas developing occupy
peripheral locations
- Developing countries in the periphery have les access to world centers of consumption,
communications, wealth, power, which are all clustered in the core

Two paths to development

- Developing countries face two fundamental obstacles in trying to encourage more rapid
development
 o Adopting policies that successfully promote development
o Finding funds to pay for development

1. self sufficiency path

In this model, countries encourage domestic production of goods, discourage foreign ownership
of businesses and resources and protect their businesses from international competition
- Barriers limit import of goods from other places
o High taxes (tariffs) on imported goods to make them more expensive than
domestic goods
o Fixing quotas to limit quantity of imported goods
o Requiring licenses in order to restrict the number of legal importers
- Fledging business are nursed to success by being isolated from competition with large
international corporations, such as insulation from the potentially adverse impacts of
decisions made by businesses and governments in developed countries encourages
country’s fragile businesses to achieve independence
- Investment spread equally as possible across all sectors of a country’s economy and all
regions
- Incomes in the countryside keep pace with those in the city and reducing poverty takes
precedence over encouraging a few to become wealthy consumer
CASE STUDY: India
Gained independence from Britain in 1947, leading example of self-sufficiency strategy; policies
including limiting foreign companies from importing into India and exercising strong control
over companies operating in India
- Foreign companies had to secure a license to import goods
- Heavy taxes
- Indian money couldn't convert to currencies

International trade path

1. Rostow model: pioneering advocate of the international trade approach was WW Rostow,
who in 1950 proposed five stage model of development； each country is in one of the
five stages of development
o Traditional society : not started development yet, contains high percent of people
engaged in agriculture and higher percent of national wealth allocated to
nonproductive activities, such as military and religion
o Preconditions for takeoff : elite group initiates innovative economic activities,
under influence of leaders country invests in tech and infrastructure
 o Takeoff: rapid growth generated in limited number of economic activities, such as
textiles, food products (these takeoff industries achieve technical advances and
become productive but other sectors of economy remain dominated by traditional
practices)
o Drive to maturity: modern tech, workers more skilled and specialized
o Age of mass consumption: economy shifts from production of heavy industry,
such as steel and energy to consumer goods like motor and fridge

International trade example

1. Four Asian dragons: Hong Kong, Singapore, South Korea, Taiwan
These have traditionally been economic trade points in Asia and act as economic centers.
2. Petroleum rich Arabian peninsula states

World trade organization

- Works to reduce barriers to international trade in two ways
 1. WTO, countries negotiate reduction or elimination of international trade restrictions on
manufactured goods such as government subsidies for exports, quotas for imports, tariffs
on both imports and exports
2. Reduced or eliminated restrictions on international movement of money by banks,
corporations
3. Enforce agreements

CRITICS:
Protesters routinely gather in the streets outside high-level meetings of the
- Progressive critics charge that the WTO is antidemocratic because decisions made behind
closed doors promote the interests of large corporations rather than poor people
- Conservatives charge that WTO compromises power and sovereignty of individual
countries because it can order changes in taxes and laws that it considers unfair trading
practices

Foreign direct investment

- Investment made by a foreign company in the economy of another country
- Investment deosnt flow equally around the world, 1/3 of FDI went to developing in 2013
- Major sources of FDI are transnational corporations that invest and operate in countries
other than the one in which the company headquarters are located

Loans
World bank:
- Includes international bank for reconstruction and development and the international
development association
- Provides loans to countries to reform public admintration and legal insitutions
- IBRD lends money raised from sales of bonds to private investors, IDA lends money
from government contributioins
International Monetary Fund
- Provides loans to countries experiencing balance of payments problems that threaten
expansion of international trade
 - Developing countries borrow money to build new infrastrcutre, such as hydroelectric
dams, electric transmission lines, flood protection systems, water supplies, roads, hotels

- The theory is that new infrastructure will make conditions more favorable for domestic
and foreign businesses to open. After all, no business wants to be located in a place that
lacks paved roads, running water, and electricity. In principle, new or expanded
businesses are attracted to an area because improved infrastructure will contribute
additional taxes that the developing country will use in part to repay the loans and in part
to improve its citizens' living conditions
- In reality, the World Bank itself has judged half of the projects it has funded in Africa to
be failures.
- Common reasons include the following:
o Projects don't function as intended because of faulty engineering.
o Recipient nations squander or spend aid on. armaments, or the aid is stolen.
o New infrastructure does n o t attract other investment.
- Some countries have been unable to repay the interest on their loans, let alone the
principal. Debt actually exceeds annual income in a number of countries. When countries
cannot repay their debts, financial institutions in developed countries refuse to make
- further loans, so construction of needed infrastructure stops. The inability of many
countries to repay loans also damages the financial stability of banks in developed
countries.

Stimulus or austery
- stimulus strategy: proponent of stimulus argue that during downturn, gov should spend
money than they collect in taxes
- austery: gov should sharply reduce taxes so people and businesses can revive the
economy
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