Economic Development in the Global Economy

Economically Less Developed Countries

According to the World Bank's classification, includes countries that have a per capita GNI below a particular level (which changes from year to year); some common characteristics include low levels of GDP per capita, high levels of poverty, large agricultural sectors and large urban informal sectors.

Economically More Developed Countries

According to the World Bank's classification system, includes countries that have a per capita GNI above a particular level (which changes from year to year); they generally have relatively high levels of GDP per capita, relatively low levels of poverty, small agricultural sectors, and large industrial and service sectors.

Informal Economy

That part of an urban economy that lies outside the formal economy, consisting of economic activities that are unregistered and legally unregulated.

Dual Economy

Arises when there are two different and opposing sets of circumstances that exist simultaneously, often found in economically less developed countries.

Poverty Cycle (Poverty Trap)

Arises when low incomes result in low (or zero) savings, permitting only low (or zero) investment in physical, human and natural capital, and therefore low productivity of labour and of land.

Millennium Development Goals

Eight development goals adopted by the Millennium Declaration of 2000, consisting of 18 targets to be achieved by the year 2015.

GNI per Capita

Gross national income divided by the number of people in the population; is an indicator of the amount of income in an economy per person in the population.

GDP per Capita

Gross domestic product divided by the number of people in the population; is an indicator of the amount of domestic output per person in the population.

Composite Indicators

A summary measure of more than one indicator, often used to measure economic development.

Human Development Index (HDI)

A composite indicator of development which includes indicators that measure three dimensions of development: income per capita, levels of health and educational attainment.

Multidimensional Poverty Index (MPI)

A composite indicator that measures poverty in three dimensions: health, education and living standards, each of which reflects deprivations.

Appropriate Technology

Technologies that are well-suited to a country's particular economic, geographical, ecological and climate conditions.

Labour-intensive technologies

Technologies that require a large amount of labor as opposed to capital.

Micro-Credit

A programme to provide credit (loans) in small amounts to people who do not ordinarily have access to credit.

Micro-enterprises

Very small businesses that are financed by micro-credit loans.

Empowerment

Creation of conditions for equality of opportunities; involves increasing the political, social and economic power of individuals or groups.

Import Substitution

A growth and trade strategy where a country manufactures simple consumer goods for the domestic market to promote its domestic industry.

Export Promotion

A growth and trade strategy where a country attempts to achieve economic growth by expanding its exports.

Trade Liberalization

The policy of liberalizing international trade by eliminating trade protection and barriers to trade.

Diversification

Change involving greater variety, specifically increasing the variety of goods and services produced and/or exported by a country.

Capital Liberalization

The free movement of financial capital in and out of a country, occurring through the elimination of exchange controls.

Foreign Direct Investment (FDI)

Investment by firms based in one country in productive activities in another country.

Multinational Corporation (MNC)

A firm involved in foreign direct investment that undertakes productive investments in another country.

Foreign Aid

Concessional financial flows from the developed world to economically less developed countries, including loans and grants.

Concessional Loans

Loans offered as part of foreign aid, made on concessional terms with lower interest rates and longer repayment periods.

Remittances

A transfer of money from one country to another, typically by foreign workers sending money to their home country.

Grants

A type of foreign aid consisting of funds that do not have to be repaid.

Humanitarian Aid

Foreign aid extended in emergencies caused by conflicts or natural disasters, intended to save lives and provide basic necessities.

Development Aid

Foreign aid intended to help economically less developed countries, involving project aid, programme aid, technical assistance, or debt relief.

Project Aid

Foreign aid involving support for specific projects, such as building schools, clinics, or irrigation systems.

Programme Aid

Foreign aid involving financial support to sectors, such as education, health care, agriculture, urban development, the financial sector (credit, banking, insurance), the environment, or others.

Official Development Assistance (ODA)

The more important part of foreign aid, referring to foreign aid that is offered by countries or by international organizations composed of a number of countries (it does not include aid offered by non-governmental organizations).

Tied Aid

The practice whereby donors make the recipients of foreign aid spend a portion of the borrowed funds on the purchase of goods and services from the donor country. It occurs only in the context of bilateral (not multilateral) aid.

Non-Governmental Organizations (NGOs)

Non-profit organizations that provide a very wide range of services and humanitarian functions; in developing countries they provide foreign aid, all of which takes the form of grants (there are no loans involved).

Multilateral Development Assistance

Lending to developing countries for the purpose of assisting their development on non-concessional terms (market rates of interest and repayment periods) by multilateral organizations, i.e. organizations composed of many countries, including development banks such as the World Bank, and the International Monetary Fund.

World Bank

A development assistance organization, composed of 185 member countries which are its joint owners, that extends long-term credit (loans) to developing country governments for the purpose of promoting economic development and structural change.

Conditional Assistance

Refers to development assistance provided by bilateral or multilateral development organizations, which is extended to countries on condition that they satisfy certain requirements, usually requiring that they adopt particular policies.

International Monetary Fund (IMF)

An international financial institution composed of 185 member countries, whose purpose is to make short-term loans to governments on commercial terms (i.e. non-concessional) in order to stabilize exchange rates, alleviate balance of payments difficulties and help countries meet their foreign debt obligations.

Foreign Debt

Refers to external debt, meaning the total amount of debt (public and private) incurred by borrowing from foreign creditors (i.e. lenders).

Market-Oriented Policies

A policy in which government intervention is limited, economic decisions are made mainly by the private decision-makers (firms and consumers) and the market has significant freedom to determine resource allocation.

Interventionist Policies

Any policy based on government intervention in the market.

Social Safety Net

A system of government transfers of cash or goods to vulnerable groups, undertaken to ensure that these groups do not fall below a socially acceptable minimum standard of living.

Governance

Refers to the way of governing, and the exercise of power in the management of an economy's economic and social resources, in order to achieve particular objectives such as economic growth and development.