4.1 Globalisation

They key drivers for economic development in recently developed countries

• Willingness to accept inward investment from multinationals

• More enterprising behaviour from local businesses

• More stable government

• Globalisation - easier access to export markets due to improved communication and transport

Enterprising behaviour

When individuals or businesses innovate, initiate or take calculated risks to grow or create a business.

Result of economic growth for businesses

• New export opportunities

• Offshoring production

• Increased domestic competition

New export opportunities (Result of econ growth for firms)

As developing countries see incomes rising, the UK may see more markets to export to.

As economies reach the latter stage of development, demand for services generally increase. Meaning UK exporters should target China right now.

Offshoring

Moving a business function to another country, generally in order to lower costs.

Offshoring production

Many UK manufacturers have closed their UK manufacturing facilities and opened them in developing countries (e.g Dyson moving to Malaysia)

The goal of this is to exploit lower production costs, to boost their profit margins, even if the transport costs increase as a result.

Increased domestic production

As countries develop, entrepreneurs that will have increased access to credit and capital, may create firms that are successful enough to export to developed countries like the UK.

This causes increased competition for UK businesses.

How economic growth impacts economic sectors

The primary sector will need less workers because machinery is more available (Tractors, drillers etc)

This leads to the secondary (manufacturing) sector having higher demand for workers, which is both a cause and effect of development.

This is because manufacturing jobs add more value than primary jobs, stimulating growth

Results of economic growth for individuals

• Rural to urban migration

• Increased need for managers, expanding the middle class

• Increased skill levels in the economy

• Creates increased opportunity to start up businesses (due to higher incomes there’ll be more demand)

Indicators of economic growth

• GDP per capita

• Literacy

• Health

• HDI (Human development index)

GDP per capita as an indicator of growth

This is a clear indicator if economic development.

If a person has a higher income, they will spend more, creating a circle

Literacy as an indicator of GDP

As an economy goes through economic development, literacy rates should increase dramatically.

A literate workforce will also be more productive, capable of performing more tasks that add more value to production, thus causing further economic development

More productive, skilled workers → more valuable products → higher income for businesses and workers → more money to invest → faster economic growth.

Health as an indicator of GDP

Levels of health should improve as an economy develops.

This can be measured through life expectancy.

Economic development should lead to healthier living.

HDI as an indicator of growth

This combines factors such as income, education and health to provide a well rounded picture of economic development