Economic Development Notes

Economic Development

  • Definition: Economic development is the advancement of a country through economic and technological progress, improvements in quality of life, education, income, human rights, and living conditions.

Measuring Development

  • World Bank Classification:
    • Low Income Countries (LICs): 30 of the world's poorest countries with poor quality of life, inadequate services, and limited opportunities. Primarily in Africa and the Middle East.
    • Newly Emerging Economies (NEEs): Countries experiencing rapid economic growth and industrial development, leading to rising incomes and a reasonable standard of living. Examples: Brazil, India, China.
    • High Income Countries (HICs): 80 countries with a good standard of living, high incomes, efficient industries, and a large service sector. Includes Western Europe, North America, and Oceania.

Economic and Social Measures of Development

  • Economic Indicators:
    • Gross National Income (GNI)
  • Social Indicators:
    • Birth rate/death rate
    • Infant mortality
    • Life expectancy
    • People per doctor
    • Literacy rates
    • Access to safe water
  • Composite Measure:
    • Human Development Index (HDI): Combines life expectancy, income, and education data.

Limitations of GNI

  • GNI is an average that can be skewed by a few wealthy individuals.
  • Excludes the informal sector.
  • Income data can be unreliable due to dishonesty.

Birth Rate vs. Death Rate as a Measure of Development

  • Death rates can be higher in HICs due to a larger elderly population, not necessarily reflecting poor development.
  • In LICs, many deaths are unrecorded, especially infant deaths.

Human Development Index (HDI)

  • Most widely used measure of development because it combines social and economic indicators.

Demographic Transition Model (DTM)

  • Definition: A graph plotting changes in birth rates and death rates over time, showing population growth.
  • Migration is not reflected in the DTM.
  • Countries progress through the stages of the model as they develop.

DTM Stages

  • Stage 1: High birth rate and death rate
    • Applies to tribal groups untouched by civilization
  • Stage 2: High birth rate, falling death rate
    • Applies to most LICs
  • Stage 3: Falling birth rate, falling death rate
    • Applies to most NEEs
  • Stage 4: Low birth and death rate
    • Applies to most HICs
  • Stage 5: Low birth rate and even lower death rate

Causes of Uneven Development

  • Physical Causes:
    • Landlocked location
    • Weather & climate
    • Relief
    • Water shortages
    • Tropical environments prone to pests and diseases
  • Economic Causes:
    • Poverty reduces investment in infrastructure
    • Trade: LICs trade low-value primary goods (raw materials)
  • Historical Causes:
    • Colonialism

Consequences of Uneven Development

  • Disparities in Wealth: Unevenly distributed globally. North America holds 35% of global wealth with 5% of the population, while Africa holds 1% with 12% of the population.
  • Disparities in Health: LICs have poor healthcare, high infant mortality, and low life expectancy. 40% of deaths are in children under 15, compared to 1% in HICs. HICs mainly see deaths from chronic diseases (cancer, heart disease), while LICs face infectious diseases (TB, HIV/AIDS, Malaria).
  • International Migration:
    • Inequalities lead to migration. In 2018, 260 million people lived in a country where they were not born.
    • Economic Migrants: Move voluntarily for better employment prospects.
    • Refugees: Forced to move due to conflict or disaster.

Strategies to Reduce the Development Gap

  • Investment: From TNCs, World Bank, and HICs to improve infrastructure and services, providing employment and increasing income. Example: China invested in HEP for Madagascar.
  • Industrial Development: Investment in manufacturing provides employment and generates income (multiplier effect). Example: Manufacture of Proton car in Malaysia.
  • Aid: Financial support from countries and international organizations. Short-term (disaster relief) or long-term (development support). Example: UK aid supports girls' education in Nigeria.
  • Intermediate Technology: Sustainable technology for local development projects in agriculture, water, and health. Example: Small dam to improve water supply in Adis Nifas, Ethiopia.
  • Fairtrade: Promotes fair wages for farmers in LICs and invests in local community projects. Example: Coffee farmers in Uganda investing in bean processing technologies.
  • Debt Relief: Cancelling debts of the poorest countries by the IMF so the money saved can be used on development projects.
  • Microfinance Loans: Small-scale financial support for individuals and community groups to start businesses. Example: Grameen Bank, Bangladesh lending to women to buy mobile phones to improve their market selling prices.
  • Tourism: Valuable source of foreign exchange.

Tourism in Jamaica (Case Study)

  • Jamaica: An LIC promoting tourism due to:
    • Tropical climate
    • Sandy beaches
    • Rich cultural heritage
    • Excellent air and water communications
    • Wildlife
  • Benefits:
    • Contributes to 34% of GDP (2018)
    • Income exceeds 2billion2 billion per annum
    • 200,000 people employed in tourism
    • Multiplier effect on the economy
    • Improved infrastructure
    • Improved quality of life in tourist areas
    • Environmental benefits through landscaping and nature parks

Economic Development in Nigeria

  • Location: West Africa, north of the Equator, bordered by Benin, Niger, Chad, and Cameroon.
  • Climate: Tropical rainforest to the south, desert to the north, tropical savanna in the center.
  • 3 times the size of the UK and most populous country in Africa with 200 million people.
  • Economic growth is largely based on oil, transforming it from an LIC to an NEE.
  • Global Importance:
    • World’s 27th largest economy
    • Ranked 13th in population size
    • World’s 12th largest oil producer
    • Lagos: A thriving world city with a strong economic and financial base
    • Important role in global peacekeeping
  • Regional Importance:
    • Africa’s fastest-growing economy with the highest GNP
    • Third-largest manufacturing sector in Africa
    • Highest agricultural output in Africa with the highest number of cattle (20.7 million)
    • Indicator of the health of the entire African continent
  • Political Context:
    • Exploited by European superpowers, colonized by the UK; achieved independence in 1960
    • Experienced political instability from 1967-1970 (Biafran civil war)
    • Abuja became the capital in 1991
    • Political stability since 1999 has encouraged investment from China, South Africa
  • Social Context:
    • Multi-cultural, multi-faith society with many tribes
    • Regional conflicts and power struggles
    • Rise of Boko Haram has caused conflict & hindered development
  • Cultural Context:
    • Rich and varied artistic culture, Nollywood film industry
    • Successful Nigerian football team
  • Environmental Context:
    • Tropical rainforest in the south (cocoa, rubber, palm oil)
    • Savanna grasslands further north (millet, cotton, groundnuts)
    • Jos Plateau uplands allow for more profitable farming
    • Desert to the far north with nomadic cattle grazing
  • Economic Structure:
    • Previously dominated by agriculture
    • Rapid industrialization means that now over 50% of the country’s GDP now comes from manufacturing

Changes in Nigeria's Economic Structure

  • Increased mechanization has reduced employment in agriculture.
  • Political stability has led to a rapid rise in manufacturing, encouraged by a large, cheap workforce and a huge market for goods.
  • Growth in services as people become more affluent.
  • Discovery of oil and gas in the Niger Delta in the 1950s has fuelled the industrial revolution.

Impact of Manufacturing on Economic Growth

  • Manufacturing industry has had a ‘multiplier effect’ on economic growth.

Transnational Corporations (TNCs) in Nigeria

  • TNCs play an important role in Nigeria’s economic growth.
  • They invest huge amounts of money and expertise while benefiting from tax incentives, cheap labor, and large internal markets.
  • TNCs within Nigeria have good access to other African markets.
  • Currently, there are 40 TNCs operating within Nigeria, mostly headquartered in Europe or the USA. Asian TNCs are increasingly investing.
  • Advantages of TNCs:
    • Provide employment, training, and skills
    • Introduce modern technology
    • Invest in the local area improving services and infrastructure
    • Government benefits from taxes
  • Disadvantages of TNCs:
    • Exploit the low-wage economy and often avoid paying taxes
    • Poor working conditions
    • Cause environmental damage
    • Higher-paid management jobs are often reserved for foreign nationals
    • Profits are leaked abroad

Case Study: Shell in Nigeria

  • Oil and gas discovered in the Niger Delta in the 1950s.
  • Exploitation depended on investment and expertise of TNCs, such as Royal Dutch Shell.
  • In the 1970s, TNCs invested heavily in oil and gas exploration, constructing oil and gas platforms, laying pipelines, and constructing oil and gas terminals.
    • Advantages:
      • Created 65,000 jobs
      • Raised incomes
      • Contributed to the growth of the Nigerian economy
      • Many Nigerian companies won contracts with the TNCs due to their operation.
    • Disadvantages:
      • Crude oil is refined overseas where most of the profit is generated
      • Oil spills have damaged the fragile deltaic environment (e.g., Bodo)
      • Toxic flares have increased air pollution.

Nigeria’s Political and Trading Relationships

  • Transition from LIC to NEE has changed Nigeria’s political position.

  • Nigeria has become a member of the Commonwealth.

  • Plays a lead role in Africa with regards to economic planning through the African Union and is involved in peacekeeping as part of the United Nations

  • Growing links with China as it has benefitted from 12billion12 billion of Chinese investment with the construction of a 14,000km railway.

  • Trading Relationships:

    • Imports: Refined petroleum products from the EU/USA; cars from Brazil; mobile phones from China.
    • Exports: 50% of exports are to the EU including crude oil, natural gas, rubber, cotton and cocoa. Most of Nigeria’s crude oil is exported to India, China, Japan and South Korea. 30% of Nigeria’s cotton is exported to Australia and 15% to Indonesia. Cocoa is exported for processing to Barbados.
    • Nigeria belongs to several trading groups including: Economic Community of West African States (ECOWAS), Organisation of Petroleum Exporting Countries (OPEC)

Aid to Nigeria

  • Despite economic growth, poverty is common.
  • Infant mortality rates are high, and life expectancy is low, especially in northeast Nigeria.
  • About 60 million Nigerians live below the poverty line.
  • Nigeria receives about 4% of the total aid given to African countries.
  • Aid comes from organizations such as the World Bank, the EU and UNICEF as well as countries like the USA, the UK and Germany. In 2019, the UK gave £258 million in aid

Impact of International Aid on Nigeria

  • Aid has benefited many people through community-based projects:
    • Aid from the UK pays for education programs which promote the education of girls in Nigeria
    • Aid from the USA helps to educate and protect people against AIDS/HIV
    • Anti-mosquito nets provided by the organization ‘Nets for Life’ help to eradicate malaria in areas where this is problematic.
    • The Aduwan Health Centre in northern Nigeria, funded by Action Aid and the World Bank, provides vaccinations for mothers and babies

Consequences of Economic Development in Nigeria

  • Social Impacts:
    • Nigeria’s HDI has increased since 2005 from below 0.47 to 0.539 in 2019,
    • Life expectancy has increased from 45.6 to 54
    • Access to safe water has increased from 46% to 70%
    • Expected years in schooling has increased from 6.7 to 10 years
    • Over 87% of Nigerian’s now have mobile phone subscriptions and 47% have internet access.
      Note: 40% of Nigerians still live in poverty and government corruption needs to be addressed
  • Environmental Impacts:
    • Mining and oil extraction: this has resulted in serious incidents of pollution, with oil spills and fires in the Niger Delta causing damage to aquatic ecosystems and toxic fumes being released into the atmosphere e.g. two massive spills in 2008/9 devastated 20km² of natural swamps close to the town of Bodo.
      Shell agreed to pay £55 million to clean up the area.
    • Industrial development: industrial development is often unregulated and lacks planning consent so toxic chemicals are discharged into drains & open sewers posing dangers to human health and natural ecosystems . Chimneys emit poisonous gases and waste contaminates rivers soil and groundwater
    • Urban growth: urban sprawl in big cities like Lagos has resulted in the loss of countryside and the growth of squatter settlements

The Changing UK Economy

Defining Industry Sectors

  • Primary Industry: Extraction of raw materials (e.g., mining, farming, fishing).
  • Secondary Industry: Manufacturing raw materials into products (e.g., car production, construction).
  • Tertiary Industry: Providing services to the public (e.g., healthcare, education, retail).
  • Quaternary Industry: Highly skilled, research and development jobs (e.g., IT, biotechnology).
  • Economic Structure: The combination of these sectors

Historical Changes in the UK Economy

  • Mid-19th Century: Industrial Revolution, dominated by manufacturing (shipbuilding, iron, and steel).
  • 20th Century:
    • Primary sector declined due to increased mechanization.
    • Manufacturing declined since the 1960s due to mechanization and competition from abroad.
    • Tertiary sector increased due to growth in public and financial services.
    • Quaternary industry grew since the 1980s.
  • 2018: 85% of the workforce in the service sector, 9.5% in manufacturing. The UK is now a post-industrial economy.

Causes of Economic Change in the UK

  • De-industrialization: Decline of the UK's heavy industry.
    • Heavy industry was located close to raw materials in areas like South Wales, Yorkshire, North-east England, and Clydeside.
    • The closure of manufacturing and coal mines from the 1970’s onwards left a legacy of unemployment, low incomes and environmental dereliction
  • Globalization: Increased interdependence of countries due to improvements in communications and technology with the development of trading groups like the European Union (EU).
    • Many of the UK’s manufacturing industries were able to relocate abroad to LICs to take advantage of cheaper operation costs
  • Government Policy:
    • 1945-79: State-run industries
      • The government created state-run industries (e.g. British Steel) to support the UK’s declining heavy industry and protect jobs but outdated machinery and working practices led to factory closures, unemployment and unrest.
    • 1979-2010: Privatization
      • State run industries were privatised, many heavy industries closed, and jobs were lost.
        Government private sector investment meant many former industrial areas were transformed into financial centres (e.g. Canary Wharf), offices and retail parks as services rapidly grew.
    • 2010 onwards: Northern Powerhouse
      Government efforts have focused on rebalancing the economy by investing in the high-tech manufacturing sector (e.g. high-tech manufacturing; computer engineering and aerospace) but also, transport infrastructure (e.g. HS2).

Features of a Post-Industrial Economy

  • Development of Information Technology:
    • The use of IT has transformed people’s lives and the economy of the UK
    • UK recognised as one of the top IT countries in the world attracting business and investment from overseas
  • Large Service Industry:
    • Service industries provide support rather than manufacture products
    • It is the largest economic sector in the U K both in terms of employment and economic output
  • Research and Development:
    • Research and development is part of the UK’s rapidly growing quaternary sector.
    • It employs 60,000 people and contributes £3 billion to the UK economy
  • Science Parks & Business Parks:
    • Science parks are usually located on the edge of university cities such as Southampton, Oxford and Cambridge benefitting from good transport links and a pleasant working environment . They usually employ recent graduates .
    • Business Parks usually involve a small group of businesses on a single plot of land.There are hundreds across the UK , usually located on the edges of towns where the land is relatively cheap and there are good road communications

Environmental Impacts of Industry

  • Toxic waste materials polluting the land and water supplies
  • Gas and soot emissions from burning coal polluted the air resulting in smog over London in the 1950s
  • Landscapes in coal-mining areas were transformed by ugly spoil heaps
    Modern industry is more conscious of its impact on the environment and is often built on sustainable principles

Case Study: Nissan Car Plant, Sunderland

  • Nissan employs 7,000 people at its car plant which opened in 1986. It produces 50,000 cars each year.
  • The factory is working to be more sustainable by:
    • Obtaining 7% of its energy from renewable sources e.g. wind turbines
    • Models are being designed with fuel efficiency in mind and with tighter restrictions on exhaust emissions
    • All cars are designed using materials which can be readily recycled

Case Study: South Cambridgeshire

  • Area of rural population growth
  • Rural area south of Cambridge has a population of 154,000 expected to rise to 182,000 by 2026.
    • Rising house prices
    • Modern housing developments causing tension with local people
    • Loss of sense of community
    • Loss of services like buses
    • Lack of affordable housing for local people
    • Some shops forced to close
      Services boosted by increased custom e.g. local pub

Case Study: Outer Hebrides, Western Scotland

  • Area of rural population decline
  • Experienced a 50% decline in population since 1901 as many young people have moved to the mainland in search of better-paid jobs.
    • Out-migration of youth has resulted in an ageing population which require increasing amounts of care
    • Fewer young people of working age has resulted in the decline of traditional industries like farming and fishing
    • Tourism has become an important economic activity, but the infrastructure is struggling to cope.

Developments in UK Transportation Infrastructure

  • Roads:
    • 2014 – Road Improvement Strategy launched at a cost of £15 billion
      Involves conversion of many motorways into ‘Smart motorways’ enabling better traffic flow to reducer congestion
    • Ports:
      • UK port industry is largest in Europe employing 120,000 people
        Planned upgrades include:The Liverpool2 container terminal which will double the freight handling capacity of the Liverpool port at a cost of £300 million
    • Airports:
      Airports account for 3.6% of the UK GDP. Over 2 million tonnes of freight pass through the UK airports every year.
      There are plans to add an additional third runway at Heathrow to ease congestion and enable expansion creating thousands of jobs . The controversial project will cost of £18.6

North-South Divide in the UK

  • Describes the cultural and economic disparities between the south of England and the rest of the UK.
  • People in the south of England have:
    • Higher incomes
    • Longer life expectancies
    • Higher standards of living
    • In the south of England: House prices are higher, Unemployment rates are lower

Causes of the North-South Divide

  • Deindustrialization is the main cause; traditional manufacturing industries in the north have shut down.
  • The service economy in the south has grown due to London's dominance as a global financial center.

Strategies to Address the North-South Divide

  • Government and EU have invested in the north.
    • Enterprise Zones
    • Devolution of Power
    • Northern Powerhouse

UK Links with the Wider World

  • Former global influence, now member of the Commonwealth

  • Trade

  • Culture

  • Transport

  • Electronic Communications

UK Links with the European Union

In 2016, the UK referendum resulted in a majority decision to leave the EU. This became known as ‘Brexit’

UK Links with the Commonwealth

  • Maintains political and economic links with former colonies as part of the 50-country Commonwealth.
  • Encourages cooperation and promotes sustainable development.
    *Commonwealth Games is an important sporting link between the countries.