Chapter 10 Unit 7 Industry Development
Chapter 10 Vocab
Development -
Developed Country -
Developing Country -
Human Development Index (HDI) -
Development Regions -
Gross National Income (GNI) -
Purchasing Power Parity (PPP) -
Gross Domestic Product (GDP) -Primary Sector -
Secondary Sector -
Tertiary Sector -
Productivity -
Pupil/Teacher Ratio -
Literacy Rate -
Life Expectancy -
Inequality-Adjusted Human Development Index (IHDI) - modifies the HDI to account for inequality within a country
World-Sytems Theory -
Gender Inequality Index (GII) -
Gender Development Index (GDI) -
Female Labor Force Participation Rate -
Adolescent Fertility Rate -
Maternal Mortality Rate -
Self-Sufficiency Model -
Rostow’s International Trade Model -
World Trade Organization (WTO) -
Foreign Direct Investment -
Microfinance -
Austerity -
Structural Adjustment Program -
Fair Trade -
Key Issue 10.1: Why does development vary among countries?
Development is the process of improving people's conditions through the diffusion of knowledge and technology. Defined by the U.N. as a process of enlarging people’s ability to lead a long and healthy life, to acquire knowledge, and to have access to resources needed for a decent standard of living.
A developed country (MDC/More Developed Country) has progressed further along the development continuum.
A developing country (LDC/Less Developed Country) has made some progress toward development, though less than the developed countries.
The U.N. created the Human Development Index (HDI) to measure a country's level of development by combining a decent standard of living, a long and healthy life, and access to knowledge. The highest score is 1.0/100%.
Developed Regions - North America (.92) and Europe (.88)
Developing Regions - Latin America (.76), East Asia (.75), South Asia (.64), Southeast Asia (.69), Central Asia (.72), Southwest Asia & North Africa (.7), and sub-Saharan Africa (.54).
Gross National Income (GNI)- the value of the output of goods and services produced in a country in a year, including money that leaves and enters the country. Dividing GNI by total population measures the contribution of the average individual.
Purchasing Power Party (PPP) - an adjustment made to the GNI to account for differences among countries in the cost of goods.
Gross Domestic Product (GDP) - the value of the output of goods and services produced in a country in a year, does not account for money that leaves and enters the country.
Primary Sector - activities that directly extract materials from Earth through agriculture and sometimes by mining, fishing, and forestry.
Secondary Sector - manufacturers that process, transform, and assemble raw materials into useful products, as well as industries that fabricate manufactured goods into finished consumer goods
Tertiary Sector - the provision of goods and services to people in exchange for payment, such as retailing, banking, law, education, and government
Productivity is the value of a product relative to the labor required to produce it. The World Bank measures by dividing the total GDP by the number of employed people. Around $10,000 in sub-Saharan Africa, but exceeding $100,000 in North America and Europe.
The pupil-teacher ratio is the number of enrolled students divided by the number of teachers.
The literacy rate is the percentage of a country’s people who can read and write.
Key Issue 10.2: Where are inequalities in development distributed?
The Inequality-adjusted Human Development Index (IHDI) modifies the HDI to account for inequality within a country.
The U.N. has created the IHDI to measure inequality. If the IHDI is lower than the HDI, the country has some inequality. The greater the difference, the greater the inequality. A perfect place would have equal HDI and IHDI. In a country with a few high-income earners, college degrees, and health care, the IHDI is lower than in a country with minimal income and greater access disparities. The lowest scores are in sub-Saharan Africa and South Asia.
According to world-systems theory, developed countries are the core, and developing countries are the periphery. Africa, Asia, and Latin America contain 75% of the world's population and almost all of the population. growth, but are on the periphery of the world’s wealth. One change that has disproved this is the emergence of semiperiphery countries situated close to both the core and the periphery. Most developed countries are in the Northern Hemisphere, and developing in the Southern Hemisphere.
Inequality in Brazil and Turkey
The difference between the HDI and IHDI (Brazil’s gap is much higher than that of Turkey, so Brazil has more inequality).
Differences in GDP per capita among states or provinces within countries. In both cases, GDP per capita is $20,000 in the wealthiest and $ 4,000 in the poorest.
Inequalities can also be seen in contrasts among neighborhoods within the largest cities of developing countries. Wealthy people live in modern high-rise apartments or single-family homes, while poor people live in improvised structures made of inexpensive or reused materials.
Brazil’s wealthiest regions are on the southeast coast.
Regional Inequality Within Developed Countries
GDP per capita differences. Incomes in the UK (Central London) are twice as high as in some northern communities.
In the US, the GDP per capita is 22% above the national average in the wealthiest region (New England) and 10% below the national average in the poorest region (Southeast).
Widening Inequality Within Developed Countries
Regional inequality has reduced in the US, but the gap between the rich and the poor has increased. Inequality was reduced because developed countries used some of their wealth to extend health care and education to more people and to provide financial assistance to poorer people.
Gender Inequality
Log-standing cultural and legal obstacles can limit women’s participation in development and access to its benefits.
The UN uses the GII and the GDI, but has not found a single country in the world where women are treated as well as men.
At best, women have achieved near-equality with men in some countries, but in others, women's development lags far behind men's.
The Gender Inequality Index (GII) measures the gender gap in achievement across three dimensions: reproductive health, empowerment, and labor market participation. The GII uses a similar methodology to the IHDI.
Empowerment refers to women's ability to improve their own status or achieve economic and political power. This is measured by the % of seats held by women in the national legislature and the % of women who have completed secondary school (high school).
Although more women than men vote in most places, only three countries have a national parliament or congress with a women's majority (Bolivia, Cuba, and Rwanda).
Women in Europe comprise ¼ of nat. parliaments.
24% of the House of Representatives were women in 2019, with 19% in 2018.
In 2018, Canada’s House of Commons included 26% women
In 2018, the United Kingdom’s House of Commons included 32% women
62% of women have completed some secondary (high) school, compared to 71% of men
In North America, girls are more likely than boys to complete high school, while in Europe, boys are slightly ahead.
In developing countries, boys are much more likely than girls to be high school graduates.
For every ten boys who attend high school in developing countries, only 6 girls attend.
The gap is especially high in South Asia.
Employment
The female labor force participation rate is the percentage of women holding full-time jobs outside the home.
49% of women work outside the home, compared to 75% of men.
Women in developed countries are more likely than women in developing countries
South Asia, Southwest Asia, and North Africa have substantial gaps in labor participation between men and women.
East Asia and sub-Saharan Africa have smaller gaps. Women hold jobs in agriculture or services in sub-Saharan Africa, even while they have the world’s highest fertility rates.
Reproductive Health
Reproductive health is measured by the adolescent fertility rate and the maternal mortality rate.
The adolescent fertility rate is the number of births per 1,000 women ages 15 to 19.
The rate is 16 in developed countries and 48 in developing countries.
The teenage pregnancy rate is below 10 per 1,000 in most European countries.
In sub-Saharan Africa, the teenage pregnancy rate is 110 per 1,000.
The US adolescent fertility rate was 21 in 2017, which was twice that of most European countries and Canada. The rate is especially high for African Americans and Hispanics. This is due to a lack of economic opportunities for these young women.
The maternal mortality rate is the number of women who die giving birth per 100,000 births.
The ratio is 16:100,000 in developed countries and 171:100,000 in developing countries.
The highest rates are in sub-Saharan Africa.
150,000 women and 1.6 million children die each year between the onset of labor and 48 hours after birth.
The US is one of only 13 countries where the rate has increased since 1990.
The higher the GII, the greater the inequality.
A GII score of 0 would be equal, and a score of 1.0 means they are as poor as possible in all measures.
The GII is 0.468 in developing countries compared with 0.170 in developed countries.
Sub-Saharan Africa, South Asia, and Southwest Asia & North Africa are the developing regions with the highest levels of gender inequality, mostly because of reproductive health.
South Asia, Southwest Asia & North Africa have relatively poor female empowerment scores.
21 countries, including 17 in Europe, as well as Canada, have GII values below 0.1.
Countries with high HDIs have low GIIs and vice versa.
Gender inequality has declined since the 1990s in all but 4 of 138 countries for which time-series data is available.
Reasons for the Low US GII Ranking
Compared with other high HDI countries, the US has a much higher birth rate among teenage women and a higher mortality rate among women during childbirth.
The percentage of women in the national legislature is lower in the US than in other high HDI countries.
The Gender Development Index (GDI) measures the gender gap in achievement across the three dimensions of the Human Development Index: income, education, and life expectancy.
If females and males had precisely the same HDI scores, the GDI would be 1.000.
The world's overall GDI is .941, meaning the average HDI for all females (.705) is 94.1% of the average HDI for all males (.749).
The average GDI in developed regions in .983, whereas the average in developing countries is .917.
The lowest GDI scores are in South Asia, sub-Saharan Africa, and Southwest Asia & North Africa.
Key Issue 10.3: Why do countries face development challenges?
To reduce disparities between rich and poor countries, developing countries must increase their growth rates.
Developing countries face two obstacles in development:
Adopting policies that successfully promote and sustain development
Finding funds to pay for development
To promote development, developing countries choose the self-sufficiency or international trade path.
The Self-Sufficiency Path
Countries encourage domestic production of goods, discourage foreign ownership of businesses and resources, and protect their businesses from international competition.
There are import limits with barriers (high taxes/tariffs, fixed quotas on goods, and licenses for legal importers).
Businesses are insulated from competition with large international corporations, which have adverse impacts on business and government decisions. Fragile businesses achieve independence.
Equal investment is spread across all sectors of a country’s economy and regions.
Equal income for residents of the countryside and the city is encouraged to prevent the rich from becoming richer.
The International Trade Path
Countries open themselves to foreign investment and international markets. This became more popular in the late twentieth century. A country needs to identify its distinctive or unique economic assets and concentrate scarce resources on their expansion.
Rostow’s International Trade Model has 5 stages of development:
Traditional society: a society that has not started development and has a high % of agricultural workers and national wealth allocated to nonproductive activities (like military and religion).
Preconditions for takeoff: a society where an elite group initiates innovative economic activities and has an influence over investment in new technology and infrastructure (like water supplies/transportation systems). This increases productivity.
Takeoff: a society where rapid growth is generated in a limited number of economic activities (like textiles/food products), and they achieve technical advances, becoming productive.
Drive to maturity: modern technology diffuses across a wide variety of industries, and rapid growth comparable to that of the takeoff industries occurs. Workers become skilled and specialized.
Age of mass consumption: the economy shifts from the production of heavy industry (steel/energy) to consumer goods (motor vehicles/refrigerators).
World Trade Organization
countries, representing 97% of the world, created the WTO in 1995
The WTO reduces trade restrictions on manufactured goods, like government subsidies, quotas, and tariffs. Reduction or elimination of restrictions on the international movement of bank money, corporations, and wealthy individuals also occurs.
The WTO enforces agreements, and countries can accuse other countries of violating said agreements. The WTO protects intellectual property on the internet.
Critics often attack the WTO for decisions made behind closed doors and the compromise of power/sovereignty in individual countries.
The Four Dragons
South Korea, Singapore, Taiwan, and Hong Kong adopted the international trade path. While they lacked resources, the four dragons produced clothing and electronics at low labor costs and sold them inexpensively in developed countries.
Petroleum-rich Arabian Peninsula States
Saudi Arabia, Kuwait, Bahrain, Oman, and the United Arab Emirates were once the world’s least developed countries but became some of the wealthiest through escalating petroleum prices in the 1970s.
International Trade Model Pros
Other Countries’ Success: If countries like Japan, South Korea, ones in Europe, and ones in North America could become developed, why couldn’t other countries?
Resource Riches: Raw materials in developing countries are sought by developed countries. Extractions of these materials could generate funds for the developing countries and promote development.
International Competitiveness: Exposure to the demands, needs, and preferences of consumers in other countries allows for the takeoff of industries to accommodate changes in consumer preferences, marketing strategies, production engineering, and design technology.
Shortcomings of Self-Sufficiency
Inefficient Industries: Businesses can sell at government-controlled prices and have little incentive to improve quality, lower production costs, reduce prices, or increase production.
Lack of Competitiveness: Companies were not pressured to keep pace with technological change, sustainable development, and environmental protection.
Corruption: A complex bureaucracy ruled and processed permits. Unmonitored power encourages abuse and corruption.
Black Market: Struggling to produce goods is less rewarding than illegally importing goods and selling them at inflated prices.
India under Self-Sufficiency
In 1947, India gained independence from Britain and controlled imports with:
License Process Length and Time
Import Limits
Heavy Taxes for Importers
Nonconvertible Currency
India also controlled its own companies with:
Required Permits for new Products, Factories, Production, Prices, Worker Editing, and Job Classification
Government Subsidies
Government Ownership
India under International Trade
Adopted in the 1990s, the government changed to international trade.
Foreign Companies had Easier Permit Processes
Taxes and Quotas were Reduced or Eliminated
Competition was Eliminated
Companies have improved the quality of their products. India’s auto industry went from government control to Japanese ownership.
India’s GDP increased modestly during self-sufficiency, but increased greatly during International Trade.
Foreign Direct Investment
Foreign Direct Investment (FDI) is an investment made by a foreign company in the economy of another country. FDI has grown from $172 billion in 2002 to $646 billion in 2016.
1/3 of FDI went to developing countries, while the other 2/3 went to developed countries.
In 2016, 1/3 of all FDI in developing countries went to China, and 1/3 5o Singapore, Brazil, Russia, and Mexico.
The major sources of FDI are transnational corporations.
500 of the largest transnational corporations were headquartered in developed countries (322, including 126 in the United States) and in developing countries (156, including 120 in China).
International Monetary Fund
The IMF provides loans to countries with problems in balancing payments that threaten the expansion of international trade.
Designed to help a country rebuild international reserves, stabilize currency exchange rates, and pay for imports without harsh trade restrictions or capital controls.
Does not lend for specific projects
Funding is based on each member country’s relative size in the world economy
World Bank
Includes the International Bank for Reconstruction (IBRD) and the International Development Association (IDA).
IBRD provides loans to reform public administration and legal institutions, develop/strengthen financial institutions, and implement transportation or social service projects.
IDA supports poor countries considered too risky for IBRD.
IBRD lends private investors money
IDA lends government contributions
$40 billion in loans are disbursed annually (14% to India and 5% each to China, Mexico, Turkey, Brazil, Indonesia, Pakistan, Bangladesh, and Vietnam).
Microfinance is an alternative source of loans, providing small loans and other financial services to individuals and small businesses in developing countries that are unable to obtain loans from commercial banks.
The Grameen Bank (1977) in Bangladesh specializes in loans for women as mothers and wage earners in their homes.
Failed projects don’t succeed because of faulty engineering, have recipient nations that squander/spend aid on armaments, have aid stolen through graft/corruption, or even have new infrastructure attract other investment.
Stimulus vs Austerity
Stimulus - governments should spend more money than they collect in taxes and put people to work building bridges/other needed projects.
Austerity - governments should reduce taxes so people and businesses can revive the economy by spending their tax savings.
The US used stimulus to help recover in 2008, but the Tea Party's success led to austerity in 2010.
Austerity is imposed through a policy framework paper (PFP) that outlines a structural adjustment program. This program contains economic reforms or adjustments (goals, strategies, and external financing requirements). This may lead to cuts in health, education, and social services that benefit the poor; higher unemployment; job losses in state enterprises and the civil service; and less support for those most in need, such as poor pregnant women, nursing mothers, young children, and the elderly.
Structural adjustment programs punish the poorest people for actions they did not commit.
Key Issue 10.4: Why are countries able to make progress in development?
Progress made in the HDI since 1980:
GNI per capita - increased much more rapidly in developed countries than in developing countries
Education - mean years of education has increased by around the same number in developed and developing countries
Life Expectancy - increased by around the same number of years in developed and developing countries
HDI - the gap between developed and developing countries has narrowed, and the HDI has increased more in developing countries than in developed ones.
17 Sustainable Development Goals (adopted in 2015 with the goal of achieving them by 2030) replace the eight Millennium Development Goals adopted in 2002 with the goal of achieving them by 2015.
End poverty in all forms everywhere
End hunger, achieve food security and improved nutrition, and promote sustainable agriculture
Ensure healthy lives and promote well-being for all at all ages
Ensure inclusive and quality education for all and promote lifelong learning
Achieve gender equality and empower all women and girls
Ensure access to water and sanitation for all
Ensure access to affordable, reliable, sustainable, and modern energy for all
Promote inclusive and sustainable economic growth, employment, and decent work for all
Build resilient infrastructure, promote sustainable industrialization, and foster innovation
Reduce inequality within and among countries
Make cities inclusive, safe, resilient, and sustainable
Ensure sustainable consumption and production patterns
Take urgent action to combat climate change and its impacts
Conserve and sustainably use the oceans, seas, and marine resources
Sustainably manage forests, combat desertification, halt and reverse land degradation, and halt biodiversity loss
Promote just, peaceful, and inclusive societies
Revitalize the global partnership for sustainable development
Fair trade is international trade that provides greater equity to workers and small businesses in developing countries. Products are made and traded according to standards that protect workers, businesses, and consumers. Focused on exported products from developing countries to developed countries.
Fair Trade Producer Standards - Fair Trade returns 1/3 of the price to the producer in the developing country.
Raising the incomes of small-scale farmers and artisans by eliminating some middlemen
Distributing profits and risks with the production and sale of goods fairly
Increasing the entrepreneurial and management skills of producers
Promoting safe and sustainable farming/working conditions
Cooperatives can qualify for credit with borrowed funds for equipment and investment
materials purchased at a lower cost
people growing or making products, manage allocation of services
profits are reinvested in the community
Fair Trade Worker Standards
oversight of workers’ conditions
workers work long hours in poor conditions for low pay
Children may be in the workforce
health problems
Injured, ill, or laid-off workers are not compensated
paid fair wages
permitted to organize a union and have the right ot collective bargaining
protected by environmental and safety standards
Fair Trade & Customers
Most fair trade sales are in food (coffee, tea, bananas, chocolate, cocoa, juice, sugar, and honey).
North America is primarily decorative home accessories, jewelry, textiles, and ceramics
Buying fair trade helps consumers connect with producers
Fair trade does not cost more
fair trade bypasses exploitive intermediaries and works directly with producers