iGCSE Economics

7.1 Developed and Less Developed Countries

What is the missing key?

Learning Outcomes

• Describe why some countries are classified as developed and others are not

• Discuss the differences in standards of living within countries and between countries, both developed and developing

• Describe the difference between absolute and relative poverty

• Recognise and discuss policies to alleviate poverty

ECONOMIC GROWTH VS ECONOMIC DEVELOPMENT

What’s the difference?

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Let’s compare….

Economic Growth• A narrow concept• It is an increase in a

country's real level of national output

• Can be caused by improvements in quality or quantity of the factors of production

Economic Development

• an increase in living standards, improvement in self-esteem needs and freedom from oppression as well as a greater choice. 

• Economic growth is a necessary but not sufficient condition of economic development

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DEVELOPING VS DEVELOPED ECONOMIES

How do we judge if an economy is developed?

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The United Nations Say….

• There is no established convention for the designation of "developed" and "developing" countries or areas in the United Nations system.

A Developed Country is…

• "one that allows all its citizens to enjoy a free and healthy life in a safe environment.“

Kofi Annan, former Secretary General of the United Nations

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Task….

• We are going to watch a video called• ‘Top Ten Developed Countries’• In groups how many can you guess

correctly?• 5 bonus points for identifying the country

which occupies the top spot correctly!

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Task – Be the Economy Doctor

• You are doing a health check on an Economy

• What are the ‘symptoms’ (or characteristics) of a developed economy?

• What signs would you be able to see in a ‘healthy’ patient?

Ways of Measuring Development

• Watch the video• ‘Is HDI the best measure of development?’

• Which of the measures discussed do you think is the best measure of development?

• Why?• Which measurement do you think would

rank the Philippines as the highest?

THE PROCESS OF DEVELOPMENT….

It’s time for a bit of Hans Rosling….Yay!

• Hans Rosling is a Swedish medical doctor, academic, statistician and public speaker.

• He is Professor of International Health at Karolinska Institute and co-founder and chairman of the Gapminder Foundation Video – Debunking the

Third World Myth

Rapidly industrialising economy

•Expanding manufacturing and services sectors

•Rapid development of modern infrastructure

•Rising incomes and living standards

•Improving health care, diet and life expectancy

Less-developed economy

•Low level of human and economic development and diversification

•Low industrial development

•Lack of infrastructure

•Low levels of education and skills

•Low average incomes and poor living standards

•Low average life expectancy

Developed economy

•High level of human and economic development

•Wide range of industries

•Well developed road, power and communications networks

•Skilled and educated workforce

•High average incomes and living standards

•Long average life expectancy

Stages of Economic Development

SO WHY DO SOME COUNTRIES DEVELOP LESS THAN OTHERS?

What factors might inhibit the economic development of

some countries?

•Over-dependence on subsistence farming to provide jobs and incomes

•International trade is dominated by developed nations who are able to control world prices for natural resources exported from less-developed economies

•Lack of capital to invest in modern infrastructure to support businesses and communities

•Insufficient investment in education and health care

•Low skilled and poorly educated workforce

•Low level of effective consumer demand

•Rapid population growth

•Famines, natural disasters, wars, corruption, etc.

Why are some countries less developed?

-Why would each of these factors inhibit economic

development?- Can you think of any

examples?

The vicious cycle of low economic development

LOW INCOME

LIMITED BUYING POWER

POOR INCENTIVES TO INVEST

LACK OF CAPITAL

LOW PRODUCTIVITY

LOW OUTPUT

So…. What policies should government’s implement in

countries to encourage development?

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Discuss Question

• To what extent are the government in the Philippines being effective in aiding economic development?

POVERTY

Questions….

• What does the word ‘Poverty’ mean?• Does Poverty look the same in different

countries?• What causes poverty?• How can we measure poverty?

Absolute poverty

The inability to afford basic necessities such as food, water, education, health care and shelter.

Measured by the number of people living below a certain income threshold.

Relative poverty

Having far fewer resources than others in the same society.

Measured by the extent to which a person’s or household’s income falls below the average income in the economy.

Measures of Poverty

To what extent do you agree with Nelson Mandela?What can be done to solve poverty?Who’s responsibility is it to solve poverty?

• Expansionary fiscal and monetary policies to reduce unemployment

• Progressive taxes to reduce income and wealth inequality after tax

• Provision of welfare services and benefits for households on very low incomes

• Subsidize the building of free or low-cost housing

• Minimum wage laws to raise the wages of the lowest paid employees

• Increase the quantity and quality of education available to improve skills and job prospects

• Attract inward investment from overseas firms to provide jobs and incomes

• Seek aid from overseas governments and international aid organizations

Reducing Poverty – Government Policies

OVERSEAS AID

In what ways can foreign governments/charities help to

reduce poverty?

Task

• Each group will do some research about one of the main types of aid.

• You will have 20 mins to research and prepare.

• You will then give a 5 minute (max) presentation which addresses the questions asked

Food Aid

• An outline of how this type of aid works• Some recent examples of this type of foreign aid• Some criticisms of this type of aid• Your opinion on this type of aid and the

circumstances in which it is suitable

Financial Aid

• An outline of how this type of aid works• Some recent examples of this type of foreign aid• Some criticisms of this type of aid• Your opinion on this type of aid and the

circumstances in which it is suitable

Technological Aid

• An outline of how this type of aid works• Some recent examples of this type of foreign aid• Some criticisms of this type of aid• Your opinion on this type of aid and the

circumstances in which it is suitable

Debt Relief

• An outline of how this type of aid works• Some recent examples of this type of foreign aid• Some criticisms of this type of aid• Your opinion on this type of aid and the

circumstances in which it is suitable

• Food aid

• Financial aid

• Technological aid

• Debt relief

But full or partial cancellation of public debt owed to overseas organizations may simply encourage some indebted governments to be financially irresponsible again

But many less-developed countries are poorly managed and do not have the skills they need to invest financial aid wisely; and some have governments that are corrupt and misuse overseas aid

But food may be stolen and sold illegally; if too much is provided it will stop people buying produce from their local farmers causing them to cease production

But local people will also need training to operate new equipment and to use new farming, building and other techniques

Over seas Aid