Money-making activities


Any activity where a natural resource (raw material) is used directly for profit.

Farming

Fishing

Mining

Logging


When raw materials are taken to produce or manufacture a product.

Iron and Coal (extracted – primary) produces Steel

Steel produces thousands of parts for machinery of all kinds. (automobiles)

Cotton is harvested (primary)

Taken to a factory and made into clothes. (textiles)



Anything that provides a product or service to the public.
Largest sector of an MDC country today.

Banking, education, medicine, retail or wholesale sales, food service, military, insurance, entertainment, transportation, tourism


Processing and distribution of primarily technical information.

Engineering

Research and development

Information technology

Software

Web design

Support


Decision makers




CEO’s
CFO’s
Conglomerates
Highest levels of State

These people will directly impact the markets and therefore the economies from local to global scale.

 https://youtu.be/9-4V3HR696k



There are 3 primary types of Economic
Systems.

Traditional or Subsistence

Market or Demand System

Command System
Like activities, these systems can be found in many places throughout the world.





Generally associated with subsistence agriculture.
Subsistence-producing only enough for you and your family at a survival level.
Almost exclusively involved in Primary economic activities.
LDC’s of sub-Saharan Africa, parts of
South Asia, parts of Latin America.





Guided by the principle of free enterprise.
People are free to decide on what they will produce, sell, and buy.
Competition is encouraged by supply and demand principles.
Capitalism – A system based on private ownership of property, businesses, and resources with little government interference.




A system where the government makes most, if not all decisions in regards to ownership, production, and distribution.
Communism version requires all property to be re-distributed by the government after commanding what, when, and how much can be produced.
Socialism involves governments controlling, owning or operating certain businesses within a country.




An economic system that includes a mixture of capitalism and socialism. This type of economic system includes a combination of private economic freedom and centralized economic planning and government regulation.
MOST COUNTRIES ECONOMIES FALL
INTO THIS CATEGORY TODAY.
http://www.youtube.com/watch?v=1efDli000Cw

Measuring Economic Development



GNP (Gross National Product) is the total value of goods and services that a country produces in a year, including all foreign investment.
GDP (Gross Domestic Product) includes only those good and services produced within the country.
GNI (Gross National Income) is the dollar value of all goods and services, plus the dollar value of EXPORTS minus IMPORTS.

Measuring Economic Development

Gross National Income (GNI) then is
GOODS + SERVICES + (EXPORTS – IMPORTS)
Per Capita Calculations
GDP per capita :
(GOODS + SERVICES) divided by POPULATION
GNP per capita:
(GOODS + SERVICES) + (EXPORTS – IMPORTS) divided by POPULATION




(GNI PPP) is an estimate that takes into account differences in prices between countries.
If in a poor country, the cost of goods can be cheap, and can actually raise their true
GNI PPP. In other words, they can get more for their money.
Example:
China’s PC-GNI is $6,560 approximately
China’s GNI PPP is about $12,880

 http://www.youtube.com/watch?v=klm6yZxDmJc



This measures the level of income disparity between the country’s richest and poorest population groups on a scale of 0 – 100. High number means a wider gap between rich and poor.
Examples:





China – 37
South Africa – 65
U.S. – 41
Venezuela - 45
Colombia – 54 http://databank.worldbank.org/data/views/reports/metadataview.aspx



A quality of life index developed by the UN based on:

Life expectancy at birth (demographic)



Literacy rate (social)
Years of education (social)
Per capita GDP (economic)

HDI 0 – 1.0


Norway 0.944 (1 st )
U.S. 0.914 (5 th )



Russia 0.778 (57 th )
India 0.586 (135 th )
D.R. Congo 0.338 (186 th )

Real World Examples:

Qatar, United States, Japan, Germany



MDC’s
Free Market System
Per Capita GDP - PPP:

Qatar - $143,427 #1

U.S.
- $54,957 #10

Germany - $45,888 #18

Japan - $37,390 #28

PRE-DOMINANTLY TERTIARY AND
SECONDARY ACTIVITIES


Real World Examples:
Brazil Russia, India, China, South Africa
( B R I C S )

Developing Countries (very uneven)



Now referred to as NIC’s
Socialists (mixed economies)
GDP - PPP:

Brazil - $16,096 #74





Russia - $24,805 #49
China - $12,880 #89
India - $5,855 #125
South Africa - $13,046 #87
MIXED SECONDARY AND AGRICULTURAL PRE-
DOMINANTLY, AND INCREASING TERTIARY

Real World Examples:

Haiti, Congo, Somalia



LDC’s
Command-Traditional
Per Capita GDP’s:

Haiti - $1,100

Afghanistan - $950

Congo - $350

SUBSISTENCE IN AFRICAN
COUNTRIES

Measuring Social Development


Education and Literacy
Health and Welfare

MDC’s vs. LDC’s

What infrastructure is necessary to insure social development and a higher quality of life?





Life Expectancy
Infant Mortality Rates
Total Fertility Rates
Natural Increase Rates

Crude birth and death rates

Walt Rostow developed this approach in the 1950’s to examine what is necessary for full development to take place within any given country.

Rostow’s Modernization Model





Traditional Society
Pre-conditions for takeoff
The takeoff
Drive to maturity
Age of mass consumption


Traditional Society - Rostow uses this term to define a country that has not yet started a process of development. A traditional society contains a very high percentage of people engaged in agriculture and a high percentage of national wealth allocated to what Rostow calls
"non productive" activities, such as the military and religion.


Preconditions for Take-Off - According to
Rostow, the process of development begins when an elite group initiates innovative economic activities. Under the influence of these well-educated leaders, the country starts to invest in new technology and infrastructure, such as water supplies and transportation systems. These projects will ultimately stimulate an increase in productivity.


Take-Off - Rapid growth is generated in a limited number of economic activities, such as textiles or food products. These few take-off industries achieve technical advances and become productive, while other sectors of the economy remain dominated by traditional practices.


Drive to Maturity - Modern technology, previously confined to a few take-off industries, diffuses to a wide variety of industries, which then experience rapid growth comparable to the take-off industry. Workers become more skilled and specialized.


Age of Mass Consumption - The economy shifts from production of heavy industry, such as steel and energy, to consumer goods, like motor vehicles and electronic products

International Trade Approach



The Persian Gulf states





Saudi Arabia
U.A.E.
Qatar
Kuwait
Bahrain
Focus was on natural capital (oil) as a means to economic prosperity and development.
This began in earnest in the 1970’s.



Dependency Theory

Political and economic relationships often based on colonialism limits the economic development of poorer countries.
World-Systems Theory

Wallerstein’s theory


Core, semi-periphery, periphery relationships
Would imply that the world cannot be “flat”

International Trade Approach




The original Asian Tigers

South Korea

Singapore

Taiwan

Hong Kong
The focus was on human capital building a manufacturing base.
Japan was the original “Asian Miracle”
New to the game: Malaysia, Vietnam, and of course CHINA.

International Trade Approach





China’s Market Socialist model
Central planned economy
Gradual approach starting with
Special Economic Zones (SEZ’s)
Joint partnerships have led to direct foreign investment.
Government backed, slow privatization





India’s Self-Sufficiency Model
Nehru chose a path that focused on internal development without outside interference.
It was based on isolation an a system of high tariffs and quotas.
Discouraged exports and instead focused on producing for internal consumption.





India’s Self-Sufficiency Model
Government controlled prices created monopolies and this led to inefficiency.
A complex bureaucracy led to a reduction in entrepreneurship.
Since the early 1990’s open market reforms have led to rapid increase in development.


WTO works to reduce barriers to international trade.


Reducing tariffs, quotas and general restrictions
Enforcing agreements and laws



China entered the WTO in 2001
Governments sometimes use subsidies and corporate interest to dominate markets.
Some are also concerned about the impact of losing sovereignty and outsourcing.





LDC’s must borrow often from the IMF or
World Bank.
Focus on building infrastructure which should lead to further development is often unsuccessful.
Profits are often times insufficient to provide wealth to the nation as it must use it’s profits to repay its loans.
Leads to arguments over Fair Trade


Not ran by a state or economic alliance


Doing the work that governments can’t or won’t do.
The Economist refers to at as a “parallel state”

Medecins san frontier


Red Cross
Charities, Churches, and volunteer organizations


Microcredit




Popular for of economic empowerment
Loans to poor people, especially women
Started in Bangladesh
Muhammad Yunus (Grameen Bank)

Ways to help:






 www.grameen-info.org
www.grameenfoundation.org
www.grameenamerica.org
www.kiva.org
www.msf.org
www.heifer.org
www.redcross.org