The Development Gap
Why does it exist?
Causes of the Development Gap Economic
• Trade
• Level of Savings
• Fiscal Trap and Debt
Causes of the Development Gap Other
• Political – Corruption
• Environmental - Physical Environment
• Social - Demographic Trap
Trade
• Some countries benefit more from free trade than others.
• Dependency Theory – Development of MEDCs promotes the
underdevelopment of LEDCs and LLEDCs
• This is because the value of most goods, products and services are
added in MEDCs – means less wealth in developing countries
• Seen with production of cocoa in Ghana and the Ivory Coast farmers only received 40-50% of the market value of unprocessed
cocoa beans, a tiny amount compared to the final price sold for in
MEDCs
• MEDCs can also use their financial power to negatively influence
trade in developing countries. For example, US cotton subsidies
keep the global price 6-14% lower, without this, West African
farmers would earn additional income enough to cover the
healthcare costs of 6-10 people for a year
Level of Savings
• Can have significant impact
on potential for sustained
economic growth
• Those in poverty cannot
save as they need income to
sustain life (subsistence)
• World Bank figures show
that those in the least
developed countries only
save 10 % of their income
compared to 25 % in the
most developed countries.
Fiscal Trap (Debt)
• Governments can lack finance to pay for
improvements in services and infrastructure due
to need to repay debt.
• In Malawi 9.6 % of countries GDP goes towards
repaying debt compared to 4.6 % on healthcare.
• This discourages FDI which further prevents
economic growth. Furthermore, SAPs emplaced
by the IMF to counter debt can tend to
negatively impact other areas – leading some to
claim that they harm more than help
Politics
• Government can fail to invest in
infrastructure or allows corruption to rise to
levels that impair economic activity.
• Zimbabwe political corruption left the
economy in deep crisis with rapid inflation
deindustrialisation and shortages of fuel
and food. This has led life expectancy to fall
from 60 in 1990 to 39 in 2008.
Demographic Trap
• High fertility and rapid population growth can put
a strain on infrastructure and services. This often
occurs in areas of high levels of poverty due to
high infant mortality, lack of state welfare and
low levels of education.
• Bangladesh 3 Million added to the population
each year which has put great strain on the
resources and of the economy to meet the need
of the rising number of people, 50 % below
poverty line.
Physical Environment
• Can pose specific problems to people and act as
catalysts to other factors which generate poverty.
• Climate change offers serious threat to
developing countries are less able to respond
such as Bangladesh where climate change is
predicted to have devastating impact on crops
with yields falling by up to 30 %. Serious threat to
people’s livelihoods and food security
• Sudan – severe drought has put pressure on
people’s ability to subsist and survive
In conclusion…
• Combination of factors, yet those relating to
economics hold more importance.
• This is because it is economics that impacts upon
all aspects of development –it is needed to
ensure good social development i.e. in healthcare
and education
• Also, the non-economic factors tend to see
importance in their ability to impact upon
economics i.e. issues in the physical environment
or with demographics limit successful economic
growth