Emerging And Developing Economies 4.3

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Economic Development

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The sustainable increase in living standards for a country, typically characterised by increases in life span, educational levels, & income

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The Human Development Index (HDI)

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Developed by the UN, it is a combination of 3 indicators: Health- as measured by the life expectancy at birth, Education - as measured by a combination of the mean years of schooling, Income - as measured by the real GNI per capita at purchasing power parity.

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Advantages of using HDI

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It is a composite indicator which provides a more useful comparison than single indicators, incorporates important metrics, allows citizens to understand how their quality of life compares to other countries.

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Disadvantages of using HDI

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It does not measure the inequality that exists, it does not measure or compare the levels of absolute & relative poverty, data often lags reality.

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Characteristics of IHDI

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The IHDI will be equal to the HDI value when there is no inequality but falls below the HDI value as inequality rises. It provides greater insight into the differences in human development that exist in a country.

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Characteristics of MPI

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It measures the complexities of poor peoples lives, it tracks deprivation across the three dimensions. It can also focus on religions/ ethnicities and the differences associated.

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Economic Factors that Influence Growth & Development

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A lack of propetry rights can cause loss in income, education & skills, lack of infrastrucute can impact economic activity, the dependency ratio (the number of dependents to the working population), capital flight (when assets leave a country).

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Non-Economic Factors that Influence Growth & Development

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Corruption, Poor Governance, War, Political Instability, Geography.

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Market-Orientated Stratergies

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Stratergies that create the conditions for private individuals & firms to pursue economic activity with the aim of maximising profit.

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Trade Liberalisation (Market-Orientated Stratergies)

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Removing barriers to international trade e.g tarrifs will lead to more trade which increases output, employment and incomes.

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Foreign Direct Investment (Market-Orientated Stratergies)

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FDI is investment by foreign firms, it will increase output, employment and income.

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Subsidy Removal (Market-Orientated Stratergies)

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Removing subsidies can increase competition, efficency, employment and income.

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Floating Exchange Rate Systems (Market-Orientated Stratergies)

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This is a system which demand & supply determines the rate at which one currency exchanges for another. The appreciation of this currency can generate higher incomes as raw material prices falls.

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Microfinance (Market-Orientated Stratergies)

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Small loans are made available to unemployed or low income households, this helps to break the poverty cycle.

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Privatisation (Market-Orientated Stratergies)

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This is the transfer of ownership of assets from the State to the private sector, this can increase competition and increase output, employment and incomes.

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Interventionist Stratergies

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They are put in place by government to correct the failings of the free market & promote the welfare/ development of its citizens.

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Protectionism (Interventionist Stratergies)

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Government policies that restrict international trade in order to protect domemstic industires, this will protect employees from harmful market forces and can lead to higher levels of incomes.

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Managed Exchange Rates (Interventionist Stratergies)

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A system in which the free market determines the value of a currency but also where the central banks can intervene, this prevents appreciation leading to long periods of growing income.

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Joint Ventures (Interventionist Stratergies)

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A contractual agreement between two or more firms to combine their resources to achieve a goal, they can increase trade and therefore output, employment & incomes.

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Buffer Stocks (Interventionist Stratergies)

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Occurs when the government buys up suppliers of agricultural products and sells them when supplys are low. This ensures income stability and may increases employment due to more production

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Tourism (Additional Development Strategies)

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This is a good source of employment and income, Ecotourism (A form of tourism which attempts to minimise its impact upon the environment) is developing as a response to negative externalities of consumption.

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Fairtrade (Additional Development Strategies)

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They aim to bypass restrictions such as volatile prices by connecting ethical buyers directly with the farmers in developing countries. They pay high prices, they often help them to develop.

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Aid (Additional Development Strategies)

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Three of the most common forms are humanitarian aid (aid used to alleviate suffering), grants (A sum of money that does not need repaying) & soft loans (A loan that is expected to be repaid but at a lower interest rate).

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Debt Relief (Additional Development Strategies)

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This is where debt is written off if countries cannot repay it or if the opportunity cost of these repayments is significant e.g loss of infrastructure, inability to improve welfare.