ch.26 - The Challenge of Economic Developments Economic...

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Unformatted text preview: The Challenge of Economic Developments Economic Chapter 26 Population growth and development development Malthus: population will grow exponentially or by Malthus: geometric progression. Eventually, a population doubles every generation – 1,2,4,8,16,32,64, 128, 256, …becomes so large that there is not enough space in the world for all the people to stand. stand. Therefore, economic growth will be limited due Therefore, to the finiteness of our natural resources and environmental constraints. environmental Problems: increase prices of basic commodities, Problems: worries about externalities (global warming, etc…) etc…) Economic Growth in poor countries Economic - Aspects of a developing country: Low per capita income People having poor health Low levels of literacy Extensive malnutrition Little capital to work with Usually they have high population growth Suffer from out-migration especially skilled Suffer workers workers How can low-income countries improve their living standards improve Economic growth rides on 4 wheels: 1) Human resources 2) Natural resources 3) Capital 4) Technology Human Resources Human It’s hard for poor countries to overcome It’s poverty when overpopulated – one strategy is to curb population growth – many countries have introduced educational campaigns and subsidized birth controls birth Families should substitute quality for Families quantity – devoting time and incomes to a better education for fewer children Human Resources Human Poor countries need to care about the Poor quality of their human capital: quality - Control disease and improve health and Control nutrition nutrition - Improve education, reduce illeteracy and Improve train workers train - Do not under-estimate the importance of Do human resources human Natural resources Natural Surprisingly poor countries are rich in Surprisingly natural resources, but the land and minerals they possess are divided among large populations. large Also, Corruption is there!!! Capital Capital Countries to develop need to abstain from Countries current consumption (poor savings) to engage in fruitful production. engage First need is to build up the infrastructure Technological Change and Innovation Innovation You need not reinvent the wheel but build You on previous technologies on Promoting Entrepreneurial spirit Vicious Cycle of Poverty Low incomes low saving retards the Low growth of capital prevents introduction of new machinery and rapid growth in productivity low productivity leads to low income Poverty is accompanied by low levels of Poverty education, literacy and skill; these in turn prevent the adoption of new and improved technologies and lead to rapid population growth, which eats away at improvements in output and food production. production. Countries that suffer from a vicious cycle can get Countries caught in a poverty trap. poverty Strategies of Economic Development Development Backwardness Hypothesis: Emphasizes the international context of Emphasizes development: relative backwardness may aid development. Countries can buy modern machinery, chemical fertilizers, etc .. Because they can lean on technologies of advanced countries, today’s developing countries can grow more rapidly that Britain and Europe in 1780-1850. 1780-1850. Industrialization vs. Agriculture: Accelerating industrialization at the expense Accelerating of agriculture, which is capital-intensive attracts workers into crowded cities and produces high levels of unemployment. Raising productivity on farms may require less capital, while providing productive employment for surplus labor. employment State Vs. Market: Market economy includes private ownership, Market outward orientation in trade policy, promotion of small businesses and fostering of competition. fostering Growth and outward orientation: Import substitution = self sufficient vs. outward orientation or openness outward Openness allows countries to reap Openness economies of scale and benefits of international specialization to use domestic resources for efficiently and effectively. effectively. ...
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This note was uploaded on 12/29/2010 for the course ECONOMICS 501 taught by Professor Maryjoh during the Spring '08 term at Prince Sultan University.

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