Question Details

[answered] 17 Diana Mayfield/Getty Images The Challenge of Economic De


Please help me answer this discussion question... must include a citation from the attached chapter, section 17.5, help from private sector: ?multinationals.

Need 100 word minimum. ?


Imagine you are in charge of development for a developing country and were approached by a multinational corporation interested in locating in your country.

Identify some of the benefits and some of the costs to the host country from allowing a multinational corporation to locate in a country with a developing economy. Discuss with your classmates if developmental assistance from world developmental agencies, such as the World Bank or the United Nations, would be preferable to private investment.?




17 Diana Mayfield/Getty Images The Challenge of Economic

 

Development

 

Learning Outcomes

 

By the end of this chapter, you will be able to:

 

? Describe the distinctive characteristics of developing countries.

 

? Analyze the role of population growth and human capital and their effects on developing

 

countries.

 

? Explain the primary theories and strategies for economic development.

 

? Understand varying views on the role of government in promoting economic development.

 

? Discuss the role of developed countries in assisting developing countries. ama80496_17_c17_465-494.indd 465 12/4/12 4:44 PM Pre-Test CHAPTER 17 Introduction G reece was once one of the richest countries in the world. Ancient Greece was where

 

the first Olympic Games were played, where democracy was born, and where

 

Western civilization began. In 2010, Greece?s purchasing-power-adjusted GDP per

 

capita was the world?s 25 highest, and its health care system ranked as one of the best in

 

the world (www.investingreece.gov.gr). Since 2010, though, Greece?s economy has suffered from the European sovereign debt crisis. Before the debt crisis, Greece?s GDP had

 

expanded at an average annual rate of 4% from 2004 to 2007, one of the highest rates in

 

the Eurozone. But the GDP shrank by 3.4% in 2010 and again by 6.9% in 2011. Also in

 

2011, Greece?s ratio of public debt to nominal GDP stood at 165.3% (Oikonomakou &

 

Papandreou, 2012). What was once a healthy and vibrant country respected the world

 

over was suddenly on the brink of financial and economic breakdown. What happened?

 

What changed?

 

At different times in history, Egypt, Rome (Italy), Ethiopia (home of the Queen of Sheba),

 

and Babylonia (now Iraq) were all highly developed by the standards of their time. Other

 

countries that were poor in the past, like Taiwan, Thailand, and Mexico, are now prospering. Is there some explanation of why certain countries prosper while others decline? This

 

chapter attempts to unravel the secrets to success in the economic sphere for those countries classified as developing nations. Pre-Test

 

1. Most less developed countries have dual economies. a. True b. False

 

2. In industrialized countries, the crude death rate has fallen over recent years. a. True b. False

 

3. The founder of market economics is also considered the original theorist of economic development. a. True b. False

 

4. The laissez-faire view of government is essentially the same as the dirigiste view

 

of government. a. True b. False

 

5. Aid to developing nations comes mostly from the private sector. a. True b. False ama80496_17_c17_465-494.indd 466 12/4/12 4:44 PM Section 17.1? Characteristics of Developing Countries CHAPTER 17 Answers

 

1. a. True. The answer can be found in Section 17.1.

 

2. b. False. The answer can be found in Section 17.2.

 

3. a. True. The answer can be found in Section 17.3.

 

4. b. False. The answer can be found in Section 17.4.

 

5. b. False. The answer can be found in Section 17.5. 17.1? Characteristics of Developing Countries G rowth is a matter of concern for developed, industrial countries like the United

 

States. However, it is closer to a life-or-death matter for many developing countries (also referred to as ?less developed countries,? or LDCs). The problems facing

 

these countries encompass the whole operation of the economy. The term economic growth

 

used in Chapter 16 is too narrow to describe the goal of most of the poorer nations of the

 

world. Economic development is a total process of transformation. It means not only raising current standards of living but also building a solid foundation of human and physical

 

capital, technology, infrastructure, and economic institutions that will support continued

 

improvement in the future.

 

It is easy to blame the poor countries themselves for their failure to attain a high standard

 

of living, or to blame the rich for the problems of the poor. Some view that success economically is because one country is ?good? while others are ?bad??but the good guy/

 

bad guy argument does not fully capture the extent to which relations between rich and

 

poor countries affect the growth and development of both sides. However, the industrial

 

world does play a role in determining the future of the developing countries. Level of Per Capita Income

 

Although developing countries are diverse, they all have some important similarities. The

 

most obvious characteristic of a developing economy is low per capita income. The World

 

Bank considers any country with a gross national income (GNI) of less than $1,006 per

 

capita (in 2012 U.S. dollars) as a low-income country. Thirty-five countries were categorized as low income in 2011. Another 56 countries were classed as lower middle income,

 

with per capita GNI ranging from $1,006 to $3,975. Fifty-four countries were classed as

 

upper middle income, with a range from $3,976 to $12,275. Seventy countries made the list

 

of high-income countries, including both industrial market economies and high-income

 

oil exporters (?Country and Lending Groups,? 2012). Among this prosperous group, per

 

capita incomes ranged from $12,275 up. Figure 17.1 identifies the World Bank?s low-, middle-, and high-income economies. Table 17.1 presents per capita GNI and growth rates of

 

GDP for selected countries at various income levels. ama80496_17_c17_465-494.indd 467 12/4/12 4:44 PM Section 17.1? Characteristics of Developing Countries CHAPTER 17 Figure 17.1: Income levels by country Low income ? $1,005 or less

 

Lower middle income ? $1,006?$3,975

 

Upper middle income ? $3,976?$12,275

 

High income: nonOECD ? $12,275 or more

 

High income: OECD ? $12,275 or more

 

This map shows the world?s nations divided into three economic groups based on income levels. Lowincome economies have per capita GNI below $1,005. Lower middle-income countries range from

 

$1,006 to $3,975, and upper middle-income from $3,976 to $12,275 in per capita GNI. High-income

 

countries have per capita GNI of $12,275 and above.

 

Source: The World Bank Group, July 2011. Table 17.1 both exhibits and conceals a great deal of diversity. The high-income oil-exporting countries are subject to the fluctuations of the world oil market and must eventually

 

find other economic activities to replace dwindling oil reserves. Other countries we can

 

speak about that are not on the table include Bangladesh and Mexico. Bangladesh is very

 

poor and its growth in per capita GDP has been slow because of a high birthrate, but it has

 

made progress in agricultural production. Mexico graduated from lower middle income

 

to upper middle income in the last few years, partly as a result of good policy choices. ama80496_17_c17_465-494.indd 468 12/4/12 4:45 PM CHAPTER 17 Section 17.1? Characteristics of Developing Countries Table 17.1: GNI and GDP growth, selected countries

 

Income Group and Country Per Capita GNI, 2011 Average Annual GDP Growth

 

%, 2000?2009 Uganda 1,320 7.5 Rwanda 1,240 6.8 Ethiopia 1,110 8.5 Sierra Leone 850 9.5 Democratic Republic of the

 

Congo 350 5.2 Sri Lanka 5,560 5.5 Paraguay 5,310 3.4 Iraq 3.770 0.3 India 3,620 7.8 Nigeria 2,300 6.4 Bulgaria 13,980 5.3 Costa Rica 11,950 5.1 Brazil 11,500 3.6 South Africa 10,790 4.1 Peru 10,160 6.0 Singapore 59,790 6.5 Norway 58,090 2.1 Macao Special Administrative

 

Region, China 57,060 5.2 United States 48,890 2.1 United Kingdom 36,970 1.9 Low Income, 1,375 Lower Middle Income, 3,832 Upper Middle Income, 10,680 High Income, 38,637 Source: ?Gross National Income Per Capita 2011, Atlas Method and PPP,? by the World Bank, 2011.

 

Retrieved from http://databank.worldbank.org/databank/download/GNIPC.pdf. ama80496_17_c17_465-494.indd 469 12/4/12 4:45 PM Section 17.1? Characteristics of Developing Countries CHAPTER 17 The figures in Table 17.1 must be used with caution. Per capita GNI may not be very reliable for comparison purposes. The problems of accurately measuring income and production are even greater in developing countries than in developed ones. Developing

 

countries cannot use sophisticated methods of gathering and processing data. In addition,

 

a much larger share of output in these countries is produced outside the market. In rural

 

areas especially, a family is likely to grow its own food, build its own house, and make its

 

own clothes. This output is difficult to estimate and value at market prices.

 

The spread in growth rates across the groups in the table is quite narrow. Compare the

 

3.6% per year average for the high-income group to the 4.8% for the upper middle-income

 

group and the 7.5% in the low-income group. However, the differences in rates of growth

 

do not imply that income gaps are closing. First, the averages conceal the fairly wide

 

country-to-country variation within each group, including some rates that are negative.

 

Second, starting from a lower base of per capita income, it is possible for one country to

 

grow at a faster rate than another and still fall further behind in absolute dollars. If country A starts at $100 per capita and grows at 5% a year while country B starts at $1,000 and

 

grows at 3% a year, at the end of 10 years country A will have a per capita income of $163,

 

and country B will have a per capita income of $1,344. The gap between the two will have

 

widened from $900 to $1,181.

 

However, even very small differences in growth rates can matter a great deal. Consider

 

country A, with a growth rate of 2.5%, and country B, with a growth rate of 3.5%. A 1% difference seems like a small amount; however, starting out at a per capita income of $1,000,

 

country B will see its income rise to $1,280 in 10 years at a 2.5% growth rate. The same per

 

capita income will rise to $1,411 in 10 years at a growth rate of 3.5%. The 1% difference in

 

growth becomes a 9% difference in per capita income. Agriculture

 

Most developing countries devote a large share of resources to agriculture. Some of this

 

agriculture is large scale and relatively modern, producing export crops such as cocoa, coffee, and bananas. Most of it, however, is basically subsistence agriculture. Simple, laborintensive technology is used to produce food for individual families rather than crops to

 

be sold for cash. Rural overcrowding, small landholdings that preclude modern cultivation, and low agricultural yields per acre are typical. A dominant role for the agricultural

 

sector is strongly linked to low levels of per capita income. In order to escape poverty, a

 

country must have some resources left over after feeding itself, either directly (by producing enough food for home use and export) or indirectly (by exporting enough nonfood

 

items to import needed foodstuffs).

 

Figure 17.2 shows significant differences in the agricultural sector across various groupings. In South Asia, about 18% of GDP is derived from agriculture. In Latin America, that

 

figure drops to 6%. In both low-income and lower middle-income countries, the agricultural sector is a major source of exports. In the United States, only 2% of the labor force

 

produces enough to feed the entire nation. In general, agriculture tends to be much more

 

productive in upper middle-income and high-income countries. In those countries, agriculture is highly mechanized, and a small part of the population produces an abundant

 

harvest, including some for export. Figure 17.2 shows a consistent pattern of declining

 

reliance on agriculture as a nation?s GDP increases. ama80496_17_c17_465-494.indd 470 12/4/12 4:45 PM Section 17.1? Characteristics of Developing Countries CHAPTER 17 Figure 17.2: Agriculture as share (value added) of GDP Share of

 

Agriculture

 

(GDP)

 

50

 

45

 

40

 

35

 

30

 

25

 

20

 

15

 

10

 

5

 

0

 

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

 

South Asia

 

East Asia and Pacific Year

 

Sub-Saharan Africa

 

Europe and Central Asia Middle East and North Africa

 

Latin America and Carribbean A quick reading of this figure might suggest that focusing on other sectors of the economy at the

 

expense of agriculture is a recipe for economic growth. Of course, with the benefit of hindsight, most

 

observers today now agree that the agriculture sector contributes to economic growth, but that economic growth reduces the role of agriculture in terms of GDP.

 

Source: Meijerink, G., & Roza, P. (2007). The role of agriculture in economic development (Markets, Chains and Sustainable Development

 

Strategy & Policy Paper 4). Wagening, Netherlands: Stichting DLO. As a producing sector, agriculture faces certain problems in both developed and developing countries. Supply is unpredictable, depending on the weather. Demand is not very

 

responsive to price changes. Thus a bumper crop will lead to a big price drop. A poor

 

harvest will command high prices, but high prices are little comfort to farmers with little

 

or nothing to sell. Of course, these problems are more serious when agriculture is a large

 

share of GDP. For this reason, reducing dependence on agriculture is a goal of every development program. Development of new high-yield dwarf varieties of rice and wheat in the

 

1970s, with the support of the Rockefeller Foundation, helped to make some developing

 

countries more nearly self-sufficient in food and to increase their agricultural productivity. However, the new varieties also had drawbacks, including lower resistance to pests

 

and greater need for fertilizer, irrigation, and use of machinery. ama80496_17_c17_465-494.indd 471 12/4/12 4:45 PM Section 17.1? Characteristics of Developing Countries CHAPTER 17 Climate

 

Many of the world?s poorest countries are in tropical climates. Conversely, all industrialized countries are in temperate climates. This relationship between climate and development is so strong that it seems unlikely to be a coincidence. In fact, the gap between levels

 

of development between the regions is sometimes referred to by development economists as the ?north?south problem.? Some development economists have suggested that

 

warmer climates produce lower human effort, more diseases, and unfavorable agricultural conditions. There is no winter to wipe out large numbers of disease-bearing pests

 

and parasites. In addition, many tropical countries are largely jungle or desert, neither of

 

which is very hospitable to agriculture. Dualism

 

Almost all developing countries are really two societies in the same country?one modern, urban, and market oriented and the other made up of rural peasants who are illiterate

 

and largely employed in agriculture, with very little of their economic activity passing

 

through the market. This coexistence is called dualism.

 

Cities in developing countries contain many people who are poor but also have modern

 

transportation and plumbing, manufacturing and service jobs, culture, a concentration

 

of educated people, and a modern market economy. Birthrates are lower, and women are

 

more likely to have access to education and market opportunities. Rural areas, in contrast,

 

tend to maintain traditional lifestyles with centuries-old farming methods, early marriage

 

with many children, and much home production with few market transactions. Most citizens in rural areas live in poverty or near poverty, generating little saving and investment

 

and little interest in innovation.

 

China is one example of a nation with a dualistic economic structure. Following the opening of trade barriers and booming economic growth reaching a high of 14% per year in

 

1992 and still upwards of 7.6% in 2012, China is poised to offer its citizens a far greater

 

standard of living www.stats.gov.cn/english/). However, that greater standard of living

 

has not reached many regions of China, where access to running water and basic health

 

care is still very much a problem.

 

Dualism can be a major handicap to development. The urban population in a dual economy is too small to provide a market for manufacturing and services or to generate enough

 

saving and investment in human and physical capital. Dualism also complicates the challenge of development because growth is not enough; it must also include increases in

 

well-being for both the rural as well as the urban poor. Poverty and Inequality

 

As in developed countries, the distribution of income in developing countries shows

 

great inequality. Typically there are greater extremes of wealth and poverty, with a small

 

wealthy elite, a large mass of people who are poor in both urban and rural areas, and a

 

very small middle class. This distribution of income makes it difficult to save and invest

 

because the wealthy group is so small and most of the rest of the population is at a subsistence level of income. ama80496_17_c17_465-494.indd 472 12/4/12 4:45 PM CHAPTER 17 Section 17.1? Characteristics of Developing Countries The World Bank has established a poverty line of $1.25 per day (2005 U.S. dollars) as the

 

threshold for absolute poverty. At this level, almost 1.3 billion people remain below the

 

extreme poverty line. Figure 17.3 shows poverty rates from 1981 to 2008 for the developing world using both $1.25 and $2.00 as poverty thresholds. Figure 17.4 groups certain regions to further distinguish both the overall level and rate of decrease in poverty

 

over time. Although all regions have reduced the level of poverty, a large percentage of

 

the world?s population still faces extreme poverty. Other measures such as illiteracy and

 

infant mortality suggest that people who are poor still make up about 30%?50% of the

 

population in the developing world.

 

Figures 17.3 and 17.4: Poverty rates in the developing world, 1981?2008

 

Percent

 

Living

 

Below

 

Poverty

 

Line

 

60 $2 per day

 

$2 per day (less China)

 

$1.25 per day 40

 

$1.25 per day (less China)

 

20 0

 

1980 Population

 

living on

 

less than

 

$1.25/day

 

in 2005 PPP

 

(Millions)

 

2,000 1985 1990 1995

 

Year 2000 2005 2010 Rest of the world

 

Sub-Saharan Africa 1,500

 

1,000

 

500

 

0 South Asia

 

East Asia and

 

the Pacific

 

1981 1984 1987 1990 1993 1996 1999 2002 2005 2008

 

Year Figure 17.3 shows poverty rates from 1981 to 2008 for the developing world using both $1.25 and $2.00

 

as threshold levels of poverty. Figure 17.4 groups certain regions to further distinguish both the overall

 

level and rate of decrease in poverty over time.

 

Source: Poverty. (2012). Retrieved June 15, 2012, from http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/

 

0,,contentMDK:20040961~menuPK:34480~pagePK:36694~piPK:116742~theSitePK:4607,00.html. ama80496_17_c17_465-494.indd 473 12/4/12 4:45 PM CHAPTER 17 Section 17.1? Characteristics of Developing Countries In recent years, a number of developing countries have succeeded in reducing poverty,

 

some primarily through economic growth and others through investing in health and

 

education for people who are poor, guaranteeing their access to basic services, or some

 

combination of these strategies (?Poverty,? 2012). Economic growth does not automatically translate into poverty reduction. Some countries that have had high rates of economic growth, such as Brazil, have not improved such indicators as health and educational attainment. Growth can and does generate resources with which to address some

 

of the problems facing people who are poor. On the other hand, there are countries with

 

low incomes and slow growth, such as Nicaragua, that have made significant gains in life

 

expectancy, reduced infant mortality, and literacy. Poverty programs can be progrowth

 

if they involve investing in the health and skills of people who are poor or antigrowth if

 

they increase dependency and discourage work. Ideally, economic growth and reduction

 

in poverty will go hand in hand, but the combination is not automatic. Experience at the

 

World Bank indicates that providing basic social services, specifically in health and education, has been the most effective way to work toward both growth and poverty relief. Demographics

 

One striking difference between developing and more developed countries is in demographics?the birthrate, the population growth rate, and the age distribution of the

 

population. Figure 17.5 shows some important differences in population characteristics

 

between developing and more developed countries.

 

Figure 17.5: Trends in birth and death rates, 1850?2000 Births/deaths

 

per 1,000

 

people

 

50 Death rate in

 

developing countries 40 Natural population

 

increase Natural population

 

increase

 

30

 

20 Birthrate in

 

developing countries Death rate in

 

developed countries 10 Birthrate in

 

developed countries 0

 

1850 1875 1900 1925

 

Year 1950 1975 2000 Birthrates and death rates have generally declined over time worldwide, although the decline has been

 

more rapid in developing countries since 1955.

 

Source: http://www.worldbank.org/depweb/english/beyond/beyondco/beg_03.pdf. ama80496_17_c17_465-494.indd 474 12/4/12 4:45 PM Section 17.2? Population, Human Capital, and Economic Development CHAPTER 17 The crude birthrate is the number of births per thousand of population. There is a large

 

difference in the crude birthrates of poor and industrialized countries. As of 2012, the average global birthrate is 19.15 births per 1,000 total population, compared to 19.95 per 1,000

 

population in 2009 and 20.43 per 1,000 population in 2003. A high birthrate means a high

 

dependency ratio, or the percentage of the population not of working age (under 15 or

 

over 64). Low-income countries have much higher dependency ratios. A high dependency

 

ratio means that a smaller proportion of the population is available to engage in productive labor. More resources must be used to meet the needs of people who are dependent

 

(a few of them elderly, but mostly children) for food, clothing, shelter, medical care, and

 

basic education. Those resources will not be available to promote economic development

 

through building factories and power plants, providing worker training, and developing

 

transportation systems.

 

Why are birthrates so high? Women marry soon after puberty in many poor countries

 

because they have few economic alternatives to marriage. They bear children early because

 

children, especially sons, are useful as labor and for old-age insurance.

 

People in poorer countries also die younger. A shorter life expectancy reflects poor health

 

care, poor nutrition, and high infant mortality. A shorter life expectancy means that the

 

productive work life of the average adult is not as long. The consequence of a short life

 

expectancy and a high birthrate in developing countries is a large number of children with

 

relatively few adults to support them. A growing population with a high dependency

 

ratio is a major barrier to achieving the goal of increasing output and raising the standard

 

of living. Key Ideas: Developing Versus Developed Countries

 

Developing countries share some important characteristics, like

 

? ? ? ? ? ? low per capita incomes,

 

a large share of resources devoted to agricultural production,

 

tropical climates,

 

dualism, with greater extremes of wealth and poverty,

 

high birthrates, and

 

shorter life expectancies. 17.2? Population, Human Capital, and Economic Development I n 1800, the estimated world population was about 1 billion. In 1990, it was 5.3 billion.

 

By 2011, it surpassed 7 billion. By 2050, there could be as many as 20 billion people on

 

the planet. The world?s population is growing by 200,000 people per day, or 70 million people per year. The good news is that the growth rate is slowing down. The key to

 

controlling population growth is the total fertility rate (TFR), or the number of children a

 

woman will bear during her childbearing years. A TFR of 2.0 keeps population constant.

 

In 1960?1965, the world TFR was 5.0. By 2010, it had fallen to 2.5?only 1.6 in the industrial countries (?World Population Prospects, the 2010 Revision,? 2011). Even in developing countries, there has been some progress in reducing fertility rates. ama80496_17_c17_465-494.indd 475 12/4/12 4:45 PM CHAPTER 17 Section 17.2? Population, Human Capital, and Economic Development Figure 17.6: World population, 1750?2050

 

Developing nations Developed nations Billions

 

10

 

9

 

8

 

7

 

6

 

Total world

 

population 5

 

4

 

3

 

2

 

1

 

0

 

1750 1800 1850 1900 1950 2000 2050 Future population growth is expected to come almost exclusively from developing countries.

 

Source: http://www.worldbank.org/depweb/english/beyond/beyondco/beg_03.pdf. The problem for development is that most of the projected growth will still occur in the

 

developing countries (see Figure 17.6). Today, medical advances, inoculations, and many

 

life-lengthening techniques have spread throughout the world, reducing death rates even

 

in developing countries. Birthrates did not decline in the developed world until most

 

countries had attained relatively high levels of per capita income. In most nations, death

 

rates fell first as better health care, better nutrition, and higher standards of living lengthened life spans. After a time, birthrates fell. A nation that has bridged the developmental

 

gap from falling death rates to falling birthrates, thus slowing population growth and

 

reducing the dependency ratio, has made the demographic transition.

 

Most economists consider a large number of dependent children as a drag on economic

 

development. Population growth due to high birthrates may, however, have positi...

 


Solution details:
STATUS
Answered
QUALITY
Approved
ANSWER RATING

This question was answered on: Sep 18, 2020

PRICE: $15

Solution~0001001856.zip (25.37 KB)

Buy this answer for only: $15

This attachment is locked

We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free copy from our tutoring website www.aceyourhomework.com (Deadline assured. Flexible pricing. TurnItIn Report provided)

Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .
SiteLock

About this Question

STATUS

Answered

QUALITY

Approved

DATE ANSWERED

Sep 18, 2020

EXPERT

Tutor

ANSWER RATING

GET INSTANT HELP/h4>

We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.

You can also use these solutions:

  • As a reference for in-depth understanding of the subject.
  • As a source of ideas / reasoning for your own research (if properly referenced)
  • For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student.

NEW ASSIGNMENT HELP?

Order New Solution. Quick Turnaround

Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.

WE GUARANTEE, THAT YOUR PAPER WILL BE WRITTEN FROM SCRATCH AND WITHIN YOUR SET DEADLINE.

Order Now