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What are the ways of dividing up the world?
Original method This was devised from a Western European perspective. First world - European countries Second world - Colonies of the British Empire such as Australia and North America Third world - Poor countries Fourth world - Poorest countries whose economic growth was declining or standing still
North/South divide This method was published in 1981 in the Brandt Report. This made a simpler division contrasting economically wealthier and industrialised countries with the poor, less mature and largely agricultural ones. GNP per capita was the development indicator used to draw the North-South divide.
Modern methods This is another simpler way of dividing up the world according to economic development LEDC – Less Economically Developed Countries MEDC – More Economically Developed Countries
The Development Gap
NIC – Newly Industrialising Countries. These are the most rapidly developing countries e.g. China Five-fold division based on wealth This is the newest method of classifying the world. There are five categories based on wealth. There are still problems with classifying countries according to wealth as oil exporting countries for example have a higher GNP per capita than would be in reality. The oil industry is a huge business and it doesn’t necessarily mean that the main population benefits from the money made from exporting oil.
Measuring development
Statistics are used to show the level of development which allows countries to be compared. These are called development indicators.
- Gross National Income (GNI) - total wealth made by a country including income received from other countries (interest).
- Gross National Product (GNP) - total value of all products and services produced in a year by residents of a country (even if abroad).
- Gross Domestic Product (GDP) - total value of all products and services produced in a year within a country like Britain, even if the business is not British. ‘Per capita’ means the figure is averaged per person.
There are correlations between GNP per capita and other development indicators such as literacy rate or birth rate as economic development of a country will mean that the governments can provide funds for healthcare and education.
Human Development Index (HDI) The UN has devised another way of measuring development. The Human Development Index combines four indicators:
- Life expectancy
- Literacy rate
- Average number of years spent at school
- GDP per capita (PPP)
Each indicator is given a score and the HDI is the average of the four scores. 1. is the best score and 0.000 is the worst. Countries are then ranked from 1 – 169 according to their overall score.
The HDI is better than relying on just one indicator because it can... Measure differences within a country (unlike GNP) as well as between countries. It shows how the wealth of the country affects the life of the people who live there. It acts as a measure to show how far a country has developed and whether there are improvements in its level and rate of development. It helps a country to set targets that can lead to improvements in quality of life for its citizens e.g. better healthcare to improve life expectancy and better education to improve literacy rates
PPP = Purchasing Power Parity. It means GDP is adjusted because a dollar buys more in some countries than others
Standard of living This refers to how much money people have – so it’s measured as GDP per capita. Do people have enough money to pay for the basics of food and housing? Is there any money left for anything else? Are people surviving on a dollar a day or less?
Physical Quality of Life Index (PQLI) Physical Quality of Life Index (PQLI) is the average of three social indicators: literacy rate, life expectancy and infant mortality.
The difference between PQLI and HDI is that the HDI takes into account the number of years a child spends in schools (rather than the adult literacy rate) and GNP (PPP) whereas PQLI only uses social indicators.
PQLI and standard of living should be used together as people may be poor yet they
can be educated, live to a good age and their children are healthy (low Standard of
living buthigh PQLI).
Case Study: Christian Aid – improving quality of life in Nairobi
Kiambiu is an informal settlement in Nairobi, Kenya. They are also known as slums, shanty towns or favelas. 60% of people in Nairobi live in slums without access to clean drinking water, proper toilets, education and healthcare. In 2009, 4 million people living in Kenya’s urban areas were short of food.
Christian Aid has a Kenyan partner called Maji na Ufanisi (MNU) – it means ‘water and development’. With the help of MNU, the residents of Kiambui have built five toilet and shower blocks and have employed local people to clean and maintain them.
They charge a small fee to use them, and then use that money to improve life further for the community e.g. by building more toilet blocks and providing emergency healthcare for families. They’ve also got clean drinking water now. It has made a huge difference to people’s live, their health and their children.
Case Study: Hurricane Ivan
Hurricane Ivan was the 10th most intense Atlantic hurricane ever recorded. Ivan formed in early September 2004 and became the fourth major hurricane that year.
Effects of the Hurricane
Environmental Social Economic
Agricultural land lost
39 Died Extensive looting 17th century stone prison partially destroyed that left criminals on the loose
St. George, the capital was severely damaged 85% of the small island was devastated Damage on the island totalled $1.1 billion. 90 per cent of homes were damaged Communications were disrupted Nutmeg crop was wiped out which is Grenada’s main export
Effects on Grenada’s development Grenada suffered serious economic repercussions following the destruction caused by Ivan. Before Ivan, the economy of Grenada was projected to grow by 4.7%, but the island's economy instead contracted by nearly 3% in 2004. The economy was also projected to grow by at least 5% through 2007, but, as of 2005, that estimate had been lowered to less than 1%. The government of Grenada got into debt: 130% of the island's GDP which was “unsustainable”. More than $150 million was sent to Grenada in 2004 to aid reconstruction following Ivan.
Trade
Trade is the movement and sale of goods from one country to another.
Some countries rely heavily on a few main exports which can be a problem. Countries can end up in real difficulty if: their product runs out e.g. oil a crop fails or is wiped out via natural disasters e.g. rice prices for the product fall e.g. sugar demand falls for their product another country can produce the same product but more cheaply
Key terms
Export - are goods transported by one country to sell in another. Import - are goods or services that a country buys that it doesn't have enough of or can get more cheaply from somewhere else. Primary goods - are cheap products harvested from the land e.g. tea, fish, cement. Manufactured goods - are goods that a country makes, usually expensive and requires machinery to produce. Trade surplus - country earns more money from exports than it spends on imports. Trade deficit - a country spends more on imports than it earns from exports. Trade balance - the difference between the value of imports and exports of a country. Interdependence - the reliance of a country, especially in terms of trade and aid, on other countries in the global economy.
World Trade Organisation (WTO) The WTO makes the rules on world trade. It polices free trade agreements, settles trade disputes and organises trade negotiations. The WTO promotes free trade by persuading countries to get rid of tariffs and other trade barriers.
How can international efforts reduce global inequalities?
Debt relief This is reducing the interest rate or the amount of the loan.
Debt abolition
Key terms
Debt - money owed to others, to a bank or to a global organisation such as the World Bank or IMF. Loan - money that is lent to another person, company or country that has to be paid back with interest payments. If the project the money borrowed for is a success, the debt is repaid. However things don’t always go to plan and if the country defaults on the debt it then has be paid back over a longer period of time, which means more interest. This means that standards of living cannot improve as the burden of the debt is too great. Aid - money, food, training and technology, given by richer countries to poorer ones, either to help with an emergency or to encourage long-term development. The aim is to raise standards of living in the country. True aid is not a loan that needs to be repaid. However, in the real world some ‘aid’ really is a loan because some form of payback is required.
This is where debts are abolished or written off. Debtor nations benefit hugely as they can then begin to improve life for their citizens. In July 2005, ten Live 8 concerts were held around the world to campaign to Make Poverty History. A few days later, at a meeting of the G8 (the world’s eight richest countries), an agreement was made to cancel all debts (worth $40 billion) owed by 18 Highly Indebted Poor Countries (HIPC).
Two conditions had to be met though before the debts were cancelled. These were that each government had to show that it could manage its finances, and show that it wasn’t corrupt. They also had to agree to spend the saved debt money on education, healthcare and reducing poverty.
By 2008, 27 of the 38 HIPC countries had met these conditions and had had $ billion of debt cancelled. The bad news is that African countries still owe $ billion and there’s little chance that they’ll be able to repay it.
Loan solutions Non-profit groups in the USA have been lending money to individuals in poor countries. Sara Garcia in Lima, Peru borrowed $1,845 in 1984. She invested in equipment to make patterned handkerchiefs. She hired extra workers and family members to help. Output has risen from 20 to 500 items per day. She met her repayments on time. The technology was appropriate, allowing the business to become sustainable and successful. These schemes work on a small scale but small businesses are the basis of any economy and it employs a surprising number of people and supports their families. Everyone gains!
Conservation swaps In their attempts to develop, poorer countries are tempted to use every natural resource available to them, even if it is something valuable whose loss will result in future difficulties for the country itself.
Conservation swaps are agreements whereby a proportion of a country’s debts are written off in exchange for a promise by the debtor country to undertake environmental conservation projects.
Between 1987 and 2001, 50 countries took part. Usually areas of valuable land are set aside for protection, especially tropical rainforest. In 2002 and 2008, Peru and the USA agreed to a debt swap of $ million. Peru agreed to conservation activities to preserve more than 27.5 million acres of endangered
Fairtrade rewards and encourages farming practices that are environmentally sustainable. Producers are also encouraged to strive toward organic certification. Producers must:
- Protect the environment in which they work and live. This includes areas of natural water, virgin forest and other important land areas and dealing with problems of erosion and waste management.
- Follow national and international standards for the handling of chemicals. There is a list of chemicals which they must not use.
- Not, intentionally, use products which include genetically modified organisms (GM foods)
In some national markets Fairtrade accounts for between 20-50% of market share in certain products. There are now 827 Fairtrade certified producer organizations in 58 producing countries.
Aid
Aid is when a country receives help from another country or an organisation such as an NGO to help it develop and improve people’s lives.
Key terms
Short term aid – aid given to relieve a disaster situation. Long term aid – aid given over a significant period of time, which aims to promote economic development. Donor country – a country giving aid to another country. Receiving country – a country receiving aid from another country. Bilateral aid – aid given by one government to another. It may include trade and business agreements tied to the aid. Multilateral aid – MEDCs give money to international organisations such as the World Bank, UN or IMF. They then redistribute this to development projects in LEDCs. Top down aid – aid used so that governments can run more efficiently or to build infrastructure such as roads and bridges. Bottom up aid – aid used to provide basic health care for communities, clean drinking water and money for education. NGOs – Non-Governmental Organisations. These are charities such as AcionAid, UNICEF or Oxfam.
Advantages and disadvantages of aid for donor and receiving countries
Case Study: Cahora Bassa Dam, Mozambique
(bilateral aid)
The Cahora Bassa dam was begun by the Portuguese government of Mozambique in the 1960’s, although it was only completed three decades later. Civil war (1977-1992) prevented its development and use of the scheme as well as damaging its infrastructure.
It is the largest HEP scheme in southern Africa with five huge turbines. Despite this huge resource, only 1% of
Development differences in the EU
The EU was set up in 1957 to achieve economic and political cooperation after WWII. Twenty-seven countries now belong to the EU, and they account for 31% of global GDP.
The EU may be one of the richest parts of the world, but there’s still a big gap between its richest and poorest countries and regions. The richest regions (in terms of GDP per capita) are all cities – London, Brussels and Hamburg. The richest country is Luxembourg – more than seven times richer than Bulgaria or Romania, the poorest members of the EU
Economic periphery: The edge of a country or region in terms of economies. It may not physically be the edge, but is a more remote, difficult area where people tend to be poorer and have fewer opportunities. A less well-developed area.
Economic core: The centre of a country or region economically, where businesses thrive, people have opportunities and are relatively wealthy. A highly developed area.
EU policies to reduce the differences in development
There are many ways that the EU is trying to reduce the development gap between countries and regions in the EU. These include:
The Common Agricultural Policy The Common Agricultural policy (CAP) was set up in 1962. It wanted to achieve: A single market in which agricultural products could move freely. Make the EU more self-sufficient by giving preference to EU produce and restricting global imports. Give money to support farmers by guaranteeing prices (subsidies) and a market for their goods. Farmers could produce more and that their surplus would be bought even if not sold on the market. An increase in the average field size, farm size and farmers income.
Supporters of the CAP say that it guarantees the survival of rural communities, where more than half of EU citizens live and preserves the appearance of the countryside. Critics say that as only 5% of the EU citizens work in agriculture, which generate only 1.6% of GDP, the CAP costs too much!
The Problems: Due to guaranteed wage for farmers produce, farmers produced much more than was needed in the EU. This created huge surpluses of food products (called ‘cereal, butter or beef mountains’ and ‘wine and olive-oil lakes’) in the 1980s. Farmers received £31billion worth of subsidies a year. This was 70% of the whole EU budget and only provided 5% of the EU income!!! The EU couldn’t keep this up so it changed or reformed in 1992. Hedgerows were destroyed to make larger fields and bigger machinery. This destroyed habitats.
CAP Reform, 1992. The main changes were: Single Payment Scheme (SPS). Started in 2003 this is where farmers didn’t get several different subsidy payment they got just one. Farmers must meet certain standards of animal welfare and land management to get the payment. Concentration changed from quantity to quality of produce. However, dairy farmers still have quotas and this has being boosted since 2008, however they are being scrapped in 2015. Quotas are where farmers are told how much milk they can produce and can’t produce more than this. Arable farmers must set-aside part of their land (up to 15% of their land). This is where the land isn’t used for growing crops or keeping land. There are strict rules on how much land, its type & how its managed otherwise farmers won’t get their payment under the SPS. Training of young farmers was put into place. Diversification was encouraged.
at least 20%; cutting congestion and improving travel times and air quality in the town. The new road also links previously isolated neighbourhoods; there are paths for cyclists and joggers. It cost €16.6 million.
European Investment Bank (EIB) The EIB’s money comes from the member countries who own it. They contribute according to their size and wealth. In 2004 they contributed €163.6 billion. The bank borrows on the world financial markets.
Its main purpose is to invest in regional development. Some regions are suffering difficulties because of the decline of local industry or reduced farm incomes. Projects are usually locally based and funds are used to train people with new skills and to help set up new businesses.
Structural Funds Structural funds support poorer regions of Europe and improves infrastructure, particularly transport because that enables the economy in an area with difficulties to work more efficiently. Together with CAP, it makes up most of the EU spending.
Regions whose GDP per capita is less than 75% of the EU average are targeted. The aim is to accelerate development so they catch up with other regions. The budget for 2007-2013 is €347.1 billion. In addition, the most deprived regions will receive extra money from other funds.
