Throughout the course, students are introduced to several important concepts in development economics and, in particular, to the undamental distinction between economic growth and economic development established in section 3. This important distinction needs to be re-emphasized at the beginning of this section.
Given the dynamic nature of the international economy, it is problematic to group countries into clearly established categories such as developed, developing, newly industrialized countries (NICs) and transition economies. However, students should understand current terminology and be aware that similarities and differences exist within different categories. It is important for teachers to help students find relevant examples of the different categories of countries.
The main purpose of this section is to provide students with the opportunity to understand the problems faced by developing countries, and to develop an awareness of possible solutions to these problems.
5.1 Sources of economic growth and/or development
- Natural factors: the quantity and/or quality of land or raw materials
- Human factors: the quantity and/or quality of human resources
- Physical capital and technological factors: the quantity and/or quality of physical capital
- Institutional factors that contribute to development
- banking system
- education system
- health care
- infrastructure
- political stability
5.2 Consequences of growth
- Externalities
- Income distribution
- Sustainability
5.3 Barriers to economic growth and/or development
- Poverty cycle: low incomes › low savings › low investment › low incomes
- Institutional and political factors
- ineffective taxation structure
- lack of property rights
- political instability
- corruption
- unequal distribution of income
- formal and informal markets
- lack of infrastructure
- International trade barriers
- overdependence on primary products
- consequences of adverse terms of trade
- consequences of a narrow range of exports
- protectionism in international trade
- International financial barriers
- indebtedness
- non-convertible currencies
- capital flight
- Social and cultural factors acting as barriers
- religion
- culture
- tradition
- gender issues
5.4 Growth and development strategies
- Harrod-Domar growth model
- Structural change/dual sector model
- Types of aid
- bilateral, multilateral
- grant aid, soft loans
- official aid
- tied aid
- Export-led growth/outward oriented strategies
- Import substitution/inward-oriented strategies/protectionism
- Commercial loans
- Fair trade organizations
- Micro-credit schemes
- Foreign direct investment
- Sustainable development
5.5 Evaluation of growth and development strategies
- Evaluation of the following in terms of achieving growth and/or development
- aid and trade
- market-led and interventionist strategies
- The role of international financial institutions
- the International Monetary Fund (IMF)
- the World Bank
- private sector banks
- non-government organizations (NGOs)
- multinational corporations/transnational corporations (MNCs/TNCs)
- commodity agreement