Measuring The Standard of Living

Introduction

The standard of living is a measure of material welfare.
The baseline measure is real national output per head of population or real GDP per capita
Real income per capita is an inaccurate and insufficient indicator of living standards

National income data can be used to make cross-country comparisons. This requires

Converting GDP data into a common currency
Making an adjustment to reflect differences in the cost of products in each country to produce data expressed at ‘purchasing power parity’ standard.

The chart below tracks changes in real per capita national income adjusted for PPP for a selection of African countries. Note: not all countries have seen their absolute position improve.

Problems in using national income statistics to measure living standards

Official data on GDP understates the growth of real national income per capita over time due to theshadow economy and the value of unpaid work by volunteers and people caring for their family.

The "shadow economy" includes illegal activities such as drug production and distribution, prostitution, theft, fraud and concealed legal activities such as tax evasion on otherwise-legitimate business activities such as un-reported self-employment income.

The scale of the “shadow economy” varies across countries at different stages of their development.

According to the IMF, in developing countries it may be as high as 40% of GDP; in transition countries of central and Eastern Europe it may be up to 30% of GDP and in the countries of the OECD, the shadow economy may be in the region of 15% of GDP.

Here are some reasons why GDP data may give a distorted picture of living standards in a country:

Regional variations in income and spending: National GDP data can hide regional variations in output, employment and income per head of the population.
Inequalities in income and wealth: Average (mean) incomes might be rising but inequality could grow at the same time
Leisure and working hours and working conditions: An increase in real GDP might have been achieved at the expense of leisure time if workers are working longer hours or if working conditions have deteriorated.
Imbalances between consumption and investment: High levels of investment as a share of GDP might be superb for creating extra capacity to produce but at the expense of consumer goods and services for the current generation.
Changes in life expectancy: Improvements in life expectancy don’t always show through in the GDP accounts. Putting a monetary value on the benefits of increased longevity is difficult.
The value of non-marketed output: Much useful and valuable work is not produced and sold in markets at market prices. The value of the output of people working unpaid for charities, self-help groups and of housework might reasonably be added to national income statistics.
Innovation and the development of new products: New goods and services become available because of invention and innovation that simply would not have been available to the richest person on earth less than fifty years ago. About half of what we spend our money on now was not invented in 1870. Examples include air travel, cars, computers, antibiotics, hip replacements, insulin and many other life-enhancing and life-saving drugs
Environmental considerations: Rising output might have been accompanied by an increase in air and noise pollution and other externality effects that have a negative effect on our social welfare.
Defensive expenditures: Much spending is to protect against an “economic or social bad” e.g. crime, or spending to clean up the effects of pollution and waste

Globalisation - Introduction

Introduction to Globalisation

The OECD defines globalization as

“The geographic dispersion of industrial and service activities, for example research and development, sourcing of inputs, production and distribution, and the cross-border networking of companies, for example through joint ventures and the sharing of assets.”

51 of the largest economies in the world are corporations. The top 500 TNCs account for nearly 705 of world trade.

Globalisation is best defined as a process of deeper economic integration between countries involving:

An expansion of trade in goods and services
An increase in transfers of financial capital including the expansion of foreign direct investment(FDI) by trans-national companies (TNCs) and the rising influence of sovereign wealth funds
The development of global brands
Spatial division of labour– for example out-sourcing and off shoring of production and support services as production supply-chains has become more international. As an example, the iPod is part of a complicated global supply chain. The product was conceived and designed in Silicon Valley; the software was enhanced by software engineers working in India. Most iPods are assembled / manufactured in China and Taiwan by TNCs such as FoxConn
High levels of labour migration within and between countries
New nations joining the trading system. Russia joined the World Trade Organisation in July 2012

Global inter-dependence and shifts in world economic influence

The shifting centre of global influence

“In 1980, North America and Western Europe produced more than two-thirds of the world’s income, so as a result, in 1980 the world’s economic center of gravity was a point in the middle of the Atlantic Ocean. By 2008, because of the continuing rise of India, China and the rest of East Asia, that center of gravity had shifted to a point just outside İzmir.”
Professor Danny Quah, LSE

Globalisation is a process of making the world economy more inter-dependent

It is also bringing about a change in the balance of power in the world economy. Many of the newly industrializing countries are winning a rising share of world trade and their economies are growing faster than in richer developed nations especially after the global financial crisis (GFC)

Previous waves of globalisation

There have seen several previous waves of globalisation:

Wave One: Began around 1870 and ended with the descent into protectionism during the interwar period of the 1920s and 1930s. This first wave started the pattern which persisted for over a century of developing countries specializing in primary commodities which they export to the developed countries in return for manufactures. During this wave of globalisation, the ratio of world exports to GDP increased from 2 per cent of GDP in 1800 to 10 per cent in 1870, 17 per cent in 1900 and 21 per cent in 1913.
Wave Two: After 1945, there was a 2nd wave of globalization built on a surge in trade and reconstruction. The International Monetary Fund was created in 1944 to promote a stable monetary system and provide a sound basis for multilateral trade, and the World Bank to help restore economic activity in the devastated countries of Europe and Asia. Their aim was to promote lasting multilateral co-operation between nations. The General Agreement on Tariffs and Trade (GATT) signed in 1947 provided a framework for a mutual reduction in import tariffs. GATT eventually became known as the WTO.
Wave Three: The most recent wave of globalisation has seen another sharp rise in the ratio of trade to GDP for many countries and secondly, a sustained increase in capital flows between counties

What factors have contributed to globalisation?

Among the main drivers of globalisation are the following:

Containerisation – the costs of ocean shipping have come down, due to containerization, bulk shipping, and other efficiencies. The lower cost of shipping products around the global economyhelps to bring prices in the country of manufacture closer to prices in the export market, and makes markets contestable in an international sense.
Technological change – reducing the cost of transmitting and communicating information - known as “the death of distance” – this is an enormous factor behind trade in knowledge products using internet technology
Economies of scale: Many economists believe that there has been an increase in the minimum efficient scale associated with particular industries. If the MES is rising, a domestic market may be regarded as too small to satisfy the selling needs of these industries. Overseas sales become essential.
De-regulation of global financial markets: This has included the removal of capital controls in many countries which facilitates foreign direct investment.
Differences in tax systems: The desire of multi-national corporations to benefit from lower labour costs and other favourable factor endowments abroad and develop and exploit fresh comparative advantages in production has encouraged many countries to adjust their tax systems to attract foreign direct investment.
Less protectionism - old forms of non-tariff protection such as import licencing and foreign exchange controls have gradually been dismantled. Borders have opened and average tariff levels have fallen – that said in the last few years there has been a rise in protectionism as countries have struggled to achieve growth after the global finance crisis.

Average Most Favoured Nation Applied Import Tariffs (%)	1991	2001	2009
*Developing Countries* (134 countries)	27.7	13.5	9.9
*Low Income Developing Countries* (42 countries)	44.4	14.4	11.8
Source: World Bank

The breakdown of the Doha trade talks dashed hopes of a globally based multi-lateral reduction in import tariffs. In its place there has been a flurry of bi-lateral trade deals between countries and the emergence of regional trading blocs such as NAFTA and MECOSUR
Globalization no longer necessarily requires a business to own or have a physical presence in terms of either owning production plants or land in other countries, or even exports and imports. For instance, economic activity can be shifted abroad using licensing and franchising which only needs information and finance to cross borders.

Joint Ventures

Increasingly we see many examples of joint-ventures between businesses in different countries

BMW and Toyota agreed a partnership in 2011 to co-operate on hydrogen fuel cells, vehicle electrification, lightweight materials and a future sports car. Partnership agreements between competing automakers are becoming increasingly common in the industry as manufacturers seek to pool efforts on costly technologies.
Renault-Nissan’s joint venture with Indian firm Bajaj to produce a £1,276 car
Alliances in the airline industry e.g. Star Alliance and One World
Burger King, the US fast food restaurant chain plans to open 1,000 stores in China through a new joint venture with a Turkish private equity business
Sony and Olympus agreed to form an alliance in September 2012 setting up a new company (51% owned by Sony to develop new businesses)

Our chart above tracks the annual growth of real GDP for the world economy and for developing countries as a group. In nearly every year the developing world has seen faster growth. 2009 marked a difficult year for the world economy with a recession – this was felt most severely in rich advanced countries.

Economic Growth - Development & Labour Migration

Introduction

A Global War for Talent

“A higher rate of global migration is desirable for four reasons: it is a source of innovation and dynamism; it responds to labour shortages; it meets the challenges posed by rapidly aging populations; and it provides an escape from poverty and persecution”

Ian Goldin, director of the Oxford Martin School and Professorial Fellow at Balliol College, University of Oxford

This revision note focuses on international labour migration – keep in mind that large migration can happen within a country too. In China there has been rural-urban migration in the last 20 years amounting to over 150 million people.

Cross-border migration from one country to another has become an increasingly important feature of our globalizing world and it raises many important economic, social and political issues
About 200-million people now live in countries in which they were not born
Estimates compiled in 2009 suggested 580,000 to 820,000 Chinese migrants were living in Africa. In 2012 the figure is likely around 1 million

Migrant Workers as a % of a country’s total population
Country	2010	Country	2010
Kuwait	76.6	World	3.1
Qatar	74.2	Sub-Saharan Africa (all income levels)	2.1
United Arab Emirates	43.8	Least developed countries	1.4
Singapore	38.7	Korea, Rep.	1.1
Australia	21.1	Mexico	0.6
Ireland	20.1	Philippines	0.5
United States	13.8	India	0.4
Germany	13.2	Brazil	0.4
United Kingdom	10.4	China	0.1
South Africa	3.7	Indonesia	0.1
Source: World Bank

Factors affecting the direction and scale of migration

Many economic and social factors affect the rate of migration. In general, the incentive to migrate is strongest when the expected increase in earnings exceeds the cost of relocation.

Differences between countries in wages and salaries on offer for equivalent jobs – reflected in differences in expected incomes over a working life
Access to the benefits system of host countries plus state education, housing & health care
Employment opportunities vary between nations, in particular for younger workers
A desire to travel, learn a new language, build new skills and qualifications and develop networks
A desire to escape political repression and corruption in the country of origin especially in failing states
The impact of satellite television and the internet in changing people’s expectations
The effects of cheaper trans-national phone calls and more affordable air travel and coach travel for example within the European Union
The unwillingness of people within the domestic economy to take certain “drudge-filled” jobs such as porters, cleaners and petrol attendants

Economic Benefits from Cross-Border Migration

Supporters of inward labour migration have argued that migration provides numerous advantages:

Fresh skills: Migrants can provide complementary skills to domestic workers, which can raise theproductivity of both (a Brazilian child minder provides good quality child care at an affordable price which allows a highly paid female magazine editor to continue to work.)
A driver of innovation and entrepreneurship: Inward migration can also be a driver of technological change and a fresh source of entrepreneurs. Much innovation comes from the work of teams of people who have different perspectives and experiences. Migrant networks accelerate the spread of technology.
Pressure on government to reform: Labour migration can also put political pressure on failing governments and regimes e.g. a mass exodus of productive workers from Zimbabwe.
Multiplier effects: New workers create new jobs, there is a multiplier effect if they find work and contribute to a nation’s GDP through a higher level of aggregate demand.
Reducing skilled-labour shortages and expanding the labour supply: Migration can help to relieve labour shortages and help to control wage inflation. For example, recruitment of skilled workers from outside the European Union is important to many businesses in the UK, and evidence indicates they currently make a positive contribution to UK’s GDP.
Making a country attractive to FDI: Availability and quality of labour is known to be a key investment location factor for many businesses. In a global battle for talent, if a country is not successful in attracting and keeping skilled workers then FDI in high-knowledge industries will eventually flow to other parts of the world.
Income flows (remittances): Remittances sent home by migrants add to the gross national income of the home nations. And if these remittances boost spending in these countries, this creates a fresh demand for the exports of other nations. According to the economist Professor Ian Goldin from Oxford University, in Latin America and the Caribbean, more than 50-million people are supported by remittances, and the numbers are even higher in Africa and Asia.
Tax revenues: Legal immigrants in work pay direct and indirect taxes and are likely to be net contributors to the government’s finances.

Supporters of allowing free movement of labour argue that labour mobility is a positive-sum game rather than a zero-sum game.

Disadvantages of inward migration

On the other side there are several pressure groups campaigning for tighter restrictions on migrant workers. Some of the arguments include:

Welfare costs: Increasing cost of providing public services as migrants come into a country.
Worker displacement: Possible displacement effects of domestic workers
Social pressures: Social tensions arising from the problems of integrating hundreds of thousands of extra workers into local areas and regions.
Pressure on property prices: Rising demand for housing which forces up prices and rents.
Benefit claims: Many immigrants find it hard to get work
Who really gains? The benefits of migration are focused mainly on employers, especially those who take on illegal workers at low wages.
Poverty risk: Migration may have the effect of worsening the level of relative poverty in a society. And many migrant workers have complained of exploitation by businesses that have monopsony power in a local labour market.

Brain Drains – Human Capital Flight

Migration directly impacts the migrants, their families and their employers, and also impacts development indirectly.
Development in turn impacts migration. There is no doubt that migration is a very important driver of development.

Source: World Bank, Jan 2013

Every immigrant is also an emigrant. A brain drain is a term that describes the movement of highly skilled or professional people from their own country to another country where they can earn more money. It has been used to describe net outward migration of people from several European Union countries in recent times (notably Ireland, Greece and Spain) - another phrase for this is human capital flight.

A sizeable brain drain can bring economic costs and benefits for the sending nation. One disadvantage is that countries lose out on the benefits that might have accrued from the resources used in educating people who leave. Add to this the loss of tax revenue from those who choose to live and work overseas. A sizeable loss of skilled workers (many of whom may be younger and therefore more geographically mobile) could lead to labour shortages in the sender country, putting upward pressure on wages and labour costs. Some of this income earned overseas returns to the sender country in the form of remittances and many skilled migrants often leave only for a year or two - the percentage of permanent migration inside the EU is relatively small.

The benefits and costs of labour migration are hard to quantify and estimate. Much depends on

The types of people who choose to migrate from one country to another.
The ease with which they assimilate into a new country and whether they find regular jobs.
Whether a rise in labour migration stimulates capital spending by firms and by government.
Whether workers who come into a country decide to stay in the longer term or whether they regard migration as essentially a temporary exercise (e.g. to gain qualifications, learn some English) before moving back to their country of origin.

Economic Development - Strategies for Sustainable Development

Introduction

Which strategies and policies are best for an individual country wishing to see sustained economic growth and development? Remember that growth and development are not the same!

"Never before in history has the dream of eliminating global poverty been so attainable, yet seemed so elusive. We live in a world where the reach of technology and markets are global, and yet more than a billion men, women, and children live in abject poverty, devoid of their benefits. How can that possibly be? In an age of plenty, what deprives people of adequate food, shelter, clean water, education, good health and enough income to live on with dignity? What can governments, international agencies, and non-governmental organizations do to make the dream a reality?”

Source: Professor Dani Rodrik. Harvard

The role of the state: Throughout much of the 1960s and 1970s, traditional development thinking had been that government/state control and economic planning, high levels of public investment and protection from the volatility of the world market using protectionism was the best recipe for promoting development.

Self-sufficiency was the main goal including investment in import-substitution industries - so foreign trade was seen as a hindrance and therefore a tax opportunity to raise revenues for the government.

In the 1980s and 1990s a new pro-market doctrine gained momentum supported by the work of institutions such as the World Bank and the International Monetary Fund (IMF). This approach advocatedmarket-friendly and open-border policies including cuts in import tariffs and increasing cross-border flows of financial capital and labour.

The core idea behind increasing openness in the world economy was that developing countries stronger engagement with the developed world allows them to mimic and develop the technologies of the West, raise productivity and drive per capita incomes higher.

Development Challenges: Escaping the Middle Income Trap

The middle income trap exists for some countries that make significant progress in reducing extreme poverty and experience structural change and growth but then find it difficult to make the climb from being a middle-income country to achieve high-income fully-developed status. GDP growth rates often slow down and a country can struggle to build and maintain international competitiveness. Research from the World Bank finds that only 13 of the 101 countries deemed to be middle-income countries in 1960 had achieved high-income levels in 2011. Different studies find different thresholds for where growth tapers off, ranging from $8,500 to $18,500 at 2010 prices, adjusted for purchasing power parity.

Possible Causes of the Middle-Income Trap

Strategies for Avoiding the Middle Income Trap

Key to avoiding the trap is for each country to find the right mix of demand and supply-side policies to sustain a further lift in their per capita incomes and to achieve balanced growth sourced from domestic and overseas markets. Every country has a different set of economic, social, cultural, demographic and political circumstances so there is no unique policy mixes to avoid the middle income trap – some of the approaches often mentioned include the following:

The growth that brings a country out of extreme poverty is not always the type of growth that makes a country richer and lifts their per capita income above middle-income levels
The middle income trap is largely the result of a country’s inability to continue the process of moving from low value-added to high value-added industries
The advantages of low-cost labour and imitation of foreign technology can disappear when middle- and upper-middle-income levels are reached
The focus switches towards improving competitiveness rather than narrow emphasis on input-driven growth (i.e. just adding more land, labour and capital into the production process)
Many middle-income countries experience a “growth slowdown”. Leading economist, Professor Barry Eichengreen has found that growth slowdowns typically occur at per capita incomes of about $16,700 in 2005 constant international prices. At that point, the growth rate of GDP per capitaslows from 5.6 to 2.1 percent, or by an average of 3.5 percentage points

Case Study: Malaysia attempts to break the middle income trap

The Malaysian economy achieved rapid growth during the period 1990-97 with annual increases in real GDP close to 10%. The economy then suffered a recession in 1998 because of the Asian financial crisis before starting a recovery. But growth rates since then have been substantially lower – averaging only 4.3% pa from 2001-2009.
Our chart below confirms this and shows also that capital investment spending as a share of GDP has dropped from over 40% to 15% in 2009. Malaysia can still reach her target of becoming a high income developed country by 2020; indeed the government has an ambitious five year national economic plan that includes a target of doubling per capita incomes.

Malaysian growth potential:

A youthful population - 31% below the age of 14 , 5% the population older than 65
Export driven economy spurred by high technology, knowledge-based, capital-intensive industries
A leading exporter of semiconductor devices, hard disks, audio/video products and air conditioners
Tourism regarded as a key growth and development industry – now supported by increased infrastructure investment. Malaysia has 32 airports with paved runways + 83 with unpaved runways
Focus on giving the private sector a bigger role in driving growth and in attracting FDI

Malaysia ranks well in terms of global competitiveness and the chances of breaking the middle-income trap: The 2012 Global Competitiveness Index ranked Malaysia as follows (ranked out of 142 countries):

Institutions: 30/142
Infrastructure: 26/142
Macroeconomic environment: 29/142
Health and primary education: 33/142
Technological readiness: 44/142
Higher education and training: 38/142

Malaysia’s overall global competitiveness ranking for 2012 was 21 out of 142 countries

Case Study: The Greek Economic Crisis – Debt, Default, Deflation and Social Breakdown

Macroeconomic indicators for Greece – negative growth and mass unemployment

Greece has been a member of the single European currency since it was launched in 2001
2013 will be the sixth year in succession that Greece has been in recession
Cumulatively the economy will have lost more than 20% of national output before a recovery starts
Private sector demand has collapsed, there have been deep falls in consumer spending on goods and services and even great reductions in real private sector capital spending
Government consumption on state-provided goods and services is now shrinking rapidly too as the fiscal austerity measures take effect.
This combination of weak private sector demand and a contracting public sector makes it inevitable that the Greek economy stays in recession
Net trade (X-M) is making a small contribution to positive growth and the current account deficit is likely to dip below 5% of GDP for the first time in several years. But this on its own is insufficient to provide Greece with the means to achieve a sustainable recovery
Greek national output is vastly below potential – there is a huge margin of spare capacity
This is one reason why the Greek economy remain at risk of price deflation – which given the scale of national and private sector debt could be catastrophic. Low positive inflation is good news for Greece if it helps to restore price competitiveness, deflation would be a different story.
Unemployment has reached historic highs, more than 25% of the working population is out of work and youth unemployment has soared to nearly 60%
Despite austerity measures the fiscal deficit remains high and national debt will move higher – towards 190% of GDP. IMF aims to bring this down to 120% of GDP in 2020 look fanciful.
The OECD estimates that the trend rate of growth for Greece is zero or perhaps slightly negative – this is highly unusual and reflects the depth of the economic and fiscal crisis facing the country. The IMF does not see Greece returning to growth until 2015 by which time its economy is forecast to be 25% smaller than at the start of the crisis.

The Greek Debt Crisis

The Greek economy became embroiled in a huge debt crisis in the aftermath of the global financial crisis from 2007 onwards. Having struggled to keep public sector spending under control and tackle widespread tax evasion, it became clear a few years ago that the annual Greek budget deficit was much higher than expected. About €30bn annually of tax revenues go uncollected in Greece.

The tipping point for Greece was the immediate and short-run fall-out from the Global Financial Crisis (GFC). Students ought to be familiar with the background here. The sub-prime mortgage crisis in the United States quickly turned into a major global financial meltdown affecting most countries but especially those with highly leveraged financial systems i.e. banking systems and other lenders that had created too much credit to private sector businesses and individuals.

The Greek economy was hit by a fierce demand-side shock and this was made worse because the economy was already suffering from structural competitiveness problems inside the single currency system.

As a direct consequence of the GFC:

Most of Greece’s main trading partners went into a deep recession – cutting exports
There was a 2% fall in world output (unusual) but worse, a 12% fall in global trade

Greece suffered badly because her economy was heavily dependent on tourism and construction, two sectors badly hit by the sharp fall in demand and production.

In 2009 Greek exports collapsed by nearly a fifth (causing a large inward shift of AD) and the Greek fiscal deficit grew from 5% of her national income in 2007 to nearly 14% in 2009. A decade of progress in reducing unemployment was reversed within the space of two harsh years.

The Greek government has run a budget deficit in every year of at least 4% of GDP. Even during the first half of the last decade there was a sizeable deficit although corruption and fraud meant that the official figures hid this. The deficit peaked at over 15% of GDP in 2009 and in 2011 the budget deficit was nearly 10%. Strong growth in Greece helped to keep the government debt to GDP ratio at or around 115% during the years from 2001 to 2008 but a combination of huge annual deficits and six years of recession has brought about a huge rise in the scale of the national debt.

The OECD is forecasting that this will reach 200% of GDP in 2014 despite attempts to cut the deficit. The reason is simple – even though the Greek budget deficit is coming down, their economy is shrinking so the base level of real GDP is falling. In December 2012, the 'troika' of the IMF, the EU and the European Central Bank reached a new funding agreement for which will cut Greece's long term debt burden. And Greece has made some progress in cutting the annual budget deficit. Greece reduced its fiscal deficit before interest payments by 13.4% of GDP between 2009 and 2012.

The European Union, International Monetary Fund and the European Central Bank are the main creditors to the Greek government. They are known as the EU-IMF-ECB troika

Fiscal austerity means contractionary fiscal policy measures in the form of higher taxes and/or cuts in planned government (public) spending. In Greece in 2010, the country was forced to agree a Euro 110bn emergency bailout and introduce an austerity budget. These measures included a VAT rise from 19% to 23%, higher duties on fuel, alcohol and cigarettes, an increase in the retirement age, a public sector pay freeze and a freeze on the size of the basic state pension.

There is a fierce debate in economics about the most effective ways to address the problems caused by high levels of government debt. Many economists including Nobel-winner Joseph Stiglitz argue that contractionary policies make the debt problem worse and that sustained growth is the best pathway out of a debt crisis.

Greece is also seeking to implement structural economic reforms as part of their bail-out package. Structural economic reforms have included:

Pension reforms including raising the official state retirement age
Privatisation of state assets both to raise revenue and to increase competition
Cuts in the national minimum wage
Measures to reduce entry barriers to certain occupations / professions including transport
Cutting taxes on employing workers to boost employment
Making the Greek judicial system more efficient
Cutting red tape for businesses to promote investment
Stronger measures to tackle tax evasion by individuals and businesses

The key issue is whether these structural supply-side reforms will be sufficient to improve competitiveness and generate the minimum growth that Greece needs to break out of their debt trap?

Trade cycle

Introduction

All countries experience regular ups and downs in the growth of output, jobs, income and spending. These fluctuations form what is known as the economic or business cycle.

Boom

A boom occurs when real national output is rising at a rate faster than the trend rate of growth. Some of the characteristics of a boom include:

A fast growth of consumption helped by rising real incomes, strong confidence and a surge in house prices and other forms of personal wealth
A pick up in the demand for capital goods as businesses invest in extra capacity to meet rising demand and to make higher profits
More jobs and falling unemployment and higher real wages for people in work
High demand for imports which may cause the economy to run a larger trade deficit because it cannot supply all of the goods and services that consumers are buying
Government tax revenues will be rising as people earn and spend more and companies are making larger profits – this gives the government money to increase spending in priority areas such as education, the environment, health and transport
An increase in inflationary pressures if the economy overheats and has a positive output gap.

The UK enjoyed sustained growth over the last fifteen from 1993 through to the end of 2008 but for better examples of booming countries we have to look overseas. The obvious example is China whose growth has been astonishing. And many other emerging market countries have experienced a decade or more of phenomenally rapid increases in the size of their economies. The BRIC countries have interested economists interested in understanding their fast rates of growth and development. In addition to China, the BRIC nations include Brazil, Russia and India.

Slowdown

A slowdown occurs when the rate of growth decelerates – but national output is still rising
If the economy grows without falling into recession, this is called a soft-landing.

Recession

Recession and rising unemployment

“There is a risk is that productive capacity in the UK economy could be permanently lost, as temporary job losses morph into long-term unemployment due to job-seekers losing skills and dropping out of the labour market”

Source: IMF Blog, August 2011

A recession means a fall in the level of national output i.e. a period when growth is negative, leading to a contraction in employment , incomes and profits .

The simple definition:

A fall in real GDP for two consecutive quarters i.e. six months

The more detailed definition:

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

There are many symptoms of a recession – here is a selection of key indicators:

A fall in purchases of components and raw materials from supply-chain businesses
Rising unemployment and fewer job vacancies
A rise in the number of business failures including high profile names such as Woolworths
A decline in consumer and business confidence
A contraction in consumer spending & a rise in the percentage of income saved
A drop in the value of exports and imports of goods and services
Deep price discounts offered by businesses in a bid to sell excess stocks
Heavy de-stocking as businesses look to cut unsold stocks when demand is weak
Government tax revenues are falling and welfare spending is rising
The budget (fiscal) deficit is rising quickly

The difference between a recession and a depression

A slump or a depression is a prolonged and deep recession leading to a significant fall in output and average living standards
A depression is where real GDP falls by more than 10% from the peak of the cycle to the trough.

What are the main causes of a recession?

Recessions are unusual. To some economists they are an inevitable feature of a market economy because of the cyclical nature of output, demand and employment.
Every recession is different! It is undeniable that the global credit crunch has been hugely significant in causing the downturn even though macroeconomic policy has tried hard to prevent it.

The 2009 recession was the result of a combination of domestic and external economic factors and forces:

The collapse of the British property boom – falling house prices hit wealth and led to a large contraction in new house building
Reductions in real disposable incomes due to wages rising less quickly than prices
A sharp fall in consumer confidence – made worse by rising unemployment – leading to an increase in household saving – Keynes called this the ‘paradox of thrift.’ (see the chapter on Keynesian economics)
External events – such as recession in the UK’s major trading partners including the USA (which accounts for 15% of UK trade) and the Euro Area (which has 55% of UK trade)
UK exports declined because of recession in major trading partners and this hit manufacturing industry and other businesses that supply export firms
Cut-backs in production have led to a negative multiplier effect causing a decline in demand for consumer services and lower sales and profits for supply-chain businesses
The credit crunch caused the supply of credit to dry up affecting many businesses and home-owners
Falling profits and weaker demand has caused a fall in business sector capital investment – known as the negative accelerator effect.
Unemployment has started to rise early in the downturn – a reflection of our flexible labour market and sticky wages

An important evaluation point is that, in a recession, some businesses are affected more than others.

The extent of the effects will depend on the type of business, the market it operates in and the nature of the product sold

When real incomes are falling, we would expect to see a decline in demand for products with a highincome elasticity of demand – typically these goods and services are regarded as luxury items by consumers, things that they might choose to do without when the economy is having a bad time.

Demand for products with negative income elasticity (i.e. inferior goods) might rise during a recession!

Slow Recovery for the UK

The British economy which contracted 6.4pc in the downturn, has rebounded 2.5pc, and is still 3.9pc below its peak. This recovery is taking longer to take root than from any 20th Century recession bar the Great Depression

Source: News reports, August 2011

Recovery

A recovery occurs when real national output picks up from the trough reached at the low point of the recession.
The pace of recovery depends on how quickly AD starts to rise after a downturn. And, the extent to which producers raise output and rebuild their stock levels in anticipation of a rise in demand
The state of business confidence plays a key role here. Any recovery might be subdued if businesses anticipate that a recovery will be temporary or weak in scale.

A recovery might follow a deliberate attempt to stimulate demand. In the UK a number of strategies have been used to boost confidence and demand and prevent the recession turning into a damaging depression:

Cuts in interest rates – the policy interest rate fell to 0.5% in the Autumn of 2008 and they have stayed at this low level ever since (0.5% at the time of writing in August 2012)
A rise in government borrowing – the budget deficit rose above £150bn in 2009 and government borrowing is likely to remain high for some time to come despite attempts to cut it
A policy of quantitative easing (QE) by the Bank of England to pump more money into the banking system in a bid to increase the supply of loans – now worth more than £325 billion.
A temporary cut in the rate of VAT from 17.5% to 15% (now reversed – VAT rose to 20% in 2011)
The launch of a car scrappage scheme for older cars worth up to £2000 per car and a consumer subsidy for households replacing their old boilers.

Why has the economic recovery in the UK economy been so weak?
The year 2009 saw the UK economy suffer a deep recession with a fall in real GDP of 4.4% and a steep rise in the unemployment rate. There was an encouraging recovery in national output in 2009 with real GDP growing close to the estimated trend rate of growth.

Since then however the pace of expansion in the UK economy has slowed down with growth of only 0.7% in 2011 and even weaker growth forecast for 2012. Indeed in the 2nd quarter of 2012, data showed that the British economy had fallen into a second recession – known as a double-dip.

The level of real GDP remains well below the peak reached at the end of the last economic cycle. Many commentators are forecasting that recovery will continue to be slow in the next couple of years and this poses big risks for households, businesses and the government.

Key economics indicators for the United Kingdom	2007	2008	2009	2010	2011	2012
Real GDP (% change)	3.5	-1.1	-4.4	2.1	0.7	0.5
Consumer spending (% change)	2.7	-1.5	-3.5	1.2	-1.2	0.8
Government spending (% change)	0.6	1.6	-0.1	1.5	0.1	-0.7
Capital investment spending (% change)	8.1	-4.8	-13.4	3.1	-1.2	-0.9
Exports of goods and services (% change)	-1.3	1.3	-9.5	7.4	4.6	1.9
Imports of goods and services (% change)	-0.9	-1.2	-12.2	8.6	1.2	1.5
Unemployment rate (% of labour force)	5.4	5.7	7.6	7.9	8.1	8.6
Government fiscal balance (% of GDP)	-2.8	-5.0	-11.0	-10.3	-8.4	-7.7
Short-term interest rate (per cent)	6.0	5.5	1.2	0.7	0.9	1.0
Consumer price index (% change)	2.3	3.6	2.2	3.3	4.5	2.6
Balance of Payments, current account balance (% of GDP)	-2.5	-1.4	-1.5	-3.3	-1.9	-2.1
Source: OECD World Economic Outlook, May 2012. Data for 2012 is a forecast

Why is the UK finding it hard to achieve a decent recovery in output and jobs? As always when we study macroeconomics, there are many factors at work. The UK is an open economy and our fortunes are affected not just by domestic events and policies but also what is happening in the global system.

Why is GDP growth so difficult to forecast?

When economists make forecasts about the future path for an economy they have to accept the inevitability of forecast errors. Conditions in the economy are always changing and no macroeconomic model can hope to cope with the fluctuations and volatility of indicators such as inflation, exchange rates and global commodity prices. GDP growth is hard to forecast – the chart above is the one produced by the Bank of England when they publish their quarterly Inflation Report. The projection area is their forecast, notice how the uncertainty grows as we move further from the present. In 2014, the range of probabilities for real GDP growth in the UK stretches from -1% (recession) to over 5% (very strong growth). The graph above is a probability fan chart, the darker the area, the higher is the probability attached to the outcome.

Economic Development - Human Development Index (HDI)

Introduction to the HDI

The Human Development Index is published by the UNDP and focuses on longevity, basic education and minimal income. It tracks progress made by countries in improving these three outcomes.
The inclusion of education and health indicators is a sign of successful government policies in providing access to important merit goods such as health care, sanitation and education.
Knowledge: First an educational component made up of two statistics – mean years of schooling and expected years of schooling
Long and healthy life: Second a life expectancy component is calculated using a minimum value for life expectancy of 25 years and maximum value of 85 years.
A decent standard of living: The final element is gross national income (GNI) per capita adjusted to purchasing power parity standard (PPP).

The UNDP classifies each country into one of three development bins:

Low human development for HDI scores between 0.0 and 0.5,
Medium human development for HDI scores between 0.5 and 0.8
High human development for HDI scores between 0.8 and 1.0.

Important note:
GNI is now used rather than GDP because of the growing size of remittances in the global economy and also the importance of international aid payments. For example, because of remittances from abroad, GNI in the Philippines greatly exceeds GDP
Log of income is used in the HDI calculation because income is instrumental to human development but higher incomes are assumed to have a declining contribution to human development

Global Human Development Map for 2011

GNI per Capita - Purchasing Power Parity (PPP)

This is a method of currency valuation based on the idea that two identical goods in different countries should eventually cost the same. This is illustrated by the Big Mac index, which takes a Big Mac hamburger and compares its prices in different countries in order to establish the relative value of their currencies. If PPP holds true, then you can buy the same goods and services with £100 in London as you can in Glasgow, New York and Cape Town. There are many reasons why this will not be the case!

Human Development Index for 2010

A selection of data drawn from the Human Development Index is provided in the table below.

Country	GNI per capita (2008 US$PPP)	HDI value	Inequality-adjusted HDI value (IHDI)	Life expectancy at birth (years)	Mean years of schooling (of adults) (years)
Norway	58,809	0.938	0.876	81.0	12.6
Australia	38,691	0.937	0.864	81.9	12.0
United States	47,093	0.902	0.799	79.6	12.4
Ireland	33,077	0.895	0.813	80.3	11.6
Canada	38,668	0.888	0.812	81.0	11.5
Sweden	36,936	0.885	0.824	81.3	11.6
Germany	35,308	0.885	0.814	80.2	12.2
Japan	34,692	0.884	Not available	83.2	11.5
Korea (Republic of)	29,517	0.877	0.731	79.8	11.6
France	34,340	0.872	0.792	81.6	10.4
Spain	29,661	0.863	0.779	81.3	10.4
Greece	27,580	0.855	0.768	79.7	10.5
Italy	29,619	0.854	0.752	81.4	9.7
United Kingdom	35,087	0.849	0.766	79.8	9.5
Hungary	17,472	0.805	0.736	73.9	11.7
Poland	17,803	0.795	0.709	76.0	10.0
Chile	13,561	0.783	0.634	78.8	9.7
Mexico	13,971	0.750	0.593	76.7	8.7
Russian Federation	15,258	0.719	0.636	67.2	8.8
Brazil	10,607	0.699	0.509	72.9	7.2
China	7,258	0.663	0.511	73.5	7.5
Sri Lanka	4,886	0.658	0.546	74.4	8.2
Thailand	8,000	0.654	0.516	69.3	6.6
South Africa	9,812	0.597	0.411	52.0	8.2
India	3,337	0.519	0.365	64.4	4.4
Kenya	1,627	0.470	0.320	55.6	7.0
Bangladesh	1,587	0.469	0.331	66.9	4.8
Nigeria	2,156	0.423	0.246	48.4	5.0
Côte d'Ivoire	1,624	0.397	0.254	58.4	3.3
Ethiopia	992	0.328	0.216	56.1	1.5
Sierra Leone	808	0.317	0.193	48.2	2.9
Niger	675	0.261	0.173	52.5	1.4
Zimbabwe	176	0.140	0.098	47.0	7.2

Note: IHDI: Inequality-adjusted HDI (a new measure introduced into 2010 Human Development Report)

Uneven progress but deep inequalities

The world average HDI rose to 0.68 in 2010 from 0.57 in 1990, continuing the upward trend from 1970, when it stood at 0.48
The fastest progress has been in East Asia & the Pacific, followed by South Asia and Arab States.
All but 3 of the 135 countries have a higher level of human development today than in 1970
The exceptions are the Democratic Republic of the Congo, Zambia and Zimbabwe
From 1970 to 2010 real per capita income in developed countries increased 2.3 percent a year on average, compared with 1.5 percent for developing countries
The real average income of people in 13 countries in the bottom quarter of today’s world income distribution is lower than in 1970

Limitations of the Human Development Index

The HDI notably fails to take account of qualitative factors, such as cultural identity and political freedoms (human security, gender opportunities and human rights for example).

Many argue that the HDI should become more human-centred and expanded to include more dimensions, ranging from gender equity to environmental biodiversity

The GNP per capita figure – and consequently the HDI figure – takes no account of income distribution. If income is unevenly distributed, then GNP per capita will be an inaccurate measure of the monetary well-being of the people. Inequitable development is not human development.

PPP values change very quickly and are likely to be inaccurate or misleading

The 2010 edition of the Human Development Report marked the launch of a new Inequality-adjusted HDIand also a Gender Inequality Index and a Multidimensional Poverty Index

Inequality HDI - The average loss in the HDI due to inequality is about 23 percent—that is, adjusted for inequality, the global HDI of 0.682 in 2011 would fall to 0.525.

Key point: the HDI is intended to allow economists to draw broad conclusions about which countries enjoyrelatively high standards of living, and which are, by comparison, under-developed.

Economic Growth - Productivity & Economic Development

Introduction

Productivity is a measure of the efficiency with which a country combines capital and labour to produce more with the same level of factor inputs. We commonly focus on labour productivity measured by output per person employed or output per person hour.

A better measure of productivity growth is total factor productivity which takes into account changes in the amount of capital to use and also changes in the size of the labour force.

If the size of the capital stock grows by 3% and the employed workforce expands by 2% and output (GDP) increases by 8%, then total factor productivity has increased by 3%.

Productivity is an important determinant of living standards – it quantifies how an economy uses the resources it has available, by relating the quantity of inputs to output. As the adage goes, productivity isn't everything, but in the long run it’s almost everything.
Higher productivity can lead to:

Lower unit costs: These cost savings might be passed onto consumers in lower prices, encouraging higher demand, more output and an increase in employment.
Improved competitiveness and trade performance: Productivity growth and lower unit costs are key determinants of the competitiveness of firms in global markets.
Higher profits: Efficiency gains are a source of larger profits for companies which might be re-invested to support the long term growth of the business.
Higher wages: Businesses can afford higher wages when their workers are more efficient.
Economic growth: If an economy can raise the rate of growth of productivity then the trend growth of national output can pick up.
Productivity improvements mean that labour can be released from one industry and be made available for another – for example, rising efficiency in farming will increase production yields and provide more food either to export or to supply a growing urban population.
If the size of the economy is bigger, higher wages will boost consumption, generate more tax revenue to pay for public goods and perhaps give freedom for tax cuts on people and businesses.

The Productivity Gap

Productivity varies hugely across nations. The Millennium Development Goals Report for 2012 stated that the dollar value of output per worker in the developed regions of the world was $64,319 in 2011, compared with an average of $13,077 in developing regions.

A table of selected data on output per worker employed is shown below.

Output per worker ($000, at constant 2005 prices, PPP adjusted)	1991	2011
Sub-Saharan Africa	5	6
Southern Asia	4	9
South-Eastern Asia	6	10
Latin America and the Caribbean	20	23
Developing regions	6	13
Developed regions	48	64

What are the main determinants of factor productivity in a country?

For example, South Korea has achieved sustained improvements in labour productivity – a key factor behind escaping the middle-income trap.

Our chart below tracks the annual change in output per worker employed and real GDP. Higher productivity growth is a key reason why South Korea has now become a high-income member of the OECD.

Case Study – Productivity Gains in China

China has achieved impressive gains in productivity in recent years. Some of this is undoubtedly the huge spending on capital investment which has grown to nearly 50% of China’s GDP. The labour force has also grown although this is scheduled to level off and then decline in the years ahead.

What has driven improvements in Chinese total factor productivity?

Resource shifts: There has been a huge shift of resources out of relatively low productivity agriculture into more productive work in manufacturing industry and construction. Over half of the Chinese population now lives in urban areas.
New technology and innovation: The willingness of Chinese businesses to adopt and exploit new production technologies and process innovations. Mobile telephony has expanded at a rapid rate
FDI effects: High levels of foreign direct investment into China have boosted productivity – new manufacturing capacity and technology has lifted efficiency and may well have led to productivity spill-over effects among supply-chain businesses. For example, in April 2012, Samsung Electronics, the world’s biggest memory chip maker, unveiled plans to invest $7bn (£4.4bn) to build its first chip factory in China.
Openness and global competition: The Chinese economy has become more open – trade is accounting for a rising share of national income – global competition is a stimulus for efficiency improvements
Better infrastructure: Heavy state spending on critical infrastructure has improved the overall efficiency of the economy for example in reducing transport delays and increasing communication speeds
Management: Restructuring of state-owned businesses has been a factor behind better productivity. The Economist magazine reported recently that “sophisticated methods of control, more productive use of assets and rapid globalisation have boosted productivity”
Improved wages: There is strong pressure for mean wages to rise in China especially as the latest Five Year Plan emphasises the need to boost domestic demand. Will a number of years of rapid wage acceleration provide a boost to worker productivity?

Although China’s productivity improvements are impressive, the process of catch-up with advanced nations still has a long way to go. China’s labour productivity is about 12 per cent of that of the USA

Case study: Improving Productivity in Agriculture – Focus on the Indian Farm Sector

Some of the gains from rising farm productivity are expressed in the flow chart below. For India, despite attempts at land reform to boost the incentives for farmers, agricultural value added per worker expressed in real US dollars has grown slowly. The divergence between India and South Korea is striking.

The virtuous circle of rising agricultural productivity

In 2011, nearly 70% of Indians still live in the countryside and over half work on the farm but many are tenant farmers operating with short-term leases on their land and with little incentive to invest in machinery to improve farm yields and incomes. For example, annual rice yields in the Indian state of West Bengal remain at about half China’s level and below yields in Indonesia, Taiwan and Vietnam. Productivity is further hampered by inadequate infrastructure including poor roads and vulnerability to external climatic shocks such as droughts and floods.

Critics of India agriculture argue that whereas China has liberalized farming markets and encouraged farmers to build up surpluses to sell in local and regional markets, the India government spends too much money subsidizing fertilizer, power and water and price supports for certain farmers that have done little to stimulate diversification among rural producers.

What Factors Can Limit Growth and Development?

Introduction

Economic growth is not guaranteed and some countries struggle and sustain the minimum growth rate needed to bring down poverty and sustain their chosen development path.

In this section we will explore some of the many growth limiters that a country may face

1 / Infrastructure

Infrastructure includes physical capital such as transport networks, energy, power and water supplies and telecommunications networks.
Evidence shows that there is a strong positive correlation between a country's economic development and the quality of its road network
Poor infrastructure hampers growth because it causes higher supply costs and delays for businesses. It reduces the mobility of labour and affects the ability of exporters to get their products to international markets.

Here are three examples of infrastructure deficiencies:

India: India’s irrigation system is deficient and not properly managed and this has made it very difficult to sustain food grain production when rainfall is less than expected – as was the case in 2012. This has led to a surge in food prices which hits the poorest communities hardest. For a few days in the summer of 2012, much of northern India was plunged into darkness for two consecutive days. About 700 million people were left without power, a situation that affected transport, communication, healthcare, industries and farming. India needs an estimated $400bn investment in the power sector if it is to meet its development goals.

Brazil: Host for the 2014 World Cup and the 2016 Olympics. Brazil’s growth is constrained by infrastructure weaknesses: In 2011, only 14% of her roads were paved. The World Economic Forum ranks Brazil’s quality of infrastructure 104th out of 142 countries surveyed, behind China (69th), India (86th) and Russia (100th).

Sub-Saharan Africa: The combined power generation capacity of the 48 countries of Sub-Saharan Africa is 68 gig watts – no more than Spain’s. Excluding South Africa, this figure falls to 28 GW, equivalent to the capacity of Argentina (except Argentina has a population of 40 million and Africa has 770 million.) A recent report from the Infrastructure Consortium of Africa (ICA), found that poor road, rail and harbour infrastructure adds 30-40% to the costs of goods traded among African countries. This chronic shortage of energy - with firms and people facing acute shortages of power – is a major barrier to growth and development.

One key barrier to infrastructure investment in developing countries is that tax revenues are low or come from a narrow base of businesses. For example, East African Breweries accounts for nearly 10% of the direct and indirect tax revenues going to the Kenyan government.

Many countries will need to increase their spending on infrastructure in the years ahead to adapt to and deal with the consequences of climate change. There has been much interest in recent years concerning the investment in infrastructure that businesses from emerging countries such as Brazil and China are making in the continent of Africa. China’s foreign direct investment in Africa has jumped from under $100 million in 2003 to more than $12 billion in 2011.

2 / Dependence on limited exports

Many nations still relying on specializing in and exporting low value added primary commodities. The prices of these goods can be volatile on world markets.
When prices fall, an economy will see a sharp reduction in export incomes, an adverse movement in their terms of trade, risks of a higher trade deficit and a danger that a nation will not be able to finance state-led investment in education, healthcare and core infrastructure.

Exports of least-developed countries by major product, 2010
(Percentage of total exports)
	2005	2010
Others	14.6	19.4
Textiles	1.4	1.3
Other semi-manufactures	3.2	2.3
Raw materials	4.3	3.5
Food	9.2	9.9
Clothing	13.7	11.8
Fuels	53.6	51.7
Source: World Trade Organisation

Here are some examples of export dependence for a selection of countries in Sub-Saharan Africa: The data shows the % of total exports in 2010:

Angola: 97% oil
Ghana: 39% gold, 26% oil, 17% cocoa
Kenya: 19% tea, 12% horticulture
Nigeria: 90% oil
Senegal: 11% fish, 11% phosphate
Tanzania: 37% gold
Uganda: 18% coffee
Zambia: 84% copper

Sub-Saharan Africa (SSA) is often cited as a region where primary sector dependence is high. SSA’s share in global manufacturing trade remains extremely low.

3/ Vulnerability to external shocks

Events in one part of the world can quickly affect many other countries. For example, the global financial crisis of 2007-2010 brought about recession in many countries and deep financial distress in many regions. It also led to a fall in foreign direct investment flows into many poorer countries and pressure on governments in rich nations to cut overseas aid budgets.

If a resource rich country exports the resource, then it exposes itself to damaging volatility of its export earnings. In 2010, economists Bruckner and Ciccone found that a 10% fall in income due to falling commodity prices raises the likelihood of civil war in sub-Saharan Africa by around 12%.

4/ Landlocked countries

Land-locked economies face particular challenges to integrate in global trade – without good infrastructure and efficient logistics businesses it can be difficult, costly and slow to get products to the countries of trade partners - but some landlocked countries have been doing well especially when they achieve regional economic integration with other land-locked nations.

5/ Low national savings and low absolute savings

Savings are needed to provide finance for capital investment. In many smaller low-income countries, high levels of poverty make it almost impossible to generate sufficient savings to provide the funds needed to fund investment projects. This increases reliance on overseas borrowing or tied aid. This problem is known as the savings gap. In Africa for example, savings rates of around 17 percent of GDP compare to 31 percent on average for middle income countries. Low savings rates and poorly developed or malfunctioning financial markets make it more expensive for African public and private sectors to get funds for investment. Higher borrowing costs impede capital investment.

Problems facing The Bottom Billion – Paul Collier’s 4 Development Traps

Professor Paul Collier finds that the living standards of the world's bottom billion have stagnated over the past forty to fifty years.

He identifies four “development traps” - they are conflict, reliance on natural resources, being landlocked with bad neighbours, and bad governance.

6/ Limited financial markets

Many of the least developed countries have limited financial markets such as banking, money and credit systems, insurance markets and stock markets.

Worldwide, approximately 2.5 billion people do not have a formal account at a financial institution. Access to affordable financial services is linked to overcoming poverty, reducing income disparities, and increasing economic growth

These are essential for providing long term capital for the private sector and helping to channel savings and provide funds for investment projects.

Some progress is being made in Sub-Saharan Africa – there are now 19 stock markets in operation – but most of these are very small by international standards.

The Nigerian stock market accounts for only 3% of Brazil’s or India’s stock market capitalization.

6/ Volatile incomes and employment

Income growth so much more volatile in poor countries than in rich ones:

Volatility can be disruptive to economic health. It increases the risks for businesses considering capital investment, it raises the chances of people falling into extreme poverty and it makes a nation’s finances more fragile perhaps lowering the scope for important investment in public goods.

7/ Weaknesses in business management

Few development textbooks give much emphasis to the complex roles for and effects of business management as a constraint on growth and subsequent development. A fundamental cause of poverty is low wages and poverty pay is linked to relatively low productivity (measured in different ways, one of which is the value of output per person employed).

Economists such as Nicholas Bloom from Stanford University have been studying the impact of weak management in some developing countries including India. Bloom has argued for example that “In India are badly managed: equipment is not looked after, materials are wasted, theft is common because inventory is not monitored, defects keep occurring, etc. In a recent project with the World Bank, we found that giving management advice to Indian factories increased productivity by 20%.”

Weaker management may also help to explain why many poorer countries have not fully and intensively adopted new technologies. Economist Diego Comin finds that extensive adoption of new technologies has accelerated in recent years – witness the rapid expansion of mobile technology in many African countries – but that many of the least developed countries tend to use technologies less intensively - fewer people use less advanced computers less often.

8/ Capital flight

Capital flight is the uncertain and rapid movement of large sums of money out of a country. There could be several reasons - lack of confidence in a country's economy and/or its currency, political turmoil or fears that a government plans to take privately-owned assets under government control

Capital flight can lead to a loss of foreign currency reserves and put downward pressure on an exchange rate – driving the prices of essential imports of goods and services higher.

According to figures from Global Financial Integrity, developing countries lost $5.86 trillion in 2001-2010 to illicit financial flows

9/ Conflict, corruption and poor governance

Governance refers to how a country is run and whether the exercise of authority manages scarce resources well improving economic outcomes and the quality of life for a country’s people. High levels of corruption and bureaucratic delays can harm growth by inhibiting inward investment and making it likely that domestic businesses will invest overseas rather than at home.

Governments need a stable and effective legal framework to collect taxes to pay for public services. In India, there are 15 times more phone subscribers than taxpayers. If a legal system cannot protect private property rights then there will be less research and development & innovation.

Conflicts – there have been an estimated 150 conflicts since 1945 with 28 million deaths (this is twice the toll of WW1). Conflicts have huge collateral damage effects – for example, Angola has lost 80% of its farmland because of landmines. Most conflicts are intra-state i.e. civil war and reconstruction can take decades and many countries remain aid-dependent. About 1.5 billion people live in countries suffering repeated waves of political and criminal violence.

A recent example of the cost of conflict comes from the Ivory Coast. After a disputed presidential election in late 2010 violence erupted and the country descended into a four-month civil war that killed an estimated 3000 and displaced around a million people. The war could only be ended by a French intervention in April 2011. Since then the new government under President Ouattara has struggled to re-establish security but raids against army and policy installations still threaten stability.

Corruption has long been a barrier to sustained growth and development in Africa. Conflict has had terrible consequences; over one third of economies in Africa have suffered some kind of warfare from Rwanda, Sierra Leone, Eritrea, Uganda, and Somalia.

That said encouraging progress has been made in building democratic institutions in many African countries.

Economic growth can collapse and go into reverse when states fail – there are numerous reasons whychronic government failure can hamper growth and development:

Failures to protect property rights and provide sufficient incentives for new businesses to flourish
Forced labour, caste labour and other forms of discrimination – all of which waste scarce human resources not least limiting the roles that women can play in labour markets and – over the long term - holding back innovation and technological progress (two key drivers of growth)
Power elites controlling an economy - using their power to create monopolies and blocking new technologies
Stateless areas - large parts of the world are still dominated by stateless societies where the rule of law barely exists
Public goods - chronic failures to provide basic and effective public services such as education, health and transport. Many of the world’s least developed countries have not built effective tax systems and so their revenue base is inadequate for much needed capital investment and the annual revenues required to provide public health and education programmes
Conflicts – there have been many conflicts over natural resources e.g. in Sierra Leone

10/ Population decline and / or an ageing population

In some countries the size of the population is declining as a result of net outward migration
If a nation loses younger workers, this can have a damaging effect on growth
The changing age-structure of a population also matters, leading to a fall in the ratio of workers to dependants

Demographic change is important to many of the fast growing countries in Asia.

Most countries in East Asia are expected to experience a decline the portion of their working age population (15-64 years) to total population from now until 2025
Seven countries are expected to see declines of 10 percent or more (including China, Japan, Thailand and Vietnam) while three will see declines of over 20 percent (Hong Kong SAR China, Korea and Singapore)
Countries such as Indonesia, Mongolia, Myanmar and Vietnam are forecast to see a decline in their population size due to a combination of emigration and demographics

Declining populations in Eastern Europe

Many countries in Eastern Europe must face the challenges of continued population decline. Only two out of twelve countries will experience population growth according to recent estimates.

The relationship between demographic trends, per-capita income and economic growth is complex. Lower per-capita income should lead to higher growth, but it also has a negative impact on labour supply. Eastern Europe will have to rely on capital accumulation and productivity growth rather than labour force growth to generate economic growth.

One of the BRIC countries – Russia – is experiencing a sustained decline in their population and their active labour force. High levels of net migration, rising death rates linked to exceptionally high accident rates and the effects of alcohol abuse have all contributed to a fall in population to below 150 million.

Globally the world’s population is ageing. Within next 10 years, there will be 1 billion older people worldwide. By 2050 nearly one in five people in developing countries will be over 60

11/ Rising inflation

Fast growing countries may experience an accelerating rate of inflation which can have damaging economic consequences.

Two effects in particular can hit growth, namely falling real incomes and profits together with higher costs and also reduced competitiveness in international markets.

12/ Persistent trade deficits due to rising imports

Some countries may experience large deficits on the current account of their balance of payments. This means that the value of imported goods and services is greater than the value of exports and net investment incomes leading to an outflow of money from their economy.

High trade deficits might have to be covered by foreign borrowing (increasing external debt) or a reliance on inflows of capital investment from overseas multinationals

Large trade gaps can eventually lead to a currency crisis and possible loss of investor confidence.

13/ Over-extraction of the natural resource base

Natural resources provide an important source of wealth for many lower-income countries and when world prices are high, there is an incentive to increase extraction rates to boost export earnings.

This might lead to an excessive rate of extraction that damages growth potential

Deforestation and rapid extraction of oceanic fish stocks are two good examples of this.

A report from the OECD published in 2012 found that there is a growing need to improve the sustainable use of available land, water, marine ecosystems, fish stocks, forests, and biodiversity. Some 25% of all agricultural land is highly degraded.

Critical water scarcity in agriculture is a fact for many countries

Extreme weather events are becoming more frequent and climatic patterns are changing in many parts of the world. The damaging effects of these extreme climatic events tend to fall most heavily on the poorest and most vulnerable communities in developed and developing countries.

14/ Inadequate investment in human capital

To sustain growth requires improvements in productivity, research & development and innovation. Whilst physical capital such as factories and technology plays a role, so too does the quality of the human input into production.

Economic growth might be limited by skills shortages as businesses seek to expand which forces up average wages and labour costs.

High level skills and qualifications are also needed to help businesses to move up the value chain and supply products that can be sold for higher prices in the world economy.

In many of the least developed countries there are acute shortages of human capital. Although primary enrolment rates have risen, secondary enrolment and teacher quality is poor and the tertiary education sector is tiny and low-quality. Some countries lose some of its limited skilled workforce to other countries. Gender inequality can have a hugely negative effect on human capital development.

15/ High levels of inequality of income and wealth

Although two decades or more of globalisation has strengthened average growth rates in many lower and middle-income countries, it has brought an increase in inequalities of income and wealth.

When the gap between rich and poorer communities gets bigger there are many possible dangers not least the costs of social tension and conflict and increasing spending on insurance, law and order systems and government welfare bills.

Recent theoretical work finds a negative correlation between income inequality and economic growth. One book that supports this view is The Spirit Level (Pickett and Wilkinson) which finds evidence that unequal societies may become less competitive over time.

16/ Gender inequality and discrimination

In many countries women are subject to deep-rooted cultural norms that prevent them playing a full and active role in their economy.

According to the World Bank, 232 million women live in economies where they can't get a job without their husband's permission
Less than 10% of credit for small farmers in Africa is directed to women

Some progress is being made, from 2009 through to 2011, 39 developing countries made legal changes towards gender parity – but only 38 out of 141 nations set the same legal rights for men and women in their own labour markets

Economic and social dangers from rising inequality

17/ Malnutrition and limits to growth and development

High rates of malnutrition can severely impair development and bring untold human misery. Poor nutrition can have serious negative effects on development prospects:

It impairs brain development among the young – nearly one in five children aged under five in the developing world is under-weight
It is responsible for half of all child deaths – 38% of under-five children in the poorest 20% of families in developing countries are underweight compared to 14% of under-fives in the wealthiest 20%
It increases the risks of HIV infection and cuts the numbers who survive outbreaks of malaria
Malnourished children are more likely to drop out of school and suffer reductions in their lifetime incomes
According to the World Bank, “the effects of this early damage on health, brain development, educability, and productivity caused by malnutrition are largely irreversible.”
The surge in global food prices has had a terrible effect on the risk of malnutrition in many of the world’s poorest countries. It has certainly led to a sharp rise in premature deaths and severe illnesses linked to poor nutrition in countries such as India.

Here is the 2011 data for the % of people who are undernourished:

Sub-Saharan Africa: 27% (equivalent to 231 million)
Southern Asia: 20%
Developing regions: 15%
Rural children in developing countries: 32%
Urban children in developing countries: 17%

There has been progress in reducing malnutrition but high prices for basic foods in recent years have curbed this trend.

Prevalence of undernourishment (% of population)
Country	Data is from 2008
Eritrea	65
Burundi	62
Haiti	57
Zambia	44
North Korea	35
Kenya	33
Low income countries	29
Least developed countries	29
Heavily indebted poor countries (HIPC)	28
Sub-Saharan Africa (all income levels)	22
India	19
Low & middle income countries	14
World	13
Middle income	13
China	10
European Union	5

Policies to reduce malnutrition

Schemes to promote health and nutrition education plus direct provision of micro-nutrient supplements and fortified foods
Growth monitoring schemes for the newly born and infants supplemented with vitamin provision from community organisations
Targeting cultural norms – in some countries, young girls are often allowed to eat only after their brothers
Cash transfers – i.e. consumer subsidies that can be spent on certain foods
Government subsidies for grain prices and export bans on domestically produced foods
Better food prices paid to small-scale farmers
Opening up retail markets to international supermarkets where food prices might come down through economies of scale and increased competition

Infrastructure spending to improve access to and improved quality of sanitation and clean water supplies

ECONOMIC DEVELOPMENT-MILLENNIUM GOALS

Goal 1: Eradicate extreme poverty and hunger

Target: Halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day

Income share held by lowest 20 percent
Malnutrition prevalence, weight for age (percent of children under 5)
Poverty headcount ratio at $1.25 a day (PPP) (percent of population) - Four out of every five people living in extreme poverty will live in sub-Saharan Africa and Southern Asia.
Prevalence of undernourishment (percent of population)

% of population living on less than $1.25 a day	1990	2008
Sub-Saharan Africa	56	47
Southern Asia (including India)	52	26
South-Eastern Asia	45	17
China	60	13
Latin America and the Caribbean	12	6
Developing regions (excluding China)	41	28

There has been clear progress in reducing the scale of extreme poverty The proportion of people living on less than $1.25 a day fell from 47 per cent in 1990 to 24 per cent in 2008—a reduction from over 2 billion to less than 1.4 billion. That said the rate of extreme poverty reduction has slowed down because of the impact of the global recession post 2008 and the effects of high world food and energy prices. By 2015, well over one billion people will live in extreme poverty; 4/5ths of these people will live in Sub-Saharan Africa and Southern Asia.

Those countries that have made most rapid progress towards the first of the MDGs—to halve those living in extreme poverty by 2015—have been fast growing countries of East Asia, most notably India, China and Vietnam. The proportion of people living on less than $1.25 a day fell from 43.1% in 1990 to 22.2% in 2008

To fight extreme poverty the World Bank in 2012 reported that five key areas need to be given extra focus.

Goal 2: Achieve universal primary education

Target: Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling. More than half of all out-of-school children are in sub-Saharan Africa.

Literacy rate, youth total (percent of people ages 15–24)
Primary completion rate, total (percent of relevant age group)
School enrolment, primary (percent net)

Progress has been made in lifting school enrolment rates for primary and secondary education although the pace of improvement has slowed in recent years. In developing regions, the enrolment rate for children of primary school age rose from 82 to 90 per cent between 1999 and 2010.

There was a steep rise for Sub-Saharan Africa with enrolment rates jumping from 58% to 78% despite a rise in the size of the primary school age population. 70% of pupils completed their primary education but more progress is needed to address the percentage of girls who are out of school – this links to the MDG goal which focuses on gender opportunities. Only six African countries recorded primary completion rates of 90 percent and above in 2009.

Goal 3: Promote gender equality and empower women

Target: Achieve full and productive employment and decent work for all, including women and young people

Target: Eliminate gender disparity in primary and secondary education, preferably by 2005, and in all levels of education no later than 2015

Proportion of seats held by women in national parliament (percent) - now there are 8,716 women parliamentarians globally, which is 19.25% of the total number of MPs
Ratio of girls to boys in primary and secondary education (percent) - The ratio between the enrolment rate of girls and that of boys grew from 91 in 1999 to 97 in 2010 for all developing regions
Ratio of young literate females to males (percent ages 15–24)
Share of women employed in the non-agricultural sector

Gender parity index for enrolment in different stages of education (Data is for 2010), Girls per 100 boys	Developed Regions	Developing Regions
Primary Education	99	97
Secondary Education	99	96
Tertiary Education	120	98

Factors affecting gender disparities in secondary school enrolment rates

Goal 4: Reduce child mortality

Target: Reduce by two thirds, between 1990 and 2015, the under-five mortality rate

Immunization, measles (percent of children ages 12–23 months)
Mortality rate, neonatal (death in first month after birth, per 1,000 live births)
Mortality rate, infant (per 1,000 live births)
Mortality rate, under-5 (per 1,000)

Under-five mortality rate, 1990 and 2010 (Deaths per 1,000 live births)	1990	2010
Sub-Saharan Africa	174	121
Southern Asia	117	66
South-Eastern Asia	71	32
Latin America and the Caribbean	54	23
Developed regions	15	7
Developing regions	97	63

There has been a 35 per cent drop in child mortality rates and despite population growth, the number of under-five deaths worldwide fell from more than 12 million in 1990 to 7.6 million in 2010. Sub-Saharan Africa has experienced a 2.4% annual fall. Despite this progress there are several areas of crucial concern:

Death rates in the first month after birth have risen in the last ten years
There are big disparities in infant survival rates between rich and poor households and between families where the mother has an education and where she does not
Nearly one in five children under age five in the developing world is underweight
In the world's poorest countries every 2 minutes a woman dies from complications of childbirth

Goal 5: Improve maternal health

Target: Reduce by three quarters, between 1990 and 2015, the maternal mortality ratio

Births attended by skilled health staff (percent of total)
Maternal mortality ratio (modelled estimate, per 100,000 live births)

Maternal mortality, (Maternal deaths per 100 000 live births, women aged 15-49)	1990	2010
Sub-Saharan Africa	850	500
Southern Asia	590	220
South-Eastern Asia	410	150
The Caribbean	290	190
Latin America	130	72
Developed regions	26	16
Developing regions	440	240

In 2010, 32 women per hour died as a result of giving birth. The global burden of maternal death has fallen sharply with a reduction of 47 per cent since 1990 – but the maternal mortality ration in developing regions was still 15 times higher than in developed regions. One in ten maternal deaths in Sub-Saharan Africa was attributed to the effects of HIV-aids. There has been a ten per cent rise over twenty years in the percentage of birth deliveries attended by skilled doctors, nurses or mid-wives (65% in 2010) but this figure drops to less than half in Southern Asia and Sub-Saharan Africa.

Factors behind improving maternal health outcomes:

Goal 6: Combat HIV/AIDS, malaria, and other diseases

Target: Have halted by 2015 and begun to reverse the spread of HIV/AIDS

Contraceptive prevalence (percent of women ages 15–24)
Incidence of tuberculosis (per 100,000 people)
Prevalence of HIV, female (percent ages 15–24), total (percent of population ages 15–49)

HIV / AIDS

At the end of 2010, 6.5 million people were receiving antiretroviral therapy for HIV or AIDS in developing regions. The incidence of new HIV infections per year per 100 people aged 15-49 in 2010 was highest in Sub-Saharan Africa (0.41) and Southern Africa (1.08). For developing regions the incidence of HIV has fallen from 0.09 in 2001 to 0.07in 2010.
Limited progress has been made in reducing new HIV infections, but there is better news on increasing life expectancy because of the wider availability and lower cost of using life-saving antiretroviral therapy. The price of antiretroviral treatment has fallen in the past decade: from $10k per person per year in 2000 to $100 in 2011. Young people aged between 15-24 years account for 40% of all new adult HIV infections. Infection rates in young women 15–24 years old are twice as high as among men of the same age

Malaria

An estimated 655,000 malaria deaths occurred in 2010, of which 91 per cent were in Africa and 86 per cent were children under 5 years of age. Major progress has been made in cutting malaria partly due to increased international funding and the wider adoption of insecticide-treated ben nets. There are worries however that resistance levels to some malaria drugs may be weakening.

Goal 7: Ensure Environmental Sustainability

Target: Integrate the principles of sustainable development into country policies and programmes and reverse the loss of environmental resources

CO2 emissions (metric tons per capita), GDP per unit of energy use
Forest area (percent of land area), Nationally protected areas (percent of total land area)
Increase resilience to the effects of climate change - Studies show that the poor of the world are exposed to much greater risk from natural hazards
Improved water source (percent of population with access) - the proportion of people using an improved water source rising from 76 per cent in 1990 to 89 per cent in 2010.
Improve sanitation - nearly half of the population in developing regions—2.5 billion—still lacks access to improved sanitation facilities at the end of 2011

One of the pressing issues with this goal is the target to improve access to clean water and sanitation:

Eleven per cent of the global population—783 million people—remains without access to an improved source of drinking water and, at the current pace, 605 million people will still lack coverage in 2015. Rural water shortages continue to stay well above that for urban residents
The MDG target on sanitation is unlikely to be met by 2015. Sanitation coverage increased from 36 per cent in 1990 to 56 per cent in 2010 in the developing regions as a whole. But over 2.5 billion people in developing countries still do not have access to improved sanitation facilities. 15% of the global population have no sanitation facilities at all.

Goal 8: Develop a global partnership for development

Aid per capita (current US$)
Telephone lines (per 100 people), mobile cellular subscriptions (per 100 people)
Internet users (per 100 people), personal computers (per 1,000 people)
Unemployment, youth total (percent of total labour force ages 15–24)

There are separate chapters on the economics of aid, telecommunications and development and the economics of unemployment in developing countries.

gcse economics - the big picture: business and trade cycle

BOOM: A period of fast economic growth. Output is high due to increased demand, unemployment is low. Business confidence may be high leading to increased investment. Consumer confidence may lead to extra spending.The economy tends to experience different trends. These can be categorised as the trade cycle and may feature boom, slump, recession and recovery

SLUMP: A period when output slows down due to a reduction in demand. Confidence may begin to suffer.

RECESSION: A period where economic growth slows down and the level of output may actually decrease. Unemployment is likely to increase. Firms may lose confidence and reduce investment. Individuals may save rather than spend.

RECOVERY: A period when the economy moves between recession and a boom.

WHAT HAPPENS IN A BOOM?

- Businesses produce more goods
- Businesses invest in more machinery
- Consumers spend more money. There is a FEELGOOD FACTOR
- Less money is spent by the Government on unemployment benefits
- More money is collected by the Government in income tax and VAT
- Prices tend to increase due to extra demand (page)

WHAT HAPPENS IN A RECESSION?

- Businesses cut back on production
- Some businesses may go bankrupt
- Consumers spend less money. Fall in FEELGOOD FACTOR
- Individuals may lose their jobs
- More money is spent by the Govt on unemployment benefits
- Less money is collected by the Govt in income tax and VAT
- Prices start to fall

What is a Recession?

Recession is defined as a period of reduced economic activity, a business cycle contraction.

The U.S.-based National Bureau of Economic Research (NBER) defines economic recession as:

"a significant decline in [the] economic activity spread across the economy, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales.”

In macroeconomics, a recession is a decline in a country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year. A recession has many attributes that can occur simultaneously and can include declines in coincident measures of activity such as employment, investment, and corporate profits.

A severe or prolonged recession is referred to as an economic depression.

During a recession

There will be reduced customer confidence and a reduce consumer spending.
Businesses will reduce production levels as they find it difficult to sell their goods and services.
In order to sustain growth, businesses will cut cost and will lay off employees.
Economy will see an increased rate of retrenchment and more money is spent by the government on unemployment benefit.
Government will get less revenue from income tax and VAT.
Stock exchanges will see reduced activity.

How can government tackle the situation

In order to boost economic growth, governments may resort to several strategies. These strategies for moving an economy out of a recession vary depending on which economic school the policymakers follow.

Fiscal policy moves involve increase government spending to boost aggregate demand in the economy. Government may also reduce taxes. Tax cuts will promote business capital investment. Lower-bracket tax reductions are more effective and serve a double purpose including relieving the suffering caused by a recession.

Monetary policy involves increased money supply and reducing the price of money i.e. interest rates. Reduced interest rates will promote capital investment and spark economic growth.

Supply side policies involve giving subsidies and increasing the level of education of the work force.

Global recessions

According to International Monetary Fund (IMF) global recessions are periods when global growth is less than 3%. The IMF estimates that global recessions seem to occur over a cycle lasting between 8 and 10 years. During what the IMF terms the past three global recessions of the last three decades, global per capita output growth was zero or negative. By this measure, three periods since 1985 qualify: 1990-1993, 1998 and 2001-2002.

Discuss whether economic growth is always advantageous. [7]

Economic growth has various advantages and at the same time it has some disadvantages also. One of the advantages of economic growth could be increase in employment. When there is an increase in output, it means the employment also increases. There will be more people employed. Secondly this increase in employment increases the income of the people as well as the income of the country. Thirdly increase in employment and income of the people will bring an improvement in the living standard for the country.

However, Economic growth can result high inflation due to increase in the demand for goods and services in the country which is a cost to the economy. Moreover it might results moreexploitation of economic resources which might be a problem for the future generations. Economic growth also creates lots of externalities such as pollution. In my opinion, there are more advantages than disadvantages which mean economic growth is beneficial.

Economic Development - Overseas Aid, Remittances and Debt Relief

Introduction to aid

What role can and what role should overseas aid play in promoting and sustaining economic development?

These are hugely contentious questions in the subject. Estimates vary from those which suggest that overseas development aid has added about 0.5 per annum to growth in recipient countries to those which suggest that it has had no positive, or indeed negative, effect on growth.

Backgrounds statistics on aid

In 2011, overseas aid payments were $133.5 billion, equivalent to 0.31 per cent of developed countries’ combined national income
In 2010, global military expenditure = $1630 billion versus $128 billion on development aid
The value of trade outweighs aid by a large multiple. The export earnings of all developing countries in 2010 were more than 40 times the level of official aid flows.
Denmark, Luxembourg, the Netherlands, Norway and Sweden exceed the United Nations ODA target of 0.7 per cent of gross national income (GNI)
The largest aid donors are the United States, Germany, the United Kingdom, France and Japan
Korea, China and India now also donor nations
The main destinations of aid from advanced rich nations in 2010 were Sub-Saharan Africa (44%), which also received more aid per head than other regions, followed by South and Central Asia (19.5%) and Middle East and North Africa (10%)
In 2010, total UK aid amounted to $13.1 billion

Types of Aid

Bi-lateral aid: Aid on a country-to-country basis e.g. from UK to Kenya or from Brazil to Tanzania
Multi-lateral aid: Aid channelled through international bodies / aid agencies such as CARE
Project aid: Direct financing of specific projects for a donor country
Technical assistance: Funding of expertise of various types
Humanitarian aid: Emergency disaster relief, food aid, refugee relief and disaster preparedness - Humanitarian aid accounts for less than 10% of global aid flows
Soft loans: A loan made to a country on a concessionary basis with a lower rate of interest- for example, India has received over $2 billion in low-interest funds from the World Bank for many of its welfare schemes, these soft loans are set to stop as India heads towards middle-income status
Tied aid: i.e. projects tied to suppliers in the donor country - the UK abandoned tied aid in 1997
Debt relief – this may take the form of cancellation, rescheduling, refinancing or re-organisation of a country’s external debts

Financial flows into developing countries (also known as foreign savings) can come in different forms:

Although aid is important for many poorer nations, exports from developing countries are now more than 40 times the level of official aid flows. Remittances for migrants are about three times as large as aid flows. Private capital inflows are 10 times aid flows. The latest available data for aid and private capital flows heading to developing countries is shown in the table below.

Aid and Private Capital Flows to Developing Countries 2010
Flows	US$ billions	% of total official and private flows
Total Official Development Flows	128	10.9%
Total Private Flows (including remittances)	1042	89.1%
Foreign direct investment	509	43.5%
Portfolio Investment	128	10.9%
Net private long-term debt	84	7.2%
Remittances	321	27.4%

Priorities for UK overseas aid

Assisting Post Conflict Nations
Examples of aid projects from the UK to help fragile countries and those in post-conflict reconstruction:

Clearing minefields in Nepal, road building in the Democratic Republic of Congo
Malaria prevention and treatment programmes in Ethiopia, Training midwives in Pakistan.

Does aid help or hinder economic growth and development?
This is the subject of a fierce debate in the development economics literature

Aid has a range of economic, social, environmental and political objectives
Economic development can take place without aid - China and Vietnam have both experienced sustained and rapid growth over nearly two decades without receiving much in the way of international aid payments measured as a share of their GDP
Well directed and targeted aid can enhance a country's growth potential but the effects may not be seen for many years
Aid that might help finance the building of a power station contributes directly to aggregate demand and increases supply potential
Aid that is designed to put more children through school or humanitarian aid to vaccinate kids and prevent them dying will have an impact over a longer time horizon
Different kinds of aid projects can affect growth at different times and to different degrees

Building the Case for Overseas Aid

Counter arguments – Limits / Disadvantages of Overseas Aid

In the "The Bottom Billion" Professor Paul Collier suggests that, ceteris paribus, overseas aid may have added around 1% per year to the growth rate of the poorest countries of the world during the past 30 years. There are few economists who argue that aid has led to a reduction in economic growth of donor countries. Most of those who are critical of overseas aid focus instead on dependency and corruption. It is possible for countries to grow quickly without aid – but equally there are countries who were initially heavy aid recipients who have grown and developed and are now aid donors themselves for example South Korea.

The ceteris paribus assumption is important. Aid can provide a much needed injection of funds for some of the world's poorest countries and communities - but everything else is not equal. Many external factorsmay reduce or enhance the impact of aid on economic growth, for example the quality of government, the efficiency of financial systems and also the absence of conflict.

Key point: The contribution aid makes to growth differs sharply in countries at peace and countries in conflict

Aid Graduates – Countries whose overseas aid as a share of GDP has declined over the years
Country	Maximum aid as % of GDP	Year	Minimum aid as % of GDP	Year	Growth of GDP per capita p.a. 1990–2010
Bangladesh	8.2%	1977	1.3%	2009	5.8%
Botswana	31.6%	1966	0.5%	2005	7.1%
China	0.7%	1992	0.01%	2008	11.6%
Ghana	16.3%	2004	4.1%	2008	4.0%
India	4.1%	1964	0.1%	2009	7.0%
Kenya	16.8%	1993	6.1%	2008	3.1%
Malaysia	1.2%	1987	0.07%	2009	6.1%
Vietnam	5.9%	1992	2.9%	2008	7.4%
Source: World Bank, Global Development Finance

Critics of much of the aid that has gone to Africa in recent decades argue that a high proportion of aid has gone to low-income countries with poor institutional regimes. The UK Coalition government has a target of allocating 0.7% of GDP to overseas development assistance (ODA) - this target came into being in 1970 and has never been revised! But is it right to stick rigidly to such a target independent of what else is happening in both the domestic and the global economy? 0.7% of UK GDP is forecast to equate to around £15 billion in 2015. In November 2012 the UK announced it would end aid to India in 2015, to focus on trade links. It has suspended aid support to Rwanda over its alleged funding of rebels in the Democratic Republic of the Congo, and to Uganda over alleged corruption

In a world of increasing resource scarcity, aid can also help achieve three important aims

Helping to overcome skills shortages
Funding to relieve infrastructure shortages
Aid funded projects to help the poorest countries become more resilient to climate change

Smart Aid

There is increasing interest in the use of "smart aid" - aid programmes that use experimentation and focus on bottom-up projects in order to increase the effectiveness of each £ or $ given in aid.
The work of Esther DuFlo, the author of the award-winning "Poor Economics" and professor of development economics at the Massachusetts Institute of Technology, has been influential in shaping ideas about smart aid and the importance of randomized trials to improve the effectiveness of aid.
Oral rehydration therapy, vaccines and the spread of bed nets to reduce malaria in Africa are examples of where randomised testing has had an effect to give aid projects more impact.

Remittances

Remittances

Remittances are transfers of money across national boundaries by migrant workers.
Despite a dip because of the recent global recession, total remittance flows have grown in the world economy over the longer-term as the scale of migration between countries has grown
For many developing countries, money coming in from remittances is an importance source of income.

Advantages of remittances

Officially recorded remittance flows to developing countries are estimated to reach $406 billion in 2012, a growth of 6.5% over the previous year. The top recipients of migrant remittances in 2012 are India ($70 billion), China ($66 billion), the Philippines ($24 billion), Mexico ($24 billion), and Nigeria ($21 billion).

The size of remittance flows to developing countries is now more than three times that of official development assistance.

Limitations of remittances

Debt Cancellation and Debt Relief

Many of the world’s poorest countries are saddled with high levels of external debt owed to other governments, institutions such as the IMF and foreign companies and individuals.

The current near $5tn of external debts owed by developing countries costs them more than $1.5bn a day in repayments – and much of that comes from the poorest countries
Most of the world’s poorest countries have limited access to international capital markets – their sovereign debt does not have an official credit rating.
Without conditional loans from the IMF, World Bank and others, they would have to pay interest rates many times higher on private sector loans.
Some developing countries have chosen to borrow from other emerging economies such as China or Brazil as a way of avoiding conditional loans from international institutions
Countries with persistent trade deficits end up accumulating large external debts, so too a government where spending greatly exceeds annual tax revenue leading to high fiscal deficits

External debts can act as a severe constraint on growth and development – often times, the interest on existing debt takes up a large percentage of a nation’s export revenues or annual tax revenues. These debt repayments have an opportunity cost, they might be better used in supporting development policies.

To what extent should richer nations be prepared to write-off external debts of poor countries? The Jubilee Debt Campaign pushes for debt cancellation and debt relief avoiding where possible conditions built into debt reduction agreements that create further problems for vulnerable countries.

One option is to reschedule debt payments and change the nature of the interest rate paid on these loans. In July 2012 a United Nations report made the case for introduced indexed loan repayments where the interest rate is tied to a country’s rates of economic and/or export growth. This would help balance the risk of loans more equally between lender and borrower. In good years when growth of GDP is strong, the borrower country would repay more of their debts. During hard times (i.e. a recession caused by a fall in export revenues), the rate of interest on debt would fall.

Heavily Indebted Poor Countries Initiative (HIPCI)

This is an initiative to provide debt relief to heavily indebted low income countries. Under the Initiative, the International Monetary Fund (“the IMF”) and World Bank calculate the proportionate reduction required in the country’s external debts in order to return them to 150% of the country’s annual exports, which is considered to be a sustainable level. All creditors – multilateral, bilateral and commercial – are expected to provide the proportionate reduction that will achieve this. The Ivory Coast has benefited from HIPCI – it has been granted external debt relief of $7.7bn. As a result the stock of public debt decreased from 69% of GDP in 2011 to 40% of GDP in 2012.

Economic Development - Role of the Private Sector

Introduction

To what extent can private sector businesses and corporations be a key driver of growth and development in many of the world’s poorer developing countries? Free-market approaches favour giving a larger role to private sector enterprises with liberalization of markets, structural economic reforms to boost incentives for people and businesses and increased transparency and accountability for government given a key focus.

““In Dubai we don’t believe in planning or what you call industrial policy. We believe in the free market.” (CEO of Dubai Chamber of Commerce, 2011)

Growing the Private Sector

The Washington Consensus

The Washington Consensus was a term first coined in 1989 in the wake of the Latin American financial crisis and over the years it has become a highly contentious canvas on which supporters and protestors of western-style globalisation have battled.

According to John Williamson, the economist who came up with the idea of the Washington Consensus it comprised a group of market-friendly policy prescriptions favouring the private sector including:

Fiscal discipline - keeping control of government budget deficits and national debt
Reallocating state spending from subsidies towards health care, education & infrastructure.
Tax reform - widening the base of taxation and encouraging lower tax rates to boost enterprise and work incentives as a means of creating wealth
Liberalising interest rates - allowing financial markets more freedom in setting interest rates on savings and loans and letting market interest rates allocate capital among competing uses
Exchange rates – supports a choice of fixed or free floating exchange rates but a preference against "dirty floating" i.e. intervention to manipulate the value of a currency
Trade liberalisation - a gradual reduction in import tariffs and other forms of protectionism – trade seen as an important engine of growth and development
Liberalization of inward foreign direct investment - capital investment between countries
Privatization - transferring state-owned enterprises into the private sector
Deregulation - lowering entry and exit barriers in markets but not at the expense of necessary regulation of aspects such as working conditions and employment rights
Property rights - protecting intellectual and other rights to encourage innovation and risk-taking

Criticisms of Private Sector Dominated Growth

The Washington Consensus has come under sustained criticism even though private-sector friendly policies in many countries have contributed to an increase in trade and investment much of which has flowed into lower-income developing countries. However, development driven by the private sector has been criticised on several different grounds – some of suspicions about the private sector include the following:

Supporters of the private sector have a firm belief that the wealth generated from private sector activity and investment can have a huge positive effect on prospects for countries at every stage of development.

This quote taken from the UK government website captures this view:

“The private sector is the engine of economic growth - creating jobs, increasing trade, providing goods and services to the poor and generating tax revenue to fund basic public services such as health and education. As well as stimulating growth, new thinking within the private sector, shaped by the market, can also offer insights in to how to ensure better access to vital services or goods such as medicines or information.”

Case Study: Tullow Oil and African Development

Tullow Oil plc is Africa’s leading independent oil exploration business. It has approximately 100 production and exploration licenses in 22 countries. Tullow Oil is an oil exploration business - their job is to find oil and use the latest technologies and top-level human capital both to find oil, drill the wells and eventually bring oil to the ground.

Basic background on Tullow:

Operations in over 22 countries, employ 1,400+ people
Explore, appraise, develop and produce oil and gas
€1 billion+ operating profit in 2011
No.27 in the FTSE 100 (the business is listed on the UK stock market), market value of £14 billion
Capital spending (investment) in 2011 of $1.4 billion

Tullow Oil is playing an important role in the broader economic development of Ghana and especially the investment in the Jubilee Field in a country that had no pre-existing infrastructure or deep-water technology in the oil exploration and extraction business.

The capital intensity of Tullow’s operations is breath-taking. Dropping a well in the Jubilee Field cost $100 million and it took a further $3.5 billion to get the oil flowing to the surface. The oil field was developed in a record 40 months - to put that into context, it usually takes over seven years from oil being discovered to a new field being developed. The first oil extraction took place in December 2010 and Ghana is now a world-class oil producing country with the potential for a transformational effect on their growth and development prospects. Tullow employs over 250 people in Ghana; over 85% are Ghanaian and over 1,500 contracts awarded to Ghanaian contractors.

Crucial to Tullow’s success is in recruiting some of the top geologists in the world - they employ over 200 of them and they are a major recruiter of geo-scientists from top universities. The quality of their human capital is essential and they have worked closely with University College Dublin to develop industry-specific courses and build up an expertise that few other players in the industry can enjoy. Many of Tullow’s African employees come to the UK to study on scholarships and who are frequently top of the class beating their Far East Asian counterparts.

Non-Financial Trans-National Corporations (TNCs) from Developing Countries

Corporation	Home economy	Industry

Hutchison Whampoa Limited	Hong Kong, China	Diversified
CITIC Group	China	Diversified
Cemex S.A.	Mexico	Non-metalic mineral products
Samsung Electronics Co., Ltd.	Korea, Republic of	Electrical & electronic equipment
Petronas - Petroliam Nasional Bhd	Malaysia	Petroleum expl./ref./distr.
Hyundai Motor Company	Korea, Republic of	Motor vehicles
China Ocean Shipping (Group) Company	China	Transport and storage
Lukoil	Russian Federation	Petroleum and natural gas
Vale S.A	Brazil	Mining & quarrying
Petróleos De Venezuela	Venezuela	Petroleum expl./ref./distr.
Zain	Kuwait	Telecommunications
Jardine Matheson Holdings Ltd	Hong Kong, China	Diversified
Singtel Ltd.	Singapore	Telecommunications
Formosa Plastics Group	Taiwan Province of China	Chemicals
Tata Steel Ltd.	India	Metal and metal products
Petroleo Brasileiro S.A. - Petrobras	Brazil	Petroleum expl./ref./distr.
Hon Hai Precision Industries	Taiwan Province of China	Electrical & electronic equipment
Metalurgica Gerdau S.A.	Brazil	Metal and metal products
Abu Dhabi National Energy Company	United Arab Emirates	Utilities (Electricity, gas and water)
Oil And Natural Gas Corporation	India	Petroleum expl./ref./distr.
MTN Group Limited	South Africa	Telecommunications
LG Corp.	Korea, Republic of	Electrical & electronic equipment

Non-Financial TNCs (World)

Corporation	Home economy	Industry
General Electric	United States	Electrical & electronic equipment
Royal Dutch/Shell Group	United Kingdom	Petroleum expl./ref./distr.
Vodafone Group Plc	United Kingdom	Telecommunications
BP PLC	United Kingdom	Petroleum expl./ref./distr.
Toyota Motor Corporation	Japan	Motor vehicles
ExxonMobil Corporation	United States	Petroleum expl./ref./distr.
Total SA	France	Petroleum expl./ref./distr.
E.On	Germany	Utilities (Electricity, gas and water)
Electricite De France	France	Utilities (Electricity, gas and water)
ArcelorMittal	Luxembourg	Metal and metal products
Volkswagen Group	Germany	Motor vehicles
GDF Suez	France	Utilities (Electricity, gas and water)
Anheuser-Busch Inbev SA	Netherlands	Food, beverages and tobacco
Chevron Corporation	United States	Petroleum expl./ref./distr.
Siemens AG	Germany	Electrical & electronic equipment
Ford Motor Company	United States	Motor vehicles
Eni Group	Italy	Petroleum expl./ref./distr.
Telefonica SA	Spain	Telecommunications
Deutsche Telekom AG	Germany	Telecommunications

Land Grabs – Private Sector Investment in Land

Land Grabs have become an important and controversial issue in development economics in recent years. Throughout the world, it is estimated that 445 million hectares of land are uncultivated and available for farming, compared with about 1.5 billion hectares already under cultivation. About 201 million hectares are in sub-Saharan Africa.

The vast majority of land deals are for agricultural projects. Forestry is the next largest sector. Of the agricultural deals, fewer than 30% are for food crops alone. Almost 20% are for non-food crops such as bio-fuels and livestock feed.

Arguments in favour of land purchases

The buying of land by transnational investors / companies is viewed favorably by some economists. They see it as an opportunity to reverse under-investment in developing countries’ agricultural sectors, tocreate new jobs, and to bring improved technology to local farming industries that will boost productivity, raise farm incomes and reduce the extreme poverty.

Criticisms of land grabs

Opponents of “land grabs,” argue that transnational land buyers neglect local rights and do not pay a fair price for the land. They seek to extract short-term profits at the cost of long-term environmental sustainability. They claim that land grabs are closely connected to corruption on a large scale. Another argument is that selling thousands of hectares to large-scale investors hurts small-scale farmers. Mechanized farming reduces employment in labour-intensive farming and can accelerate forced migrationinto urban areas.

A report published by Oxfam in 2011 claimed that much of the farm land bought by western investors in recent years has been left idle or given over to bio-fuel production for motorists in rich nations instead of being used to grow food and reduce malnutrition among the poorest communities

According to development economist Professor Paul Collier there are two main types of land grab:

Pioneer commercial investment: buying unused land at low prices to see if it is viable for production; risky but high-gain. Increases factor productivity; if successful, draws others – as such, it should be encouraged because there is a net benefit
Speculative acquisition of large areas of useless land: may not stay useless – it has an option value. The investor hopes that the land will become useful in the long run (e.g. because of climate issues), causing the market value to rise.

Paul Collier believes that the 1st type beneficial to developing countries but the 2nd is not. Some countries are introducing legislation to constrain overseas buyers of land.

From January 2013, Tanzania will start restricting the size of land that single large-scale foreign and local investors can "lease" for agricultural use. The vast majority of Tanzanian small-scale farmers do not have legal protection for their property. Tanzania has an estimated population of 42 million people and 12,000 villages, but only 0.02% of its citizens have traditional land ownership titles.

Economic Development - Micro Finance and Fair Trade

Introduction

Although many of the broad approaches to economic growth and development are “top-down” in nature – for example an ambitious government strategy to increase productivity or attract foreign direct investment projects – there has been growing interest and investment in a bottom-up or grassroots approach to enterprise and innovation supported by the micro-finance industry. The world’s poor are exposed toirregular income flows, and their needs are irregular too – ranging from unforeseen medical bills to having to pay more when food prices rise unexpectedly.
Microfinance refers to a large number of different financial products, including but not exclusive to

Micro-credit - the provision of small-scale loans to the poor for example by credit unions
Micro-savings – for example, voluntary local savings clubs provided by charities
Micro-insurance- especially for people and businesses not traditionally served by commercial insurance businesses - a safety net to prevent people from falling back into extreme poverty
Remittance management – managing remittance payments sent from one country to another including for example transfer payments made through mobile phone solutions

The concept of microcredit was first introduced in Bangladesh by Professor Muhammad Yunus who started the Grameen Bank (GB) more than 30 years ago with the aim of reducing poverty by providing small loans to the country’s rural poor. At the end of 2009 in Bangladesh, there were 20.5 million active borrowers and the average loan per borrower was $114. Global funding for microfinance reached $25 billion in 2011. Microfinance institutions (MFIs) had extended loans to more than 200 million clients by the end of 2010.
A key feature of micro-finance has been the targeting of women on the grounds that compared to men, they perform better as clients of microfinance institutions and that their participation has more desirable long-term development outcomes. The Grameen Bank approach initially focused on small groups ‘lending circles’ of largely female entrepreneurs from the poorest level in the society. This became the widely accepted view of what microfinance is. In reality there are thousands of commercial microfinance institutions (MFIs) including some large international operators. Microfinance programmes also exist in advanced countries, such as Germany, the USA and also in Scotland in the United Kingdom.

Commercial micro-credit businesses – profit seeking
Not-for-profit micro-credit businesses – social enterprises, reinvesting profits for social purposes
Donor-supported micro-credit businesses – perhaps targeted at supporting the very poorest – an example being the savings schemes established by CARE international

Broad aims of micro-credit

Evaluation: Criticisms of Micro-Credit
Micro-finance has come under close scrutiny in recent years and there are many who argue that the positive effects of micro-finance have been exaggerated and that the rapid expansion of micro-credit has caused unintended consequences and limited benefits in reducing extreme poverty. Some of the criticisms are as follows:

SKS Microfinance in India
In India the commercial business SKS microfinance was floated on the Indian stock exchange in 2010 but their share price has fallen by more than 90% since then. The Indian government responded to criticisms of alleged harassment of borrowers by SKS agents by introducing stricter controls on micro-credit. Several reported suicides of people in multiple and heavy debt to lenders had a damaging effect on the reputation of SKS. It made a loss of 13.61bn rupees for the year ending March 2012, compared with a profit of 1.12bn rupees in the previous year.
Micro-Insurance
This is a growing sector within developing country finance. The number of people covered by micro-insurance has increased almost 6.5 fold in five years, reaching nearly 500 million worldwide, with China and India leading the charge
Micro-insurance attempts to protect poor people against risks arising from accidents, illness, and a death in the family or the damage caused by natural disasters - in exchange for insurance premium payments tailored to their needs, income and level of risk.
Examples of micro-insurance include:

An Indian fertiliser company providing free insurance with each bag of fertiliser bought
Cattle insurance policies – small scale insurance policies that cover the death of animals due to accident, disease, foods, drought and other events
Life insurance and accident cover bundled with farmers or other business people buying new trucks
Pay-as-you-plant insurance for Kenyan farmers to insure inputs against drought and excess rain
In South Africa, HIV patients can get life insurance providing they sign up to regular medical check-ups and adherence to taking courses of freely available antiretroviral treatments

Micro-insurance schemes can dove-tail with mobile money transfer systems such as M-PESA – for example farmers can have their insurance pay-outs sent directly through to them without having to trek into the nearest town or city.
Benefits from effective and affordable micro-insurance projects

Risks and limitations of micro-insurance
Naturally there are problems with building insurance schemes for many of the world’s poorest communities – some are standard economic arguments:

Moral hazard – insured people and businesses may take less steps to protect themselves against risks because they know they have the safety net of insurance
Adverse selection – the highest risk agents will tend to be those who bid for insurance products increasing the pooled risks of insurance everyone
Asymmetric information – often times, those seeking insurance have more information about their conditions than agents selling the insurance
Inertia and information gaps – until recently, the vast majority of people in developing countries had no access at all to formal insurance schemes, and those that were available could not be afforded save for the wealthy few. Many need to be educated about the basics of insurance and the costs and benefits of getting involved.

A good case study of the expansion of micro-insurance is the success of the financial inclusion fund set up by Leapfrog backed by JP Morgan and the George Soros Foundation.

Fair Trade

The Fair Trade movement now covers over 650 producer organisations in more than 60 countries
One of the driving forces behind the founders of Fair Trade was a desire to correct for multiple market failures in industries for many primary sector commodities. These failures included the effects of monopsony power among transnational food processors and food manufacturers which often led to farmers in some of the world's poorest countries receiving an inequitably low and unsustainable price for their products.

The Fair Trade Foundation web site explains fair trade as follows:
"Fairtrade is about better prices, decent working conditions, local sustainability, and fair terms of trade for farmers and workers in the developing world. By requiring companies to pay sustainable prices (which must never fall lower than the market price), Fairtrade addresses the injustices of conventional trade, which traditionally discriminates against the poorest, weakest producers. It enables them to improve their position and have more control over their lives."
The key aims of Fair Trade are to:

Guarantee a higher / premium price to certified producers
Achieve greater price stability for growers
Improve production standards. A grower will be able to receive a Fair Trade licence if it can improveworking conditions, better pay and guarantees of environmental sustainability
A Fairtrade premium price might be offered - for direct investment in improving businesses and communities. For example in 2008 Tate & Lyle announced all their retail sugar would be Fairtrade, benefiting 6000 sugar producers in Belize who will receive a Fairtrade premium

The Fair Trade movement has critics

Impact on non-participating farmers: Some claim that by encouraging consumers to buy their products from Fairtrade sources, this cuts demand for farmers in poorer nations not covered by the Fairtrade label thereby worsening the risk of extreme poverty
Who captures the gains from Fair-Trade coffee? There is some evidence that a large part of the premium price goes to processors and distributors rather than the farmers themselves.
Others argue that the fundamental causes of poverty are not really addressed by Fairtrade. Greater investment needs to be made in raising farm productivity, reducing vulnerability to climate change, and reaching multi-lateral trade agreements between countries to reduce import tariffs andimprove access for poor countries into the markets of rich advanced nations. Other investment might be better targeted at encouraging farmers to establish producer co-operatives of their own and create their own branded products selling direct to consumers.
Some free market think-tanks such as the Adam Smith Institute believe that the fair trade movement has resulted for example in excess production of coffee, which has driven down world coffee prices.

Tourism and Economic Development
For many developing countries tourism is already a major part of their economy and a significant source of income and employment. But there is a fierce debate about the consequences of tourism - what role can tourism play in economic development? Can travel to developing countries do more harm than good?

Tourism as a threat to sustainable growth and development

Background on the global tourism industry:

Globally, tourism is a $3 billion a day industry
The income elasticity of demand for overseas travel and tourism is high
According to a recent United Nations Report, in over 150 countries, tourism is one of five top export earners, and in 60 it is the number one export
Developing countries account for 40% of world tourism arrivals and 30% of tourism receipts
South-South tourism is growing rapidly – i.e. from developing to other developing countries
Women make up 70 per cent of the labour force in the tourism sector, and half of all tourism workers are 25 or under

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Economic Development and Growth

Measuring The Standard of Living

Introduction

Problems in using national income statistics to measure living standards

Globalisation - Introduction

Globalisation - Introduction

Introduction to Globalisation

Global inter-dependence and shifts in world economic influence

What factors have contributed to globalisation?

Economic Growth - Development & Labour Migration

Introduction

Economic Development - Strategies for Sustainable Development

Economic Development - Strategies for Sustainable Development

Introduction

Development Challenges: Escaping the Middle Income Trap

Introduction

Introduction to the HDI

Limitations of the Human Development Index

Economic Growth - Productivity & Economic Development

Introduction

Case Study – Productivity Gains in China

Case study: Improving Productivity in Agriculture – Focus on the Indian Farm Sector

What Factors Can Limit Growth and Development?

Introduction

Goal 1: Eradicate extreme poverty and hunger

Goal 2: Achieve universal primary education

Goal 3: Promote gender equality and empower women

Goal 4: Reduce child mortality

Goal 5: Improve maternal health

Goal 6: Combat HIV/AIDS, malaria, and other diseases

Goal 7: Ensure Environmental Sustainability

Goal 8: Develop a global partnership for development

gcse economics - the big picture: business and trade cycle

During a recession

How can government tackle the situation

Global recessions

Economic Development - Overseas Aid, Remittances and Debt Relief

Economic Development - Overseas Aid, Remittances and Debt Relief

Introduction to aid

Building the Case for Overseas Aid

Counter arguments – Limits / Disadvantages of Overseas Aid

Smart Aid

Remittances

Debt Cancellation and Debt Relief

Heavily Indebted Poor Countries Initiative (HIPCI)

Economic Development - Role of the Private Sector

Introduction

Economic Development - Micro Finance and Fair Trade

Introduction

Fair Trade

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