1.

Distinguish economic development and economic growth

Economic growth means an increase in real national income / national output.

Economic development means an improvement in the quality of life and living standards, e.g.
measures of literacy, life-expectancy and health care.

Economic growth

Economic growth measures an increase in Real GDP (real output). GDP is a measure of the national
income / national output and national expenditure. It basically measures the total volume of goods and
services produced in an economy.

Economic development

Development looks at a wider range of statistics than just GDP per capita. Development is concerned
with how people are actually affected. It looks at their actual living standards and the freedom they
have to enjoy a good standard of living.

Measures of economic development will look at:

 Real income per head – GDP per capita

 Levels of literacy and education standards
 Levels of healthcare e.g. number of doctors per 1000 population
 Quality and availability of housing
 Levels of environmental standards
 Life expectancy.
2. Identify and describe the theories of development

Types of Development Economics

Mercantilism

Mercantilism is thought to be one of the earliest forms of development economics that created
practices to promote the success of a nation. It was a dominant economic theory practiced in Europe
from the 16th to the 18th centuries. The theory promoted augmenting state power by lowering
exposure to rival national powers.

Like political absolutism and absolute monarchies, mercantilism promoted government regulation by
prohibiting colonies from transacting with other nations.

Mercantilism monopolized markets with staple ports and banned gold and silver exports. It believed
the higher the supply of gold and silver, the more wealthy it would be. In general, it sought a trade
surplus (exports greater than imports), did not allow the use of foreign ships for trade, and it optimized
the use of domestic resources.

Economic Nationalism

Economic nationalism reflects policies that focus on domestic control of capital formation, the
economy, and labor, using tariffs or other barriers. It restricts the movement of capital, goods, and
labor.
Economic nationalists do not generally agree with the benefits of globalization and unlimited free
trade. They focus on a policy that is isolationist so that the industries within a nation are able to grow
without the threat of competition from established companies in other countries.

The economy of the early United States is a prime example of economic nationalism. As a new nation,
it sought to develop itself without relying so much on outside influences. It enacted measures, such as
high tariffs, so its own industries would grow unimpeded.

Linear Stages of Growth Model

The linear stages of growth model was used to revitalize the European economy after World War II.

This model states that economic growth can only stem from industrialization. The model also agrees
that local institutions and social attitudes can restrict growth if these factors influence people's savings
rates and investments.

The linear stages of growth model portrays an appropriately designed addition of capital partnered
with public intervention. This injection of capital and restrictions from the public sector leads to
economic development and industrialization.

Structural-Change Theory

The structural-change theory focuses on changing the overall economic structure of a nation, which
aims to shift society from being a primarily agrarian one to a primarily industrial one.

For example, Russia before the communist revolution was an agrarian society. When the communists
overthrew the royal family and took power, they rapidly industrialized the nation, allowing it to
eventually become a superpower.

3. Secure a copy of the sustainable development goals

GOAL 1: No Poverty

GOAL 2: Zero Hunger

GOAL 3: Good Health and Well-being

GOAL 4: Quality Education

GOAL 5: Gender Equality

GOAL 6: Clean Water and Sanitation

GOAL 7: Affordable and Clean Energy

GOAL 8: Decent Work and Economic Growth

GOAL 9: Industry, Innovation and Infrastructure

GOAL 10: Reduced Inequality

GOAL 11: Sustainable Cities and Communities

GOAL 12: Responsible Consumption and Production

GOAL 13: Climate Action

 GOAL 14: Life Below Water

GOAL 15: Life on Land

GOAL 16: Peace and Justice Strong Institutions

GOAL 17: Partnerships to achieve the Goal

4. Identify and describe the different approaches to development

 “ Top down” “trickle down” Approach Proponents of the “trickle down” approach would argue
that richer individuals and larger companies are the driving force behind economic growth.
The wealth created by the more successful parts of the economy and more successful people
will naturally trickle down and benefit everyone. Therefore the country should focus on
ensuring the right environment for the rich and the larger companies to thrive. Low taxation
and lack of regulation. “Top down” approach tends to centralise decision making and is often
linked to development through large scale “prestige” projects.
 Growth Pole Approach Development of a core region or growth pole. Leading to spread
effects benefiting the country as a whole. Growth Pole – Could be planned or unplanned.
Development of a specific location through agglomeration. (Special Enterprise Zones in
China) Propulsive Industry – Industries which can stimulate growth. Ship building, Automobile,
Hi tech.
 “ Bottom up” “Grass roots” development The aim is to lift people out of poverty by helping
them directly. Helping them to help themselves. Local involvement in the decision making
process. Identifying their needs and deciding on the most effective solution. Use of
appropriate technology. Generally long term aims of sustainability. Sanitation and water
supply, improved farming through use of appropriate technology, education, health care
improvements and family planning, development of local industries and businesses through
micro loans and the reduction in bureaucracy, improved marketing and access to markets,
land and property rights, access to enabling technologies such as the Internet and mobile
phones. Countless examples of this approach throughout the world. Watch the Millennium
village documentary on Sauri in Kenya
 Fair Trade An approach which joins consumers in richer countries with producers in poorer
countries and creates a fair trading relationship. Started in the late 1980s Max Havelaar. The
basic component is producers are paid a “fair price” for what they produce. But also there is a
long term trading agreement and rules relating to worker conditions and environmental impact.
Coffee and cocoa have been the main products with fair trade options available to consumers
but now there are a wide variety of fair trade products with increasing market share. The
overall share of fair trade compared to traditional trade is tiny.
 Regional development Focus on developing the peripheral regions of the country. Attempting
to reduce the regional disparities which develop from an uneven development of the core and
periphery. Linked to attempting to reduce rural to urban migration, particularly to the primate
city of the core. Often investment in improving infrastructure particularly transport and
communications to link the region more with the core. This approach has been very popular in
Europe and is a major part of the EU budget. Particularly in regions which have suffered from
industrial decline or countries such as Ireland, Portugal and Greece.
 Export led growth Economic growth through the production and export of products which the
country has a comparative advantage at producing. Approach adopted by many East and
South-East Asian countries particularly successful in Taiwan where most of the enterprises
were Taiwanese not foreign owned. There can be significant state involvement in the form of
investment, subsidies and protectionist measures. Potential problem of dependency on key
 products and problems if export markets drop. Ivory Coast – Cocoa China - GDP growth slow
down because of USA recession http://www.guardian.co.uk/business/2009/feb/02/china-
unemployment-unrest
 Import substitution Production of products domestically instead of import of products.
Subsidies and protection of domestic industries from foreign competition and tariffs and non-
tariff barriers reducing imports. This approach was adopted by many Latin American
countries. Also USSR and Warsaw Pact countries had to adopt this approach because of
isolation from the Global Economy. Proponents of free trade argue that by following this
approach the benefits of free trade are lost and the country is wasting resources trying to
produce what it would be better off importing. The country should focus resources on what it
has a comparative advantage at producing.
 Foreign Direct Investment Encourage foreign companies to locate in the country to stimulate
economic growth. The foreign companies would provide the investment the economy needs.
Policy encouraged by the World Bank. Particularly significant in extractive industries such as
mining and oil where the initial costs are very high. Eg Nigeria oil, Bolivia silver Some
protection of domestic industries needed. Just opening economy to foreign competition will
mean even profitable and sustainable industries will be unable to survive in the initial periods.
High levels of FDI in China’s Special Enterprise Zones.
 Keynesian economics v neo liberalism Keynesian Economics – Use government spending on
the public sector and infrastructure to boost the economy and provide jobs. Neo-liberalism –
Reduce government spending and public sector of the economy. Increase the role of the
private sector and market forces.
 Free Market v Interventionist Free market viewpoint Spread effects will eventually benefit
peripheral regions. Interventionist Development in depressed regions needs to be stimulated
by government investment.
 UN Millennium Development Goals “ The Millennium Project was commissioned by the United
Nations Secretary-General in 2002 to develop a concrete action plan for the world to achieve
the Millennium Development Goals by 2015 and to reverse the grinding poverty, hunger and
disease affecting billions of people.”