Real-world issue 2

Real-world issue 2 - Why is economic development uneven?

Conceptual understandings

• Perceptions of the meanings of development and equity change over time and vary across cultures.

• Governments and other economic agents may intervene in an attempt to promote economic well-being and equity in societies.

• The pursuit of sustainability is subject to various constraints.

• Effective strategies should take account of the relevant social, economic, and political context.

• Key concepts: scarcity, choice, efficiency, equity, economic well-being, sustainability, change, interdependence, intervention.

4.7 Sustainable development

• The meaning of sustainable development

• Sustainable Development Goals

• Relationship between sustainability and poverty (HL only)

4.8 Measuring development

• The multidimensional nature of economic development

• Single indicators

  • GDP/GNI per person (per capita) at PPP

  • Health and education indicators

  • Economic/social inequality indicators

  • Energy indicators

  • Environmental indicators

• Composite indicators

  • Human Development Index (HDI)

  • Gender Inequality Index (GII)

  • Inequality adjusted Human Development Index (IHDI)

  • Happy Planet Index

• Strengths and limitations of approaches to measuring economic development

• Possible relationship between economic growth and economic development

4.9 Barriers to economic growth and/or economic development

• Poverty traps/poverty cycles

  • Diagram: a poverty cycle showing any linked combination of factors that perpetuate poverty

• Economic barriers

  • Rising economic inequality

  • Lack of access to infrastructure and appropriate technology

  • Low levels of human capital—lack of access to healthcare and education

  • Dependence on primary sector production

  • Lack of access to international markets

  • Informal economy

  • Capital flight

  • Indebtedness

  • Geography including landlocked countries

  • Tropical climates and endemic diseases

• Political and social barriers

  • Weak institutional framework

    • Legal system

    • Ineffective taxation structures

    • Banking system

    • Property rights

  • Gender inequality

  • Lack of good governance/corruption

  • Unequal political power and status

• Significance of different barriers to economic growth and/or economic development

4.10 Economic growth and/or economic development strategies

• Strategies to promote economic growth and/or economic development

  • Trade strategies

    • Import substitution

    • Export promotion

    • Economic integration

  • Diversification

  • Social enterprise

  • Market-based policies

    • Trade liberalization

    • Privatization

    • Deregulation

  • Interventionist policies

    • Redistribution policies including tax policies, transfer payments and minimum wages

  • Provision of merit goods

    • Education programs

    • Health programs

    • Infrastructure including energy, transport, telecommunications, clean water and sanitation

  • Inward foreign direct investment

    • Foreign aid

    • Humanitarian aid/development aid

    • Debt relief

    • Official Development Assistance (ODA)

    • Non-governmental organizations (NGOs)

  • Multilateral development assistance

    • The World Bank

    • International Monetary Fund

  • Institutional change

    • Improved access to banking, including microfinance and mobile banking

    • Increasing women’s empowerment

    • Reducing corruption

    • Property rights

    • Land rights

  • Diagrams: in this section students are expected to draw from the diagrams used in the other sections

• Strengths and limitations of strategies for promoting economic growth and economic development

• Strengths and limitations of government intervention versus market-oriented approaches to achieving economic growth and economic development

• Progress toward meeting selected Sustainable Development Goals in the context of two or more countries

Inquiry—possible areas to explore (not an exhaustive list)

• The patterns of economic development for countries in a region, using selected data.

• The relationship between economic growth and development, for chosen countries.

• The impact of a poverty reduction strategy, for a chosen country.

• The impacts of FDI in a chosen country on economic growth and development.

• The impacts of a microfinance project/debt relief/health programme/education programme in a chosen country/region.

Theory of knowledge questions

• Economic development draws from a set of values set out by Denis Goulet in 1971 (life sustenance, self-esteem and freedom). Does this make the pursuit of economic development unscientific?

• What knowledge questions might be encountered in constructing a composite indicator to measure development?

• Are the values on which development is based universal or do they depend on culture? Are there some goals among the Sustainable Development Goals that may not be acceptable to some cultures?

• Do economically more developed nations have a moral obligation to assist economically less developed nations, such as through foreign aid or World Bank lending? What criteria should economists use to make such judgments?