4.3 Emerging and Developing Countries Flashcards

Question

Factors Influencing Growth and Development Economic Factors Absence of Property Rights

Answer 1

Property rights are where individuals are allowed to own and decide what happens to certain resources Lack of rights means individuals and businesses cannot use law to protect their assets, leading to reduced investment Unwilling to buy machinery, build factories or establish brands

Answer 2

Corruption Diseases Climate and Terrain Civil Wars

Answer 3

Means individuals will make decisions which maximise the bribes they receive as oppose to those which maximise development and output Leaders likely to make decisions which benefit themselves rather than economy High levels of bureaucracy often linked to corruption and this is costly and time consuming, deterring new businesses and reducing output of those already established

Answer 4

Diseases such as HIV/AIDS and malaria have a negative impact on economic growth

Answer 5

Countries with poor climates and geographical terrain may suffer from natural disasters and it may be difficult for farmers or to set up businesses

Answer 6

Many countries suffer from civil wars Causes high levels of poverty and destroys infrastructures, making it difficult for the country to rebuild even after the war has ended

Answer 7

``` Trade Liberalisation Promotion of FDI Removal of Government Subsidies Floating Exchange Rate Systems Microfinance Schemes Privatisation ```

Answer 8

Countries can aim for export led growth Removing trade barriers means domestic industries either close or forced to become as efficiency as other producers Resources allocated to their best use where country has a comparative advantage

Answer 9

Investment by one sector company in one country into another private sector company in another Firms tend to undertake FDI as production costs are lower in developing countries + access to new market Different from loan as if investment fails, company has to deal with it Involves transfer of knowledge Creates jobs, fills savings gap Repatriation of product and country may be exploited Country loses sovereignty and becomes dependant Environmental damage and exploitation of nature

Answer 10

Subsides are placed on essential items within a country or target agriculture and industry in an attempt to increase output and investment Can be effective way of minimising absolute poverty and ensuring a minimum standard of living Poorly targeted Lead to inefficiency Large amount of government spending => opp cost Removing subsidy can be politically unpopular

Answer 11

Market forces determine currency Country does not have to worry about gold and foreign currency reserves and government does not intervene Currency can be volatile => difficult for exporters/importers to make decisions about future => cause large changes in macroeconomic variables

Answer 12

Aim to give poor permanent access to range of financial services Take little/no collateral and use group lending Allows borrowers to invest Targets groups who are less likely to receive loans

Answer 13

End corruption within a firm who is owned by state Encourages firms to be more efficient by increasing competition Selling a firm improves government finances and reduces levels of debt However if firm is privatised as a monopoly, there will be no competition within market Can also be associated with corruption where politicians sell company below market price

Answer 14

``` Development of Human Capital Protectionism Managed Exchange Rates Infrastructure Development Promoting Joint Ventures with Global Companies Buffer Stock Schemes ```

Answer 15

Provide workers with skills and training => more efficient and improve productivity Developed through schools or vocational training High skills allow country to develop primary sector to manufacturing sector, overcoming primary product dependency Better education improves quality of life

Answer 16

Allows domestic industries to grow by keeping foreign goods out and protects them from competition Can use policy of import substitution Create jobs in SR and allow industry to develop Barriers can be removed, industry can develop globally Countries lose out from benefits of specialisation and comparative advantage => inefficiency Other countries may retaliate

Answer 17

Currency can be fixed against different exchange rates High exchange rate for essentials means price within country is low => reduces poverty + investment Low exchange rates for other goods means price within country is high Often fail as black markets develop

Answer 18

Infrastructure is essential for development Interventionists believe these should be provided by the government Suffers from free rider problem and has high capital costs Many positive social benefits Government may not have funding for infrastructure and it may be inefficient Projects associated with bribery and corruption, cause environmental damage and can be poorly built

Answer 19

One way to reduce exploitation of countries as a result of FDI would be to set up a joint venture Government may insist firms setting up production plants find a local partner to create a jointly owned company with Help keep some profits generated within country => used as investment

Answer 20

Government imposes minimum and maximum prices for goods, buying stocks when there is excess supply and sells them when there is excess demand => self financing Stabilises prices => encourages investment Solves issues relating to primary product dependency Requires stocks to go up and down => huge start up costs

Answer 21

Lewis Model assumed developing countries had dual economies with traditional agricultural sector and modern industrial sector Suggested modern sector attracted workers from other sector => higher incomes + investment High savings + investment are key to growth => can be achieved from rural to urban migration Industrialisation is a result not cause of development?

Answer 22

Provides countries with funds to develop economy and improve living standards Income elastic nature of tourism means as global economy grows, so does tourism allowing for more growth of country Jobs created locally, higher tax revenues from higher incomes Seasonal and involves low skilled/paid jobs => multiplier is limited Wealth created can be withdrawn as TNCs repatriate profits Many externalities associated => pollution, waste, environmental damage and impact on culture

Answer 23

Some countries able to develop due to abundance in natural resources Development of primary industry provides funds to allow country to diversify as well as allowing infrastructure development and better education Primary products are volatile and primary product dependency causes issues Primary industries suffer from corruption

Answer 24

A trading partnership based on dialogue, transparency and respect, which seeks greater equity in international trade Organisation conform to key principles; fair price, community development, fair working conditions and protecting environment Gives producers stability and raises incomes Argued system has insignificant impact on developing world as non-fairtrade users see fall in demand

Answer 25

Country voluntarily transfers resources to another Helps reduce absolute poverty Can fill the savings gap, provides for further investment Fills foreign currency cap Contributes to increased globalisation and trade as well as reducing world inequality Results in dependency culture Potential for corruption Difficult to know where to spend aid

Answer 26

Many countries suffer from high interest repayments Limits growth of poor countries, whilst being relatively small to countries debt is owed to => seems reasonable to write it off Ease government finances and allow more money to be spent on provision of services to aid development Can cause moral hazard, creates prevent => every poor country may not expect debt relief, also eases pressure on weak governments to adopt reforms and good economic policies

Answer 27

Founded at Breton Woods Conference after WW2 Aims to bring long term development and reduction in poverty Consists of many different departments, all essential in different ways; Providing finance, policy advice, technical assistance, strengthening private sector in developing countries, political risk insurance and settlement of disputes

Answer 28

Set up in Bretton Woods Conference to ensure exchange rate systems work well Provide loans to countries where there are international exchanges rates crises or when they cannot pay of international debt Insists countries make macroeconomic reforms Also provides advice which aims to bring economic stability and raise living standards to help countries develop their economic institutions

Answer 29

Non profit organisations that are run independently from government Can provide direct assistance to countries Can act as pressure groups to lobby governments to adopt more pro-development strategies Believe they can alone never solve problem, has to be government to fix issues Seen as having an anti-capitalist agenda, which blames problems on World Bank, IMF and WTO => divisions in development project

4.3 Emerging and Developing Countries Flashcards

(53 cards)