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Economic Development
Topic 5.2
Sources and Consequences of
Economic Growth and Development

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Key concepts for Topic 5.2
 Explain and give sources of economic growth
 Distinguish and give examples of physical and social
capital
 Distinguishand give examples of the concepts of
capital widening and deepening
 Explain consequences of economic development
 Give examples of infrastructure

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Sources of Economic Growth and Development

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Comparing Singapore and Zambia
Singapore is a modern developed country with high standards
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of living.
Zambia is a land locked county with low levels of development
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and few opportunities for Economic Growth.
Both countries were colonized at similar times
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So where do the differences come from?
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GDP growth 7.5% (2007) GDP growth 6.0% (2007)
GDP per capita $48,900 (2007) GDP per capita $1400 (2007)
GDP by sector agriculture: 0%, GDP by sector agriculture: 22%,
industry: 33.7%, industry: 29%,
services: 66.3% (2007) services: 48.9% (2007)

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Singapore hasn’t always been
economically developed….

Sources of Economic Growth
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Singapore
Institutional
Factors
Physical
capital and
technological
factors
Human
Capital
Factors
Natural
Factors

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Natural resources
Singapore has very few natural resources
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Resources such as natural gas and oil have to be imported and
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even water.
Location is Singapore's one natural advantage for trade it is an
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entrepot or natural gateway between South East Asia and the Indian
Ocean to Europe.

+ Human Capital Factors
Quantity of human capital
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Population growth – grants and financial support
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Immigration levels – working visas
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Getting older people and more women into work
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Quality of human capital
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Immigration schemes to target skilled professionals, relocation
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costs, tax credits
Investment in education, longer hours – budget 21% of
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government spending – USA 4%
Promoting training at work schemes (apprenticeships)
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Improvements in Healthcare to extend working life
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+ Physical Capital - Technological
Quantity of investment
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Changing variables such as domestic savings, level of private
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investment, government involvement, foreign investment
Government owned corporations create 60% of GDP
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Reduce barriers to investment, tax credits, foreign ownership rules –
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1965 onwards
Stimulate aggregate demand and shift aggregate supply in LR
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Quality of investment?
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Skill training for workers, Higher education and research
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Access to foreign technology and expertise
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Capital widening vs Capital Deepening Productivity increases
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3000 Multinational Corporations
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Institutional Factors
Adequate banking system
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Legal system free from Corruption
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Good education system
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Developed modern infrastructure
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MRT
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Changi Airport
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Ports and refining industries
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Political stability – one party democracy
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International Relations – member of ASEAN and
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APEC, US Free Trade agreement

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So what sets Singapore apart?
Singapore was faced with a lack of physical resources and a
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small domestic market. In response, the Singapore
Government
adopted a pro-business, pro-foreign investment,
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export-oriented economic policy combined with
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state-directed investments in strategic government-owned
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corporations

+ Consequences of
Economic Growth
 Higher incomes but increasing inequality and poverty
 Improved economic indicators of wellbeing
 GDP per capita
 Purchasing Power increase
 Trade Balances improving
 Higher government revenues and spending
 Negative externalities from production and consumption
 Externalities leading to sustainability issues

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Externalities
Population Growth and the Environment
Beyond Economic Growth, World Bank 2000, Pg 4

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Population Growth and
Environmental consequences
Air pollution – seven economies account for 70% of
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greenhouse gas emissions
Water – fresh water shortages.
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Soil Degradation – can is be resolved or fixed.
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Forests – one fifth or all tropical forests have been cleared
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since 1950.
Fish stocks – over exploited beyond their level of replacement
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Negative Effects of Economic Growth
Is this sustainable??

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Each countries size is relative to its emissions

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Externalities
Population Growth and the Environment
Beyond Economic Growth, World Bank 2000, Pg 4

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Population, Growth and the
Environment
Do richer countries make more of an effort to protect resources
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and promote sustainability?
Environmental Germany
Korea
performance
Netherlands
India
Egypt
Tanzania
Ethiopia
Income Index

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Income Equality and Economic
Growth?
Does increase economic growth lead to improvement in income
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equality?
+2
% change in
income
-5 0 +5
inequality
-2
% change in
GDP per capita
Growth is good for the poor, World Bank 2000

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Externalities
Income Inequality and Poverty
Beyond Economic Growth, World Bank 2000, Pg 4

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Externalities
Income Inequality and Poverty
Beyond Economic Growth, World Bank 2000, Pg 4

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Externalities
Income Inequality
Beyond Economic Growth, World Bank 2000, Pg 4

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Growth and Sustainability
Managing the use of resources so that future generations can
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enjoy the same use that we enjoyed.
Is this happening is the world?
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Evidence to support?
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Evidence to reject?
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+ Pop Quiz
Consequences of Economic Growth
Does economic growth lead to improvement in income
1.
equality?
The majority of the worlds population is located in the
2.
developed or developing countries of the world?
What percentage of the worlds tropical rainforests have been
3.
cut down since 1950?
Which two nations are the world greatest polluters of CO2
4.
What are four aspects of the environment which are affected
5.
by population growth and economic growth?

+ Pop Quiz
Consequences of Economic Growth
In which two high growth countries has their been the largest
6.
decrease in the number of people living in poverty.
Is the current level of economic growth sustainable?
7.
By the year 2100 global population is predicted to have
8.
peaked. What is this projected population?
As incomes increase are citizens more or less likely to show
9.
improvement in environmental protection?
In which month is Mr McC born? 
10.

+ Pop Quiz - Answers
Consequences of Economic Growth
Does economic growth lead to improvement in income
1.
equality? Not always, but in some countries yes.
The majority of the worlds population is located in the
2.
developed or developing countries of the world? Developing
¾ of worlds population
What percentage of the worlds tropical rainforests have been
3.
cut down since 1950? 20%
Which two nations are the world greatest polluters of
4.
CO2United States and China
What are four aspects of the environment which are affected
5.
by population growth and economic growth?
Water, air, forests, soil, fish

+ Pop Quiz
Consequences of Economic Growth
In which two high growth countries has their been the largest
6.
decrease in the number of people living in poverty. India,
Vietnam or China
Is the current level of economic growth sustainable?No, the best
7.
evidence of this is Climate Change and global warming
By the year 2100 global population is predicted to have peaked.
8.
What is this projected population? Around 9-10 billion
As incomes increase are citizens more or less likely to show
9.
improvement in environmental protection? More likely,
environmental concerns are a luxury good, and is exhibited best
by the four Scandinavian nations.
In which month is Mr McC born? November
10.

+ Developing Countries to choose from
Country Profiles
Cambodia Malawi Bolivia
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Tanzania Uganda Bangladesh
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Burma Ethiopia Ethiopia
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India Rwanda Kenya
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Peru Nigeria Ukraine
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Each student picks a different country

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Sources of Economic Development
Education Healthcare
Infrastructure