3. Poverty & Income Inequality
o What is the difference between absolute & relative poverty?
o What does a Lorenz curve measure?
o Draw a Lorenz curve illustrating perfect equality
o What does the gini coefficient measure?
o How is this calculated?
o What factors can cause poverty?
o What are some of the disadvantages/limitations of using the Lorenz curve
and gini coefficient to measure income inequality?
o Draw and explain the Kuznets curve
Measuring Economic Development
o What is the difference between first, second, and third world countries?
o What is GDP and GNP?
o What does 'per capita'mean?
o What is purchasing power parity?
o Briefly describe the Human Development Index
o Briefly describe the Human Poverty Index
Millennium Development Goals
o What are the eight Millennium Development Goals?
o For each one, briefly describe how it is measured
o For each one, research how progress is going towards reaching it
o Web resources available at: httn://delicious.com/sidcuneconomics
4. Limits to Growth & Development
Construct a table (see example below) listing all the limits to growth and
development we have discussed in lessons, For each one, consider WHY it is a
limit, note down any relevant real-world examples, and then EVALUATE why it
might not be that much of a problem really
Limits Explanation of Real-world Evaluation- is this
why it's a limit examples really holding
developing
countries back?
Strategies to Promote Growth & Development
Do the same as above, only focusing on what can be done to assist developing
countries
[N.8. if you're struggling to remember the limits/strategies listed above, see the
specification on Fusion)
Looking for examples for each of the above, you have been provided with
many in the lessons, but many more can be found on the internet-
especially at www.economist.com, and in particular in the'Africa'section.
Theories of Economic Development
For each of the theories below, make the following notes:
1,. What is it's main argument? [draw diagrams if appropriate)
2. What are the limitations with this theory?
3. Can you relate this to any real-world examples?
o Harrod-Domar Model
o Rostow's Stages of Devlopment
. DependencyTheory
o Lewis Model
L
5. Development*Economics:*Linking*Case*Studies*to*Exam*Answers*
*
It#will#really#help#you#in#the#Unit#4#exam#if#you#can#bring#in#some#case#studies#to#back#up#
your#argument.#To#help#you#with#this,#I#have#produced#this#sheet#which#includes#a#selection#
of#useful#examples#you#can#use#in#exam#questions#focused#on#both#the#limits#to#growth#&#
development#and#the#strategies#governments#can#use#to#promote#it.#Please#take#some#time#
to#revise#these#in#preparation#for#your#exams,#and#then#use#them#in#your#answers.#
#
Limits#to#growth#and#development#
#
Poor*infrastructure:*
#
In#terms#of#transport,#this#generally#means#a#lack#of#paved#roads,#limited#or#no#railway#
system,#limited#port/airport#facilities#making#trade#more#expensive/difficult.#
This#also#relates#to#communication#systemsD#e.g.#telephone,#internet,#mobile#phones,#etc.#
#
Explanation#case#studies:#
D The#World#Bank#says#that#the#lack#of#inadequate#logistics#adds#15%#to#34%#to#the#
cost#of#exports#for#Latin#American#businesses,#compared#with#about#10%#in#other#
middleDincome#countries#(BBC#News,#2005)#
D Investors#in#Kenya#are#reluctant#to#build#new#offices#etc.#which#rely#on#electricity#due#
to#the#country’s#‘patchy’#electricity#service,#which#means#their#costs#increase#
significantly#due#to#the#need#for#backup#generators#(Economist,#March#2010)#
D China’s#latest#fiveDyear#plan,#which#started#in#April#2012,#includes#$1trn#of#
infrastructure#spending.#China#are#also#rapidly#expanding#their#highDspeed#rail#
network,#aiming#for#19,000#miles#of#track#in#total#(Economist,#Nov#2011)#
D Later#on#in#2012#Brazil’s#Acu#Superport#will#be#opened,#improving#efficiency#of#
exports#of#key#commodities#to#ChinaD#the#port#has#been#dubbed#the#‘highway#to#
China’#(Economist,#Nov#2011)#
Evaluation#case#studies:##
D Many#developing#countries#have#done#a#lot#to#overcome#the#problem#of#poor#
telecommunications#infrastructure#by#skipping#‘old’#technologies#like#fixedDline#
phone#networks#and#gone#straight#for#mobile#phones#and#fibreDoptic#cables.#In#
Kenya,#three#fibreDoptic#cables#have#arrived#at#the#start#of#2010.#Jeffrey#Sachs#has#
described#mobiles#phones#as#‘the#single#most#transformative#tool#for#development’.#
In#a#muchDcited#study#in#2005,#for#example,#Leonard#Waverman#of#the#London#
Business#School#found#that#an#extra#ten#mobile#phones#per#100#people#in#a#typical#
developing#country#added#0.6#percentage#points#of#growth#in#GDP#per#person.#
D Angola#is#also#following#this#strategy#of#skipping#towards#the#latest#communication#
infrastructure#as#it#launches#a#4G#network#this#year,#way#before#much#of#Europe#
(BBC,#May#2012)#
D Governments#rarely#know#what’s#best#for#their#economiesD#they#tend#to#pick#
‘prestige’#projects#rather#than#those#which#would#generate#the#most#econonmic#
benefit#for#the#country.#For#example,#China#invests#over#50%#of#its#GDP#and#provides#
very#generous#loan#terms#for#‘pet’#government#projects#such#as#the#highDspeed#rail#
network.#In#particular,#the#Shanghai#maglev#shuttle#to#the#airport#is#more#popular#as#
a#tourist#attraction#than#as#a#method#of#public#transport#due#to#its#high#prices#and#
failure#to#link#directly#to#‘downtown’#(Economist,#Sep#2011)#
#
#
#
#
#
#
3
6. Human*Capital*inadequacies:#
#
Explanation#case#studies:#
D In#South#Africa,#despite#significant#levels#of#investment,#black#children#still#lag#
significantly#behind#their#white#counterparts#in#terms#of#educational#attainment.#
There#are#a#number#of#reasons#behind#this,#including#poorer#quality#teaching#and#
lack#of#facilities,#but#it#leads#on#to#problems#for#these#children#in#the#future.#
D In#the#OECD’s#worldwide#tests#of#pupils’#abilities#in#reading,#maths#and#science,#Brazil#
is#near#the#bottom#of#the#class.#In#schools#run#by#state#governments,#13%#of#all#
school#days#were#lost#owing#to#absent#teachers#in#2006.#On#a#bad#day#in#bad#schools#
in#bad#states,#teachers’#absenteeism#can#reach#30%.#
D There#are#still#approx.#72m#children#around#the#world#not#in#education,#half#of#them#
in#subDSaharan#Africa.#The#UN#reckons#it#would#cost#$16bn#a#year#to#get#all#these#
children#into#school.#
Evaluation#case#studies:#
D Despite#investments#in#improving#education#and#training#in#the#Caribbean,#the#
country#is#still#desperately#short#of#the#skilled#medical#staff#it#desperately#needs#as#
many#of#them#are#attracted#overseas#almost#as#soon#as#they#finish#their#training,#due#
to#much#higher#pay#and#better#working#conditions.#
D Mandating#free#education#for#all#children#in#a#country#won’t#necessarily#solve#this#
problem,#as#there#are#many#other#issues#surrounding#education.#For#example,#in#
India#parentsD#even#those#on#very#low#incomesD#will#scrimp#and#save#to#get#their#
children#into#feeDpaying#schools#because#standards#have#been#gradually#slipping#in#
state#schools#as#their#numbers#have#grown#(Economist,#March#2012).#
#
*
*
Primary*Product*Dependency:#
#
Explanation#case#studies:#
D Angola#is#highly#dependent#on#the#oil#industry,#and#as#such#in#both#2006#and#2007#
real#GDP#had#surged#by#around#20%,#and#doubleDdigit#growth#rates#were#widely#
predicted#for#at#least#the#next#five#years.#Then#oil#prices#crashed#with#the#global#
recession.#Last#year#the#economy#is#estimated#to#have#grown,#at#best,#by#1.5%#
(Economist,#Jan#2010)#
D Sierra#Leone#is#heavily#reliant#on#the#diamond#trade,#with#this#being#one#of#its#main#
exports.#For#years#these#diamonds#fuelled#violent#conflict#within#the#country#and#
many#children#were#forced#to#work#in#the#mines.#Despite#the#wealth#these#resources#
should#be#generating,#70.2%#of#the#country’s#population#live#below#the#poverty#line#
(as#of#2004)#
Evaluation#case#studies:#
D Such#resources#can#be#developed#for#the#good#of#a#country,#e.g.#in#Angola#oil#has#
helped#to#bring#peace#&#prosperity:#the#port#is#being#modernised,#new#roads#&#
railways#are#being#built,#The#government#plans#to#build#1m#homes#for#shackDdwellers#
by#2012,#waterDpurification#plants#are#being#installed,#and#electricity#being#brought#
to#villages#and#urban#slums#
D In#the#end,#having#some#sort#of#resource#is#clearly#better#than#nothingD#the#
government#just#needs#to#manage#it#carefullyD#look#at#most#MiddleDEastern#countries#
and#what#they#have#done#with#their#oil#wealth.#
D Botswana#has#managed#to#create#a#highly#successful#and#profitable#50D50#joint#
venture#with#De#Beers,#the#world’s#leading#diamond#firm.#This#has#ensured#the#
country#and#the#government#benefit#from#the#industry,#including#keeping#the#jobs#of#
sorting,#refining,#etc.#within#Botswana#rather#than#in#developed#countries#like#the#UK#
(Economist,#Feb#2012)#
# 4
7. Poor*governance/civil*war:#
#
Explanation#case#studies:#
D Angola:#A#14Dyear#war#of#independence#against#its#former#Portuguese#masters#until#
1975#had#been#followed#by#nearly#three#decades#of#fighting#between#the#communist#
and#proDWestern#groups#that#ended#in#2002.#Out#of#a#population#of#7m#in#1980,#
some#1.5m#were#killed#and#more#than#4m#forced#to#flee#their#homes.#A#whole#
generation#had#missed#their#education.#Infrastructure,#political#institutions#and#social#
services#had#to#be#rebuilt,#often#from#scratch.#
D Sierra#Leone#and#the#fighting#over#blood#diamonds#led#to#a#very#long#civil#war#which#
left#the#country#in#a#ruined#state.#More#than#2#million#people#(over#a#third#of#the#
population)#were#displaced#by#the#conflict#and#there#was#essentially#no#government#
control.#
D Somalia:#declared#by#the#Economist#to#be#the#worst#country#on#the#planet,#Somalia#
completely#lacks#a#functioning#government#of#any#sort#and#is#simply#governed#by#a#
collection#of#pirates#and#tribal#warlords#who#control#their#own#small#territory.##
D Syria#is#obviously#the#latest#country#to#experience#the#‘Arab#Spring’,#but#what#looks#
increasingly#like#a#civil#war#is#clearly#costing#the#economy#greatly.#Many#have#died#in#
the#fighting,#others#have#taken#up#arms#against#the#governmentD#clearly#not#much#
economic#activity#is#going#to#be#taking#place,#and#no#foreign#firm#in#their#right#mind#
would#invest#in#Syria#at#the#moment.#
Evaluation#case#studies:#
D Despite#the#major#problems,#some#services#in#Somalia#are#still#flourishingD#a#number#
of#companies#have#introduced#mobile#phone#networks#to#the#country#and#their#
subscriber#numbers#are#increasing#rapidly#
D Depends#on#severity#of#war#or#if#it#affects#a#whole#country,#or#only#part#of#one.#
D Potential#for#a#‘better’#situation#once#conflict#has#been#resolved#in#the#long#run.#E.g.#
potentially,#with#a#democratic#government,#Egypt#will#be#free#to#prosper#and#enjoy#
increasing#economic#growth#at#faster#rates#than#would#have#been#possible#under#the#
corrupt#regime#of#Mubarak.#
#
#
#
Corruption:#
#
Explanation#case#studies:#
D Zimbabwe#is#probably#the#best#example#here.#Robert#Mugabe#essentially#ruined#
what#was#once#one#of#Africa’s#richest#countries.#Whilst#land#redistribution#is#a#good#
policy#in#itself,#the#skilled#and#knowledgeable#white#farmers#were#simply#thrown#off#
their#land#with#no#compensation#and#the#land#was#then#parcelled#up#and#given#to#
supporters#of#Mugabe’s#ZanuDPF#party#who#had#little#or#no#knowledge#of#how#to#
farm#the#land,#leading#to#a#drastic#loss#of#agricultural#output#in#the#country.#Mugabe#
also#began#printing#money#when#the#government’s#coffers#ran#out,#which#led#to#
hyperinflation,#with#people’s#life#savings#suddenly#becoming#worthless.#
D Rwanda’s#government#has#been#working#very#hard#to#overcome#corruption,#
including#jailing#government#ministers.#According#to#Transparency#International#it#is#
now#‘less#graftDridden#that#Italy#or#Greece’.#This#has#led#to#much#more#business#
activity#in#the#country,#both#local#and#foreign#firmsD#for#example#Visa#are#now#
helping#Rwandan#firms#to#link#into#its#global#payments#network.#(Economist,#Feb#
2012)#
#
#
#
# 5
#
8. Evaluation#case#studies:#
D Corruption#present#in#many#governments,#but#that#doesn’t#necessarily#mean#that#it’s#
a#problemD#many#fairly#successful#countries#have#very#corrupt#systems#in#place,#e.g.#
in#India#it#is#generally#accepted#that#bribes#are#needed#to#smooth#many#daily#
transactions#with#state#officialsD#e.g.#student#loans,#electricity#suppliers,#border#
officials.#This#does#not#stop#India#enjoying#rapid#economic#growth#and#its#firms#
expanding#abroad#in#a#number#of#significant#industries,#the#most#famous#example#
being#TATA#(owners#of#Corus,#a#European#steel#company,#and#JaguarDLand#Rover#
among#many#others).#
#
#
Strategies#to#promote#growth#&#development#
#
Aid:#
#
Explanation#case#studies:#
D Haiti#earthquake:#this#is#an#example#of#‘emergency’#aid#or#‘disasterDrelief’,#and#is#
generally#seen#as#a#good#response#to#events#such#as#natural#disasters#which#
countries,#particularly#developing#ones,#will#struggle#to#cope#with.#
D Aid#agencies#around#the#world#are#currently#campaigning#hard#for#funds#to#prevent#
what#many#experts#predict#will#be#a#major#humanitarian#disaster#across#West#and#
Central#Africa#in#the#summer#of#2012.#According#to#Oxfam#(Feb#2012),#across#the#
Sahel#region#13#million#people#are#at#severe#risk#of#a#food#crisis#caused#by#drought,#
erratic#rains,#high#food#prices,#and#regional#conflicts.#Oxfam#are#seeking#to#raise#
£23m#through#its#emergency#appeal.#
D Malaria#nets#campaign#has#been#running#for#several#years#now,#designed#to#
reduce/wipe#out#malaria#across#Africa,#mainly#by#providing#free#malaria#nets#to#those#
in#need.#This#is#a#very#cheap#yet#highly#effective#way#to#attempt#to#‘solve’#the#
problem#of#Malaria#in#many#developing#countries.##
Evaluation#case#studies:#
D Large#amounts#of#aid#money#is#given#to#Israel,#much#more#than#they#would#seem#to#
deserve,#given#the#fact#that#they#are#not#really#a#poor#countryD#suggesting#that#
politics#often#gets#in#the#way#of#aid#transactions#
D Compare#the#earthquake#in#Haiti#to#that#in#Chile,#where#very#few#people#died#and#
the#government#was#able#to#quickly#respond#to#the#problems#that#it#did#causeD#in#
sharp#contrast#to#Haiti#where#the#government#was#completely#unable#to#react#
D A#problem#with#the#malaria#nets#campaign#was#that#these#nets#were#all#imported#
from#abroad#to#be#distributed#in#many#African#countries,#but#this#then#led#to#the#loss#
of#local#manufacturers#of#nets#and#so#damaged#economic#growth.#It#also#meant#
there#was#noDone#available#locally#to#repair#the#imported#nets#when#they#became#
damaged.#
D The#key#issue#with#shortDterm#‘emergency’#aid#is#it#does#little#to#solve#the#longDterm#
issues#in#many#countries.#The#Sahel#region#of#Africa#was#in#a#very#similar#position#last#
Summer,#needing#massive#support#from#international#organisations#such#as#Oxfam#
and#the#UN’s#world#food#programme.#This#situation#is#likely#to#continue#unless#a#
more#longDterm#strategy#can#be#brought#in.#
D Over#the#last#few#decades#around#$1#trillion#has#been#given#to#African#countries#in#
aid#from#developed#countries,#yet#many#countries#on#the#continent#still#suffer#hugely#
from#absolute#povertyD#much#of#this#money#clearly#hasn’t#been#well#spent,#and#has#in#
many#ways#created#a#culture#of#dependency#and#thus#simply#exacerbated#the#
problem.#
#
#
# 6
#
9. Debt*Relief:#
#
Explanation#case#studies:#
D Uganda#was#the#first#country#to#go#through#the#Heavily#Indebted#Poor#Countries#(HIPC)#
initiative.#The#money#saved#thanks#to#debt#relief#can#now#be#spent#on#improved#
education#and#healthcare,#including#paying#for#a#programme#about#HIV#and#AIDS,#
with#the#result#that#the#number#of#people#infected#with#the#disease#is#falling.##
#
Evaluation#case#studies:#
D The#basic#problem#with#offering#a#country#debt#relief#is#moral#hazardD#the#idea#that#it#
could#then#simply#encourage#them#to#get#into#debt#again,#believing#that#once#more#
they#will#simply#be#bailed#out.#This#can#be#applied#to#any#country#that#has#benefited#
from#debt#relief.#
D The#Heavily#Indebted#Poor#Countries#Initiative#has#also#been#heavily#criticised#for#
enforcing#a#freeDmarket#agenda#on#countries#in#exchange#for#receiving#debt#relief.#
#
Developing*human*capital:#
#
Explanation#case#studies:#
D One#Laptop#per#Child#initiative#in#Rwanda:#By#2012,#Rwanda#wants#every#child#in#the#
country#between#the#ages#of#nine#and#12,#1.3m#children#in#all,#to#have#a#laptop,#each#
with#an#internet#or#intranet#connection#to#download#free#educational#software#and#
electronic#books.#By#2012#the#Rwandans#want#to#be#supplied#with#more#advanced#
laptops#that#OlpC#is#developing.#These#will#be#made#from#a#single#piece#of#plastic.#
They#will#be#waterproof,#harder#to#break,#have#colour#screens,#yet#could#cost#as#little#
as#$75#each.#With#prices#that#low,#say#the#Rwandans,#children#might#be#able#to#keep#
one#laptop#through#their#entire#school#career.#Schoolwork,#textbooks#and#a#library#of#
other#books#and#applications#would#be#stored#in#them,#with#screens#designed#to#be#
readable#in#bright#sunshine#and#to#use#minimal#power#in#huts#without#electricity#at#
night.#
D ‘Hole#in#the#Wall’#initiativeD#illustrates#that#highDquality#teaching#and#resources#are#
not#essential#to#improving#students’#learningD#and#that#providing#them#with#
computer#access#may#be#the#most#effective#method#to#improve#the#human#capital#of#
a#country#
D It#is#possible#to#compare#the#development#path#of#both#Singapore#and#Jamaica.#They#
are#both#former#British#colonies#that#once#had#fairly#equal#levels#of#development.#
However,#Singapore#decided#to#focus#on#the#education#of#its#workforce#whereas#
Jamaica#focused#on#the#mining,#agricultural,#and#tourist#industries.#Singapore’s#GDP#
is#now#roughly#seven#times#that#of#Jamaica#(Financial#Times)#
Evaluation#case#studies:#
D South#Africa#example#from#earlier,#where#large#sums#of#money#have#been#invested#in#
schooling#for#black#children,#but#it’s#done#little#to#solve#the#problems#these#children#
face#as#the#root#causesD#poorly#trained#teachers#and#lack#of#facilitiesD#still#haven’t#
been#addressed.#
D Improving#education#isn’t#enough#on#its#own:#infrastructure#is#also#needed#if#these#
highly#skilled#workers#are#to#have#jobs#(e.g.#reliable#electricity#supply#essential#for#
many#industriesD#such#as#the#call#centre#companies#Kenya#is#trying#to#attract)#
D Creating#a#highly#skilled#workforce#might#not#be#enoughD#e.g.#in#the#Caribbean#many#
nurses#are#being#trained,#but#they#are#simply#leaving#for#better#jobs#in#the#developed#
world#as#soon#as#possible#
D In#Peru#the#one#laptop#per#child#scheme#has#been#operating#for#around#a#year#now,#
and#the#schools#involved#in#the#scheme#have#seen#little#or#no#improvement#in#the#
students’#grades.#This#is#partly#down#to#lack#of#teacher#training#in#how#to#make#the#
best#use#of#the#new#technologyD#with#in#many#cases#the#laptops#simply#being#used#as#
‘highDtech#notebooks’#(Economist,#April#2012)# 7
10. #
Fairtrade*schemes:#
#
Explanation#case#studies:##
D In#Ghana#the#Volta#River#Estates#plantation#is#situated#in#an#area#of#the#country#with#
high#unemployment,#offering#wages#60%#above#the#national#minimum#wage#and#
providing#healthcare#for#all#workers#
Evaluation#case#studies:#
D Can#encourage#farmers#to#overproduce,#e.g.#coffee#is#a#commodity#grown#in#many#
developing#countries#and#which#has#in#the#past#been#massively#overDproduced,#
causing#significant#price#falls.#
D What#about#all#the#farmers#who,#for#whatever#reason,#aren’t#involved#in#the#
Fairtrade#scheme?#
D In#some#cases,#the#ability#to#sell#Fairtrade#crops#is#restricted#to#farmers#in#coD
operatives,#again#limiting#access#for#farmers#who#aren’t#in#this#position#
8
11. Levels Essav Marking Criteria
For the 'essay' half of your exam you must answer two essay questions, one 20
marks and one 30 marks. They are both marked according to a levels system, as
detailed below. Remember that you should be writing one paragraph per point,
whether explanation or evaluation. Also, within your explanation points you
must demonstrate the exam skills or knowledge, application, and analysis. This
means you MUST relate what you are talking about to economic theory, explain it
step-by-step, and illustrate your arguments with relevant case studies. Always
AIM for level 5 and make sure there's some clear, detailed evaluation within both
answers- otherwise you're severely limiting your potential grade.
Criteria for 20-mark essays
Level 14ark
Level 1 1-7 ldentification of poinis onlv
Level 2 8-10 Consideration of one factor with one evalualive point or 2 pclnts with no
evaIua:ion
Level 3 11-14 Consideration of 2 factors with one evatuative point or 3 points with no
evaluai.ion
Level 4
.15-16 Consideration of trading blocs and 2 ather factors with one evaluative
ooint
Level 5 17-20 ConsidEration of trading blocr and 2 other fqctorr with at least trvo
evaluative points
Criteria for 30-mark essalrs
Level Mark Descriptor
Level 1 1-11 ldentification of points only
Level 2 12-15 2 factors with two evaluative points or 3 factors and 1 evaluative comment
Level 3 l5-21 3 factors with two evaluative points
Level 4 z7-25 4 faciors with two Evatuative pointr
Level 3 26-30 4 factors with at teast three evatuative points
Take special care here- without evaluation your highest mark will be 11/301.
9
1
