Key TermsEconomic growth – Process by which a nations wealth increases overtime. The most widely used measure of economic growth is the real rateof growth in a countrys total output of goods and services (measured bythe gross domestic product (GDP) adjusted for inflation). 1Economic Development – is about jobs, income, and communityprosperity—is a continuing challenge to modern society. To meet thischallenge, economic developers must use imagination and commonsense, coupled with the tools of public and private finance, politics,planning, micro- and macroeconomics, engineering, and real estate. 2Sustainable development – ―Sustainable development is developmentthat meets the needs of the present without compromising the ability offuture generations to meet their own needs.‖ 3
Key TermsGross Domestic Product (GDP)This is the value of all goods and services produced withina country. It is usually measured in US$ and calculatedper capita. This makes comparisons between differentcountries easier.Gross National Product (GNP)Includes income from investments abroad (US$)Purchasing Power Parity (PPP)Takes into account local cost of living and is usuallyexpressed per capita (US$)GDP or GNP per capitaGDP or GNP divided by the total population
Development is difficult to measure because so many factors must be considered. Factors can be grouped under Economic Development and Social Development
Not all countries have developed at the same rate and globally there is a very unequal distribution of wealth The richer countries are known as More Economically Developed Countries (MEDCs) The poorer countries are known as Less Economically Developed Countries (LEDCs) MEDCs have only 20% of the worlds population but own 80% of the worlds wealth MEDCs are mainly found in the northern hemisphere and consist of countries such as USA, Canada, Britain, Germany & Japan LEDCs are mainly found in the southern hemisphere and mainly in the continents of Africa, Asia & South America
The most important factor used to measure a countrys development is GNP. It is calculated by adding up the values of all the goods and services produced in a country during the year. GNP is used to compare the wealth of countries, which means it is an economic factor. GNP can be misleading for a number of reasons In Africa there are few records of goods being sold and bartering goods still takes place Not all countries in the world provide information for political reasons
Currency fluctuations Negative externalities of Does not reflect inflation economic growth are not included (eg pollution, Does not take into environmental damage) account subsistence or informal economies which Can hide inequalities are very important in less because they do not show developed countries distribution of wealth
Social Development is measured using Population Data Birth Rate - A high birth rate would indicate a LEDC and a low one a MEDC. Death Rate - A high death rate would indicate a LEDC and a low one would similarly a MEDC. Life Expectancy - If a country had a low life Expectancy such as 40-50 yrs this would indicate a LEDC and one with in excess of 70 would be a MEDC. Infant Mortality - This is the number of infant deaths per 1000 population - obviously a country with a high rate would be a LEDC Population per Doctor - Again the amount will indicate the type of countrys development. A country with a high number of people per doctor will be a LEDC.
MEDCs LEDCs High GNP Low GNP Low birth and death High birth rates rates Low levels of literacy High levels of literacy Limited access to safe Exports mainly water and sanitation manufactured goods Most people have access to safe water and sanitation
The Human Development Index (HDI)As you can see there are two distinctive ways development can bemeasured - none is perfect! So in 1990 the United Nations introduced theHDI and it works by ranking countries according to their Quality of Life oftheir citizens. The HDI is a composite of three variables:-Life Expectancy - is regarded as the best measure of a countrys healthand safetyEducation - attainment is obtained by combining adult literacy rates andthe average number of years spent at schoolIncome per Capita - is adjusted to actual purchasing power i.e. what anincome will actually buy in a country.
Life Real GNP Expectanc Literacy Years of per capita Rank Country y Rate School $ HDI 1 Norway 78 99.5 11.8 24 940 .939 2 Australia 80 99.5 11.6 18 950 .938 3 Canada 79 99.5 12.1 21 130 .936 4 Barundi 49 50 0.2 620 .309 5 Niger 41 53 0.2 750 0.274 Sierra 6 Leone 48 29 0.5 580 .258As you can see from the three methods used that the HDI is probably thefairest and most accurate. However it cannot disguise the fact that if youplaced a map showing GNP and HDI together they would be very similar. Acountry must have wealth before it is able to spend it on improving thequality of life of its people.
1. Answers.com at http://www.answers.com/topic/economic-growth-22. All about Economic Development at http://www.economicdevelopment.net/ad_n/about.htm3. World Commission on Environment and Development (WCED), Our Common Future (New York: Oxford University Press, 1987),