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EMBURY INSTITUTE

FOR HIGHER EDUCATION

B.Ed. Foundation Phase Degree

SSG 302

Topic – Development

Economic Indicators

Study Unit 2.2

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Outcomes in this study handout:

 Demonstrate an understanding of the terminology used in this section.

 Understand concepts such as Development, Sustainability and Resources.
 Identify and describe economic, social, demographic and environmental indicators of
development.
 Understand and evaluate some models associated with development.
 Critically evaluate the economic, political and cultural effects of globalization with
special reference to countries in Africa.

Indicators of Development:

An indicator simplifies, quantifies and communicates information about how people, the
economy and the environment are doing in terms of development or lack of development. An
indicator is stated as a variable e.g. life expectancy and it will have a measure attached to it
e.g. 68 years.

 Economic development: How wealthy a country is or how much wealth is generated

e.g. GNI (PPP), GDP or how much wealth the average person can be expected to have
e.g. GNI per capita, GDP per capita

 Social (human) development: How much access people have to wealth, education,
healthcare, jobs, nutrition, leisure and safety as well as political and cultural freedom.
The material elements such as wealth and nutrition indicate standard of living. Less
material elements such as health, leisure and satisfaction are referred to as quality of
life.

 Environmental development: human and economic development is supported by

environmental resources such as water, arable land, forests and energy resources such
as coal, petroleum and gas. The increasing demand for energy resources has to be
balanced against the potential of resources to damage the environment. Biodiversity
refers to the species richness of a particular area or region. Biodiversity is measured
using the Biodiversity Index (BI), which is the total number of species in a region divided
by the size of the region (often calculated in m2 or km2).
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 Institutional development: this indicates the level to which institutions are capable of
investigating and sustaining development through investment in research and design
activities employing scientists and engineers.

World Development Continuum

“Earth’s nearly 200 countries can be classified according to their level of development.”
(Rubenstein 2007:24) The development process is continuous and consists of never-
ending actions related to improving the material conditions of people through the diffusion
of knowledge and technology so that health and prosperity is improved too. Rubenstein
(2014:317) holds that every place lies at some point along the continuum.

Less developed

countries

(LDCs) Developing Countries

More developed countries

(MDCs)

This continuum shows the extremes associated with development.

Economic Indicators
Gross National Income (GNI)
This is the value of the total output of goods and services produced in a country in a year,
including money that leaves and enters the country (Rubenstein 2014:318). Purchasing
Power Parity (PPP) is an adjustment that is done to the GNI to account for differences among
countries in the cost of goods. By dividing the GNI of a country by the country’s population,
one can determine the GNI per capita. This measures the hypothetical contribution made by
the average individual towards generating their country’s wealth in a year.

Gross Domestic Product (GDP)

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This is the value of the total output of goods and services in a country in one year, however,
this does not account for money that enters and leaves a country.
Per capita (per person) income is a difficult figure to obtain in some countries because of great
variations in salaries and wages amongst rich and poor, so to get a sense of average incomes
in various countries, geographers use per capita Gross Domestic Product (GDP) which is
more readily obtained. The GDP for the entire country is divided by the total population. The
figure is adjusted according to the purchasing power in the country e.g. US$ 1 per day in
Sudan will purchase more than US$ 1 per day in the USA. This is called Purchasing Power
Parity (PPP) (2014:318). The higher the per capita GDP is, the greater the potential for
ensuring that the citizens enjoy a comfortable life (2014:318).
(See Figure 4. (Rubenstein 2014:318))

COUNTRIES PER CAPITA GNI

MDCs US$ 20 000 and above
LDCs Below US$ 5 000
USA US$ 20 000 and above
Western European countries US$ 20 000 and above
Some African countries Below US$ 5 000
Some LDC’s have shown a modest increase in GNI, whereas China has grown rapidly. The
gap between MDCs and LDCs, however, is still enormous.

Limitations of economic indicators

Per capita GNI cannot measure perfectly a country’s level of development. Few people are
starving in MDCs with per capita GNI in thousands of dollars but there may be those who do
not earn a thousand dollars. In the USA, not everyone is equally wealthy even though the
country is developed. If the wealth of a country is in the hands of a few, then the average GNI
per capita may give a false impression of the country’s wealth. The economic indicators are
merely a useful guide when comparing large entities such as countries with one another,
however a much deeper analysis of ‘true development’ needs to be done when comparing
countries. This can only be done by examining other demographic, social, combination and
environmental indicators.

Types of jobs (Rubenstein 2014:318-319)

Employment falls into three main economic sectors

Economic activity sectors Examples of activities in each sector

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This refers primarily to the extraction of raw

Primary materials and natural resources e.g. mining,
fishing, agriculture, tourism, forestry
This refers to the manufacturing of the raw
materials and natural resources into
consumer goods. This takes place in
Secondary factories and industries related to the
processing of raw materials e.g. furniture
manufacture, steel production, canned foods,
vehicle manufacture etc.
This refers to the selling, distribution and
transportation of the manufactured goods. It
is concerned with the retail of the consumer
products. The service sector also includes all
those professions in which people have
Tertiary (service) acquired skills that they then offer as
services to others. Usually these professions
are entered by obtaining qualifications that
are standardized and require higher
education (tertiary education) e.g. nursing,
education, medicine, banking, law, insuring.

The distribution of workers between the above 3 categories varies sharply between LDCs and
MDCs. e.g.

 5% of workers in MDCs work in the agricultural sector

People need to secure food for survival. A high percentage of agricultural workers in a country
indicate that most of its people must spend their days producing food for survival. Frequently,
in LDCs, the food production rate is low as a result of inefficient farming methods, lack of
equipment and technology and exhausted soils.

 69% of workers in LDCs work in the agricultural sector

A low percentage of primary sector workers indicate that a few farmers can produce enough
food for the rest of the society (e.g. The Netherlands). Frequently MDCs have the technology
and money to develop efficient farming methods. Often their farming practices are
mechanized. More people in MDCs are thus free to work in the secondary and tertiary sectors
in order to increase the national wealth of the country. Great value is attached to the
attainment of tertiary qualifications in MDCs.

Within MDCs, the number of jobs has increased in the secondary and tertiary sectors of the
economy. This reflects greater efficiency in factories (machines, tools, robots) but also a global
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competition in many industries. The tertiary (service) sector continues to expand as a result of
increased consumer demand for goods and services.

Productivity

The following statements are made in Rubenstein; “Productivity is the value of a product [in
relation] to the amount of labour needed to make it. Productivity can be measured by the value
added per worker.” and “Value added in manufacturing is the gross value of the product minus
the cost of raw materials and energy.” (2014:319)

Compare the following:

COUNTRY VALUE ADDED PER WORKER

USA US$ 80 000

JAPAN US$ 70 000

CHINA US$ 1 000

INDIA US $ 500

Rubenstein (2014:319) believes that “Workers in MDCs produce more with less effort because
they have access to machines, tools, computer-aided technology and equipment which does
most of the work.” Workers in LDCs rely more on human and animal power. MDCs have more
wealth to pay for purchase and to manufacture of machines which makes workers more
productive and creates more wealth.

Raw Materials and Energy

Development requires access to raw materials (e.g. minerals, timber, fuel) that can be turned
into products. Development also requires energy (water, coal, oil, natural gas or uranium). The
USA and Russia became powerful in the 20th century because of their raw materials and
energy resources such as coal, oil and natural gas.

The United Kingdom (UK), the first country to become a developed society late in the 18 th
century, had considerable supplies of coal and iron ore which were used to make steel for
tools and machinery. This development later spread to other parts of the Europe which also
had deposits of iron ore and coal. When European countries ran short of raw materials, they
began to import them from other parts of the world. European countries established colonies
(especially in Africa and Asia) in order to ensure a constant supply of raw materials. This flow
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of raw materials helped development in Europe but slowed it down in Africa and Asia. Many
colonies are now independent states; some still export raw materials to MDCs and import
finished goods and services.

As certain raw materials become more important, (e.g. strategic minerals, petroleum) a
country’s level of development can improve. The revenue from the sale of petroleum in the
Middle East countries has financed development. When prices of raw materials drop e.g.
cotton, copper, platinum, LDCs development slows down.

In a global economy, availability of raw materials and energy resources measures a country’s
potential for development rather than its actual development. A country with lots of resources
has a better chance of developing. Yet some countries that lack resources e.g. Japan,
Singapore, South Korea and Switzerland have developed through world trade.

Consumer Goods

Wealth generated in MDCs is used to purchase goods and services e.g. those related to
transportation and communications e.g. cars, mobiles and computers. Cars provide people
with access to jobs and allow transportation of goods. Telephones and computers speed up
business and are vital to the growth of a country’s economy. In LDCs cars, computers and
other forms of modern communication are not vital for people who live in villages and work all
day in the nearby fields growing crops. Their lack of connectivity to each other and the internet
is a stumbling block in terms of their access to information. Thus people in poor countries can
fall even further behind the development curve.

Some people in LDCs are familiar with these goods even though they can’t afford them. They
are desired as symbols of development. Some people e.g. government officials, business
owners and other elite may have these goods. A gap between the ‘haves’ and the ‘have nots’
may emerge and lead to political unrest. ‘Haves’ are usually found in urban areas and ‘have
nots’ in rural areas. Cars, telephones and computers contribute to social and cultural elements
of development e.g. travel, new ideas via internet, leisure activities, talking to people in distant
locations. As a result, people in MDCs display more cultural diversity.

Technological change may help reduce the gap in communications between MDCs and LDCs
e.g. cell phones. Cell phones are more common than land lines in some countries in Africa and
Europe but less common in North America (Rubenstein 2014:321). Cell phones and more
recently smart phones are able to give people access to information that can make their lives
easier.

Indicators / Criteria of Development: Summary using maps (Rubenstein 2014:317- 326)

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Score for Score for

INDICATORS /
PG DEVELOPED LESS DEVELOPED
CRITERIA
COUNTRIES COUNTRIES
SOCIAL (HUMAN)
Literacy Expectancy 321
Expected years of
322
schooling
Literacy Rate 323
Cell phones ownership 320
Primary School Pupil /
323
Teacher Ration
Gender Inequality
326
Index (GII)
ECONOMIC

HDI 317
GNI per capita PPP 318

Write brief notes on Gender Inequality Index (GII).

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Development is different things to different people.

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Defining development

Activity 1

Think about development.

Work in groups of 3 to answer the following questions with reference to the cartoon shown
above.

1) Identify the figure shown on the right in the cartoon and the figure shown on the left in
the cartoon.
2) In your group develop your own definition of the terms ‘developed world’ and
‘developing world’.
3) Write down as many words as you can that describe living conditions in the developed
world and in the developing world. Tabulate your answer.
4) What things would the person on the left need to have access to, to have a reasonable
standard of living?
5) What does the cartoon say about the relationship between the developed and the
developing nations in the world today?
6) Comment on the response of the character on the right at the end of the cartoon.
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Global unevenness of development.

A common way of dividing development in the world is between the north and the south. This
division was proposed by Brandt in the 1980’s. The northern countries are considered as the
wealthier, most development countries. The countries in the south are poorer and
underdeveloped.

Map indicating ‘The Brandt Division’

The alternative view

Categorising the world’s nations in terms of development is not an objective process.

Concerns are expressed that the labeling of a country as developed or developing is
ethnocentric. This means that a country is evaluated and categorised using criteria of other
races and cultures.
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Regional Variations within Countries (Rubenstein 2014:324)

Read and make notes on this section. Note examples which illustrate the concept of regional
variation.

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The assistance offered to developing countries has previously made the less developed
countries reliant on developed countries; sustainability seems to have become the watchword
of aid projects.
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Which of the opinions shown on the previous page is the one with which you identify most
closely? Elucidate.
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Who benefits from aid? Read the following cartoon story and discuss the questions

1)
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1) Which character needed money?

2) Which character wanted money?
3) Who had the best bargain?
4) Why didn’t the rich man sell the poor man a power saw?
5) What else might the poor man have done