Disparities in Wealth & Development

Measuring Development

Economic Indicators

Economic growth has been the traditional way of measuring development based on the idea that increased wealth should mean higher qualities of life.   They give a general picture but hide inequalities  such as rich/poor, or rural/urban etc.

  • Gross domestic product (GDP): The total value of all goods and services produced domestically (inside a country) by a nation during a year.
  • Gross national income (GNI): The total value of good and services produced within a country together with the balance of income and payments from or to other countries. (GNI is increasingly become the preferred monetary indicator.)
  • Per capita = per person:  GNI/capita is often since it gives an indication of in it allows a meaningful comparison of countries of different population size (Spain and China).  It also enables year on year comparisons since  the effect of population increase/decrease is eliminated.

Social Indicators

  • Birth rates: The number of births per 1000 of population per year.
  • Death rates: the number of deaths per 1000 of population per year.
  • Infant mortality: The number of deaths before the age of one per 1000 live births per year.
  • Child mortality: The number of deaths before the age of five per 1000 live births per year.
  • Life expectancy: The average that someone is expected to live from birth with a country or region.
  • Total fertility rate: The average number of children a female is expected to have in her lifetime.

Human Development Index (HDI)

An index that takes into account index’s of three areas: Life expectancy index, Education index and Income index.  Established by the United Nations and gives a score between 0-1 (0 being poor & 1 being very high).  This aims to measure the quality of life in countries through combining economic and social indicators.

 Importance in measuring disparities:

– Allows comparisons between countries and aid/assistance to directed to where it is most needed.

– Can highlight strategies that are/are not working for countries (infrastructure developments, trade deals, education).

Origins of Disparities (National Scale)

  • Ethnicity:
    Discrimination limits opportunity
    Discrimination limits opportunity
    • In many countries ethnic minorities are often discriminated against in economic, political & social senses.
    • Some ethnic or religious groups can become marginalised and struggle to escape from poverty. This might be because the political leaders are from a certain ethnic group or tribe and they favour people from that group.Alternatively it might be that immigrant groups are discriminated against in terms of employment opportunities. They may be exploited (low pay, long hours, poor conditions) or forced into working in the unregulated informal economy.
  • Residence:
    poor quality housing: Rwanda
    poor quality housing: Rwanda
    • people living in slums are often restricted from formal jobs, bank loans & suffer discrimination.People born and living in developed countries are likely to have higher parental incomes, access to ICT and benefit from significant state support in areas such as education and health.
    • However, if you live a poor country then you are unlikely to have a reliable electricity supply, or running water, or an inside toilet with sewers, or rubbish collections, or a secure structure or even legal ownership of the land or house.
    • These factors all impact on peoples ability to get educated, stay healthy and secure bank loans.
  • Parental education: strong link between education levels & family size/ social status. Often higher education = higher income.
  • Employment: large disparities in income & living standards between employed & unemployed people, but also between formal & informal sectors (even in MEDCs).
  • Land ownership:  owners of land can sustain themselves (subsistence farming) and often produce to sell and raise their income level.  Women in developing countries sometimes excluded from owning land which outs them and their children at a disadvantage.
  • Debt: Some countries are so heavily in debt that they spend the majority of their income paying off debt interest and are unable to invest in infrastructure to stimulate growth. The World Bank and IMF are now assisting some countries that are heavily in debt to try and alleviate their populations from poverty. The  HIPCs (Highly indebted poor countries) initiative is aimed at helping the most indebted poor countries.  To receive help they have to prove that they have democratic and uncorrupt governments.

Patterns & Trends of Disparities

* Income: inequalities in income have been increasing:

International scale (MEDCs experiencing larger increases in GDP/capita than LEDCs).

National scale as in many countries the highest earners have seen wage increases far above average workers.

* Life expectancy: life expectancy has increased in most countries.  Many MEDCs experiencing ageing populations and many LEDCs seeing falling death rates & much lower infant mortality rates.  AIDS has set some countries back.

* Education: significant increases in school enrolment in most poorer countries, with reductions in gender inequality in education as well.

Millennium Development Goals (MDGs)

Mileenium development goals image
United Nations Millenium Development Goals (MDGs)

The UN established 8 goals to achieve by 2015.  The World Bank and member countries of the UN have been working towards achieving these goals.  Many of the loans that the World Bank makes are linked to making progress in these 8 areas.  The three that the syllabus requires are:

1) End poverty & hunger

2) Universal primary education

4+5) Child & maternal health 

Progress made towards meeting the targets:

* Much progress has been made in reducing poverty with China halving its rate. Hunger levels have been reduced in many countries but increasing food prices are threatening the progress. Latin America significantly reducing hunger levels.

* Good progress has been made in education in most countries but the current rate is too slow to meet the goal by 2015.  Tanzania scrapped school fees & saw attendance shoot to 95%.

* Good progress in child health has been made in the poorest countries, with large investment in immunisation programmes but this requires ongoing investment.  Brazil halved its infant mortality rate between 1990 & 2006.

* Maternal health is improving but slowly.  Many women in Sub-Saharan Africa still die in childbirth often due to lack of medical help at hand. Parts of Asia have also seen very slow improvements. Target not likely to be met by 2015.

Reducing Disparities

Foreign Direct Investment (FDI)

FDI: Investment by a company in another country to expand its operations.  It may buy shares in/takeover another company or invest in building a new subsidiary of its existing company in that country.

* Investment by MNCs in LEDCs boosts employment levels & income tax receipts for the government.  Increased exports bring money into the country.  MNCs often bring training and machinery making the industries more internationally competitive.

Debt Relief

Many LEDCs have higher levels of public debt & struggle to meet the interest payment on this. Reducing the debt they owe would allow some of the money spent on interest to be invested in infra-structure etc.

Many pledges to cancel outstanding debt for some countries have been made but many have not actually occurred.  Issues over how to do it fairly.

Trade

Reducing MEDC trade barriers such as tariffs (taxes on imports), quotas (limits on imports) and subsidies (financial aid for industries to keep costs down) would allow greater international market involvement for LEDCs.  This could generate income for the governments to invest in infra-structure, health & education.

* Trade blocs such as the EU use trade barriers to protect agricultural industries since cost of land and labour means that they cant compete on price with many LEDCs.   By subsidising EU farmers and imposing tariffs on imported food it significantly diminishes the cost of production advantages that many LEDC farms have (labour and land costs). Removing these would help primary sector based economies (LEDCs).

Aid

  • Bilateral: from one country to another.aid_project_150sq
  • Multilateral: from many countries through organisations such as the World Bank or IMF.
  • Emergency aid: water, food, medicine etc for disasters
  • NGOs (Non Governmental Organisations): charities such as Oxfam &     Cafod provide types of aid in many countries.

Criticisms:

  • Bilateral aid often has conditions attached to it that benefit the donor country.
  • Loans from the World Bank have not created the economic benefit expected and left countries struggling with debt obligations.
  • Aid may create culture of dependency and expectation in some places.
  • Aid has tended to assume the western way to development is the best way for everyone – perhaps not suited to all cultures/places.

Remittances

Remittances have been estimated to account for $413 billion in 2014.

Migrant workers often move to countries in which they can receive higher incomes & then send money home to their country of origin.  The nature of remittances means that go directly to the individuals to be used in whichever way they deem most important (food, health, education, housing etc).  This means that can directly increase the quality of life.  It bypasses issues of corruption or changes on policy/legislation.

The main restriction to remittances are the relatively high costs that are imposed on changing the currency and transferring it electronically.  These fees and costs affect small transfers the most (which means the poorest people).  New companies such as Transferwise are challenging the traditional banks and money transfer services and bringing down costs but they do require the recipients to have bank accounts.

International concern over money laundering from illegal trade in drugs and arms has led to stricter regulation from banks and more stringent rules for transferring money which has acted as a barrier to free flows of remittances.

This transfers wealth from MEDCs to LEDCs.

Many migrant worker in the United Arab Emirates from India, Bangladesh and Pakistan have left families behind in order to earn enough money to send remittances home.  Qatar has been in the international spotlight over migrant workers in the construction of the World Cup stadiums and infrastructure.

Example: Polish workers in the UK: particularly skilled construction workers (plasterers, builders).

Past Paper Questions

2) Examine the view that gender inequalities are a major obstacle to development. [15 marks]example_answer_button

3) “Migration reduces disparities in wealth and development.” Discuss this statement. [15 marks]example_answer_button