The Development Gap
What are the ways of dividing up the world?
Original method
This was devised from a Western European perspective.
 First world - European countries
 Second world - Colonies of the British Empire such as Australia and North
America
 Third world - Poor countries
 Fourth world - Poorest countries whose economic growth was declining or
standing still
North/South divide
This method was published in 1981 in the Brandt Report. This made a simpler division
contrasting economically wealthier and industrialised countries with the poor, less
mature and largely agricultural ones. GNP per capita was the development indicator
used to draw the North-South divide.
Modern methods
This is another simpler way of dividing up the world according to economic
development
 LEDC – Less Economically Developed Countries
 MEDC – More Economically Developed Countries
NIC – Newly Industrialising Countries. These are the most rapidly developing
countries e.g. China
Five-fold division based on wealth
This is the newest method of classifying the world. There are five categories based
on wealth. There are still problems with classifying countries according to wealth as
oil exporting countries for example have a higher GNP per capita than would be in
reality. The oil industry is a huge business and it doesn’t necessarily mean that the
main population benefits from the money made from exporting oil.
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Measuring development
Statistics are used to show the level of development which allows countries to be
compared. These are called development indicators.
1. Gross National Income (GNI) - total wealth made by a country including income
received from other countries (interest).
2. Gross National Product (GNP) - total value of all products and services
produced in a year by residents of a country (even if abroad).
3. Gross Domestic Product (GDP) - total value of all products and services
produced in a year within a country like Britain, even if the business is not
British. ‘Per capita’ means the figure is averaged per person.
There are correlations between GNP per capita and other development indicators
such as literacy rate or birth rate as economic development of a country will mean
that the governments can provide funds for healthcare and education.
Birth rate is an excellent measure of development. In rich industrialising countries,
women achieve high levels of education and career prospects. As it is difficult to
pursue a high-flying career and bring up several children, women have less on them.
Children are often sacrificed for success in the working world.
Limitations of using single development indicators/measures
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Death rate is a poor indicator of development. Almost all countries have low
death rates today. Sometimes, the more economically developed the country,
the higher the death rate due to ageing populations or a country could be at
war hence the high death rate.
GNP or GNI per capita doesn’t necessarily give an indication of people’s
personal living standards. They do not tell us what people earn or how much
that buys. Some billionaires or transnational companies skew the average wage
that people are supposed to earn.
All indicators are an average across the country. Within any society there are
extremes of wealth and opportunity, which a single figure hides.
Human Development Index (HDI)
The UN has devised another way of measuring development. The Human Development
Index combines four indicators:
1.
2.
3.
4.
Life expectancy
Literacy rate
Average number of years spent at school
GDP per capita (PPP)
PPP = Purchasing Power Parity.
It means GDP is adjusted
because a dollar buys more in
some countries than others
Each indicator is given a score and the HDI is the average of the four scores. 1.000
is the best score and 0.000 is the worst. Countries are then ranked from 1 – 169
according to their overall score.
The HDI is better than relying on just one indicator because it can...
 Measure differences within a country (unlike GNP) as well as between
countries.
 It shows how the wealth of the country affects the life of the people who live
there.
 It acts as a measure to show how far a country has developed and whether
there are improvements in its level and rate of development.
 It helps a country to set targets that can lead to improvements in quality of
life for its citizens e.g. better healthcare to improve life expectancy and
better education to improve literacy rates
Standard of living
This refers to how much money people have – so it’s measured as GDP per capita. Do
people have enough money to pay for the basics of food and housing? Is there any
money left for anything else? Are people surviving on a dollar a day or less?
Physical Quality of Life Index (PQLI)
Physical Quality of Life Index (PQLI) is the average of three social indicators:
literacy rate, life expectancy and infant mortality.
The difference between PQLI and HDI is that the HDI takes into account the
number of years a child spends in schools (rather than the adult literacy rate) and
GNP (PPP) whereas PQLI only uses social indicators.
PQLI and standard of living should be used together as people may be poor yet they
can be educated, live to a good age and their children are healthy (low Standard of
living but high PQLI).
Case Study: Christian Aid – improving quality of life in Nairobi
Kiambiu is an informal settlement in Nairobi, Kenya. They are also known as slums,
shanty towns or favelas. 60% of people in Nairobi live in slums without access to
clean drinking water, proper toilets, education and healthcare. In 2009, 4 million
people living in Kenya’s urban areas were short of food.
Christian Aid has a Kenyan partner called Maji na Ufanisi (MNU) – it means ‘water and
development’. With the help of MNU, the residents of Kiambui have built five toilet
and shower blocks and have employed local people to clean and maintain them.
They charge a small fee to use them, and then use that money to improve life further
for the community e.g. by building more toilet blocks and providing emergency
healthcare for families. They’ve also got clean drinking water now. It has made a
huge difference to people’s live, their health and their children.
Factors affecting development
The term ‘global inequalities’ is another way of describing that our world is unequal
with a big development gap between the richest and poorest countries. Different
factors can worsen the problem and widen the gap.
Economic
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Landlocked countries make trade less easy.
Most of the world’s trade is between the
richer countries.
Richer countries tend to sell ‘expensive’
manufactured goods and buy ‘cheap’ primary
goods e.g. coffee, metal ores.
Poorer countries tend to buy manufactured
goods that they can’t make and only sell
cheap primary goods. This means that they
spend more than they earn (trade deficit).
Low life expectancy means that there is a
lack of workers in the country.
Tariffs are placed on goods by the
purchasing country which means less profit
for the export country.
TNCs are reluctant to set up factories in
countries where there is war, political
instability, poor infrastructure, or an
unreliable electricity supply.
Poorer countries find themselves competing
against each other for business and have
lowered prices to attract buyers. This
means less profit.
Social
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Political
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Some countries like Zimbabwe are
redistributing land from white farmers to
the majority black population. Due to their
inexperience of farming methods the crop
yields have fallen so their economy is failing.
Corrupt politicians enrich themselves
illegally at the expense of their countries
development. Money is therefore not
available for education, health services,
roads, clean water and sanitation.
Water availability is one factor which
directly impacts on development. 12% of
the world’s population uses 85% of the
water.
Water quality directly links to standards of
living (GDP).
Poor water quality causes diseases e.g.
Malaria. This debilitates people from
working and prevents economic development.
Inadequate water supplies limit crop yields
and therefore food supply. If there is not
enough water for irrigation then yields
cannot be increased.
A country finds it difficult to fund
education for all children to a good level so
investors are put off by the lack of an
educated workforce.
Searching and collecting of water wastes
valuable energy and time.
Environmental
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Climatic hazards such as drought wipe out
crops and profit.
Poorer countries tend to suffer most from
natural hazards, because they lack the
money to prepare for and recover from
them.
Deforestation and overgrazing of the land
damages the land and can cause
desertification which leaves the land
useless.
Case Study: Hurricane Ivan
Hurricane Ivan was the 10th most intense Atlantic hurricane ever
recorded. Ivan formed in early September 2004 and became the
fourth major hurricane that year.
Effects of the Hurricane
Environmental
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Agricultural land
lost
Social
Economic
 39 Died
 Extensive looting
 17th century stone
prison partially
destroyed that
left criminals on
the loose
 St. George, the capital was severely
damaged
 85% of the small island was devastated
 Damage on the island totalled $1.1 billion.
 90 per cent of homes were damaged
 Communications were disrupted
 Nutmeg crop was wiped out which is
Grenada’s main export
Effects on Grenada’s development
Grenada suffered serious economic repercussions following the destruction caused by
Ivan.
 Before Ivan, the economy of Grenada was projected to grow by 4.7%, but the
island's economy instead contracted by nearly 3% in 2004.
 The economy was also projected to grow by at least 5% through 2007, but, as
of 2005, that estimate had been lowered to less than 1%.
 The government of Grenada got into debt: 130% of the island's GDP which was
“unsustainable”.
 More than $150 million was sent to Grenada in 2004 to aid reconstruction
following Ivan.
Trade
Trade is the movement and sale of goods from one country to another.
Key terms
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Export - are goods transported by one country to sell in another.
Import - are goods or services that a country buys that it doesn't have enough of or
can get more cheaply from somewhere else.
Primary goods - are cheap products harvested from the land e.g. tea, fish, cement.
Manufactured goods - are goods that a country makes, usually expensive and requires
machinery to produce.
Trade surplus - country earns more money from exports than it spends on imports.
Trade deficit - a country spends more on imports than it earns from exports.
Trade balance - the difference between the value of imports and exports of a country.
Interdependence - the reliance of a country, especially in terms of trade and aid, on
other countries in the global economy.
Some countries rely heavily on a few main exports which can be a problem. Countries
can end up in real difficulty if:
 their product runs out e.g. oil
 a crop fails or is wiped out via natural disasters e.g. rice
 prices for the product fall e.g. sugar
 demand falls for their product
 another country can produce the same product but more cheaply
Is trade fair?
Most countries have tried to control trade by creating barriers to protect their own
jobs and industries. They do this with tariffs and quotas.
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Tariffs are taxes or custom duties paid on imports. This is usually done to
make the imported goods more expensive and so less attractive than homeproduced goods. These can hit poorer countries hard.
Quotas are limits on the amount of goods that can be imported. They are
usually restricted to primary goods, and so work against LEDCs
Free trade is when counties don’t discourage, or restrict, the movement of
goods.
Trading blocs
These are countries that have grouped together to increase the amount they trade
between them, and the value of their trade. Two of the biggest trading blocs or
groups are the EU and the North American Free Trade Agreement (NAFTA). These
two blocs have over half the world’s trade whereas developing countries have less
than a quarter. Creating these groups means that member countries can cut the
tariffs in place between them – making goods cheaper. But, as trading groups like the
EU try to increase trade within the group, poorer countries from outside lose out and
the development gap widens.
World Trade Organisation (WTO)
The WTO makes the rules on world trade. It polices free trade agreements, settles
trade disputes and organises trade negotiations. The WTO promotes free trade by
persuading countries to get rid of tariffs and other trade barriers.
How can international efforts reduce global inequalities?
Key terms
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Debt - money owed to others, to a bank or to a global organisation such as the World
Bank or IMF.
Loan - money that is lent to another person, company or country that has to be paid
back with interest payments. If the project the money borrowed for is a success, the
debt is repaid. However things don’t always go to plan and if the country defaults on
the debt it then has be paid back over a longer period of time, which means more
interest. This means that standards of living cannot improve as the burden of the
debt is too great.
Aid - money, food, training and technology, given by richer countries to poorer ones,
either to help with an emergency or to encourage long-term development. The aim is
to raise standards of living in the country. True aid is not a loan that needs to be
repaid. However, in the real world some ‘aid’ really is a loan because some form of
payback is required.
Debt relief
This is reducing the interest rate or the amount of the loan.
Debt abolition
This is where debts are abolished or written off.
Debtor nations benefit hugely as they can then begin to
improve life for their citizens. In July 2005, ten Live 8
concerts were held around the world to campaign to
Make Poverty History. A few days later, at a meeting
of the G8 (the world’s eight richest countries), an
agreement was made to cancel all debts (worth $40 billion) owed by 18 Highly
Indebted Poor Countries (HIPC).
Two conditions had to be met though before the debts were cancelled. These were
that each government had to show that it could manage its finances, and show that it
wasn’t corrupt. They also had to agree to spend the saved debt money on education,
healthcare and reducing poverty.
By 2008, 27 of the 38 HIPC countries had met these conditions and had had $85
billion of debt cancelled. The bad news is that African countries still owe $300
billion and there’s little chance that they’ll be able to repay it.
Loan solutions
Non-profit groups in the USA have been lending money to individuals in poor
countries. Sara Garcia in Lima, Peru borrowed $1,845 in 1984. She invested in
equipment to make patterned handkerchiefs. She hired extra workers and family
members to help. Output has risen from 20 to 500 items per day. She met her
repayments on time. The technology was appropriate, allowing the business to
become sustainable and successful. These schemes work on a small scale but small
businesses are the basis of any economy and it employs a surprising number of people
and supports their families. Everyone gains!
Conservation swaps
In their attempts to develop, poorer countries are tempted to use every natural
resource available to them, even if it is something valuable whose loss will result in
future difficulties for the country itself.
Conservation swaps are agreements whereby a proportion of a country’s debts are
written off in exchange for a promise by the debtor country to undertake
environmental conservation projects.
Between 1987 and 2001, 50 countries took part.
Usually areas of valuable land are set aside for
protection, especially tropical rainforest. In 2002 and
2008, Peru and the USA agreed to a debt swap of $40
million. Peru agreed to conservation activities to
preserve more than 27.5 million acres of endangered
rainforest. The rainforest provides a habitat for many rare species including jaguars
and pink river dolphins.
Case Study: Fairtrade
Fairtrade is an international movement ensuring producers in poor countries get a fair
deal. They receive a minimum guaranteed price for their crop even when world
market prices fall, which provides them with a living wage, long-term contracts for
security and skills training to develop their business.
Global sales of Fairtrade goods in 2008 were €3.4 billion worldwide. Around 7 million
farmers, farm workers and their families in 58 poorer countries benefit from the
improved trading conditions brought about by Fairtrade.
There are thousands of products that carry the FAIRTRADE Mark. Fairtrade
standards exist for food products and non-food products, including:
Bananas
Cocoa
Coffee
Cotton
Flowers
Fresh fruit
Honey
Gold
Juices
Rice
Sports balls
Sugar
Spice and herbs
Tea
Wine
Fairtrade Premium
Farmers also receive a ‘Fairtrade Premium’ which helps producers
to improve the quality of their lives. It is paid on top of the agreed
Fairtrade price, and producers decide how to use it. Typically they
invest it in education, healthcare, farm improvements or processing
facilities to increase income. As many projects funded by the
Premium are communal, the broader community, outside the
producer often benefits. Approximately €43 million was
distributed to communities in 2008 for use in community
development.
Working conditions
Employers must pay decent wages, allow their workers to join trade unions and
provide adequate housing where relevant. Employers should also provide training
opportunities and conditions of employment should exceed the legal minimum
requirements. Forced labour and child labour is prohibited. Salaries must be equal or
higher than the regional average or the minimum wage. Health and safety measures
must be established in order to avoid work-related injuries.
Protecting the environment
Fairtrade rewards and encourages farming practices that are environmentally
sustainable. Producers are also encouraged to strive toward organic certification.
Producers must:
- Protect the environment in which they work and live. This includes areas of
natural water, virgin forest and other important land areas and dealing with
problems of erosion and waste management.
- Follow national and international standards for the handling of chemicals.
There is a list of chemicals which they must not use.
- Not, intentionally, use products which include genetically modified
organisms (GM foods)
In some national markets Fairtrade accounts for between 20-50% of market share in
certain products. There are now 827 Fairtrade certified producer organizations in
58 producing countries.
Aid
Aid is when a country receives help from another country or an organisation such as
an NGO to help it develop and improve people’s lives.
Key terms
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Short term aid – aid given to relieve a disaster situation.
Long term aid – aid given over a significant period of time, which aims to promote
economic development.
Donor country – a country giving aid to another country.
Receiving country – a country receiving aid from another country.
Bilateral aid – aid given by one government to another. It may include trade and
business agreements tied to the aid.
Multilateral aid – MEDCs give money to international organisations such as the
World Bank, UN or IMF. They then redistribute this to development projects in
LEDCs.
Top down aid – aid used so that governments can run more efficiently or to build
infrastructure such as roads and bridges.
Bottom up aid – aid used to provide basic health care for communities, clean
drinking water and money for education.
NGOs – Non-Governmental Organisations. These are charities such as AcionAid,
UNICEF or Oxfam.
Advantages and disadvantages of aid for donor and receiving countries
Case Study: Cahora Bassa Dam, Mozambique
(bilateral aid)
The Cahora Bassa dam was begun by the Portuguese
government of Mozambique in the 1960’s, although it was
only completed three decades later. Civil war (1977-1992)
prevented its development and use of the scheme as well as
damaging its infrastructure.
It is the largest HEP scheme in southern Africa with five
huge turbines. Despite this huge resource, only 1% of
Mozambique’s rural homes have a direct electricity supply and this level has hardly
changed during the life of the dam. Most of the power is sold to South Africa, which
makes money for the economy but does little for its citizens. The dam could produce
enough electricity to power the whole of the country; however this is not currently
happening. The dam has also caused environmental damage as it had cause river levels
to be very low as so much water is held in the reservoir. The shrimp fishing industry
in the lower valley has almost been destroyed as a result.
The dam has much greater potential than has ever been realised. Perhaps if it
concentrated on serving Mozambique, its success would have been much greater.
Case Study: FARM-Africa (sustainable
development)
The official UN definition of Sustainable Development is that it ‘meets the needs of
the present without compromising the ability of future generations to meet their own
needs’. Organisations like FARM-Africa encourage sustainable development through
the aid they provide.
FARM-Africa provides the training and support that poor rural communities need to
identify and implement appropriate solutions to many of the key problems they face.
Families are directly supported to help work themselves out of poverty through
improved ways to manage their crops, livestock, forests and access to water.
The FARM-Africa goat project provides poor families with goats and training in how
to care for them. They also give one member of the group Toggenburgs to breed
with local goats, so the hardier offspring produce lots of nutritious milk. This can be
drunk, made into cheese or sold to help pay for medicine and schoolbooks. Plus, the
goats' manure is a great fertiliser for the family's crops.
Other projects
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Tanzania: With access to new high-yielding maize seeds and training in
techniques to increase productivity and to market their produce, farmers have
nearly doubled their yields. Income has soared from less than 50 pence a day
to an average of £2.50.
Kenya: Dairy goat farmers have increased their average annual income from
£46 to around £497.
Uganda: With access to new varieties of cassava, rural farmers have increased
the value of their produce from £4 to £242 per acre. They are now selling
70% of their produce. Farmers who previously depended on food aid have
achieved food security.
Development differences in the EU
The EU was set up in 1957 to achieve economic and political cooperation after WWII.
Twenty-seven countries now belong to the EU, and they account for 31% of global
GDP.
The EU may be one of the richest parts of the world, but there’s still a big gap
between its richest and poorest countries and regions. The richest regions (in terms
of GDP per capita) are all cities – London, Brussels and Hamburg. The richest country
is Luxembourg – more than seven times richer than Bulgaria or Romania, the poorest
members of the EU
Economic periphery: The edge of a country or
region in terms of economies. It may not physically
be the edge, but is a more remote, difficult area
where people tend to be poorer and have fewer
opportunities. A less well-developed area.
Economic core: The centre of a country or region
economically, where businesses thrive, people have
opportunities and are relatively wealthy. A highly
developed area.
EU policies to reduce the differences in development
There are many ways that the EU is trying to reduce the development
gap between countries and regions in the EU. These include:
The Common Agricultural Policy
The Common Agricultural policy (CAP) was set up in 1962. It wanted to achieve:
 A single market in which agricultural products could move freely.
 Make the EU more self-sufficient by giving preference to EU produce and
restricting global imports.
 Give money to support farmers by guaranteeing prices (subsidies) and a market
for their goods. Farmers could produce more and that their surplus would be
bought even if not sold on the market.
 An increase in the average field size, farm size and farmers income.
Supporters of the CAP say that it guarantees the survival of rural communities,
where more than half of EU citizens live and preserves the appearance of the
countryside. Critics say that as only 5% of the EU citizens work in agriculture, which
generate only 1.6% of GDP, the CAP costs too much!
The Problems:
 Due to guaranteed wage for farmers produce, farmers produced much more than
was needed in the EU. This created huge surpluses of food products (called
‘cereal, butter or beef mountains’ and ‘wine and olive-oil lakes’) in the 1980s.
 Farmers received £31billion worth of subsidies a year. This was 70% of the whole
EU budget and only provided 5% of the EU income!!! The EU couldn’t keep this up
so it changed or reformed in 1992.
 Hedgerows were destroyed to make larger fields and bigger machinery. This
destroyed habitats.
CAP Reform, 1992. The main changes were:
 Single Payment Scheme (SPS). Started in 2003 this is where farmers didn’t get
several different subsidy payment they got just one.
 Farmers must meet certain standards of animal welfare and land management to
get the payment. Concentration changed from quantity to quality of produce.
 However, dairy farmers still have quotas and this has being boosted since 2008,
however they are being scrapped in 2015. Quotas are where farmers are told how
much milk they can produce and can’t produce more than this.
 Arable farmers must set-aside part of their land (up to 15% of their land). This is
where the land isn’t used for growing crops or keeping land. There are strict rules
on how much land, its type & how its managed otherwise farmers won’t get their
payment under the SPS.
 Training of young farmers was put into place. Diversification was encouraged.
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Income support and early retirement was given to keep people in farming.
Now the policy costs about £34 billion a year, just over half of the total EU budget
of £60 billion. Most of this goes straight to the farmers. Another £5 billion is
spent on rural development. The addition of 10 new member countries in 2004,
together with Bulgaria and Romania three years later brought another 7 million
farmers into the EU, in addition to the 6 million already there. CAP cannot possibly
maintain them at the previous Western European level.
EU regional policy
This transfers resources from richer to poorer areas, so the poorer areas can catch
up with the rest of the EU. From 2007-2013, regional spending will use up 36% of
the EU’s budge – a staggering €350 billion. The focus is on countries in Central and
Eastern Europe – like Poland. The money comes from three sources:
 The European Regional Development Fund – this pays for things like general
infrastructure.
 The European Social Fund – this pays for things like training and job creation
programmes.
 The Cohesion Fund – this covers environmental and transport infrastructure
projects as well as the development of renewable energy. This fund is
reserved for countries with living standards that are less than 90% of the EU’s
average, so this includes Poland, Portugal and Greece.
Urban II fund
Most Europeans live in urban areas because they are the centres of economic activity
and hold greatest opportunities. However, all cities have concentrations of social,
environmental and economic problems. Urban II fund money comes from the
European Regional Development Fund and it is for sustainable development in troubled
districts of European cities.
It aims to provide economic and social regeneration. Any successful idea in one city is
shared with others to try and improve living conditions as widely as possible. Projects
include:
 improving living conditions (e.g. renovating older buildings)
 creating new jobs in services that benefit the whole population
 developing environmentally friendly transport systems
 making greater use of renewable energy
 using up to date ICT systems to make work more efficient and to improve
people’s skills and therefore their job prospects
Urban II fund has 70 different programmes that affect 2.2 million people. Its
budget was €728.3 million between 2000 and 2006. The people of the town Teruel in
northern Spain have a new ring road. It will reduce traffic flows through the town by
at least 20%; cutting congestion and improving travel times and air quality in the
town. The new road also links previously isolated neighbourhoods; there are paths for
cyclists and joggers. It cost €16.6 million.
European Investment Bank (EIB)
The EIB’s money comes from the member countries who own it. They contribute
according to their size and wealth. In 2004 they contributed €163.6 billion. The
bank borrows on the world financial markets.
Its main purpose is to invest in regional development. Some regions are suffering
difficulties because of the decline of local industry or reduced farm incomes.
Projects are usually locally based and funds are used to train people with new skills
and to help set up new businesses.
Structural Funds
Structural funds support poorer regions of Europe and improves infrastructure,
particularly transport because that enables the economy in an area with difficulties
to work more efficiently. Together with CAP, it makes up most of the EU spending.
Regions whose GDP per capita is less than 75% of the EU average are targeted. The
aim is to accelerate development so they catch up with other regions. The budget for
2007-2013 is €347.1 billion. In addition, the most deprived regions will receive extra
money from other funds.