1.

ECONOMIC DEVELOPMENT

How to turn “Less economically

Mr spencerdeveloped
Burton countries” (LEDCs)
into “More economically developed countries” (MEDCs)
 WHAT IS ECONOMIC DEVELOPMENT?

Amartya Sen
Development is about:
(born 1933)
• Increasing peoples freedoms
• Increasing standards of living
• Reducing poverty
• Public provision of education and healthcare
• Maintaining law and order
Michael Todaro
(born 1942)

Development is the need for 3 core values:

1. Sustenance – food, shelter, health and
protection
2. Self-esteem – Develop identity, self worth,
dignity and respect
3. Freedom from servitude and ability to
choose – freedom from oppression
 HDI – THE WAY DEVELOPMENT IS
MEASURED IN A GENERAL SENSE
Human Development Index (HDI) (1990)
1. Life expectancy at birth
2. Adult literacy rate (2/3rd weighting) + percentage of population enrolled in primary, secondary and tertiary
education (1/3rd weighting)
3. GNI per capita in US$ at PPP.

• Find a country with a relatively high HDI figure

• Find a country with a relatively medium HDI figure

• Find a country with a relatively low HDI figure

http://hdr.undp.org/en/data
 ECONOMIC GROWTH AND ECONOMIC DEVELOPMENT

1. Illustrate economic growth using as many

diagrams as you can.
Think back to
your macro course 2. What are the different economic indicators
last year of a growing economy?

3. What are the sources of economic growth?

But does economic growth

Economic growth is the increase in real GDP always lead to economic
over time, which is the increase in output of development?
an economy adjusted for inflation.
A rise in GDP per capita should mean And what does economic
everyone is richer, better off. development really mean?
 HOW COULD YOU RELATE THESE TO DEVELOPING
ECONOMIES?

Benefits of Economic growth Costs of Economic growth

• Higher living standards from increased
income • Increase environmental damage
• Increased competition? • Is the rise in incomes shared equally?
• Lower unemployment • Increased inequality
• Decreased government borrowing • Inflation (if unsustainable SR growth)
• Higher tax revenue can be used? • Depletion of finite resources
• Increased R&D • Unsustainable growth from raw
• Improved public services material exporting?
• Investment (accelerator effect)

Legal, political, security and banking

frameworks need to be in place before
any of the benefits can be realised!
 DEVELOPING ECONOMIES

How many economies can you think of that you would consider “developing”?

Do these economies have things in common?

Do some of them have nothing in common?

 Dependence on primary Lack of access to
production e.g agriculture international Geographical location e.g
markets landlocked

Tropical climate and

endemic diseases Rising economic
inequality
Barriers to
Lack of growth and
infrastructure/technology
development
Indebtedness

Low levels of human

Informal
capital (lack of
Capital flight economy
healthcare/education)
 Corruption/lack of
good governance
Weak institutional
frameworks:
• Legal system
• Ineffective taxation
structures
• Banking system
• Property rights
Political and
social barriers Gender inequality

Unequal political
power/status
 THE “THIRD” AND “FOURTH” WORLD
ECONOMIES
Using the barriers stated in the previous 2 slides, pick a country from the list of
“third world less developed” nations and a country from the list of “fourth world
least developed”. Find out:
1. What makes a country classified “less developed”? (third world)
2. What makes a country classified as “least developed”? (fourth world)
3. Using a chosen country from BOTH lists (1 from each) – what makes that
specific country less/least developed? What are their barriers to development?
4. What could they implement to try and increase development?
POVERTY TRAP AND
POVERTY CYCLES

Absolute Poverty: A situation where

individuals do not have access to the basic
requirements of life – food, shelter, clothing.

Relative Poverty: A situation where

individuals are excluded from being able to
take part in what are considered the normal,
acceptable standards of living in a society.
 HOW TO
BREAK THE
POVERTY
CYCLE
 SUSTAINABLE
DEVELOPMENT GOALS Video outlining the
SDGs
Awesome website to look at SDGs in co
untries
The Sustainable
Development
Goals (SDGs),
otherwise known as
the Global Goals,
are a universal call
to action to end
poverty, protect the
planet and ensure
that all people enjoy
peace and prosperity.
 The old Millennium
SDGs over the MDG Development goals -
set out from 2000 to
2015, as the MDG
were seen as too
broad and although
relatively successful,
did not get to the
root cause of poverty.
 EXAMPLE QUESTIONS

Define Economic development (2 marks)

Define Economic growth (2 marks)

Using an appropriate diagram, explain how economic growth may lead to

economic development (4 marks)

How might a drought in India cause the economy to experience a decrease in

economic growth? (4 marks)
2. MEASURING DEVELOPMENT

Mr spencer Burton
 POVERTY TRAP AND
POVERTY CYCLES One of the basic ways of measuring
development is looking at poverty
levels in a country

Absolute Poverty: Living on below $1-$2 a day.

A situation where individuals do not have access to
the basic requirements of life – food, shelter,
clothing.

Relative Poverty: Earning less than 60% of the

median income
A situation where individuals are excluded from
being able to take part in what are considered the
normal, acceptable standards of living in a society.
 MEASUREMENTS OF ECONOMIC DEVELOPMENT
Other measures of development known as “Development indicators” are regularly used to compare
and contrast countries.
They can be split in to two distinct groups; Human development index
(HDI)
Gender inequality index (GII)

GDP/GNI per capita at PPP Composite indicators

(combining single
Energy indicators Economic/social inequality measurements and giving
different weightings)

Single indicators Happy planet index

(simpler single Inequality adjusted HDI
measurements)

Health/education indicators
Environmental indicators
 HUMAN DEVELOPMENT INDEX (HDI)

• Find a country with a relatively high HDI

figure Problems from using HDI?
It is still an average for the population and therefore may
• Find a country with a relatively medium HDI mask the real issues.
figure
The UNDP tries to calculate HDI amongst different groups
• Find a country with a relatively low HDI figure within society to give a clearer picture of the development
http://hdr.undp.org/en/data index.

What factors do you think contribute to the But there are other measures which can give more detail…
different HDI levels?
 INEQUALITY-ADJUSTED HUMAN
DEVELOPMENT INDEX (IHDI)

Under perfect
equality the IHDI is
equal to the HDI
but falls below the
HDI when
inequality rises.
The difference between the IHDI and HDI is the human development cost of inequality, also termed – the overall
loss to human development due to inequality.

The IHDI combines a country’s average achievements in health, education and income with how those
achievements are distributed among country’s population by “discounting” each dimension’s average value
according to its level of inequality.
 GENDER INEQUALITY INDEX

The higher the GII value the more disparities between females and males and the more loss to human
development.

The GII sheds new light on the position of women in 162 countries; it yields insights in gender gaps in major
areas of human development. The component indicators highlight areas in need of critical policy intervention,
and it stimulates proactive thinking and public policy to overcome systematic disadvantages of women.
 HAPPY PLANET
INDEX

An index that combines four

elements to show how efficiently
residents of different
countries are using environmental
resources to lead long, happy lives.

The elements are

well-being, life expectancy,
inequality of outcomes, and
ecological footprint.
Human Poverty Index (HPI)
1. % of people who don’t reach 40
2. % of adults who are illiterate
3. % of population without access to clean water
4. % of children underweight for their age

Human Opportunity Index (HOI)

This index measures how individual circumstances, such as place of residence, gender, and education of the household head,
can affect a child’s access to basic opportunities such as water, education, electricity and sanitation. It is created by the
World Bank.

Multidimensional Poverty Index (MPI)

An international measure of acute poverty covering over 100 economically least developed countries. It complements
traditional income-based poverty measures by capturing the deprivations that each person faces at the same time with
respect to education, health and living standards.

OECD Better Life Index

An index to compare well-being across countries, based on 11 topics that the OECD has identified as essential, in the areas
of material living conditions and quality of life.
 SINGLE MEASUREMENTS

GDP per Capita– Total economic output within the economy divided by the population. The assumption being that a higher level of GDP per Capita
the more developed a country would be. Note that the output takes place in the country so this includes foreign countries operating within the country
but not domestic firms operation abroad.

GNI per Capita – Total national income divided by the population. Note that unlike GDP per capita this does not include the income from
international firms operating in the country and does include the domestic firms operating abroad.

GDP per Capita and GNI per Capita are often adjusted for PPP to give a more true indication of wealth and development.

Life expectancy at birth – A developed country would expect to have a higher figure, because this indicates how good the health care in a country is,
the level of poverty, education and also access to such things as clean water and food.

Infant mortality rate – Measure of the number of deaths of babies under the age of one year per thousand live births in a given year. Greatly affected
by the amount of healthcare provision.

Adult literacy rates – What proportion of the population over the aged of 15 are literate. It is expressed as a percentage of the whole population at a
specific point in time. Literacy is defined as the ability to understand, write and read a short statement about their everyday life.

Net enrolment ratio in primary education – defined as the ratio of children in primary school to the total number of children of primary school age
in the country.
STRATEGIES TO PROMOTE GROWTH AND
DEVELOPMENT

Mr Spencer Burton
 ECONOMIC
DEVELOPMEN
T STRATEGIES
1. TRADE STRATEGIES & DIVERSIFICATION

Mr spencer Burton
 INTERNATIONAL BARRIERS TO TRADE

Many international trade factors can affect a developing economy when trying to
promote economic growth strategies and economic development strategies

1. Overspecialisation and the need for diversification

2. Price volatility of primary goods exports

3. Inability to access international markets

4. The need to integrate into trade blocs

 OVER SPECIALISATION

Simply put –

If a country relies on a specific good or service for its growth and

development then it can be subject to sudden changes in the demand/price
fluctuations.

• Many coastal countries reliant on tourism (Morocco, Kenya)

• Angola reliant on commodity exports (diamonds and oil)

 PRICE VOLATILITY OF PRIMARY
GOODS

PED and PES for commodities tend to be inelastic.

Therefore, any change in demand or supply conditions causes large price fluctuations.

• Can create huge negative effects on export revenues so business investment low.
• Governments unsure of future tax revenue streams so cut back on development projects.
 INABILITY TO ACCESS INTERNATIONAL MARKETS

Protectionist policies from developed economies can damage developing economy growth.

May have comparative advantage in production but are blocked by protectionist measures
i.e developed economies subsidising own farmers (25,000 US farmers get $3 billion in
subsidies)

Farmers from developed economies may also sell their surplus to developing economies at a
low price (to get rid of excess supply) which can damage growth even further.
 TRADE STRATEGIES FOR GROWTH AND DEVELOPMENT

Focuses on growth through increased

Export exports
promotion Need to – 1. Liberalise trade. 2. Liberalise capital
Import flows. 3. Float exchange rate. 4. Invest in
substitution infrastructure. 5. Deregulate markets
Worked for Japan, South Korea, Taiwan but does not
work for all – commodity led export growth brings only
Move consumption away from small revenue gains due to low prices.
imports and towards domestic
A poorly thought out policy package can create
consumption
huge negative effects long term
Subsidies, government support Trade
and protectionism is needed! liberalisation Removing trade barriers, fiscal discipline,
Effects on stakeholders? lower taxes, privatisation, deregulation.
All these will attract foreign investment and
create growth!
Protects jobs, grows economy,
Bilateral and
takes power from developed Joining of a trade bloc
economies regional PTAs
Move from primary exports to
Inefficient firms, global loss of welfare? Diversification manufacturing in order to gain higher
Long term retaliation effects export revenues
 L E T ' S A P P LY O U R K N O W L E D G E …

Approach -
Step 1 - Definition of economic development and economic development with contextual reference to the case study
(Zambia’s growth and HDI changes in recent years)
Possible positive consequences:
• may have been instrumental in allowing Zambia to become both a middle-income and a medium human development
country (paragraph 1)
• Zambian HDI higher than that of the sub-Saharan average even though its GNI per capita is lower. This suggests that its
economic development might be benefitting from the economic growth
• creation of jobs in the copper sector (paragraph 2) leading to higher incomes and improved standards of living
• generation of tax/government revenue (paragraph 2), which may be used to finance development objectives (through
spending on health, education and infrastructure)
• attraction of FDI = strong economic growth (paragraph 3), plus the theoretical benefits of FDI (increase in AD diagram,
increase in LRAS diagram, jobs, government revenue, multiplier effects, training for workers) and the ways that these might
impact upon economic development (increased incomes, improved skill levels, government revenue to finance development
objectives, paragraph 7).
 L E T ' S A P P LY O U R K N O W L E D G E …

Possible negative consequences:

• “resource curse” arguments
• while growth rates have been good, there is evidence to suggest that the benefits have not been shared equitably
(paragraph 1, paragraph 7)
• vulnerable to price volatility (both demand and supply of copper likely to be inelastic, so a fall in demand from China
leads to a significant fall in the price) (paragraph 5)
• copper mining uses a lot of hydropower, possibly diverting its use from households and other industries
• the currency is vulnerable to changes in the price of copper
• threat to government budget when the price falls making it difficult for the government to finance its development
objectives
• fluctuating revenues make it difficult for governments to plan for spending on development objectives
• copper mining may generate external costs and represent a threat to sustainable development (negative externalities of
production diagram).
2. SOCIAL ENTERPRISE / SOCIAL BUSINESS

Mr Spencer Burton
 2. SOCIAL
ENTERPRISE /
SOCIAL BUSINESS

• An organization that focuses

on meeting specific social
objectives, rather than
primarily aiming to earn a
profit for its owners.
• Instead, a social enterprise
aims to maximize
improvements in social and
environmental well-being.
 MAIN AIMS OF
SOCIAL
ENTERPRISE
Social objectives:
• Education/health/social support for
children, elderly, or underprivileged
• Protection of the local environment, e.g
sustainable tourism
• Most workers are young/female
increasing age/gender equality
• Some may charge a small fee and make
profit, but profit is reinvested into social
objectives above
• Positive relationship between social
enterprise programs and development
 SOCIAL ENTERPRISE AND
MICROFINANCE
• Provision of microfinance is considered
to be a type of social enterprise.
• Muhammad Yunus, the founder of
microfinance, used the expression social
enterprise in connection with his work.
• Applying your skills
• While Bambike is a for-profit organisation
it has important social goals. Use the
information and on its website to outline
Bambike’s social goals.
• Research and identify one or more other
social enterprises in a country of your
choice. How is the activities of the social
enterprises helping to achieve the
country’s development goals?
3A. MARKET BASED POLICIES AND
INTERVENTIONIST POLICIES

Mr spencer Burton
 THE LONG HELD DEBATE

The debate between free markets and government intervention has gone on for
hundreds of years…
Interventionist strategy
Market led strategies
Progressive taxes
Tax reductions and broaden
taxation Transfer
Deregulation payments (e.g
benefits)
Trade
Minimum wages
liberalization
Privatisation Provision of merit
goods e.g
Export led growth Infrastructure education/healthc
Structural are/clean water
adjustment
policies Subsidies
 SHOULD
THEY SPEND
MORE ON
EDUCATION?
 3B.
PROVISION OF
MERIT GOODS
 A SHORT HISTORY

After 2nd World War (1950s) – Post 1980s

Economic development was seen through strict Move towards free markets! (Reaganism and
government planning! Thatcherism)
- Public sectors grew too large - Support for government-led economies collapsed
- Inefficiency arose - Success of “Asian Tigers” attributed to export-
led growth and FDI
- Loss making nationalised industries
- BUT
- Government spending excessive and wasteful
- Infrastructure unlikely to be created by free
- High levels of inflation from over supply of money
market (free rider concept)
- Large infrastructure projects that saw little success
- Western countries promote free market but were
High debts in African/Latin American economies, themselves protectionist
poor outcomes for Soviet Union and Eastern Blocs
- Success of Asian Tigers was in fact down to some
government involvement
- Cost to low income society, inequality caused
- Urbanisation of economies (more rural poverty)
 TO SUMMARISE

In your exams, it is crucial to remember that “one size” does not “fit all”!

The IMF realised this after the 1980s structural adjustment policies that were implemented on
many differing countries.

A strategic and aligned policy towards both government intervention and free market policies is
needed and each country will be different!

Similar conditions needed:

• Free but fair Trade
• Historical Debt relief
• Free markets once infrastructure and domestic firms have been established
• Political stability and removal of corruption
• Targeted Aid in order to lift the poor out of poverty by encouraging growth
4. INSTITUTIONAL CHANGE

Mr Spencer Burton
 WHAT IS INSTITUTIONAL CHANGE?

Institutional frameworks are the key foundations of the structure of an

economy, with the following needing to be improved to promote
development:
• Access to banking (including microfinance and mobile banking),
• Women’s empowerment
• Reducing corruption
• Extending and protecting property rights
• Upholding land rights.
RESEARCH
5. FOREIGN DIRECT INVESTMENT (FDI)
AND MULTINATIONAL CORPORATIONS
(MNCS)
Mr Spencer Burton
Foreign direct investment (FDI) is investment by firms based in one country (the home
country) in productive activities in another country (the host country) with control of at
least 10 per cent of the firm in the host country.

A firm that undertakes foreign direct investment is referred to as a multinational

corporation (MNC), because it operates in more than one country.

FDI used to be
mainly developed
nation to developed
nation.

Since the 1980s,

developed to
developing is
increasing.
CHARACTERISTICS THAT MNCS LOOK
FOR BEFORE INVESTING IN LEDCS
Why MNCs have begun investing in LEDCs?

Represent huge and growing

Costs of labour are much lower
markets so able to capture
growing demand i.e Brazil, India,
China

An easy way to bypass

protectionist policies such as
tariffs if the MNC operates Usually rich in natural resources.
within the country Top recipients of FDI in Africa
are countries with valuable
natural resources i.e Angola,
Nigeria, Sudan
Potential for joint ventures and
possible low-cost acquisitions of
developing businesses
 F D I – G O OD O R B A D F O R D E V E L O P M E N T ?

Think of 3 reasons why it may help development and 3 reasons why it may
hinder economic development
Taxation revenue may not rise due to
loopholes & preferential (low) tax rates
Provides employment, training
and workplace education Bring own workers/capital for high level jobs
and therefore only low skilled employment for
Can create inflows into financial account to
LEDC
help with buying imports from current
account Increased pollution and depletion
of natural resources
Increased domestic income and FDI may
create multiplier effect Profits made may be immediately
withdrawn to developed country
Increased tax revenues
Greater variety of goods and Arrival of increased demerit goods
services from developed country
Govt. revenue spent on MNC support
Provide infrastructure, physical
(infrastructure) instead of poverty
and financial
reduction
MNC’s that have been caught using
child labour or sweatshops
Dominance of FDI as a source of external finance for developing / emerging countries

Foreign direct
investment and
remittances are now
far more significant
than overseas aid
as a source of
external finance for
developing
countries
DID YOU
KNOW…
 6. FOREIGN AID

Mr spencer Burton
 Aid – the transfer of funds or goods and services to developing countries with
the main objective to bring about improvements in their economic, social or
political conditions.

Official development assistance (ODA) vs Non-Governmental organisations (NGOs)

Aid that is organised by a non-

Aid that is organised by a
government organisation (NGO)
government or an official
such as Oxfam.
government agency of a donor
country

Humanitarian aid – this is to

Development aid – to alleviate alleviate short term suffering i.e
long run poverty. droughts, natural disasters.
• May be simple donations but • Gift and does not need to be
usually has to be repaid in repaid
some form
 Humanitarian aid vs development aid

OECD states “flows to developing

There are 3 main forms countries and multilateral
institutions provided by official
agencies

1. Food Aid – provision of food

or money for food from donor
This is done in order to promote the
countries
welfare of developing countries and is
concessional, containing a grant of at
2. Medical Aid – Provision of
least 25%
medical services

3. Emergency Aid – Emergency

supplies, including tents shelters,
clothing etc.
1. Bi-lateral aid: From one country to another

2. Multi-lateral aid: Channelled through international bodies such as International bank for
Reconstruction and development

3. Project aid: Direct financing of development projects for a country. Often by the World Bank.

4. Technical assistance: Funding of expertise of various types such as grants for technicians or to
increase technology.

5. Humanitarian aid: Emergency disaster relief, food aid, refugee relief and disaster
preparedness

6. Soft loans: A loan made to a country on a concessionary basis.

7. Tied aid: i.e loans given but only if money used to buy goods and services from donor country

8. Long-term loans: Loans repayable over 10-20 years often repayable in local currency
How aid can promote human development Criticisms of Overseas Aid

1. Helps to overcome the savings gap + 1. Poor governance - aid can be expropriated
overseas aid can play a key role in stabilizing and leaves recipient country - aid can finance
post-conflict environments and in disaster corruption / strengths / locks-in ruling elites
recovery
2. Lack of transparency – hundreds of $m
2. Project aid can fast-forward investment in spent on aid consultants and developed
critical infrastructure projects – capital country NGOs
deepening effects +higher productivity
3. Dependency culture – one aid paradox is
3. Long term aid for health and education that aid tends to be most effective where it is
projects - builds human capital and stronger needed least – it may stunt entrepreneurial
social institutions. Aid projects for enterprise culture

4. Well targeted aid might add around 0.5% to 4. Aid may lead to a distortion of market
growth rate of poorest countries - this benefits forces and a loss of economic efficiency and
donor countries too as trade grows risks of inflation
 
 WATCH THIS CLIP

https://www.youtube.com/watch?v=1xJ6p0B5V_A&t=5s

What does this speaker suggest is the problem when giving “aid”?

How do Western countries view developing countries (from this speakers perspective)?

What should Western countries do when deciding how they should help developing economies develop?
7. DEBT AND DEBT FORGIVENESS
DO YOU AGREE/DISAGREE WITH THIS
TWEET?
 “THIRD WORLD” DEBT

Debt service (paying off debt) causes major economic problems for developing
economies - vastly outweighing the money they receive through world Aid.

What is foreign debt?

•Outstanding loans to foreign private banks

•Payments to international organisations like the IMF

•Outstanding payments for a current account deficit

(owing money for imports)
 WHY DO DEVELOPING COUNTRIES BORROW
FROM FOREIGN LENDERS?
A major reason is to finance current account deficits…
How can we illustrate this?

• The ability to acquire goods from abroad (therefore to

have a current account deficit) allows developing
countries to live outside of their PPC.
Can you illustrate this?

• Good for the long-term if these imports are capital

goods that can be used to accelerate industrialisation.
Can you illustrate this?

However – THIS IS A RISK!

In reality, the buying of imports does not always lead
to acceleration in growth
• Developing country continues to import
• Continues to finance this through borrowing (selling
government bonds through the financial account)
• Resulting in higher debt, higher interest rate repayments and a
long-term debt-ridden underdeveloped country.
 WHERE DID IT ALL GO WRONG?

• Some developing countries relied on oil imports to then export oil produced goods
• Oil price hike in 1973 – created high import prices for developing countries AND a global recession so
lower prices for their exports (due to lower demand)
What would this do to the balance of payments?
DEFICIT!
• Developing countries NEEDED to borrow more to finance current account deficits
• Developing countries who EXPORTED oil now had a huge amount of cash, this went to foreign banks for
safe keeping
• This meant loanable funds increase hugely across the developed world
How can we show this on a diagram, illustrating how developed country interest rates reduced?
• This created a perfect condition for developed countries (looking for higher returns now interest rates
were low in developed countries) to lend to developing countries needing to finance CA deficits
• Coined “petrodollar recycling”
What did this lending do???
THE RESULT OF DEBT (FROM PETRODOLLAR RECYCLING)

• Some of the money was spent wisely on infrastructure projects and to service previous debt
How can this be shown on a diagram? Why would this be good?
• Money was used as a reason to cut public taxation, this created a dependency culture
• Money used to finance inefficient public sector services (projects like railways that did not get properly
built, poor healthcare system)
• Some of the money was kept by corrupt politicians…
Then came another oil price shock (1979)
• Commodity demand reduced, affecting developing economies even more
What key term would we use for this? Can we illustrate this?
• Due to the inflation in developed countries (from oil shock) interest rates increased
How would this affect refinancing debt for developing countries?
• Trade protectionism was implemented by developed countries to shelter them from the global recession
How could this be shown on a diagram, illustrating the effect on developing countries?
 THE END RESULT

These countries now owe money to commercial banks and also to

organisations like the World Bank, the International Monetary Fund,
and to First World governments.
 DEBT SPIRAL AND “LOAN CONDITIONS”

Debt spiral –
Refinancing a loan in order to pay it off (by getting another loan) is a
solution many developing economies choose. This solves the short term
problem but puts you deeper and deeper into long term debt.
World bank to the rescue!
Loans are offered but with strict conditions
like:
• Opening up the goods markets to MNC’s
• Strict austerity measures
• Allowing global financial institutions to
restructure the economy
 SOLUTIONS? WHAT CAN BE DONE…

Debt relief – Cancelling of part or full amount of debt. This can

directly affect development (it is easy to illustrate the direct
relationship between development and debt)

Reschedule the debts - This is when the terms of repaying the loan are changed and more time is allowed to repay the loan.

Debt swaps – Money owed to banks is paid to charities (banks get tax relief for this) and the money is used for development
projects.
 PROBLEMS WITH CANCELLING DEBT

• There is no guarantee that countries would use

savings from debt to fund development projects.
• Moral Hazard
• IRRESPONSIBLE borrowing
• Opportunity cost for MEDC
 AFRICA’S NEW DEBT CRISIS?

2021 could be the year that sub-Saharan Africa sees a new debt crisis.

• Since 2008 global crisis – lending to African countries has boomed

(why?)

• Lack of demand for loans from West, low interest rates in West and
Quantitative Easing means profits need to be made elsewhere!

• But, global interest rates are now rising and commodities are not
growing…

Read the article – how is debt

changing and who owes debt now in
developing countries?
Why do these factors
cause development debt
to worsen?
 WHAT IS THE JUBILEE DEBT
CAMPAIGN?

Research this and come up with a summary outlining what this campaign is
about and why these types of campaigns/organisations are important
 RE-CAP QUESTIONS

What are 2 composite measures of economic development?

What are 5 factors that developing countries may have in
common?
What are 5 factors that developing economies may have that
differ?
What is tied Aid?
What is official development assistance?
What is FDI?
What is an MNC?