Economics Economic Development. How advanced is a country? How advanced is a country? More Developed - MDC More Developed - MDC Newly Industrialized –

Economics Economics

Economic Development Economic Development

Economic Development Economic Development

How advanced is a country?How advanced is a country? More Developed - MDCMore Developed - MDC Newly Industrialized – NIC Newly Industrialized – NIC Less Developed – LDC Less Developed – LDC

Human Development Index Human Development Index Developed by UN 1990, ranks countries by looking at Developed by UN 1990, ranks countries by looking at

economic development & standards of living.economic development & standards of living.

Indices & Data | Human Development Reports (HDR) Indices & Data | Human Development Reports (HDR) | United Nations Development | United Nations Development ProgrammeProgramme (UNDP) (UNDP)

Demographic Indicators Demographic Indicators

Life Expectancy – average number of Life Expectancy – average number of years a person is expected to live.years a person is expected to live.

Birth & Death Rates – average number of Birth & Death Rates – average number of children born and people who die in a children born and people who die in a year.year. Death rate is called Mortality Rate. Death rate is called Mortality Rate.

Infant Mortality Rate – number of infants Infant Mortality Rate – number of infants who die before 1who die before 1stst birthday in year. birthday in year.

Economic Indicators Economic Indicators

Gross Domestic Product GDP – the Gross Domestic Product GDP – the total value of all goods & services total value of all goods & services produced produced withinwithin a nation in a year. a nation in a year.

GDP per capita – per person in a GDP per capita – per person in a country country

Social & Political IndicatorsSocial & Political Indicators

Social Social Literacy Rate – percentage of people who can Literacy Rate – percentage of people who can

read & write.read & write. Number attending college, number of Number attending college, number of

professionals, housing, water supply & professionals, housing, water supply & sanitationsanitation

Political Political Freedoms people enjoy, type of government, Freedoms people enjoy, type of government,

tolerance of other viewpoints. tolerance of other viewpoints.

MDC – higher life expectancy, lower MDC – higher life expectancy, lower birth rate & infant morality, higher birth rate & infant morality, higher literacy rates, more in college, more literacy rates, more in college, more doctors, better water supply & doctors, better water supply & sanitation sanitation

LDC - lower life expectancy, higher LDC - lower life expectancy, higher birth rate & infant morality, lower birth rate & infant morality, lower literacy rates, less in college, less literacy rates, less in college, less doctors, poor water supply & doctors, poor water supply & sanitation sanitation

US US – MDC #4 France – MDC #14 Zimbabwe – LDC LDC

#169#169

Bangladesh – LDC Bangladesh – LDC #129#129

Syria – NIC #111Syria – NIC #111

Economic Activities – Primary Economic Activities – Primary Primary – basic, food production & Primary – basic, food production &

extraction of raw materialsextraction of raw materials Examples – farms, ranches, fishing, logging, Examples – farms, ranches, fishing, logging,

mining.mining. LDC more people involved, MDC less people LDC more people involved, MDC less people

US only 3% of labor force US only 3% of labor force

Primary Economic ActivitiesPrimary Economic Activities

Secondary Activities Secondary Activities

Manufacturing & Production – taking Manufacturing & Production – taking raw materials & adding value. raw materials & adding value. Textiles, furniture making, processing Textiles, furniture making, processing

food, making steelfood, making steel

A SawmillA Sawmill

Raw Material

Finished Product

Semi Finished Product

ProcessesProcesses – To change Raw Materials into semi-finished or – To change Raw Materials into semi-finished orfinished products we must finished products we must processprocess them. them.

Processes

Tertiary Activities Tertiary Activities

Deals with services – doctors, nurses, Deals with services – doctors, nurses, teachers, retailer (stores & teachers, retailer (stores & restaurants) restaurants)

In the US, 80% of labor forceIn the US, 80% of labor force MDC have a higher percentage of MDC have a higher percentage of

their labor force in Tertiary activities. their labor force in Tertiary activities.

DistributionTransport,

FinancialBanks,

Credit Union

BusinessAdvertising,Accountancy

Tourism/LeisureGolf caddyHotel staff Construction

Carpenter, plumber

Teleservices11811, Customer

support

RepairMechanic,

IT Technician

Personal Dentist, Doctor,Barber

AdministrationOffice staff

CommunicationRadio, TV, Newspapers

Services

Quaternary ActivitiesQuaternary Activities

Information processing & management Information processing & management Examples: computer programmer, Examples: computer programmer,

general manager, researchers, product general manager, researchers, product development. development.

Jobs require special training & education. Jobs require special training & education. Only in the MDCOnly in the MDC

US Economy US Economy Leader in agriculture, manufactured Leader in agriculture, manufactured

goods & global trade. goods & global trade. 3 Factors = Economic success 3 Factors = Economic success

Abundant available natural resources Abundant available natural resources Skilled labor force Skilled labor force Stable political system Stable political system

US cont. US cont.

Ag – world leader – fertile soil, favorable Ag – world leader – fertile soil, favorable climate and early mechanization of farms climate and early mechanization of farms

Industry – advanced technology, Industry – advanced technology, petroleum, steel, chemicals, electronics & petroleum, steel, chemicals, electronics & telecommunication, lumber & mining. telecommunication, lumber & mining.

Postindustrial Economy – manufacturing Postindustrial Economy – manufacturing no longer plays a dominant role; 80% of no longer plays a dominant role; 80% of jobs are in the service industry jobs are in the service industry

US cont. US cont. Northeast – New England & Mid Atlantic Northeast – New England & Mid Atlantic

America’s Gateway America’s Gateway Fishing, farming, trade. Fishing, farming, trade. Coal, iron ore, oil, lumber, manufacturing, Coal, iron ore, oil, lumber, manufacturing,

electronics, communication, chemical, electronics, communication, chemical, medical research, finance, tourism. medical research, finance, tourism.

Rust belt – decline in the regions Rust belt – decline in the regions manufacturing manufacturing

States ME, NH, VT, MA, CT, RI, NY, NJ, PAStates ME, NH, VT, MA, CT, RI, NY, NJ, PA

US Cont. US Cont.

Midwest – America’s Breadbasket Midwest – America’s Breadbasket Farming – Fertile soil, adequate rainfall, Farming – Fertile soil, adequate rainfall,

favorable climate. favorable climate. Feed more people than any comparable area in Feed more people than any comparable area in

the world. the world. Corn, wheat, soybeans, meat, dairy Corn, wheat, soybeans, meat, dairy Trade, transportation, distribution – Great Trade, transportation, distribution – Great

Lakes & Mississippi & Ohio Rivers Lakes & Mississippi & Ohio Rivers Chicago transportation hub. Chicago transportation hub.

Auto making & steel industriesAuto making & steel industries States: OH, MI, WI, MN, ND, SD, NE, KS, IA, States: OH, MI, WI, MN, ND, SD, NE, KS, IA,

MO, IL, INMO, IL, IN

US Cont.US Cont.

The South – Sun Belt The South – Sun Belt Farming: cotton, tobacco, fruits, peanuts, Farming: cotton, tobacco, fruits, peanuts,

rice & livestockrice & livestock Air conditioning has allow area to grow. Air conditioning has allow area to grow.

Many companies leaving cold north for Many companies leaving cold north for the south. the south.

Tourism & retirees also drawn to warm Tourism & retirees also drawn to warm South & West.South & West.

States: TX, LA, AR, TN, OK, KY, WV,States: TX, LA, AR, TN, OK, KY, WV,

VA, NC, SC, GA, FL, AL, MSVA, NC, SC, GA, FL, AL, MS

US Cont. US Cont. The West - The West -

½ land of US, varied landscape, some ½ land of US, varied landscape, some

favorable landforms & climate, also favorable landforms & climate, also desertsdeserts Air conditioning & irrigation allowed growthAir conditioning & irrigation allowed growth Farming, ranching, fishing, logging, mining, oil Farming, ranching, fishing, logging, mining, oil

refining, tourism, film making, & computersrefining, tourism, film making, & computers States: WA, OR, CA, NV, ID, MT, CO, WY, States: WA, OR, CA, NV, ID, MT, CO, WY,

NM, AZ, HI, AKNM, AZ, HI, AK

Economic Alliances Economic Alliances

NAFTA – North American Free Trade NAFTA – North American Free Trade Agreement – began on January 1, 1994. Agreement – began on January 1, 1994. This agreement removed most barriers to This agreement removed most barriers to trade and investment among the United trade and investment among the United States, Canada, and Mexico with full States, Canada, and Mexico with full implementation beginning January 1, implementation beginning January 1, 2008. 2008.

Economic AlliancesEconomic Alliances

European Union European Union Economic and political union of 27 Economic and political union of 27

independent member states which are independent member states which are located primarily in Europe. located primarily in Europe.

Purpose to create free trade zonePurpose to create free trade zone Austria, Belgium, Bulgaria, Cyprus, Czech Austria, Belgium, Bulgaria, Cyprus, Czech

Rep, Denmark, Estonia, Finland, France, Rep, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, & UK Slovakia, Slovenia, Spain, Sweden, & UK

EU PoliciesEU Policies The EU has developed a single market The EU has developed a single market

through a standardized system of laws through a standardized system of laws which apply in all member states. which apply in all member states.

Passport controls have been abolished Passport controls have been abolished within the EU. within the EU.

EU policies aim to ensure the free EU policies aim to ensure the free movement of people, goods, services, movement of people, goods, services, and capital.and capital.

Enact equal laws, maintain common Enact equal laws, maintain common policiespolicies

EU PoliciesEU Policies The EU has established a single market The EU has established a single market

across the territory of all its members. across the territory of all its members. A monetary union, the eurozone, using a A monetary union, the eurozone, using a

single currency – Euro.single currency – Euro. In 2010 the EU generated an approx. In 2010 the EU generated an approx.

16.242 billion international dollars of 16.242 billion international dollars of global gross domestic productglobal gross domestic product (GDP) (GDP) = largest economy in the world. = largest economy in the world.

Largest exporter and importer of goods Largest exporter and importer of goods and services.and services.

Biggest trading partner to China, India, Biggest trading partner to China, India, and the United States. and the United States.

EU ProblemsEU Problems The Euro was to be a currency which would The Euro was to be a currency which would

replace the U.S. dollar, but in 2009, a debt crisis replace the U.S. dollar, but in 2009, a debt crisis arose.arose.

In 2010 the debt crisis was mostly centered on In 2010 the debt crisis was mostly centered on events in Greece = cost of financing government events in Greece = cost of financing government debt. debt.

On 2 May 2010, the eurozone countries and the On 2 May 2010, the eurozone countries and the IMF agreed to a loan for Greece, it failed.IMF agreed to a loan for Greece, it failed.

It was followed by a €85 billion rescue package It was followed by a €85 billion rescue package for Ireland in November.for Ireland in November.

That was followed by a €78 billion bail-out for That was followed by a €78 billion bail-out for Portugal in May 2011.Portugal in May 2011.

October 2011 – Greece bailout still a problem.October 2011 – Greece bailout still a problem.

Global Implications of CrisisGlobal Implications of Crisis EU losses could extend to American EU losses could extend to American

banksbanks, which have large exposures to , which have large exposures to debt in France and Italy. debt in France and Italy.

On top of this, American exports to the On top of this, American exports to the European Union could suffer if the crisis European Union could suffer if the crisis slows European growth and causes the slows European growth and causes the euro to depreciate against the dollar. euro to depreciate against the dollar.

The EU crisis also affects the cost of oil The EU crisis also affects the cost of oil and the U.S. stock market.and the U.S. stock market.

Economic AlliancesEconomic Alliances

ASEAN – Association of ASEAN – Association of South East Asia Nations South East Asia Nations Alliance that promotes Alliance that promotes

economic growth, peace, economic growth, peace, & cooperation in SE Asia& cooperation in SE Asia

Members – Brunei, Members – Brunei, Cambodia, Indonesia, Cambodia, Indonesia, Laos, Malaysia, Laos, Malaysia, Myanmar, Philippines, Myanmar, Philippines, Singapore, Thailand, & Singapore, Thailand, & VietnamVietnam

OPECOPEC Organization of Petroleum Exporting Organization of Petroleum Exporting

CountriesCountries Mission: is to coordinate and unify the Mission: is to coordinate and unify the

petroleum policies of its Member Countries petroleum policies of its Member Countries and ensure the stabilization of oil markets in and ensure the stabilization of oil markets in order to secure an efficient, economic and order to secure an efficient, economic and regular supply of petroleum to consumers, a regular supply of petroleum to consumers, a steady income to producers and a fair return steady income to producers and a fair return on capital for those investing in the on capital for those investing in the petroleum industry.petroleum industry.

Members: Algeria, Angola, Ecuador, Iran, Iraq, Members: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, VenezuelaUnited Arab Emirates, Venezuela

Outsourcing Outsourcing the act of one company contracting with the act of one company contracting with

another to provide services that could be another to provide services that could be performed by in-house employees. These performed by in-house employees. These jobs are handled by separate companies jobs are handled by separate companies that specialize in each service, and are often that specialize in each service, and are often located overseas. located overseas.

AdvantagesAdvantages Saves money, cheap laborSaves money, cheap labor Allows companies to focus on product Allows companies to focus on product

developmentdevelopment Outsource companies have specialized Outsource companies have specialized

technology that the company can’t afford to buy. technology that the company can’t afford to buy.

Finance & AccountingFinance & Accounting Recruitment Process Recruitment Process IT in BrazilNew ! Register IT in BrazilNew ! Register

today for the Brazil IT+ Rtoday for the Brazil IT+ Roundtable oundtable

IT JordanIT Jordan Human Resources OutsouHuman Resources Outsou

rcingrcing

Legal Processing OutsourLegal Processing Outsourcing cing

Business Process OutsourBusiness Process Outsourcing cing

Cloud ComputingCloud Computing MarketingMarketing Telecom Expense MgtTelecom Expense Mgt Selling Outsourcing Selling Outsourcing Outsourcing Relationship Outsourcing Relationship

Mgt Mgt

Contact Center/Call CeContact Center/Call Centernter

Advisor Support CenterAdvisor Support Center NearshoringNearshoring Travel & Hospitality Travel & Hospitality Tech Sourcing DirectioTech Sourcing Directio

nsns

Data Center ServicesData Center Services Finance & AccountingFinance & Accounting Document Document

Management and BPO Management and BPO Improvement Improvement

Telecom Expense Telecom Expense Management Management

Legal Corner Legal Corner Russia: A Vast Russia: A Vast

Offshoring Frontier Offshoring Frontier China Trends & China Trends &

OpportunitiesOpportunities

Outsourcing Outsourcing Disadvantages:Disadvantages:

eliminates direct communication between company eliminates direct communication between company and its clients.and its clients.

prevent building solid relationships with customersprevent building solid relationships with customers leads to dissatisfaction on one or both sidesleads to dissatisfaction on one or both sides not being able to control some aspects of the not being able to control some aspects of the

companycompany may lead to delayed communications & project may lead to delayed communications & project

implementation.implementation. sensitive information is more vulnerablesensitive information is more vulnerable dependent upon its outsource providers, if outsource dependent upon its outsource providers, if outsource

provider backs out on their contract suddenly. provider backs out on their contract suddenly.

InfrastructureInfrastructure

The basic support systems needed to The basic support systems needed to keep an economy going. keep an economy going.

Includes:Includes: Transportation – Most importantTransportation – Most important Communications – how linked to the worldCommunications – how linked to the world

Internet & Satellite communication Internet & Satellite communication PowerPower Water & Sanitation Water & Sanitation Education Systems Education Systems

What is Development?What is Development?DEVELOPMENT:DEVELOPMENT: Reaching an acceptable standard of living for all Reaching an acceptable standard of living for all

people by improving economic and social people by improving economic and social conditions.conditions.

DEVELOPING COUNTRY: DEVELOPING COUNTRY: Low- and middle-income countries in which most Low- and middle-income countries in which most

people have a lower standard of living with people have a lower standard of living with access to fewer goods and services than do most access to fewer goods and services than do most people in high-income countries. people in high-income countries.

There are currently about 125 developing countries There are currently about 125 developing countries with populations over 1 million; in 1997, their with populations over 1 million; in 1997, their total population was more than 4.89 billion.total population was more than 4.89 billion.

Levels Of DevelopmentLevels Of Development

DevelopedDeveloped

Newly IndustrializedNewly Industrialized

DevelopingDevelopingAgricultural/Primary ActivitiesPovertyStage 1 population characteristics

Modern citiesPoor rural areaSecondary Economic ActivitiesTertiary ActivitiesStage 2 populations

QuaternaryStage 3/4 Populations

Less Developed CountryLess Developed Country

low national income, GDPlow national income, GDP high rate of population growth high rate of population growth High unemployment, & dependence on High unemployment, & dependence on

commodity exports. commodity exports. Majority of nations in Asia, Africa, and Majority of nations in Asia, Africa, and

Latin America,Latin America, Low development of infrastructureLow development of infrastructure

LDCLDC

The Least Developed Countries The Least Developed Countries represent the poorest and weakest represent the poorest and weakest segment of the international community.segment of the international community.

More than 880 million people (about More than 880 million people (about 12% of world population), but account 12% of world population), but account for < 2% of world GDP & about 1 % of for < 2% of world GDP & about 1 % of global trade in goods .global trade in goods .

Newly Industrialized CountryNewly Industrialized Country

A country whose level of economic A country whose level of economic development ranks it between the less development ranks it between the less developed and more developed developed and more developed classifications.classifications.

Have moved from an agriculture-based Have moved from an agriculture-based economy & to a more industrialized, urban economy & to a more industrialized, urban economy, & developing infrastructure.economy, & developing infrastructure.

NICNIC NICs usually share some common features, NICs usually share some common features,

including: including: Increased social freedoms and civil rights.Increased social freedoms and civil rights. Strong political leaders.Strong political leaders. A switch from agricultural to industrial A switch from agricultural to industrial

economies, especially in the manufacturing economies, especially in the manufacturing sector.sector.

An increasingly free enterprise economy, allowing An increasingly free enterprise economy, allowing free trade with other nations in the world.free trade with other nations in the world.

Large national corporations operating in several Large national corporations operating in several continents.continents.

Strong capital investment from foreign countries.Strong capital investment from foreign countries. Political leadership in their area of influence.Political leadership in their area of influence. Lowered poverty rates.Lowered poverty rates.

More Developed CountryMore Developed Country

A country with high levels of economic A country with high levels of economic development & infrastructure. development & infrastructure.

Indicators of development:Indicators of development: low birth rate (< 10) & infant mortality low birth rate (< 10) & infant mortality

rates (< 12 per thousand)rates (< 12 per thousand) less than 10% of the workforce in less than 10% of the workforce in

agricultureagriculture high levels of nutrition, secondary high levels of nutrition, secondary

schooling, literacy, electricity consumption schooling, literacy, electricity consumption per person, and GDP per capita—generally per person, and GDP per capita—generally above $US 20, 000 per capita.above $US 20, 000 per capita.