Development notes

Page 1

Development: the level of economic growth of a country or region and the processes of change taking place within it.

Human Development Index (HDI)

Measures a country's overall achievement in its social and economic dimensions.

The social and economic dimensions of a country are based on the health of their people, their level of education attainment, and their standard of living.

HDI is a fairer way to measure development because:

It takes more factors into account.

It looks at social and economic development as opposed to just one.

It is more balanced.

It shows levels of education as opposed to just literacy rates - DETAIL.

It has composite indices.

Industries

Primary industry: extraction of raw materials directly from the earth or sea.

e.g. cotton farmer, iron ore miner

Secondary industry: converting raw materials into finished goods.

e.g. car factory worker, food processing plant worker

Tertiary industry: distributing goods or providing a service.

e.g. accountant, lawyer

Quaternary industry: knowledge-based, researching the creation of new goods.

e.g. pharmaceutical labs, disease prevention labs

Employment structure

All countries have a different employment structure.

This is because each country has different economic situations and needs.

They also have different population sizes available to work.

LEDCs may develop primary industries more as they earn their revenue from exporting their raw materials.

NICs like China/India have developed their quaternary industries more and faster due to the availability of new technology and globalization.

Employment structures can be shown on the Clark-Fisher model.

Globalization: the process by which the world is becoming increasingly interconnected as a result of developments in transport, trade, and technology.

Causes of globalization include:

Recognition of big companies in LEDCs

Growth of TNCs

Increased labour skills

Labour availability

Concept of 'shrinking world' due to technological advances

Freer movement of capital, goods, and services

International cooperation

Trade agreements between countries

Greater dependance on global economy

Improvements in transportation

Larger cargo ships mean that the cost of transporting goods between countries has decreased. Economies of scale mean the cost per item can reduce when operating on a larger scale. Goods and people can travel more quickly.

Freedom of trade

Organizations like the World Trade Organization (WTO) promote free trade between countries, which helps to remove barriers between countries.

Improvements in communications

The internet and mobile technology has allowed greater communication between people in different countries.

Labour availability

Countries such as India have lower labour costs and high skill levels. Labour intensive industries such as clothing in Bangladesh can take advantage of cheaper labour costs and reduced legal restrictions in LEDCs.

Impacts on host country of globalization:

+ : Increase in GNP due to companies relocating

+ : Encourages more companies to relocate there

+ : Brings new technology and skill sets to the country

+ : Decreased unemployment

- : Exploitation of workers

- : Economy may become dependent on foreign firms

- : Can discourage local investment

- : Negative environmental impacts due to abundance of factories

Q: Are TNCs good or bad for the economies of LEDCs?

They can be good because they bring new technology, skills, and investment to LEDCs.

Jobs are also created for those who are poor and/or unemployed.

If the people have (better) skills and a job, they'll be more equipped to develop their own business, which will benefit them and the economy.

However, the LEDC's economy may become over-dependent on the TNC and discourage local investment.

The TNC may also damage the environment - governments will have to spend additional money to fix it.

Page 2

CASE STUDY: NIKE INC, TRANSNATIONAL CORPORATION

Background

HQ location: Oregon, USA

Branch plants: England, Japan, Australia, Turkey (+48 more countries)

1981: Blue Ribbon Sports officially merges with Nike, becomes Nike Inc.

2006: Annual revenues of $15 billion

IMPACTS ON

Locals

In the USA, specifically Oregon,it may be harder for new businesses to start up as all of the potential workers may have gone to work for Nike.

New/existing businesses may not be able to produce the same quality of goods - therefore go out of business.

However, Oregon may get more business from rich people visiting Nike HQ, and will visit surrounding businesses, increasing their products.

National

Nike will bring recognition to the USA and because people in other countries will then want Nike to set up a branch there, the USA will benefit from incentives provided.

It will also provide these products to the entire market in the USA - consumers benefit.

Global

Some mismanagement may occur as communication between plants may be misunderstood, leading to decreased product quality.

Plants in countries with lots of raw materials can send materials to the USA at a cheaper price than if they were extracted in the USA.