9.7: Key Terms Defined
Absolute Advantage – In economic terms, a country that is blessed with abundant natural resources or geographic advantages that are rare or in short supply and in high demand elsewhere.
Adult Literacy Rate – The proportion of the adult population aged 15 years and over that is literate. This indicator provides a measure of the stock of literate persons within the adult population who are capable of using written words in daily life and to continue to learn.
Asian Dragons (Asian Tigers) – The high-growth economies of Hong Kong, Singapore, South Korea and Taiwan: all of which focus on exports, an educated populace and high savings rates as pathways to development.
BRICS Countries – The countries of Brazil, Russia, India, China, and South Africa – countries that collectively account for 40% of the world’s population and 25% of the world’s land. From 1990-2014 these countries share of the global economy rose from 11% to almost 30%. In recent years, economic growth in the BRICS has been slowed by corruption, crisis, and dropping commodity prices.
Capitalism – The historically contingent economic system of trade in which parties are categorized into laborers and capitalists, both of whom seek to maximize their profit/wages. Within capitalism prices, production, and wages are determined by market conditions including, but not limited to supply and demand. Contemporary capitalism is intimately tied to the industrial revolution and ensuing societal transformations in England that diffused across Europe initially and then to many other parts of the world. Capitalism assumes that rational consumers seek to maximize their own utility.
Collectivism (Collective Societies) – A socio-political-economic system that prioritizes the well-being of the group over the individual. Collectivist modes of development, for example tend to include progressive tax regimes, affordable access to healthcare and higher education for all, and protections for marginalized groups. In LDC’s this may also include communal ownership of land or other assets.
Comparative Advantage – The principle whereby individuals (or territories) produce those goods or services for which they have the greatest cost or efficiency advantage over others and the lowest opportunity cost . The outcome tends to be specialization across places.
Dependency Theory – A theory of development positing that the global economic system disadvantages certain regions and countries. It is argued that prior colonial relationships created systems of trade that benefitted the colonizer much more than the colonized. Countries that were made producers of pineapple, sugar, rubber, and other products during colonial times continue to be dependent upon the production of very low-profit items, limiting opportunities to produce other more valuable products and services long after independence, because the trade systems remains the same.
Developing Country – A term that includes all countries, other than those in the wealthiest category, that continue to improve their levels of development in the late 20 th and early 21 st centuries. The label has come to replace the less preferred term, LDC, to account for the fact that LDC is a static identifies while ‘Developing’ is a dynamic one.
Development – Processes related to improving people’s lives through improved access to resources, technology, education, wealth, opportunity, and choice. Governments, individuals, non-profit organizations, and inter-government agencies all work towards similar goals with a variety of different approaches.
Domestic subsidy – A government-sponsored financial incentive that provides a production advantage to a company or entity. This may take a variety of forms. Examples include no-interest loans or cash payouts to farmers that meet certain criteria. Such programs are designed to lower risks and increase productivity of particular industries, services, or products and to protect them from competition that comes from outside of that country.
Fair Trade – One of a variety of different global trading systems that seek to guarantee fair (higher) payment for producers; often with other social and environmental considerations.
Free Trade – A system of trade that removes (or attempts to remove) all ‘artificial’ barriers that otherwise limit exports and exports between countries. A major component of free trade is the elimination of tariffs, duties, domestic subsidies, or laws that favor one country or company over another.
Gig Economy – A labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.
Gross Domestic Product (GDP) – All of the goods and services produced within a country within a given year. The formula for GDP is Consumption + Investment + Government Spending + Net Exports. Global GDP was approximately $76 trillion in 2016.
Gross National Happiness – a holistic and sustainable approach to development, which balances material and non-material values with the conviction that humans want to search for happiness. The objective of GNH is to achieve a balanced development in all the facets of life that are essential for collective and individual happiness. The 4 pillars of happiness are: 1) sustainable & equitable socio-economic development; 2) environmental conservation; 3) preservation & promotion of culture; 4) good governance.
Gross National Income – All of the goods and services produced within a country in addition to all of the net income its companies and citizens receives from overseas.
GDP per capita – GDP divided by total population.
Global North – Those countries generally considered to be ‘more developed’, which also fall primarily north of the Brandt line as drawn in 1980. See Figure 9.1.
Global South – Those countries generally considered to be ‘less developed’, which also fall primarily south of the Brandt line as drawn in 1980. See Figure 9.1.
Human Agency – The concept that human beings take an active role in their own situation to invoke change. The concept is of critical importance in understanding how and why models and theories of development are so complex.
Human Development Index (HDI) – A measure developed by the United Nations in 1990 to consider and compare levels of development by all countries of the world using life expectancy, literacy, school enrollment, and income as the indicators. This provides a more meaningful way to compare countries than looking only at income/GDP. Those with the highest HDI tend to be in Australia and Northern Europe. Those with the lowest tend to be in Sub-Saharan Africa.
Human Development Report – An annual comprehensive analysis, assessment, and ranking of every country in the world based upon the Human Development Index. The report has been compiled and released every year since 1990.
Infant Mortality Rate – A measure of how many children die in any given year compared to 1,000 live births. Countries with low levels of development tend to have high infant mortality.
Informal Economy – Those activities within any economic system that are unregulated, untaxed, and/or unquantified. Includes, but not limited to: selling anything illegally, unreported paid work, consuming unlicensed/artificial products (movies, music, watches, etc.). Women, children, and the poor are those most likely engaged in the informal economy, but globalization and technology also plays an important in driving new forms of informalization. This sector of the economy is also related to the rise of the gig economy , in which workers increasingly are contractors rather than employees – an important distinction.
International Trade Model of Development – A strategy of development in which a country embraces free trade and elects seek specialization of certain products and services that are valuable as exports in the global marketplace. Following such a strategy necessitates the embrace of increasing imports and removing barriers to trade.
International Monetary Fund (IMF) – An intergovernmental organization that provides short-term loans to governments that are in economic crisis.
Least Developed Countries (LDC’s) – Defined by the United Nations, those countries with the lowest levels of combined income, human assets, and economic vulnerability. In 2015, LDC criteria was given to 48 countries, where 950 million resided and more than half earned less than $1.25/day.
Life Expectancy – The average predicted number of years of life for any given person beginning at birth. In 2015, global life expectancy was about 72 years.
Macroeconomic Theory – The branch of economics concerned with large-scale or general economic factors, such as interest rates and national productivity.
Market liberalization – A process of removing barriers to foreign companies from operating and competing with domestic ones
Modernization theory –Belief that, with the proper intervention each country will pass through a similar pathway of development
Micro-finance – Financial and banking services designed for those who otherwise would be excluded due to their socioeconomic situation.
Micro-loans – Very small loans designed for those who otherwise would be excluded due to their socioeconomic situation.
More Developed Country (MDC’s) – A category for those countries that have the highest levels of development as measured by income, education, and industrialization. MDC’s tend to derive most of their GDP from services rather than from agriculture or manufacturing in the 21 st century. The term MDC is used less commonly than the term ‘Developed Country’ but serves as a convenient way to refer to the wealthiest countries collectively.
Newly Industrialized Country (NIC) – Newly industrialized country. Examples include (but not limited to): India, China, Singapore, Taiwan, Turkey, Brazil, Mexico, South Africa and Thailand
Nontariff barrier to trade – Any impediment to trade placed by governments, including regulations based upon environmental, cultural, or political concerns. Examples include political trade embargoes or the prohibition of trade in eagle feathers, ‘blood’ diamonds, and human organs.
Opportunity Cost – The activity that has to be given up (forgone) in order to conduct the current activity. A country, for example, may choose to specialize in the production of coffee or cocoa. If it chooses coffee, then the opportunity cost is represented by the cocoa production that it could have, but did not produce. In classical economic terms, the opportunity cost is the difference between the two outcomes.
Purchase Power Parity (PPP) – A formula that accounts for cost of living variability from one place to another. PPP adjusted income allows for a meaningful comparison between two places with different cost structures.
Quota – A control on trade that limits amounts of particular items that may be imported or exported from/to a particular country.
Remittance – Money sent to the country of origin by overseas workers. This has become a significant driver of development in many countries in recent years.
Resource Curse/Dutch Disease – The idea that those places blessed with valuable natural resources often are negatively affected by the activities associated with cultivation, mining, and/or extracting those resources.
Self Sufficiency Model of Development – A centralized strategy of development for a country that seeks to develop all sectors of an economy within one’s own borders and reduce dependency on outside entities. Such an approach requires tight controls on imports and exports as well as considerable protections on domestic producers against outside competitors.
Specialization – A focus upon skills, experience, and resources that improve capacity to produce one or more types of goods or services that are in high demand in the global economy. Specialization is directly related to the international trade model of development.
Stages of Growth – A concept that aims to categorize any national economy according to its stage. Stages are deterministic. The 5 stages are: traditional, transitional, take- off, drive to maturity, and high mass consumption.
Structural Adjustment Program – A series of requirements (adjustments) placed upon any country that accepts a loan from the IMF.
Sustainable development – A mode of development theory and strategy that considers and accounts for the impacts of economic growth upon society, culture, and environment.
Tariff – A tax placed upon imports.
Universalism – idea that phenomena, conceptual definitions or moral, aesthetic or epistemological truths hold for all times and places, transcending their immediate local circumstances. Its significance for development lies in the belief that human development is not for the few, not even for the most, but for everyone.
World Bank – a financial institution established near the end of WWII with the purpose of providing capital in the form of loans to developing countries and to those in need of reconstruction at the end of the war. The bank offers loans to countries for large-scale projects.
World Systems Theory – an approach to world history and social change that suggests there is a world economic system in which some countries benefit while others are exploited
WTO – World Trade Organization. An intergovernmental organization created in 1994 that promotes international trade between countries. It seeks to reduce trade restrictions, enforce existing agreements, and protect intellectual property.