Bonus Web Chapter
AFTER READING THIS CHAPTER, YOU SHOULD BE
1 Describe how the World Bank distinguishes
between industrially advanced countries (highincome nations) and developing countries (middleincome and low-income nations).
2 List some of the obstacles to economic
3 Explain the vicious circle of poverty that afflicts
4 Discuss the role of government in promoting
economic development within low-income nations.
5 Describe how industrial nations attempt to aid
The Economics of Developing
It is difficult for those of us in the United States, where per capita GDP in 2009 was about $48,000, to grasp the fact that about 2.5 billion people, or nearly half the world’s population, live on $2 or less a day. And about 1.4 billion live on less than $1.25 a day. Hunger, squalor, and disease are the norm in many nations of the world.
In this bonus Web chapter we identify the developing countries, discuss their characteristics, and explore the obstacles that have impeded their growth. We also examine the appropriate roles of the private sector and government in economic development. Finally, we look at policies that might help developing countries increase their growth rates.
The Rich and the Poor
Just as there is considerable income inequality among
families within a nation, so too is there great income inequality among the family of nations. According to the United Nations, the richest 20 percent of the world’s population receive more than 80 percent of the world’s income; the poorest 20 percent receive less than 2 percent. The poorest 60 percent receive less than 6 percent of the
Several comparisons will bring the differences in world income into sharper focus: • In 2008 U.S. GDP was $14.6 trillion; the combined
GDPs of the 144 DVCs in that year added up to
• The United States, with only 4.5 percent of the
world’s population in 2008, produces 25.1 percent of
the world’s output.
• Per capita GDP of the United States in 2008 was 150
times greater than per capita GDP in Sierra Leone,
one of the world’s poorest nations.
• The annual sales of the world’s largest corporations
exceed the national incomes of many of the DVCs.
Walmart’s annual world revenues of $379 billion in
2008 were greater than the national incomes of all
but 23 nations.
The World Bank classifies countries into high-income,
medium-income, and low-income countries on the basis
of national income per capita, as shown in Figure 39W.1.
The high-income nations, shown in gold, are known as the
industrially advanced countries (IACs); they include
the United States, Japan, Canada, Australia, New Zealand, and most of the nations of western Europe. In general, these nations have well-developed market economies based on large stocks of capital goods, advanced production technologies, and well-educated workers. In 2008 this group of economies had a per capita income of $37,665. The remaining nations of the world are called developing countries (DVCs). They have wide variations of income per capita and are mainly located in Africa, Asia,
and Latin America. The DVCs are a highly diverse group
that can be subdivided into two groups:
• The middle-income nations, shown in green in Figure 39W.1, include such countries as Brazil, Iran, Poland, Russia, South Africa, and Thailand. Per
capita output of these middle-income nations
ranged all the way from $925 to $11,906 in 2008
and averaged $3251.
• The low-income nations, shown in purple, had a per
capita income of $925 or less in 2008 and averaged
only $523 of income per person. The sub-Saharan
nations of Africa dominate this group. Low-income
DVCs have relatively low levels of industrialization.
In general, literacy rates are low, unemployment is...
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