What are the ways of dividing up the world?

Original method

This was devised from a Western European perspective.

First world - European countries

Second world - Colonies of the British Empire such as Australia and North

America

Third world - Poor countries

Fourth world - Poorest countries whose economic growth was declining or

standing still

North/South divide

This method was published in 1981 in the Brandt Report. This made a simpler division

contrasting economically wealthier and industrialised countries with the poor, less

mature and largely agricultural ones. GNP per capita was the development indicator

used to draw the North-South divide.

Modern methods

This is another simpler way of dividing up the world according to economic

development

LEDC – Less Economically Developed Countries

MEDC – More Economically Developed Countries

The Development Gap

NIC – Newly Industrialising Countries. These are the most rapidly developing

countries e.g. China

Five-fold division based on wealth

This is the newest method of classifying the world. There are five categories based

on wealth. There are still problems with classifying countries according to wealth as

oil exporting countries for example have a higher GNP per capita than would be in

reality. The oil industry is a huge business and it doesn’t necessarily mean that the

main population benefits from the money made from exporting oil.

Measuring development

Statistics are used to show the level of development which allows countries to be

compared. These are called development indicators.

1. Gross National Income (GNI) - total wealth made by a country including income

received from other countries (interest).

2. Gross National Product (GNP) - total value of all products and services

produced in a year by residents of a country (even if abroad).

3. Gross Domestic Product (GDP) - total value of all products and services

produced in a year within a country like Britain, even if the business is not

British. ‘Per capita’ means the figure is averaged per person.

There are correlations between GNP per capita and other development indicators

such as literacy rate or birth rate as economic development of a country will mean

that the governments can provide funds for healthcare and education.

Birth rate is an excellent measure of development. In rich industrialising countries,

women achieve high levels of education and career prospects. As it is difficult to

pursue a high-flying career and bring up several children, women have less on them.

Children are often sacrificed for success in the working world.

Limitations of using single development indicators/measures

Death rate is a poor indicator of development. Almost all countries have low

death rates today. Sometimes, the more economically developed the country,

the higher the death rate due to ageing populations or a country could be at

war hence the high death rate.

GNP or GNI per capita doesn’t necessarily give an indication of people’s

personal living standards. They do not tell us what people earn or how much

that buys. Some billionaires or transnational companies skew the average wage

that people are supposed to earn.

All indicators are an average across the country. Within any society there are

extremes of wealth and opportunity, which a single figure hides.

Human Development Index (HDI)

The UN has devised another way of measuring development. The Human Development

Index combines four indicators:

1. Life expectancy

2. Literacy rate

3. Average number of years spent at school

4. GDP per capita (PPP)

Each indicator is given a score and the HDI is the average of the four scores. 1.000

is the best score and 0.000 is the worst. Countries are then ranked from 1 – 169

according to their overall score.

The HDI is better than relying on just one indicator because it can...

Measure differences within a country (unlike GNP) as well as between

countries.

It shows how the wealth of the country affects the life of the people who live

there.

It acts as a measure to show how far a country has developed and whether

there are improvements in its level and rate of development.

It helps a country to set targets that can lead to improvements in quality of

life for its citizens e.g. better healthcare to improve life expectancy and

better education to improve literacy rates

PPP = Purchasing Power Parity.

It means GDP is adjusted

because a dollar buys more in

some countries than others

Standard of living

This refers to how much money people have – so it’s measured as GDP per capita. Do

people have enough money to pay for the basics of food and housing? Is there any

money left for anything else? Are people surviving on a dollar a day or less?

Physical Quality of Life Index (PQLI)

Physical Quality of Life Index (PQLI) is the average of three social indicators:

literacy rate, life expectancy and infant mortality.

The difference between PQLI and HDI is that the HDI takes into account the

number of years a child spends in schools (rather than the adult literacy rate) and

GNP (PPP) whereas PQLI only uses social indicators.

PQLI and standard of living should be used together as people may be poor yet they

can be educated, live to a good age and their children are healthy (low Standard of

living but high PQLI).

Case Study: Christian Aid – improving quality of life in Nairobi

Kiambiu is an informal settlement in Nairobi, Kenya. They are also known as slums,

shanty towns or favelas. 60% of people in Nairobi live in slums without access to

clean drinking water, proper toilets, education and healthcare. In 2009, 4 million

people living in Kenya’s urban areas were short of food.

Christian Aid has a Kenyan partner called Maji na Ufanisi (MNU) – it means ‘water and

development’. With the help of MNU, the residents of Kiambui have built five toilet

and shower blocks and have employed local people to clean and maintain them.

They charge a small fee to use them, and then use that money to improve life further

for the community e.g. by building more toilet blocks and providing emergency

healthcare for families. They’ve also got clean drinking water now. It has made a

huge difference to people’s live, their health and their children.

Factors affecting development

The term ‘global inequalities’ is another way of describing that our world is unequal

with a big development gap between the richest and poorest countries. Different

factors can worsen the problem and widen the gap.

Economic

Landlocked countries make trade less easy.

Most of the world’s trade is between the

richer countries.

Richer countries tend to sell ‘expensive’

manufactured goods and buy ‘cheap’ primary

goods e.g. coffee, metal ores.

Poorer countries tend to buy manufactured

goods that they can’t make and only sell

cheap primary goods. This means that they

spend more than they earn (trade deficit).

Low life expectancy means that there is a

lack of workers in the country.

Tariffs are placed on goods by the

purchasing country which means less profit

for the export country.

TNCs are reluctant to set up factories in

countries where there is war, political

instability, poor infrastructure, or an

unreliable electricity supply.

Poorer countries find themselves competing

against each other for business and have

lowered prices to attract buyers. This

means less profit.

Social

Water availability is one factor which

directly impacts on development. 12% of

the world’s population uses 85% of the

water.

Water quality directly links to standards of

living (GDP).

Poor water quality causes diseases e.g.

Malaria. This debilitates people from

working and prevents economic development.

Inadequate water supplies limit crop yields

and therefore food supply. If there is not

enough water for irrigation then yields

cannot be increased.

A country finds it difficult to fund

education for all children to a good level so

investors are put off by the lack of an

educated workforce.

Searching and collecting of water wastes

valuable energy and time.

Political

Some countries like Zimbabwe are

redistributing land from white farmers to

the majority black population. Due to their

inexperience of farming methods the crop

yields have fallen so their economy is failing.

Corrupt politicians enrich themselves

illegally at the expense of their countries

development. Money is therefore not

available for education, health services,

roads, clean water and sanitation.

Environmental

Climatic hazards such as drought wipe out

crops and profit.

Poorer countries tend to suffer most from

natural hazards, because they lack the

money to prepare for and recover from

them.

Deforestation and overgrazing of the land

damages the land and can cause

desertification which leaves the land

useless.

Case Study: Hurricane Ivan

Hurricane Ivan was the 10th most intense Atlantic hurricane ever

recorded. Ivan formed in early September 2004 and became the

fourth major hurricane that year.

Effects of the Hurricane

Environmental Social Economic Agricultural land

lost

39 Died

Extensive looting

17th century stone

prison partially

destroyed that

left criminals on

the loose

St. George, the capital was severely

damaged

85% of the small island was devastated

Damage on the island totalled $1.1 billion.

90 per cent of homes were damaged

Communications were disrupted

Nutmeg crop was wiped out which is

Grenada’s main export

Effects on Grenada’s development

Grenada suffered serious economic repercussions following the destruction caused by

Ivan.

Before Ivan, the economy of Grenada was projected to grow by 4.7%, but the

island's economy instead contracted by nearly 3% in 2004.

The economy was also projected to grow by at least 5% through 2007, but, as

of 2005, that estimate had been lowered to less than 1%.

The government of Grenada got into debt: 130% of the island's GDP which was

“unsustainable”.

More than $150 million was sent to Grenada in 2004 to aid reconstruction

following Ivan.

Trade

Trade is the movement and sale of goods from one country to another.

Some countries rely heavily on a few main exports which can be a problem. Countries

can end up in real difficulty if:

their product runs out e.g. oil

a crop fails or is wiped out via natural disasters e.g. rice

prices for the product fall e.g. sugar

demand falls for their product

another country can produce the same product but more cheaply

Key terms

Export - are goods transported by one country to sell in another.

Import - are goods or services that a country buys that it doesn't have enough of or

can get more cheaply from somewhere else.

Primary goods - are cheap products harvested from the land e.g. tea, fish, cement.

Manufactured goods - are goods that a country makes, usually expensive and requires

machinery to produce.

Trade surplus - country earns more money from exports than it spends on imports.

Trade deficit - a country spends more on imports than it earns from exports.

Trade balance - the difference between the value of imports and exports of a country.

Interdependence - the reliance of a country, especially in terms of trade and aid, on

other countries in the global economy.

Is trade fair?

Most countries have tried to control trade by creating barriers to protect their own

jobs and industries. They do this with tariffs and quotas.

Tariffs are taxes or custom duties paid on imports. This is usually done to

make the imported goods more expensive and so less attractive than home-

produced goods. These can hit poorer countries hard.

Quotas are limits on the amount of goods that can be imported. They are

usually restricted to primary goods, and so work against LEDCs

Free trade is when counties don’t discourage, or restrict, the movement of

goods.

Trading blocs

These are countries that have grouped together to increase the amount they trade

between them, and the value of their trade. Two of the biggest trading blocs or

groups are the EU and the North American Free Trade Agreement (NAFTA). These

two blocs have over half the world’s trade whereas developing countries have less

than a quarter. Creating these groups means that member countries can cut the

tariffs in place between them – making goods cheaper. But, as trading groups like the

EU try to increase trade within the group, poorer countries from outside lose out and

the development gap widens.

World Trade Organisation (WTO)

The WTO makes the rules on world trade. It polices free trade agreements, settles

trade disputes and organises trade negotiations. The WTO promotes free trade by

persuading countries to get rid of tariffs and other trade barriers.

How can international efforts reduce global inequalities?

Debt relief

This is reducing the interest rate or the amount of the loan.

Debt abolition

Key terms

Debt - money owed to others, to a bank or to a global organisation such as the World

Bank or IMF.

Loan - money that is lent to another person, company or country that has to be paid

back with interest payments. If the project the money borrowed for is a success, the

debt is repaid. However things don’t always go to plan and if the country defaults on

the debt it then has be paid back over a longer period of time, which means more

interest. This means that standards of living cannot improve as the burden of the

debt is too great.

Aid - money, food, training and technology, given by richer countries to poorer ones,

either to help with an emergency or to encourage long-term development. The aim is

to raise standards of living in the country. True aid is not a loan that needs to be

repaid. However, in the real world some ‘aid’ really is a loan because some form of

payback is required.

This is where debts are abolished or written off.

Debtor nations benefit hugely as they can then begin to

improve life for their citizens. In July 2005, ten Live 8

concerts were held around the world to campaign to

Make Poverty History. A few days later, at a meeting

of the G8 (the world’s eight richest countries), an

agreement was made to cancel all debts (worth $40 billion) owed by 18 Highly

Indebted Poor Countries (HIPC).

Two conditions had to be met though before the debts were cancelled. These were

that each government had to show that it could manage its finances, and show that it

wasn’t corrupt. They also had to agree to spend the saved debt money on education,

healthcare and reducing poverty.

By 2008, 27 of the 38 HIPC countries had met these conditions and had had $85

billion of debt cancelled. The bad news is that African countries still owe $300

billion and there’s little chance that they’ll be able to repay it.

Loan solutions

Non-profit groups in the USA have been lending money to individuals in poor

countries. Sara Garcia in Lima, Peru borrowed $1,845 in 1984. She invested in

equipment to make patterned handkerchiefs. She hired extra workers and family

members to help. Output has risen from 20 to 500 items per day. She met her

repayments on time. The technology was appropriate, allowing the business to

become sustainable and successful. These schemes work on a small scale but small

businesses are the basis of any economy and it employs a surprising number of people

and supports their families. Everyone gains!

Conservation swaps

In their attempts to develop, poorer countries are tempted to use every natural

resource available to them, even if it is something valuable whose loss will result in

future difficulties for the country itself.

Conservation swaps are agreements whereby a proportion of a country’s debts are

written off in exchange for a promise by the debtor country to undertake

environmental conservation projects.

Between 1987 and 2001, 50 countries took part.

Usually areas of valuable land are set aside for

protection, especially tropical rainforest. In 2002 and

2008, Peru and the USA agreed to a debt swap of $40

million. Peru agreed to conservation activities to

preserve more than 27.5 million acres of endangered

rainforest. The rainforest provides a habitat for many rare species including jaguars

and pink river dolphins.

Case Study: Fairtrade

Fairtrade is an international movement ensuring producers in poor countries get a fair

deal. They receive a minimum guaranteed price for their crop even when world

market prices fall, which provides them with a living wage, long-term contracts for

security and skills training to develop their business.

Global sales of Fairtrade goods in 2008 were €3.4 billion worldwide. Around 7 million

farmers, farm workers and their families in 58 poorer countries benefit from the

improved trading conditions brought about by Fairtrade.

There are thousands of products that carry the FAIRTRADE Mark. Fairtrade

standards exist for food products and non-food products, including:

Bananas

Cocoa

Coffee

Cotton

Flowers

Fresh fruit

Honey

Gold

Juices

Rice

Sports balls

Sugar

Spice and herbs

Tea

Wine

Fairtrade Premium

Farmers also receive a ‘Fairtrade Premium’ which helps producers

to improve the quality of their lives. It is paid on top of the agreed

Fairtrade price, and producers decide how to use it. Typically they

invest it in education, healthcare, farm improvements or processing

facilities to increase income. As many projects funded by the

Premium are communal, the broader community, outside the

producer often benefits. Approximately €43 million was

distributed to communities in 2008 for use in community

development.

Working conditions

Employers must pay decent wages, allow their workers to join trade unions and

provide adequate housing where relevant. Employers should also provide training

opportunities and conditions of employment should exceed the legal minimum

requirements. Forced labour and child labour is prohibited. Salaries must be equal or

higher than the regional average or the minimum wage. Health and safety measures

must be established in order to avoid work-related injuries.

Protecting the environment

Fairtrade rewards and encourages farming practices that are environmentally

sustainable. Producers are also encouraged to strive toward organic certification.

Producers must:

- Protect the environment in which they work and live. This includes areas of

natural water, virgin forest and other important land areas and dealing with

problems of erosion and waste management.

- Follow national and international standards for the handling of chemicals.

There is a list of chemicals which they must not use.

- Not, intentionally, use products which include genetically modified

organisms (GM foods)

In some national markets Fairtrade accounts for between 20-50% of market share in

certain products. There are now 827 Fairtrade certified producer organizations in

58 producing countries.

Aid

Aid is when a country receives help from another country or an organisation such as

an NGO to help it develop and improve people’s lives.

Key terms

Short term aid – aid given to relieve a disaster situation.

Long term aid – aid given over a significant period of time, which aims to promote

economic development.

Donor country – a country giving aid to another country.

Receiving country – a country receiving aid from another country.

Bilateral aid – aid given by one government to another. It may include trade and

business agreements tied to the aid.

Multilateral aid – MEDCs give money to international organisations such as the

World Bank, UN or IMF. They then redistribute this to development projects in

LEDCs.

Top down aid – aid used so that governments can run more efficiently or to build

infrastructure such as roads and bridges.

Bottom up aid – aid used to provide basic health care for communities, clean

drinking water and money for education.

NGOs – Non-Governmental Organisations. These are charities such as AcionAid,

UNICEF or Oxfam.

Advantages and disadvantages of aid for donor and receiving countries

Case Study: Cahora Bassa Dam, Mozambique

(bilateral aid)

The Cahora Bassa dam was begun by the Portuguese

government of Mozambique in the 1960’s, although it was

only completed three decades later. Civil war (1977-1992)

prevented its development and use of the scheme as well as

damaging its infrastructure.

It is the largest HEP scheme in southern Africa with five

huge turbines. Despite this huge resource, only 1% of

Mozambique’s rural homes have a direct electricity supply and this level has hardly

changed during the life of the dam. Most of the power is sold to South Africa, which

makes money for the economy but does little for its citizens. The dam could produce

enough electricity to power the whole of the country; however this is not currently

happening. The dam has also caused environmental damage as it had cause river levels

to be very low as so much water is held in the reservoir. The shrimp fishing industry

in the lower valley has almost been destroyed as a result.

The dam has much greater potential than has ever been realised. Perhaps if it

concentrated on serving Mozambique, its success would have been much greater.

Case Study: FARM-Africa (sustainable

development)

The official UN definition of Sustainable Development is that it ‘meets the needs of

the present without compromising the ability of future generations to meet their own

needs’. Organisations like FARM-Africa encourage sustainable development through

the aid they provide.

FARM-Africa provides the training and support that poor rural communities need to

identify and implement appropriate solutions to many of the key problems they face.

Families are directly supported to help work themselves out of poverty through

improved ways to manage their crops, livestock, forests and access to water.

The FARM-Africa goat project provides poor families with goats and training in how

to care for them. They also give one member of the group Toggenburgs to breed

with local goats, so the hardier offspring produce lots of nutritious milk. This can be

drunk, made into cheese or sold to help pay for medicine and schoolbooks. Plus, the

goats' manure is a great fertiliser for the family's crops.

Other projects

Tanzania: With access to new high-yielding maize seeds and training in

techniques to increase productivity and to market their produce, farmers have

nearly doubled their yields. Income has soared from less than 50 pence a day

to an average of £2.50.

Kenya: Dairy goat farmers have increased their average annual income from

£46 to around £497.

Uganda: With access to new varieties of cassava, rural farmers have increased

the value of their produce from £4 to £242 per acre. They are now selling

70% of their produce. Farmers who previously depended on food aid have

achieved food security.

Development differences in the EU

The EU was set up in 1957 to achieve economic and political cooperation after WWII.

Twenty-seven countries now belong to the EU, and they account for 31% of global

GDP.

The EU may be one of the richest parts of the world, but there’s still a big gap

between its richest and poorest countries and regions. The richest regions (in terms

of GDP per capita) are all cities – London, Brussels and Hamburg. The richest country

is Luxembourg – more than seven times richer than Bulgaria or Romania, the poorest

members of the EU

Economic periphery: The edge of a country or

region in terms of economies. It may not physically

be the edge, but is a more remote, difficult area

where people tend to be poorer and have fewer

opportunities. A less well-developed area.

Economic core: The centre of a country or region

economically, where businesses thrive, people have

opportunities and are relatively wealthy. A highly

developed area.

EU policies to reduce the differences in development

There are many ways that the EU is trying to reduce the development

gap between countries and regions in the EU. These include:

The Common Agricultural Policy

The Common Agricultural policy (CAP) was set up in 1962. It wanted to achieve:

A single market in which agricultural products could move freely.

Make the EU more self-sufficient by giving preference to EU produce and

restricting global imports.

Give money to support farmers by guaranteeing prices (subsidies) and a market

for their goods. Farmers could produce more and that their surplus would be

bought even if not sold on the market.

An increase in the average field size, farm size and farmers income.

Supporters of the CAP say that it guarantees the survival of rural communities,

where more than half of EU citizens live and preserves the appearance of the

countryside. Critics say that as only 5% of the EU citizens work in agriculture, which

generate only 1.6% of GDP, the CAP costs too much!

The Problems:

Due to guaranteed wage for farmers produce, farmers produced much more than

was needed in the EU. This created huge surpluses of food products (called

‘cereal, butter or beef mountains’ and ‘wine and olive-oil lakes’) in the 1980s.

Farmers received £31billion worth of subsidies a year. This was 70% of the whole

EU budget and only provided 5% of the EU income!!! The EU couldn’t keep this up

so it changed or reformed in 1992.

Hedgerows were destroyed to make larger fields and bigger machinery. This

destroyed habitats.

CAP Reform, 1992. The main changes were:

Single Payment Scheme (SPS). Started in 2003 this is where farmers didn’t get

several different subsidy payment they got just one.

Farmers must meet certain standards of animal welfare and land management to

get the payment. Concentration changed from quantity to quality of produce.

However, dairy farmers still have quotas and this has being boosted since 2008,

however they are being scrapped in 2015. Quotas are where farmers are told how

much milk they can produce and can’t produce more than this.

Arable farmers must set-aside part of their land (up to 15% of their land). This is

where the land isn’t used for growing crops or keeping land. There are strict rules

on how much land, its type & how its managed otherwise farmers won’t get their

payment under the SPS.

Training of young farmers was put into place. Diversification was encouraged.

Income support and early retirement was given to keep people in farming.

Now the policy costs about £34 billion a year, just over half of the total EU budget

of £60 billion. Most of this goes straight to the farmers. Another £5 billion is

spent on rural development. The addition of 10 new member countries in 2004,

together with Bulgaria and Romania three years later brought another 7 million

farmers into the EU, in addition to the 6 million already there. CAP cannot possibly

maintain them at the previous Western European level.

EU regional policy

This transfers resources from richer to poorer areas, so the poorer areas can catch

up with the rest of the EU. From 2007-2013, regional spending will use up 36% of

the EU’s budge – a staggering €350 billion. The focus is on countries in Central and

Eastern Europe – like Poland. The money comes from three sources:

The European Regional Development Fund – this pays for things like general

infrastructure.

The European Social Fund – this pays for things like training and job creation

programmes.

The Cohesion Fund – this covers environmental and transport infrastructure

projects as well as the development of renewable energy. This fund is

reserved for countries with living standards that are less than 90% of the EU’s

average, so this includes Poland, Portugal and Greece.

Urban II fund

Most Europeans live in urban areas because they are the centres of economic activity

and hold greatest opportunities. However, all cities have concentrations of social,

environmental and economic problems. Urban II fund money comes from the

European Regional Development Fund and it is for sustainable development in troubled

districts of European cities.

It aims to provide economic and social regeneration. Any successful idea in one city is

shared with others to try and improve living conditions as widely as possible. Projects

include:

improving living conditions (e.g. renovating older buildings)

creating new jobs in services that benefit the whole population

developing environmentally friendly transport systems

making greater use of renewable energy

using up to date ICT systems to make work more efficient and to improve

people’s skills and therefore their job prospects

Urban II fund has 70 different programmes that affect 2.2 million people. Its

budget was €728.3 million between 2000 and 2006. The people of the town Teruel in

northern Spain have a new ring road. It will reduce traffic flows through the town by

at least 20%; cutting congestion and improving travel times and air quality in the

town. The new road also links previously isolated neighbourhoods; there are paths for

cyclists and joggers. It cost €16.6 million.

European Investment Bank (EIB)

The EIB’s money comes from the member countries who own it. They contribute

according to their size and wealth. In 2004 they contributed €163.6 billion. The

bank borrows on the world financial markets.

Its main purpose is to invest in regional development. Some regions are suffering

difficulties because of the decline of local industry or reduced farm incomes.

Projects are usually locally based and funds are used to train people with new skills

and to help set up new businesses.

Structural Funds

Structural funds support poorer regions of Europe and improves infrastructure,

particularly transport because that enables the economy in an area with difficulties

to work more efficiently. Together with CAP, it makes up most of the EU spending.

Regions whose GDP per capita is less than 75% of the EU average are targeted. The

aim is to accelerate development so they catch up with other regions. The budget for

2007-2013 is €347.1 billion. In addition, the most deprived regions will receive extra

money from other funds.