The Development Gap

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					The Development Gap
      Why does it exist?
   Causes of the Development Gap -
• Trade
• Level of Savings
• Fiscal Trap and Debt
   Causes of the Development Gap -
• Political – Corruption
• Environmental - Physical Environment
• Social - Demographic Trap
• Some countries benefit more from free trade than others.
• Dependency Theory – Development of MEDCs promotes the
  underdevelopment of LEDCs and LLEDCs
• This is because the value of most goods, products and services are
  added in MEDCs – means less wealth in developing countries
• Seen with production of cocoa in Ghana and the Ivory Coast -
  farmers only received 40-50% of the market value of unprocessed
  cocoa beans, a tiny amount compared to the final price sold for in
• MEDCs can also use their financial power to negatively influence
  trade in developing countries. For example, US cotton subsidies
  keep the global price 6-14% lower, without this, West African
  farmers would earn additional income enough to cover the
  healthcare costs of 6-10 people for a year
                  Level of Savings
• Can have significant impact
  on potential for sustained
  economic growth
• Those in poverty cannot
  save as they need income to
  sustain life (subsistence)
• World Bank figures show
  that those in the least
  developed countries only
  save 10 % of their income
  compared to 25 % in the
  most developed countries.
                                     Fiscal Trap (Debt)
• Governments can lack finance to pay for
  improvements in services and infrastructure due
  to need to repay debt.
• In Malawi 9.6 % of countries GDP goes towards
  repaying debt compared to 4.6 % on healthcare.
• This discourages FDI which further prevents
  economic growth. Furthermore, SAPs emplaced
  by the IMF to counter debt can tend to
  negatively impact other areas – leading some to
  claim that they harm more than help
• Government can fail to invest in
  infrastructure or allows corruption to rise to
  levels that impair economic activity.
• Zimbabwe political corruption left the
  economy in deep crisis with rapid inflation
  deindustrialisation and shortages of fuel
  and food. This has led life expectancy to fall
  from 60 in 1990 to 39 in 2008.
            Demographic Trap
• High fertility and rapid population growth can put
  a strain on infrastructure and services. This often
  occurs in areas of high levels of poverty due to
  high infant mortality, lack of state welfare and
  low levels of education.
• Bangladesh 3 Million added to the population
  each year which has put great strain on the
  resources and of the economy to meet the need
  of the rising number of people, 50 % below
  poverty line.
          Physical Environment
• Can pose specific problems to people and act as
  catalysts to other factors which generate poverty.
• Climate change offers serious threat to
  developing countries are less able to respond
  such as Bangladesh where climate change is
  predicted to have devastating impact on crops
  with yields falling by up to 30 %. Serious threat to
  people’s livelihoods and food security
• Sudan – severe drought has put pressure on
  people’s ability to subsist and survive
               In conclusion…

• Combination of factors, yet those relating to
  economics hold more importance.
• This is because it is economics that impacts upon
  all aspects of development –it is needed to
  ensure good social development i.e. in healthcare
  and education
• Also, the non-economic factors tend to see
  importance in their ability to impact upon
  economics i.e. issues in the physical environment
  or with demographics limit successful economic

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