Poverty
Millennium Development Goals
In 2000, 189 member states of the UN met at the Millennium Summit to 'spare no effort to free our fellow men, women and children from the abject and dehumanising conditions of extreme poverty to which more than a billion of the are currently subjected.'.
The summit came up with 8 targets to monitor progress of world development. Collectively the 8 targets are known as the Millennium Development Goals.
Goal 1: Eradicate extreme poverty and hunger
To accomplish this goal the proportion of people on an income of less than $1 a day needs to halve as well as a halving of people suffering from hunger, between 1990 and 2015.
This will be measured by taking into account the proportion of the population living on less than a dollar a day, the poverty gap ratio (incidence X depth of poverty), share of poorest quintile in national consumption and the proportion of the population below the minimum level of dietary energy needed.
Goal 2: achieving universal primary education
By 2015 every child should be able to complete a full course of primary schooling funded by the state. Education is essential to economic development and provides knowledge for people to use resources more effectively and efficiently. This will be monitored on the basis of the net enrolment ratio in primary education, the literacy rate of 15-24 year olds and the proportion of pupils who complete 5 years of primary education.
Goal 3: Emancipation of women
The target states that gender disparities in primary and secondary education have to be eliminated by 2005, with it being eliminated from all other levels of education by 2015. Women living in less developed country are currently at a disadvantage due to gender inequality. To measure this target the ratio of girls to boys in education, ratio of literate females compared to males, the share of women in paid employment in the non-agricultural sectors, proportion of seats in the national Parliament held by women, will all be taken into account.
Goal 4: The reduction of child mortality
By 2015 the UN members wish for the under 5 mortality rate to fall by two-thirds compared with 1990. Indicators used for this goal are; under 5 mortality rate, infant mortality rate and the proportion of 1 year olds being immunised against measles.
Goal 5: improvement in maternal health
This target stipulates that the maternal mortality ratio should decrease by three quarters between 1990 and 2015. This can be measured using the maternal mortality ratio and the proportion of births attended by skilled health personnel.
Goal 6: Combating diseases such as HIV/AIDS, malaria and others
The aim of this goal is to have stopped the spread, and begin to reverse the spread of HIV/AIDS, malaria and other major diseases by 2015. The effects of diseases in many countries has an adverse effect on the age structure of the population as well as resulting in illness (preventing people from working and spending, as well as potentially resulting in them not spending as they are saving in case they need hospital treatment) and mortality. There are many factors that will indicate the success of this goal, they include; HIV prevalence amongst pregnant women, contraceptive prevalence rates, number of children orphaned as a result of HIV/AIDS, death rates as a consequence of malaria, proportion of population in malaria risk area and death rates associated with TB.
Goal 7: Ensuring environmental sustainability
Such a target aims to reverse the loss of environmental resources and to halve the proportion of people without sustainable access to drinking water by 2015. Indicators of this measure include; change in land area covered by forest, the extent of land area protected to maintain diversity and carbon dioxide emissions per capita.
Goal 8: Creation of a global partnership for development
This target is based around the establishment of a trading and financial system which has clear rules and is non-discrimination. Commitments need to be made towards good governance, poverty reduction and development on both the international and domestic stage. This can be measured by market access, debt sustainability and other targets. This goal is less specific than the other 5 targets however it is still crucial for globalisation. It is widely believed that less developed countries have been exploited by the international trading system (for example through the reduction of tariffs in certain areas pushed for by the WTO which may not benefit less developed countries).
Poor market access means that developing countries find it hard to export to the developed world in order to earn foreign exchange; reasons for this may be due to geography (being landlocked or an island) or due to poor relations with other countries.
Debt sustainability is the problem that a country may have if it can no longer pay off debt that it has accrued. In the 1990s some countries were relieved of their debt; whereby their debt burden was wiped off by foreign banks and nations to help these countries focus their budgets on other areas as oppose to paying off debt interest.
Such targets will not only reduce inequality and ameliorate the living conditions for millions of global citizens, but will also permit economic development. It will do this by improving the health and education of citizens, allowing them to work and contribute to the economy as well as possibly encouraging FDI. Promoting gender equality may result in a larger workforce, which could be beneficial for a country as it is able to produce more, and may also result in a lower wage, possibly appealing the interest of MNCs to engage in FDI. However a lower wage as a result of an increase in women in the labour force may lead to increased poverty, hence causing a problem for the accomplishment of Goal 1.
Indicators of Development
GDP per Capita
GDP per capita is the amount a country produces in output divided by its population. Therefore a higher GDP per capita can be seen as a positive thing. Usually GDP is expressed in terms of PPP (Purchasing Power Parity) as the official conversion rate using market based exchange rates can be misleading due to speculation and the flow of hot money. $US Dollar conversion using official exchange rate tends to underestimate the real purchasing power of incomes in less developed countries.
Development
1st World Countries – the first world countries are mainly Western economies and former ‘white’ colonial possessions. They are also known as developed countries. Such countries include; UK, USA, Canada, France, Germany, Italy, Spain, Australia, New Zealand, Japan and other Western European countries.
2nd World Countries – refers to countries that were former Communist countries or under the hemisphere of the USSR. Such countries are now referred to as transition economies as they are in the process of transitioning from command economies to free or mixed economies.
3rd World Countries – These countries are located in Asia, Africa and Latin America and have lower incomes than 1st world countries. These are known as developing countries or less developed countries. Because there are so many 3rd world countries and there are large differences this category is split into low income countries (4th world) and middle income. Middle income is split further into lower middle and upper middle. Middle income countries which are expanding their economies quickly and are catching up with the developed countries are known as emerging economies. Some Asian countries like South Korea, Singapore and Taiwan are known as NICs (newly industrialised countries) as they have recently adopted a Western style economy that is in line with the developed countries.
The North/South division called the Brandt Report (created on behalf of the German Chancellor Brandt) on the state of world development was published in 1971. It was very simple, contrasting economically wealthier and industrialised countries with poorer, less mature and largely agricultural ones. A line was drawn across the world map –called the North-South divide – to make the difference clear. The indicator was GNP (Gross Nation Product) per capita (per Person). The system has decreased in popularity because it’s too simple as economies have becomes more varied. The North part of the world is called the Rich North whilst the South is called the Poor South.
When evaluating the status of different countries, particularly when classing 3rd world countries based on their income we have to remember the inadequacies of using GDP (or a variation) as a classification. Such drawbacks include; exchange rate problems (PPP), inequality in income distribution not being taken into account, the informal sector and accuracy of data collection, and the importance of social and other indicators.
Third world countries have less physical capital (per capita) than 1st world countries. This includes factories, offices, machines, infrastructure (roads, railways, ports, airports), communication infrastructure schools and hospitals. Physical capital is important because the more that is available in a developing country then the greater the productive potential of the economy. In order for a country to grow it must increase its stock of physical capital, this will cause a rightward shift of the production possibility frontier.
As well as physical capital, human capital is also lacking in developing countries. It is difficult to measure levels of human capital, however education statistics, the breakdown of the types of industry and IQ levels can give an indication. 3 useful measures for human capital are the percentage of enrolment in different stages of education (primary/secondary/further), the percentage of primary school children who complete their education, and finally, literacy rates. Primary education has a higher rate of return of investment than other levels of education, but the better educated the workforce the more likely the country is to develop by attracting FDI and having a competitive advantage over foreign countries.
3rd world countries tend to have higher rates of population growth relative to 1st world countries. This poses problems, firstly it means there is a larger population that needs educating in order to attain jobs. This means more investment by the state is required to provide both the physical and human capital required to create jobs. Meanwhile, there is also a need to increase consumption to provide an increased standard of living for the population. However in order to invest in education and physical capital an economy needs to forgo consumption currently (the opportunity cost of a well educated workforce in the future is a degree of standard of living today). One way that this can be overcome is by seeking investment capital from abroad, but this isn’t possible for all countries. It is also possible to finance this growth by using domestic savings, some countries like China have large savings rates and much of Japans government debt is financed by domestic savings as opposed to foreign savings which secure much of American and British debt.
The second issue of a high population growth rate is that there is also a high dependency rate. In 1st world countries there is an issue with a high dependency ratio for the elderly, that is there is a high elderly population relative to the working population. The elders require pensions, increased healthcare and support whilst not largely contributing to the workforce. This means there is an increased burden on the working population to support pensioners. Conversely in 3rd world countries there is a large dependency ration for children. They require education now and jobs in the future, for this to happen the government needs to invest a lot of resources and capital.
In 3rd world countries there tends to be higher rates of unemployment, this is mainly down to a lack of physical capital causing structural unemployment. There is also a lack of human capital and other factors such as government economic policies may hold back job creation. Many jobs in 3rd world countries are seasonal as 3rd world countries are highly reliant on agriculture.
The structure of the economy changes through growth and development, developed countries have shifted from primary to secondary and now tertiary production through their development process. A possible indicator of development could therefore be the reliance on agriculture production compared to industrial or service industries.
Developed countries (1st world economies) have well developed institutional structures to support the economy. These include well developed legal systems (to protect private property and oversee trade transactions), financial systems (which provide financial capital to firms and consumers), and an efficient government. Corruption is also relatively low in developed countries. On the other hand developing countries are less likely to have developed such institutions. Weak financial systems mean entrepreneurs and citizens are unable to access funds to consume or invest and create jobs. The legal system may be flawed in developing countries and the government corrupt, this holds back growth and makes foreigners reluctant to invest.
Page last updated on 15/04/14
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