Transcript Economics: Principles and Practices

Chapter Introduction
Section 1: Economic
Development
Section 2: Achieving
Economic
Development
Section 3: The Transition
to Capitalism
Visual Summary
Your pen pal from abroad has
asked for your school’s help on
a project to improve the quality
of life for the students in his
school and community. As a
member of the planning
committee, your task is to
suggest ideas. Create a list of
ways to help students and the
neighborhood as a whole.
Present your proposals to the
class. Read Chapter 17 to learn
about the ways that developing
nations can improve the quality
of life for their citizens.
1. Every society has an
economic system to
allocate goods and
services.
2. The study of economics
helps us deal with global
economic issues and
global demand on
resources.
Section Preview
In this section, you will learn that developing
countries face a number of obstacles that make
economic growth difficult.
Content Vocabulary
• developing
country
• primitive
equilibrium
• takeoff
• crude birthrate • default
• life expectancy • capital flight
• zero population
growth (ZPG)
• external debt
Academic Vocabulary
• proportion
• primary
Approximately how many people
currently live in poverty throughout
the world?
A. 10 billion
A
0%
C
C. 5 billion
A. A
B. B
0% C 0%
C.
B
B. 1 billion
Economic Development
• Most of the world’s population lives in
developing countries.
• Best way to improve the rampant poverty
is with economic growth and development.
The Importance of Economic
Development
In a global economy, the
economic health of all nations
is important.
The Importance of Economic
Development (cont.)
• Impact of poverty
– Economic problem
– Source of social discontent
– Source of political unrest
Gross National Income and
Gross National Income Per Capita
The Importance of Economic
Development (cont.)
• Economists convert all currencies to a
common unit then express it on a per
capita basis.
• Findings—about 1 billion people live in
poverty today.
Gross National Income and
Gross National Income Per Capita
The Importance of Economic
Development (cont.)
• International community shares
humanitarian and economic concern for
the poor:
– Moral responsibility to help those with
less income and wealth
– Self interest—critical raw materials
needed from developing countries
– Global economic cooperation leads to a
more stable political climate.
Does the export of diamonds from
developing countries in Africa have a
positive or negative impact on its
economy?
A
C. No impact on its economy
0%
C
B. Positive impact on
its economy
A. A
B. B
C.0% C 0%
B
A. Negative impact on
its economy
Stages of Economic Development
Thinking about economic
growth as occurring in stages
helps us understand
economic development.
Stages of Economic Development (cont.)
• Developing countries pass through stages
of economic development:
– Primitive equilibrium
– Transition
– Takeoff
– Semidevelopment
– High development
What stage of economic development
is a developing country in when its
old customs start to crumble?
A. Primitive equilibrium
A
0%
0%
C
C. Takeoff
A. A
B. B
C.0%C
B
B. Transition
Obstacles to Development
Numerous obstacles make
economic growth in
developing countries more
difficult than in developed
countries.
Obstacles to Development (cont.)
• Challenges facing developing countries
– Population growth
• High crude birthrate
• Increase in life expectancy
• Zero population growth (ZPG)
– Limited natural resources and
geography
– Disease and substance abuse
Obstacles to Development (cont.)
– Education and technology
– External debt
• Default on loans
– Corruption
– War and its aftermath
– Capital flight
The Corruption Perception Index
Which of the following do you think is the
biggest obstacle to a developing
country’s economic growth?
A. Natural resources
and geography
0%
D
A
D. Education and
technology
0%
A
B
C
0%
D
C
C. Population growth
A.
B.
C.
0%
D.
B
B. External debt
Section Preview
In this section, you will learn that developing
countries can progress in economic development
by finding domestic and international funding and
by encouraging regional cooperation.
Content Vocabulary
• micro loan
• soft loan
• International
Monetary
Fund (IMF)
• expropriation
• World Bank
• customs union
• free-trade area
Academic Vocabulary
• ethic
• duration
• European Union
(EU)
• euro
• ASEAN
• cartel
What is the World Bank?
A. A religious affiliated
organization that makes
loans available to foreign
entities
C
0%
A
C. A group of foreign investors
providing economic assistance
to the poorest of the poor
A. A
B. B
C.0% C 0%
B
B. An international
corporation that makes
loans and provides advice
to developing countries
Funding Economic Development
Developing countries can
fund economic development
through savings, international
aid and loan programs, and
foreign investment.
Funding Economic Development (cont.)
• Sources of funding for economic
development
– Internal savings
– Micro loans
– International Monetary Fund (IMF)
– World Bank Group
• Soft loans made to the neediest countries
Funding Economic Development (cont.)
– Borrowing from foreign governments
– Private funds from foreign investors
• Expropriation
The Global Economy & YOU
Types of Peace Corps Aid
Which loans are popular with women
in small African villages?
A. World Bank loans
B. Micro loans
0%
D
A
0%
A
B
C
0%
D
C
D. IMF loans
A.
B.
C.
0%
D.
B
C. Soft loans
Regional Economic Cooperation
Regional economic
agreements foster trade and
economic growth among
member nations.
Regional Economic Cooperation (cont.)
• Ways to promote regional economic
cooperation:
– Free-trade area
– Customs union
– European Union (EU)
• Euro
The European Union
Regional Economic Cooperation (cont.)
– ASEAN
– OPEC
• Cartel
The European Union
Which of the following is not true about the
European Union?
A. The EU acts as a single market.
0%
D
0%
A
D. A single EU currency is used
by all members replacing their
national currencies.
A
B
C
0%
D
C
C. Citizens of EU member
nations can travel anywhere
in EU without trouble.
A.
B.
C.
0%
D.
B
B. No internal barriers regulating
flow of workers, capital, goods
or services within EU
Section Preview
In this section, you will learn that reforms in the
former Soviet Union, China, and many Latin
American and eastern European nations have
moved these economies toward more capitalistic,
market-oriented systems.
Content Vocabulary
• capitalism
• Gosplan
• privatization
• collectivization • black market
• vouchers
• perestroika
• capital-intensive
• Five-Year
Plan
• Great Leap
Forward
• keiretsu
Academic Vocabulary
• undertaking
• isolationism
• Solidarity
• population
density
Is capitalism good for developing
countries?
A. Yes
B. No
A. A
B. B
0%
B
A
0%
The Transition to Capitalism
• As countries develop their economies,
capitalism based on their own cultural
and social values spreads across the
globe.
Problems of Transition
Countries in transition to
capitalism must learn to abide
by the rules of free market
economies.
Problems of Transition (cont.)
• Capitalism’s benefits
– Increased productivity and economic
growth
– Standard of living for nearly everyone
within country increases.
• Transition from communist and socialist
economic systems to capitalism is difficult.
– Privatization
Profiles in Economics:
Karl Marx
Problems of Transition (cont.)
• Vouchers
– Loss or shift of political power
– Underestimating the costs of capitalism
before seeing benefits
– Everyone must adjust to new incentives,
interpret prices, and fend for him-or
herself.
What are some of the costs a nation
may undergo before transitioning to
capitalism?
A. Social unrest
0%
D
0%
A
D. Any of the above
C
C. Recession
A. A
B. B
C. 0%C
0%
D. D
B
B. Unemployment
Countries and Regions in Transition
Different countries have had
varying success in their
transitions to capitalism.
Countries and Regions in Transition
(cont.)
• Russian economy
– Five-Year Plan—introduced by Joseph
Stalin in 1927
– Gosplan
– Collectivization
– Perestroika—introduced by Mikhail
Gorbachev in 1985
Countries and Regions in Transition
(cont.)
– After fall of Soviet Union, Boris Yeltsin
accelerated privatization.
– Currently, under Vladimir Putin,
privatization is slowing.
Countries and Regions in Transition
(cont.)
• China’s economy
– Communist economy in 1949 modeled
after Soviet Union
– Great Leap Forward instituted in 1958
– Free-market practices in specific regions
were copied in 1980s.
– Currently, privatizing industries and
introducing market reforms
Countries and Regions in Transition
(cont.)
• Latin American economy
– Economic path—combined socialism
and isolationism
Countries and Regions in Transition
(cont.)
• Eastern Europe economy
– Many unwilling participants in the Soviet
block embraced capitalism.
– Struggle began in Poland with Solidarity.
– Hungary was successful transitioning to
capitalism after a thriving black market.
What impact does Vladimir Putin’s action
of slowing down privatization have on
Russia’s ability to transition to
capitalism?
0%
D
D. All of the above
0%
A
C. Inhibits profit motive
A
B
C
0%
D
C
B. Causes political unrest
A.
B.
C.
0%
D.
B
A. Decreases the standard
of living for its citizens
Other Faces of Capitalism
A number of nations have
developed successful free
market economies.
Other Faces of Capitalism (cont.)
• Japan
– Loyal and dedicated work force
– Ability and willingness to develop new
technologies
• Capital-intensive
– Government is involved in day-to-day
activities of private sector
Economic Systems and Economic Success
Other Faces of Capitalism (cont.)
• Stagnation occurred in 1990s—keiretsu
prevented true competition.
• Japan is restructuring today so it can
resume its previous growth.
Economic Systems and Economic Success
Other Faces of Capitalism (cont.)
• South Korea
– In mid 1950s—one of poorest countries
in Asia
– Had highest population density
– Began opening markets to world trade a
few industries at a time
Economic Systems and Economic Success
Other Faces of Capitalism (cont.)
• Singapore
– Offers generous tax breaks, government
subsidies, and training of employees
– Research and development spending is
high—developing own technologies
– Focuses on a few select industries
Economic Systems and Economic Success
Other Faces of Capitalism (cont.)
• Taiwan
– Government concentrates on industries
most likely to grow
– Concern: People’s Republic of China
regards Taiwan as a “renegade
province.”
Economic Systems and Economic Success
The success South Korea has had in capitalism
impacts you in what way?
A. South Korea has no
impact on my daily life.
B. Increases my standard
of living.
C. My family may purchase
a television or appliance
manufactured in South
Korea.
D. Answers B and C apply.
0%
A
A.
B.
C.
0%
D.
B
A
B
C
0%
D
C
0%
D
Stages of Economic Development Countries
usually go through several stages of economic
development, although the boundaries between
these stages may overlap.
Funding Economic Development Countries that
need to develop their economies have a variety of
funding sources available to them.
Problems of Transition While capitalism provides
a remarkable degree of economic growth, making a
successful transition to capitalism can be difficult.
Karl Marx (1818–1883)
• published The Communist
Manifesto in 1848
• his ideas inspired communist
revolutions
developing country
country with relatively low average
per capita income and less developed
infrastructure, education, and health
care system
primitive equilibrium
first stage of economic development
during which the economy is stagnant
takeoff
third stage of economic development
when barriers of primitive equilibrium
have been overcome
crude birthrate
number of live births per 1,000 people
life expectancy
average remaining life span in years
for persons who attain a given age
zero population growth (ZPG)
condition in which the average
number of births and deaths balance
so that population size is unchanged
external debt
borrowed money that a country owes
to foreign countries and banks
default
the act of not repaying
borrowed money
capital flight
legal or illegal export of a nation’s
currency and foreign exchange
proportion
comparative relationship between
things in terms of size, quantity, etc
primary
most important
micro loan
small, unsecured loan made primarily
to women to help them undertake an
income-generating project in a
developing country
International Monetary Fund
(IMF)
international organization that offers
advice, financial assistance, and
currency support to all nations
World Bank
international agency that makes loans
and provides financial assistance and
advice to developing countries
soft loan
loan that may never be paid back
expropriation
government confiscation of private- or
foreign-owned goods without
compensation
free-trade area
group of countries that have agreed
to reduce trade barriers among
themselves but lack a common tariff
barrier for nonmembers
customs union
group of countries that have agreed
to reduce trade barriers among
themselves and have uniform tariffs
for nonmembers
European Union (EU)
economic, political, and social union
established in 1993 by the Maastricht
Treaty as the successor of the
European Community
euro
single currency of the EU introduced
in January 2002 and adopted by
many member nations
ASEAN
group of 10 Southeast Asian nations
working to promote regional
cooperation, economic growth,
and trade
cartel
group of sellers or producers acting
together to raise prices by restricting
availability of a product
ethic
moral principles; generally recognized
rules of conduct
duration
length of time
capitalism
economic system in which private
citizens own and use the factors of
production in order to generate profits
privatization
conversion of state-owned factories
and other property to private
ownership
vouchers
certificate that could be used to
purchase government-owned
property during privatization
Five-Year Plan
comprehensive, centralized economic
plan used by the former Soviet Union
to coordinate the development of
industry and agriculture
Gosplan
central authority in the former Soviet
Union that devised and directed FiveYear Plans
collectivization
forced common ownership of all
agricultural, industrial, and trading
enterprises used in former Soviet
Union to boost output
perestroika
fundamental restructuring of the
Soviet economy introduced by
Gorbachev
Great Leap Forward
China’s second five-year plan that
began in 1958 and forced rapid
industrialization and collectivization of
agriculture
Solidarity
independent Polish labor union
founded in 1980 by Lech Walesa
black market
market in which economic products
are sold illegally
capital-intensive
production method requiring relatively
large amounts of capital relative
to labor
keiretsu
independently owned group of
Japanese firms governed by an
external board of directors in order to
regulate competition
population density
number of people per square mile of
land area
undertaking
entering into an activity
isolationism
national policy of not interacting with
other countries
To use this Presentation Plus! product:
Click the Forward button to go to the next slide.
Click the Previous button to return to the previous slide.
Click the Home button to return to the Chapter Menu.
Click the Transparency button from the Chapter Menu, Chapter Introduction, or
Visual Summary slides to access the Economic Concepts transparencies that are
relevant to this chapter. From within a section, click on this button to access the
relevant Daily Focus Skills Transparency.
Click the Return button in a feature to return to the main presentation.
Click the Economics Online button to access online textbook features.
Click the Reference Atlas button to access the Interactive Reference Atlas.
Click the Exit button or press the Escape key [Esc] to end the chapter slide show.
Click the Help button to access this screen.
Links to Presentation Plus! features such as Graphs in Motion, Charts in Motion,
and figures from your textbook are located at the bottom of relevant screens.
This slide is intentionally blank.