4.3+The+role+of+domestic+factors


 * Learning Outcomes: **


 * With reference to a specific developing economy, and using appropriate diagrams where relevant, examine how the following factors contribute to economic development. **


 *  a. Education and health **


 *  b. The use of appropriate technology **


 *  c. Access to credit and micro-credit **


 *  d. The empowerment of women **

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 *  e. Income distribution **

This topic looks at why some countries are developed/rich and why some remain poor. Remember that development isn’t simply a country having a high GDP per capita, but a high national income does help development occur.

Revision:
 * What causes a movement from inside a Production Possibility Curve, to a position on the PPC?
 * What causes a shift outwards in a PPC?
 * What relevance does this have for Development?
 * Now name the four Factors of Production


 *  a. Education and health **

Obviously this improves the quality and efficiency of labour and so is essential for economic growth. With more productive workers wages can increase. Education and gender equality is important as if girls are not educated this reduces both the quantity and quality of labour.

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 * b. The use of appropriate technology (P364 textbooks) **

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Investment and Technological are essential for development. Multinationals and inward investment can help here, as they can bring with them finance and new technologies. Especially important is the building of efficient communication (mobile phones are having a major effect on development – see video and handout) <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">and transportation as well as an effective and trusted banking system open to all. Often the lack of available finance stops growth and development. Micro credit schemes can help here (see later). Note also that increased savings may be needed for increased investment (through the banking system) but will this be at the expense of present consumption. We may have to sacrifice present consumption to concentrate on saving and investment but of course in the Long run this may boost standards of living. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Appropriate technology: Technology is appropriate when it employs methods that make the best use of available resources i.e. labour-intensive, simple techniques : low technology in under developed rural areas. However, LEDCs often prefer capital-intensive projects because, although they provide less immediate employment, they promise higher rates of growth. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Many EDCs are seen as having a comparative advantage in manufacturing which is labour intensive and requires low capital e.g. textiles and canning fruit are‚appropriate technology.

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 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;"> c. Access to credit and micro-credit (P362-3 Dorton Textbook) **


 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Definition of Microcredit: **
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Programmes extend small loans to very poor people for self-employment projects that generate income, allowing them to care for themselves and their families. **

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Micro-credit has an important role in breaking **the poverty cycle** =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px; line-height: 1.5;">Absolute Poverty: = <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- measured in terms of the basic necessities for survival <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- the amount a person needs to have in order to live <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- living with less than $1 a day (take into account of cost of living)

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Relative Poverty: <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- poverty in relevance to specified level of income <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- measures the gap between the rich and the poor <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- e.g. in China, the absolute poverty is declining with economic growth, but relative poverty is increasing at the mean time. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Relative poverty is comparative. For example, a person is in relative poverty if they do not reach the average level of income in that country. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Often politics play a role in determining relative poverty. Governments may set the poverty level at 40% of average earnings, while the opposition party may set the poverty level at 60% of average earnings.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">A poverty trap is any linked combination of barriers to economic growth and/or development that forms a self-perpetuating circle unless the circle can be broken. This cycle is commonly known as the “Poverty Cycle” or “Development Trap”.
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">The Poverty Cycle: **

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">The left circle is a classic poverty cycle demonstrating how low incomes perpetuates low incomes. When an individual receives a low income, he/she will spend most if not all of this income on necessities to live. By spending a large proportion of one’s disposable income, less money is spared as savings. Low levels of savings then lead to low levels of investment. An increase in a county’s aggregate demand results in economic growth. In the equation: AD=C+I+G+(X-M), component “I” stands for gross capital investment. Investment also shifts the LRAS curve to the right. Therefore as a consequence of lower levels of investment, there's low economic growth, which ultimately causes low incomes, completing the cycle.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">The right circle illustrates a different cycle where low incomes perpetuate low incomes but harming economic development rather than economic growth. Families with low incomes are unable to support full education for children or afford advanced medical care causes low levels of education and health care. With the death rate and infant mortality rate increasing, the quantity and quality of human capital decreases. A small labor force achieves low productivity, which eventually links back to low incomes.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Economic Growth poverty cycle <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Economic Development poverty cycle <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Grameen Bank was the founder of the microcredit scheme, and provides an average loan of $75 to individuals. Other organisations such as the United Nations and World Bank also support the microcredit scheme. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Much of micro lending is offered to women and they tend to spend money more carefully and productively. They are more likely to payback loans. Microcredit has helped empower women by giving them greater bargaining power, allowing them to take part in family decision-making. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">The three C’s Determine Who Can Borrow Microcredit:
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">o Character: how a person has handled past debt obligations
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">o Capacity: how much debt a borrower can comfortably handle
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">o Capital: current available assets of the borrower

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Different forms of microcredit lending models: <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Association:

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">This is where the target community forms an 'association' through which various microfinance (and other) activities are initiated. Such activities may include savings. Associations or groups can be composed of youth, or women; they can form around political/religious/cultural issues; can create support structures for microenterprises and other work-based issues.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Bank Guarantee:

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Bank Guarantee is a form of capital guarantee scheme. Guaranteed funds may be used for various purposes, including loan recovery and insurance claims. Several international and UN organizations have been creating international guarantee funds that banks and NGOs can subscribe to, to onlend or start microcredit programmes.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Co-Operatives:

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Credit Union:

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">A credit union is a unique member-driven, self-help financial institution, who agree to save their money together and to make loans to each other at reasonable rates of interest.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">A credit union is a democratic, not-for-profit financial cooperative. Each is owned and governed by its members, with members having a vote in the election of directors and committee representatives.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Grameen Model:

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">The Grameen model emerged from the poor-focussed grassroots institution, Grameen Bank, started by Prof. Mohammed Yunus in Bangladesh. It essentially adopts the following methodology:

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">A bank unit is set up with a Field Manager and a number of bank workers, covering an area of about 15 to 22 villages. The manager and workers start by visiting villages to familiarise themselves with the local milieu in which they will be operating and identify prospective clientele, as well as explain the purpose, functions, and mode of operation of the bank to the local population. Groups of five prospective borrowers are formed; in the first stage, only two of them are eligible for, and receive, a loan. The group is observed for a month to see if the members are conforming to rules of the bank. Only if the first two borrowers repay the principal plus interest over a period of fifty weeks do other members of the group become eligible themselves for a loan. Because of these restrictions, there is substantial group pressure to keep individual records clear. In this sense, collective responsibility of the group serves as collateral on the loan.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Group:

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">The Group Model's basic philosophy lies in the fact that shortcomings and weaknesses at the individual level are overcome by the collective responsibility and security afforded by the formation of a group of such individuals.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Individual:

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">This is a straight forward credit lending model where micro loans are given directly to the borrower. It does not include the formation of groups, or generating peer pressures to ensure repayment

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Non-Government Organisations:

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">NGOs have emerged as a key player in the field of microcredit. They have played the role of intermediary in various dimensions. NGOs have been active in starting and participating in microcredit programmes. This includes creating awareness of the importance of microcredit within the community, as well as various national and international donor agencies. They have developed resources and tools for communities and microcredit organizations to monitor progress and identify good practices. They have also created opportunities to learn about the principles and practice of microcredit.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Peer Pressure:

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Peer pressure uses moral and other linkages between borrowers and project participants to ensure participation and repayment in microcredit programmes.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Rotating Savings:

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Rotating Savings and Credit Associations (ROSCAs) are essentially a group of individuals who come together and make regular cyclical contributions to a common fund, which is then given as a lump sum to one member in each cycle. For example, a group of 12 persons may contribute Rs. 100 (US$33) per month for 12 months. The Rs. 1,200 collected each month is given to one member. Thus, a member will 'lend' money to other members through his regular monthly contributions. After having received the lump sum amount when it is his turn (i.e. 'borrow' from the group)

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Small Businesses:

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">The prevailing vision of the 'informal sector' is one of survival, low productivity and very little value added. But this has been changing, as more and more importance is placed on small and medium enterprises (SMEs) - for generating employment, for increasing income and providing services which are lacking.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Policies have generally focussed on direct interventions in the form of supporting systems such as training, technical advice, management principles etc.; and indirect interventions in the form of an enabling policy and market environment.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Village Banking:

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Village banks are community-based credit and savings associations. They typically consist of 25 to 50 low-income individuals who are seeking to improve their lives through self-employment activities. Initial loan capital for the village bank may come from an external source, but the members themselves run the bank: they choose their members, elect their own officers, establish their own by-laws, distribute loans to individuals, collect payments and savings.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Microcredit Development: <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Problems Associated: <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">web page name Grameen Bank <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">URL http://www.grameen-info.org/.
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">o Attacks the most basic roots of poverty, allowing LEDC’s to develop more efficiently.
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">o It attempts to reduce disparity between the rich and the poor.
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">o It promotes Gender equality.
 * 1) <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">1. The time needed to payback the loan.
 * 2) <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">2. Interest might be as much as 50% on a loan.
 * 3) <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">3. It is hard to determine the priorities of each applicant will deserve.
 * 4) <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">4. Does everyone has the potential to correctly use the money, and pay back the loan?
 * 5) <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">5. Some institutions are profit maximizing, which does not benefit the poor.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">date taken 3rd November 2011

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">date written Last update 23rd August 2011

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">These can certainly help growth and development, but there are examples of countries with huge resources that are still poor (Nigeria) and other countries who are rich, but have few natural resources (Japan). =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Human Factors = <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">The quantity and Quality of labour: In theory an increase in the population should aid growth as it has an effect on both AS and AD. However we should also note that increases can reduce standards of living. Why? = = =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Culture = <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Culture affects what is of value in a society and influences how individuals, communities and organisations respond to change. Culture can make economic growth easy or hard. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">For example: Entrepreneurship is seen as essential for development, but if there is no culture of this then there may be a problem. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">•Western and native cultures may have different views on women and class e.g. In some Islam countries women are not allowed to drive cars or even work- this would reduce their productivity <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">•Capitalist notions of meritocracy (appointing the best qualified person to a job) may clash with traditional loyalty to family or kinship group. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Education and training are essential for development, but if certain groups are excluded (eg women) then this may pose a problem <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Now think of your own examples:
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Natural Resources: **

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">What are social cohesion, social capital and social inclusion? <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">(Look up the meaning of cohesion and inclusion-do you understand what these words mean?)

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Development economics emphasis the role of social capital, cohesion and inclusion in the process of development:

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">•Social cohesion <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">is about how well people and groups get on with each other in a country. Social cohesion needs tolerance for cultural differences. Switzerland has a culturally diverse population and social cohesion; the former Yugoslavia lost all social cohesion and dissolved into war. Standards of living collapsed. Will the present problems in the S of Thailand have a bad effect on growth and development ? <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">•Social inclusion means the whole of society enjoys the benefits of economic activity and have full access to education and jobs.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Institutional Factors: Institutions are formal organisations such as: <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">non-government organisation (NGOs) like trade unions, universities, professional associations, cultural and religious groups. These groups are stakeholders in the development process and as pressure groups they help to hold the government accountable for its policies including development Encouraging broad-based participation in the development process by consulting with civic society on problems and polices means the development programme is owned and not external-ie development is hopefully benefiting everyone. The King in Thailand and the Buddhist faith may be seen as important factors in pressurizing governments to provide policies that benefit all groups within society <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">•International agencies such as Oxfam and the IMF <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Institutions cannot operate effectively, without good governance. Strengthening civil society non-government organisations means the stateand has to justify actions to citizens.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">political stability is important to economic growth and development. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">This is particularly important in raising business confidence and investment within countries. If due to instability people lack confidence in a country savings and investment will leave the country and businesses that have stayed, may find it difficult to raise finance. Thailand has recently seen conflict between the “Reds” and “Yellows” and this has reduced economic grow.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">The type of Economic System (See separate section)

=<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">What domestic factors may be hindering development? =

=<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">STUDENT TASK: Split into groups and do some further research on these (one per group, teacher to assign task ). You'll need to "teach" these to your fellow students. Please add to the wiki....... =

= =

=<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Ineffective Taxation Structure =

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Hard for governments to collect tax in developing countries because

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- Less than 3% of the population in developing countries pay income taxes

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- There’s little corporate activity therefore corporate tax revenue is low

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- Governments offer large incentives to domestic firms and to facilitate inflows of FDI

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- Main tax revenue of developing countries come from exports/imports/excise duties, but only if they rely heavily on foreign trade

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Problems with administration of tax systems

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- Inefficiency

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- Lack of information

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- Corruption

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Informal markets

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- Greater in developing countries than developed countries

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- Large informal markets lead to low tax revenue because people don’t have to pay income tax that’s gained from informal markets

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">- Workers in informal markets are usually low-skilled, low-educated and are working under a poor working condition with low protection, low salary unprotected, poorly paid, and no social care. Hence low productivity.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Low Tax collection <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">In countries that are poor ( i.e. people have low incomes), there is a low tax base and hence a low tax collection. This is because most people have incomes that are below the first tax bracket, which means their incomes are not taxed. Therefore, the low tax tax revenues means that governments cannot create public goods and merit goods. The infrastructure of the country will continue to remain poor.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">In other cases where corruption is rampant, there is an ineffective taxation system that also results in poor infrastructure.

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<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Lack of infrastructure: <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Watch this video and try and remember the key points it makes <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">media type="youtube" key="54PvCQzMUik" height="315" width="560" <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">There are four categories of infrastructure: <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">1. Transport -> roads, railways, seaports, airports, public transport, pavements <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">2. Public utilities -> electricity, gas, water supply, sewers <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">3. Public services -> police service, fire service, education service, health service, waste management <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">4. Communication services -> Postal system, telecommunications, radio and television.
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">** Infrastructure (essential facilities and services) = essential for growth

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Lack of infrastructure decreases chance for economic growth
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">If goods cannot be transported from one area to another because of poor roads, then trade & economic growth is restricted.
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">If power supplies are unreliable, then production is harmed.
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Bad communication channels = poor ability to coordinate economic activity
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Lack of infrastructure also hinders development prospects:
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Poor roads = difficult to get to school to obtain education
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Underdeveloped radio & television network = difficult for people to find and participate in wider communities.
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">The availability of gas and electricity is important to house holds for cooking and food preservation.
 * <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Sanitation and safe water are vital for health to improve.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">lack of property rights <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Main thesis

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">• No nation can have a strong market economy with out adequate participation in an information framework that records ownership of property and other economic information.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">• Unreported, unrecorded economic activity results in many small entrepreneurs who lack legal ownership of property making it difficult for them to obtain credit, sell the business, or expand.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Property rights
 * 1) ====<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;"> The right to use the good ====
 * 2) ====<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;"> The right to earn income from the good ====
 * 3) ====<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;"> The right to transfer the good to others ====
 * 4) ====<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">The right to enforcement of property rights. ====

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Companies

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">If a company does not own the land and factory that they use to produce their goods/services, then the company is not responsible for paying taxes on the income gained through using the property, because it is not in their ownership. Therefore, the income earned is ‘legally’ no-ones. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Not having ownership also prevents the company from selling the factory, and makes it difficult to earn credit from a bank or expand. This is therefore called ‘dead capital’. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Even if a company owns land/property, in underdeveloped countries they often do not have the adequate paperwork to be included in the ‘legal economy’. They have houses but not “titles”, crops but not “deeds”, and businesses but not “statutes of incorporation”. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Untitled assets held by the world’s poor add up to at least $9.3 trillion, which is more than the foreign aid given to the developing world since 1945.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Example used

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">• Since the fall of the USSR, responsible nations around the developing world have worked hard to make the transition to a market economy, but have in general failed.• Hernando believes that the real enemy is, rather than the failure of the free market system, within the flawed legal systems of developing nations that make it virtually impossible for the majority of their people to gain a stake in the market.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">source: <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">“Destruction of economic facts” by Hernando de Soto

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Microcredit!


 * =<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Over regulation, bribery and corruption, political instability and conflict: =

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Angola- It takes an average of 123 days to set up a company, and the cost of setting up is 5 times the average salary. There are 17 procedures needed- over regulation is repelling multinationals and therefore reducing foreign direct investment <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Ranks 172/183 in the ease of doing business index

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Corruption in Kenya- <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Corruption reduces the effectiveness of the legal system, leads to a reduced "trust" in an economy. Furthermore, it leads to the risk of contracts not being honored and is therefore a deterrent to investment. An average urban Kenya pays 16 bribes per month. Corruption on large scale. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">1 billion pound transferred out of Kenya by family and associates of former Kenya leader.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Corruption in India <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">55% of Indians had first hand experience of paying bribes to get jobs done in public offices. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Ranked 87th out of 178 in transparency index <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Has the most black money in the entire world with almost $1.5 trillion in Swiss banks. 13 times the national debt. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">In 2008 120 of indias 522 parliament members were facing corruption charges. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Government officials award contracts to people who bribe, officials often steal state property and sell the land they stole in illegal ways. <span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Pay bribes to tax officials to pay less tax.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">Political instability and conflict-Sudan with civil wars from 1955 to 1972, then from 1983 to 2005, together with a new civil war in Darfur, has displaced the population. Chad also declared war on Sudan in December 2005. This results in low standards of living and the likelihood of foreign investment coming in is low. Wars will often result in damage to infrastructure, loss of investment and sometimes aid.

<span style="font-family: 'Trebuchet MS',Helvetica,sans-serif; font-size: 16px;">LECD Debt: we'll look at this as a separate topic as it is a big topic.