ECO100Y1 Lecture : Development of Low income Countries

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3 Aug 2010

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March 18, 2009

Big 3 auto have increased labor productivity to about that of the Japanese auto makers

12.3-12.4-Krugman

-Lipskey-EU and US have agreement, proposition, emerging nations will lead the global recovery if

they are not starved for capital, funding

-President of the IMF predicted that in 2009, there will be a decline in GDP in the world, fiscal

stimulus is needed for the advanced economies, the financial system has to be working in order for

recovery, IMF asked for a doubling of its financial ability-250-500B

-If IMF has 500B, then it will be able to meet most short term emergencies, will have more

confidence in restoring growth and success

Krugman-food price spikes, food crisis in 2008 was not dependent upon speculation, it was

dependent on real world forces, will have more spikes in future years for food prices, should create

some mechanism to deal with food spike, should prevent food spikes in developing countries,

develop foreign aid packages to deal with food price spikes, invest in R&D

-drive for biofuel is hurtful for food availability for food products

-much of the land is being converted from agriculture to non-agriculture sector

-unpolluted fresh water, the scarcest resource, demand for water is increasing strongly in the world,

changing diets, higher standard of living, population growth

-this brings security risks for the availability for water, security risks may emerge in Sri lanka,

Columbia, middle east, Haiti

-In some areas, lack of water restricts economic growth, 70% of water use goes to agriculture

-polluted water accounts for 10% of all disease and suffering in the world

-China-Feb trade data-sharpest fall in export levels, last October was 40B, February is 5B

-this should reduce the world pressure for countries to resist import tariffs on Chinese i

-very low trade, some outflows, foreign exchange reserves will b stable, China will not be able to buy

as many US securities as before

-Opec decreased its production by 4.8 million barrels a day, as price falls, in 2009 it is predicted that

there will be a decrease in world demand for oil, 1.4 million a day or 1.6% decrease

-OPEC supplies 40% of world oil

->E}ÀuUE]P]vsvÌµo]v[µZ]}µ]}vU^µ]]]

production levels by reducing as a equivalent amount of Nigera and Vene

-Business sector productivity (private not government)-in Canada labor productivity fell by 1.1%, US-

2.7%

Collier-poverty reduction

Dollar

Stern

In 1950-îìììUíõõì[uvÇo}Á]v}u}µv]uu}ul}]vU]Àu

public companies, regulations were reduced in many countries, improved the market performance

of the countries, the prices were right,

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Document Summary

Big 3 auto have increased labor productivity to about that of the japanese auto makers. Lipskey-eu and us have agreement, proposition, emerging nations will lead the global recovery if they are not starved for capital, funding. If imf has 500b, then it will be able to meet most short term emergencies, will have more confidence in restoring growth and success. Drive for biofuel is hurtful for food availability for food products. Much of the land is being converted from agriculture to non-agriculture sector. Unpolluted fresh water, the scarcest resource, demand for water is increasing strongly in the world, changing diets, higher standard of living, population growth. This brings security risks for the availability for water, security risks may emerge in sri lanka, In some areas, lack of water restricts economic growth, 70% of water use goes to agriculture. Polluted water accounts for 10% of all disease and suffering in the world.

Related Questions

Two students, Ryan Wattenberg and Emma Bennett are discussing the idea of convergence over coffee. Ryan considers convergence to be true in theory but impractical in the real world. He claims that most low-income developing countries are stuck in a cycle of poverty and so cannot catch up with developed countries. With increased globalization, Emma feels that the developing countries are growing and will converge with higher-income countries eventually. Zoey Smith, a friend of theirs, however, thinks that the evidence on convergence is rather unclear. Despite the fact that developing countries are growing much faster than the developed countries, she thinks that they will not be able to catch up with the developed nations in the near future.

Which of the following, if true, would strengthen Emma's argument that developing countries will not catch up with developed countries?

A. Most developing nations are at the point where the cost of capital exceeds the marginal product of capital.

B. The number of bilateral and multilateral agreements relating to technology transfer from developed to developing nations has significantly increased.

C. With low public investment in healthcare, the cost of private healthcare as a proportion of average income is very high in developing.

D. Since cash flows from foreign sources are considered volatile, many developing countries have capital controls and other regulations that restrict the flow of foreign investment.

E. Unlike the developed nations, most developing countries do not have extensive government-sponsored social security programs.

sapphirewallaby89

Two students, Ryan Wattenberg and Emma Bennett, are discussing the idea of convergence over coffee. Ryan considers convergence to be true in theory but impractical in the real world. He claims that most low-income developing countries are stuck in a cycle of poverty and so cannot catch up with developed countries. With increased globalization, Emma feels that the developing countries are growing and will converge with higher-income countries eventually. Zoey Smith, a friend of theirs, however thinks that the evidence on convergence is rather unclear. Despite the fact that developing countries are growing much faster than the developed countries, she thinks that they will not be able to catch up with the developed nations in the near future.

Which of the following, if true, would strengthen Ryan's argument that developing countries will not catch up with developed countries?

a. Most developed countries do not have similar resources endowments.

b. Some of the fastest growing developing countries in the world also score well on many social indicators.

c. Credit creation by the formal banking system in most developing countries has been falling or stagnant in the last five years.

d. High population in developing countries, which for decades acted as a drag on growth, now forms a productive workforce.

e. Most developed countries experienced a high degree of inequality in the initial phases of economic growth.

Hello, could you please assist with this discussion question for the Economics course? Thank you.

5) Go to the internet and find an article that discusses the problems of income inequality in the U.S. economy, summarize key points, and post in the Discussions area.

http://neweconomics.org/2014/12/why-inequality-is-an-economic-problem/

Why Inequality Is An Economic Problem

Rising economic inequality was a major driver of the financial crisis. With the OECD recently debunking âtrickle-downâ economics, our new report sets out the links between inequality, the growth in scale and influence of the financial sector, and the dangers for financial stability.

A fragile recovery

A return to growth in economies such as the UK and USA has been welcomed as a sign of recovery from the 2008 financial crisis. But as GDP picks up, so too has the widening gap between rich and poor.

The crisis may be over for the wealthy but the aftermath for ordinary workers depressed wages and growing debt is only getting worse.

Most nations have mustered only negligible growth and this has failed to benefit the vast majority of those nation's populations.

In the seven years following the crash, the UK has suffered the longest sustained decline in real wages since records began.

This decline hasn't has been shared equally across the income spectrum latest annual data up to the end of 2013 shows real earnings for the top 10% increasing by 3.9% and a 2.4% fall for the remaining 90%.

Households are once again piling on risky personal debt at a rate of almost $1billion a year.

Globally, wealth grew by 8.3% last year to $263 trillion, even as living standards stagnate for the majority. Income inequality has seen a sharp return the top 1% of earners have reaped 95% of the USA's economic gains since the crash.

Inequality increases as economies are financialised

Over the past four decades, financial sectors have been extensively deregulated and have expanded enormously as a result, particularly in the UK and USA.

This deregulation produced two systemic outcomes: finance has been freed to become the motor of the economy while the pursuit of greater equality of citizens, as was the focus after the second world war, has been abandoned.

Instead, the notion that unrestrained pursuit of wealth would trickle-down from rich to the poor has been embraced in the mainstream political and economic arenas.

Financial markets, products, and firms now play a much larger role in many areas; from pensions and social insurance to homes and public infrastructure.

Privatization and the doctrine of maximizing value for shareholders have increased the amount of economic activity focused on extracting the largest possible short-term profit. These trends are referred to collectively as âfinancialisationâ.

Until now the connections between this increasing prevalence of financial activities and the steady increase in economic inequality have not been clear. But when these two trends reached a boiling point in the mid-2000s they fuelled a global collapse of financial systems.

The polarization of wealth and incomes fed asset bubbles, risky financial activity,, and necessitated vast levels of household debt â resulting in the 2008 financial crash. With little done since to address these interconnected drivers, the threat of another crisis is very real.

This diagram lays out the seven indicators of economic instability, each fuelled by rising inequality and increasing financial sector activity:

Our report describes how these indicators laid the path for the 2008 crash, and threaten to do the same again:

Increasing inequality depresses demand since consumption levels depend more on the wages of those at the lower end of the income scale than the profits of the wealthy

In the face of stagnating wages, households rely increasingly on debt to maintain their lifestyles with rising asset prices, especially in residential housing, worsening this.

Financial liberalization allows money to flood into countries with trade deficits, such as the USA and the UK, providing the funds for debt-led consumption.

Snowballing wealth at the top increases risky financial speculation.

Inequality doesn't bring growth, it brings economic instability

In recent years there has been a marked slowing of growth across the world's wealthiest economies, with none returning to the growth trends experienced before the crisis. Many have begun to speculate that this stagnation could, in fact, be a permanent development meaning that wealthy economies are fundamentally unable to create enough demand to keep growing.

The mainstream political consensus has for decades now suggested that inequality is a price worth paying for economic growth.

But new research from the Organisation for Economic Co-operation and Development (OECD) shows definitively that this inequality/growth trade-off is false adding to a growing body of research showing that inequality actually prevents economies from growing. This points to a fundamental structural flaw in the economy: if the proceeds of growth are not shared, the pie stops growing.

The pursuit of higher returns for the already wealthy within this dwindling pie cannot persist forever. With wealth refusing year on year to trickle down, debt has been used to plug the wage-consumption gap for the rest.

The signals are showing quite plainly that this pursuit of growth, via inequality, is ineffective and unsustainable.

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ECO100Y1 Lecture : Development of Low income Countries

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