Development Definitions
Economic development is a general (for most of the population) improvement in the quality of
life (or standard of living) - not equated to GDP/capita
Human capital is labour and entrepreneurs i.e. the human factors of production or resources
(presumably a form of capital as they are created by humans).
Agricultural or rural sector is the part of the economy that produces agricultural products (in
Finland accounting for less than 10% of GDP and employment while in most Sub-Saharan
African countries it accounts for over 50%)
Urban sector is the production in cities; manufacturing and services.
Formal sector is the production in an LDC that pays tax and keeps proper accounts.
Informal sector is the production that doesn’t pay tax or keep formal accounts; this is not illegal
or a parallel market but simply another sector in the economy.
High birth rate is when the number of births per thousand is high enough for natural population
growth to occur (unlike Finland where the birth rate is so low the population would be falling if
there was no immigration)
Poverty trap (poverty cycle) is the way low savings leads to low investment leading to low
growth leading to poverty that results in low savings (completing the cycle).
Millennium Development Goals are these
Health indicators are indicators of health in an economy; life expectancy, doctors per thousand,
hospital beds per thousand etc.
Education indicators are indicators of education; literacy, years of primary or secondary
education, degrees per thousand etc.
Composite indicators are measures of quality of life that combine different indicators e.g. HDI.
Human Development Index (HDI) is the composite indicator used by the UN combining
GDP/capita, life expectancy and mean years of education.
Micro-credit is the offering of small amounts of credit at little or no interest to the poor in order to
encourage entrepreneurship, increase production and reduce poverty.
Over-specialization is when a developing country is dependent on one product; e.g. Zambia on
copper, Ethiopia on coffee, Nigeria on oil, Ivory Coast on cocoa etc.
Price volatility is when the price (and income) can vary very much as a result of inelastic supply
and demand.
Primary products are agricultural products and raw materials (cocoa or copper).
Secondary products are manufactured or processed products (cars or chocolate).
Tertiary products are services (education or health care).
Import substitution is a policy to increase tariffs in order to substitute and stimulate domestic
production rather than rely on foreign imports; India traditionally followed this policy.
Export promotion is a policy to liberalise trade and attract MNCs in order to increase exports and
promote growth; Chile and China have followed this policy.
Trade liberalization is the reduction of tariffs and other protectionist measures to allow greater
free trade; India has started such a policy during the past decade.
Diversification is the opposite of over-specialization; the development of many different sectors
so there is not any over-specialization, China and India have managed this (large economies
find it easier).
Foreign direct investment (FDI) is when an MNC invests in another country; starting up
production or sales like Glencore starting copper production in Zambia and Congo.
Multinational corporations (MNCs) are firms that have production and/or sales in more than one
country like Glencore, Nestlé or Toyota
Official development assistance (ODA) is the aid given by governments of donor countries to
LDCs - Finland is a donor country with ODA to Nepal and Zambia.
Non-governmental organizations (NGOs) is the aid given by voluntary organisations such as
Oxfam and the Red Cross.
Humanitarian aid is aid given after a natural disaster such as a famine or earthquake (in Haiti).
Development aid is aid given to try to create economic development such as ODA.
Grants is money given to LDCs to help with development projects like USA gives grants to
Afghanistan to help with education and security.
Concessional long-term loans are loans at a low interest rate (below the market rate) to be paid
off over a long period of time.
Project aid is aid given for a specific project; like a school or hospital in an LDC, often by NGOs.
Programme aid is aid given for an education or health care programme, often as ODA
Tied aid is aid given with conditions attached in attempt to avoid corruption.
International Monetary Fund (IMF) helps countries that have debt or balance of payments
problems.
World Bank is an international bank that sponsors development projects (and reconstruction
projects after conflicts).
Foreign debt is the debt owned by commercial banks or governments to foreign investors.
Rescheduling of the debt is the re-organisation of debt giving a longer payback period to try to
make it easier for repayment.
Conditional assistance is the loans given out by the IMF under conditions of balancing the
budget or trade deficit or at least reducing it; often leading to (unpopular) privatisation in LDCs
Market-oriented policies are export-led and trade liberalisation policies.
Interventionist policies are import substitution and provision of public goods policies.
