IB Docs (2) Team
Economic development
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Introduction
This lesson introduces the development economics course and focuses on the distinction between economic growth and development. Furthermore, that while both concepts often go hand in hand, they are different with economic growth measured by rises in GDP and Development by changes on HDI.
This page contains an exercise which shows a world map and the patterns of development in different parts of the globe. You can use this exercise to challenge your students to question why development levels differ between nations and between continents. Responses might include access to trade, differing access to natural resources, the quality of political institutions, religion, history (including colonialism), war and geographical factors e.t.c. All of which will be the focus during the first lessons.
Enquiry question
What is the difference between economic growth and development?
Lesson time: 80 minutes
Lesson objectives:
Distinguish between economic growth and economic development.
Explain the multidimensional nature of economic development in terms of reducing widespread poverty, raising living standards, reducing income inequalities and increasing employment opportunities.
Discuss the relationship between economic growth and economic development, noting that some limited economic development is possible in the absence of economic growth, but that over the long term economic is usually necessary for economic development (however, it should be understood that under certain economic growth may not lead to economic development).
Outline the current status of international development goals, including the Millennium Development Goals and the sustainable development goals.
Teacher notes:
1. Beginning activity - begin with the opening video and then discuss this as a class. (Allow 15 minutes in total for the video, discussion and questions on activity 1 and 2)
2. Processes - technical vocabulary - the students can learn the background information from the videos, activities and the list of key terms. (allow 5 minutes to read the key terms)
3. Apply the theory - activity 3 and 4 focus on two success stories, Singapore a once LEDC and now a fully Developed nation and Ethiopia a nation that has put recent famines in the past and delivered significant improvements in living standards for its people. (20 minutes)
4. Develop the theory - activities 5 - 7 take a TOK concept of 'the chicken and the egg, what comes first' and then applies it to development and growth. Which comes first and can we prove this either way? (15 minutes)
5. Link to the assessment - activity 10 consists of a paper two type question on this topic. (10 minutes)
6. TOK question - what makes the perfect country? (15 minutes)
Key terms:
Development - measures improvements in individual freedom, reducing poverty as well as the provision of public services – education, health care and the maintenance of law and order. Economic development is measured by the HDI (human development index).
Human development index (HDI) - provides a measurement of economic development in three areas - per capita income, heath and education. It is derived from the sum of three separate indexes - life expectancy index, education index and income index.
Life expectancy index - provides nations with a LEI between 0 and 1, with a nation awarded an index of 1 when its life expectancy at birth is 85 years and a rating of 0 when the life expectancy at birth is only 20.
Education index - calculated by measuring the mean years of schooling index (MYSI). A nation with an average years of schooling equal to fifteen receive a rating of 1. Similarly countries where children receive no formal schooling receive a rating of 0. Eighteen years of schooling is equivalent to achieving a master’s degree in the majority of countries.
Income index - nations will receive a rating of 1, if the GNI per capita is $ 75,000 or 0 if the GNI per capita is $ 100.
The activities on this page are available as a PDF file at: 
Development
Activity 1
Study the following presentation before answering the question, 'what is economic development?' and how is it different to economic growth?
DevelopmentNext watch the following short video and then answer the questions which follow:
(a) How is economic development measured?
Economic development is measured by the human development index (HDI) and ranks each nation according to their rank or performance in gross national income (GNI) per capita, years of schooling / expected years of schooling and life expectancy. For more information on the HDI read the accompanying class handout.
(b) Has global human development improved or worsened in recent decades?
Surprisingly, given the gloom which gathers on much of the world's news channels, many nations in the world are making significant progress in raising living standards in their nations. The video highlights Bangladesh for example.
(c) What criticisms might there be of HDI as a measurement?
HDI does not distinguish between different rates of development within each nation. Many LEDCs, for example, have vastly different rates of development between urban and rural communities.
While the income index measures HDI per capita, in terms of purchasing power parity, this takes no account of the distribution of income.
Individual freedoms are not measured in the index - access to the internet, freedom of speech and political freedoms for example.
The HDI ignores factors such as crime, corruption, poverty, deprivation, and negative externalities associated with pollution and urbanisation.
Activity 2: Selected HDI rankings
Currently Yemen is the nation with the lowest HDI ranking at 0.482 in 2016. Outline the patterns of economic development throughout the globe.
A nation with an index of 0 – 0.49 indicates a nation with low development. For example, in 2016 Yemen had a human development index of 0.48.
Similarly an index of 0.5 – 0.69 means a nation with medium development, for example, South Africa in 2016 had a rating of 0.66.
An index of 0.7 to 0.79 represents high development. An example of a nation in this category is Bulgaria, with a HDI rating of 0.79 in 2016.
Lastly, a rating above 0.8 means represents a nation with very high development. In 2016 Norway had the worlds highest HDI rating at 0.949.
The world's most developed regions are represented by the world's most developed nations - Australasia, Europe, Japan, North America and South Korea. Most nations in Latin America, middle East as well as the wealthier nations of Asia and Africa generally have middle levels of development, in keeping with their status as middle income nations. The poorest nations in Asia and Africa make up the world's poorest nations, as well as the least developed in terms of HDI rankings.
Activity 3: A focus on Ethiopia
Ethiopia grabbed the headlines in 1984 after 3 years of drought, which inspired musician Bob Geldoff and a host of others to play Live Aid, the largest music concert ever held. Start by watching the short video before reading the case study which follows.
Thirty two years later
Ethiopia has averaged 10.8% growth since 2005, led primarily by large levels of public sector led development. The agriculture, services and industry sectors make up 38.8%, 46.6% and 15.2% of real GDP, respectively. The government has made huge investments in infrastructure and plans many more, with the development of industrial parks a priority.
In addition to significant investment spending prudent fiscal policy, focused mainly on increasing spending on income inequality reduction policies and growth enhancing sectors, has also contributed to the growth miracle in the economy. At the same time the monetary policy stance has ensured a stable exchange rate and single digit inflation targets. While the nation continues to face challenges, not least a high level of national debt and a stubbornly high current account deficit, the nation is a very different place to the scenes witnessed in the video.
This was illustrated in 2016, when the country experienced an even worst drought than in 1984. 18 million people required aid but crucially there was no famine.
Source: African Development Bank Group
The full report can be accessed at: 
Ethiopia case study
What is the secret behind Ethiopia's recent economic success?
Consider the following reasons:
- fiscal policy
- monetary policy
- economic development
- help from western nations.
The Ethiopian government has been a model nation in terms of economic growth, development and fiscal responsibility, during this period and this has contributed significantly to the growth miracle during this period. This can be illustrated by the first table which shows a rise of 57% in terms of HDI during the period. After the 1984 famine western governments and NGOs e.t.c. poured money into the nation (although too late for many) and this money has largely been invested wisely.
Activity 4: A focus on the Singapore miracle?
The following diagram illustrates the GDP per capita, for a range of middle income countries in 1965. The table also records the current GDP of those same nations.
| Country | Real GDP per capita in 1965 | GDP per capita in 2018 |
| Colombia | $ 2,689 | $ 7,398 |
| Singapore | $ 2,665 | $ 57,714 |
| Brazil | $ 2,448 | $ 9,821 |
| Romania | $ 2,386 | $ 10,813 |
| Malaysia | $ 1,804 | $ 9,944 |
Now watch the following youtube video from the Economist and answer the question, how did Singapore achieve an economic miracle?
Hint:
The video identified three important reasons which contributed to the Singapore miracle. Firstly the country was fortunate in its location, having a deep water port, conveniently located within a busy shipping route. But while Singapore was extremely fortunate in terms of its location there was no luck whatsoever about reasons two and three for their success. Successive governments have been transparent and relatively free from corruption - in complete contrast to some other nations in the region. Lastly, as with South Korea and other successful nations, Singapore invested heavily in human capital which contributed significantly to the long term development of the nation.
Activity 5: The link between development and economic growth
Study the following table which ranks 9 nations according to their rank by GDP per capita and HDI in 2016. To what extent are development and economic growth linked?
| Country | GDP rank | HDI rank |
| Norway | 3 | 1 |
| USA | 5 | 5 |
| Denmark | 8 | 10 |
| Qatar | 2 | 35 |
| Portugal | 39 | 45 |
| Turkey | 64 | 71 |
| Palestine | 97 | 100 |
| Bangladesh | 148 | 150 |
| Niger | 184 | 199 |
1.On a sheet of graph paper plot the above table. Then using a pencil to draw a line of best fit to show the correlation between economic development (HDI) and GDP?
2. To what extent are the two variables correlated and explain possible reasons for this.
The close correlation between GDP per capita and HDI can be explained by two reasons. Firstly national income or specifically GNI per capita is one of the three components which make up a nation's HDI rank / level of development. The second reason is that the other two indexes - health and education levels are also strongly correlated with income levels. The wealthiest nations can afford better health and education systems, which the citizens of those nations can then enjoy.
Activity 6: Does rapid economic growth help development?
The world's fastest growing economies 2006 - 2016
| Country | Growth in GDP annual % 2006 - 2016 | Growth in HDI 2000 - 2015 % |
| Qatar | 13.0 | 5 |
| Turkmenistan | 11.0 | 4.5 |
| Ethiopia | 10.8 | 57 |
| Azerbaijan | 10.1 | 25 |
| China | 9.5 | 42 |
| Mongolia | 9.2 | 32.6 |
| Angola | 8.9 | 36 |
| Sierre-Leone | 8.5 | 41 |
| Panama | 8.5 | 14.7 |
| Timor-Leste | 8.4 | 50 |
1. Using graph paper illustrate the above on two axis.
2. What does the above table suggest about the link between economic growth and economic development?
A number of countries have seen significant improvements, in both variables, indicating that those nations invested in long term development measures, between the year 2000 and the present day. This meant that they were rewarded with significant growth in economic activity. Examples of countries falling into this category include Ethiopia, China, Sierre-Leone, and Timor-Liste. Other nations e.g. Qatar, Turkmenistan and Angola made significant discoveries of oil / gas which helped fund their high economic growth rates.
Activity 7: TOK exercise - which comes first economic development or economic growth?
The TOK syllabus considers how we know that certain facts are true? Do facts come first and then theories develop from there or do scientists create theories and then use facts to prove the theory is correct?
In development economics a key question is what comes first 'economic development or economic growth?' Start by discussing this question.
Divide the class in two and discuss the merits of both arguments.
The wealth comes first theory
This argument states that as a country enjoys a sustained period of economic growth there is a rise in average income levels. In many cases the benefits of rapid expansion are not evenly distributed but as mean and median incomes rise, the new wealthy classes will start to demand improved levels of education, health, roads e.t.c, and have the money to pay for them. At the same time governments are likely to see a sharp rise in income tax receipts and governments can use this additional revenue to pay for improvements in education and health services. Individuals can afford a better diet and may even adopt healthier lifestyles.
The development comes first theory
The counter argument is that development comes first - as a nation improves its health and education services, productivity rises throughout the economy and this leads to significant improvements in income growth.
So which of the two theories is correct? Is there any evidence that economists can use to answer this question?
Hint:
This is very difficult to prove because very often the two events happen simultaneously.
Other TOK titles on development
1. What are the knowledge issues involved in compiling a list of development goals?
2. Does the term “economic development” mean different things in different cultures?
3. How can we decide if the distinction between economically more developed countries and economically less developed countries is a meaningful one given that economic development itself might not be so clearly defined?
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