Development economics flashcards

Development economics examines why some countries remain poor while others achieve sustained improvements in living standards. Students must understand that economic development is broader than economic growth, encompassing improvements in health, education, gender equality, and political freedom. Key measures include GDP per capita, the Human Development Index (HDI), and multidimensional poverty indicators. Students should be able to evaluate strategies for development, including trade, aid, foreign direct investment, microfinance, and the role of institutions. Barriers to development such as debt, poor governance, geographic disadvantage, and commodity dependence must be understood. The distinction between developed, emerging, and least-developed economies is important, as is the debate between market-led and interventionist approaches. Critical evaluation of each strategy, including their limitations and unintended consequences, is essential for higher-level responses.

1. Card 1

   What is the difference between economic growth and economic development?

   Economic growth is a rise in real GDP, while economic development is a broader improvement in living standards, health, education, and freedom.

2. Card 2

   What does the Human Development Index (HDI) measure?

   The HDI combines income per capita, life expectancy, and education levels into a single score to compare human well-being across countries.

3. Card 3

   What is a poverty trap and why does it matter in development economics?

   A poverty trap is a self-reinforcing cycle where low income prevents saving and investment, keeping households or nations persistently poor.

4. Card 4

   What is the role of foreign direct investment (FDI) in development?

   FDI brings capital, technology, and jobs to developing countries, but may lead to profit repatriation and limited benefits for local workers.

5. Card 5

   What is microfinance and how can it support development?

   Microfinance provides small loans to low-income individuals, especially women, enabling entrepreneurship where traditional banks refuse credit.

6. Card 6

   What is official development assistance (ODA) and what are its limitations?

   ODA is government-to-government aid or aid via international organisations. Limitations include dependency, corruption, and tied aid conditions.

7. Card 7

   What does the term 'commodity dependence' mean for developing countries?

   Commodity dependence means relying heavily on primary exports, leaving countries vulnerable to volatile world prices and deteriorating terms of trade.

8. Card 8

   What are the Sustainable Development Goals (SDGs)?

   The SDGs are 17 global targets set by the United Nations for 2030, covering poverty, health, education, inequality, and environmental sustainability.

9. Card 9

   What is the Washington Consensus in development economics?

   The Washington Consensus is a market-led approach recommending privatisation, trade liberalisation, and fiscal discipline to promote growth in developing nations.

10. Card 10

    What is import substitution industrialisation (ISI)?

    ISI is an interventionist strategy where countries use tariffs and subsidies to develop domestic industries instead of relying on imported manufactured goods.

11. Card 11

    How does the debt burden hinder economic development?

    Heavy external debt forces governments to spend on repayments rather than health or education, and may require austerity measures that reduce living standards.

12. Card 12

    What is the Gini coefficient and why is it relevant to development?

    The Gini coefficient measures income inequality on a scale of 0 to 1. High inequality can undermine development even when average incomes are rising.

• Many students confuse economic growth with economic development, wrongly treating a rise in GDP as sufficient evidence that a country is developing.
• Students often assume that all forms of aid are beneficial without evaluating drawbacks such as dependency, corruption, or conditionality attached to loans from institutions like the IMF.
• A common error is to argue that free trade always benefits developing countries equally, ignoring how commodity dependence and unequal bargaining power can leave poorer nations worse off.

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