CHAPTER 17

Developing Countries
SECTION 1: Economic Development
SECTION 2: Challenges to Growth
SECTION 3: Paths to Economic Development

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 SECTION 1
Economic Development

Objectives:
 What characteristics do developing countries
have in common?
 How can scarcity of resources affect a
developing nation?

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 SECTION 1
Economic Development
Characteristics of developing
countries:
 low per capita GNI
 limited or insufficient use of resources
 high population growth rate
 dependence on agricultural production

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 SECTION 1
Economic Development
Potential effects of resource scarcity
on a developing nation:
 inability to compete in the global
marketplace
 inability to trade
 limited economic growth
 dependence on a subsistence agriculture

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 SECTION 2
Challenges to Growth

Objectives:
 How do many developing countries respond
to scarce factors of production?
 How can the status of an economic
infrastructure help or hinder a developing
country?
 How can political instability challenge a
developing nation?
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 SECTION 2
Challenges to Growth
Many developing countries’ response
to scarce factors of production:
 specialization in the production of goods
 increased spending on primary and
secondary education
 nationalization, expropriation, and
privatization of industries and businesses

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 SECTION 2
Challenges to Growth
Impact of an economic infrastructure
on a developing country:
 can limit or expand development
 can discourage or promote production and trade
 can restrict or improve development of human
resources
 can discourage or encourage savings and
investment
 can lead to nationalization, expropriation, and
privatization of industries and businesses
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 SECTION 2
Challenges to Growth
Potential effects of instability on a
developing nation:
 can discourage foreign investment
 can disrupt normal business activity
 can destroy capital investment
 can restrict economic development

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 SECTION 3
Paths to Economic Development

Objectives:
 What are the characteristics of the socialist
and capitalist models of decision making?
 What types of aid do governments extend to
developing countries?
 What are the key public sources of foreign
aid?

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 SECTION 3
Paths to Economic Development

Characteristics of the socialist model

of decision making:
 ability of government to direct and redirect
resources and production toward specific
economic goals
 inefficiency
 bureaucratic resistance to change
 corruption

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 SECTION 3
Paths to Economic Development

Characteristics of the capitalist model

of decision making:
 freedom to make economic decisions
 difficulty in redirection of resources and
production toward specific economic goals

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 SECTION 3
Paths to Economic Development

Types of aid governments extend to

developing countries:
 economic assistance
 military aid
 emergency assistance

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 SECTION 3
Paths to Economic Development

Key public sources of foreign aid:

 the World Bank
 the International Monetary Fund
 the United Nations
 regional organizations

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 CHAPTER 17
Wrap-Up
1. How is per capita GNI used to classify developing
nations?
2. What are developing nations’ three major obstacles
to capital formation?
3. Why is scarcity a problem for developing nations?
4. How can leaders influence economic growth and
development in a nation that uses the capitalist
decision-making model?
5. Provide an example of each of the following:
economic assistance, military assistance, and
emergency assistance.
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