chapter 20: economic growth in developing nations nations. e conomic growth in developing countries...

Application and Enrichment

E CONOMIC GROWTH IN DEVELOPING COUNTRIES

HEALTH STATISTICS IN DEVELOPING COUNTRIES

Directions: Select seven countries: three developed and four developing countries. Find out the GDP, malelife expectancy, and infant mortality for each country. Use the table below to record your data and thenrank each country as follows: GDP ranked highest to lowest, life expectancy highest to lowest, and infantmortality (number of deaths per 1,000) lowest to highest.

Create a bar graph. Label the horizontal axis of your graph “Country” and place the abbreviations for eachcountry along the axis, ordering them from left to right by their Per Capita GDP ranking. Label the verticalaxis “Rank.” Draw three narrow bars for each country, depicting the ranks that appear in your table.

1. Which are the developing countries?

2. In general, what does your bar graph reveal about life expectancy, infant mortality and GDP?

3. Are there any inconsistencies in your data?

4. Create a hypothesis to explain the inconsistencies.

5. How might you test your hypothesis?

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Country Per Capita GDP Life Expectancy Infant Mortality

Data Rank Data Rank Data Rank

Enrichment Activity 20

Teaching Transparency

Application and Enrichment

Review and Reinforcement

C HAPTER 20 ECONOMIC GROWTH IN DEVELOPING NATIONS

Directions: Read each vocabulary clue on the left, and then write the letter of the matching term in theblank space.

1. Loans and grants of money and equipmentto developing countries

2. Nations that have a high standard of living;economy is based more on industry thanagriculture

3. Money, goods, and services given by private organizations and governments tohelp other nations

4. Nations with less industrial development;standard of living is lower

5. Provides weapons or strategies of war anddefense to a nation

6. Crops are grown to feed families, not for export.

7. Place businesses under government ownership

8. Provides training to a nation to develop itshuman resources

9. A structure of agencies and officials

10. The number of infant deaths per 1,000 alive births

a. bureaucracy

b. developed nations

c. developing nations

d. economic assistance

e. foreign aid

f. infant mortality

g. military assistance

h. nationalize

i. subsistence agriculture

j. technical assistance

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Economic VocabularyActivity 20

516A

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T AKING A TESTWhether you are in school or looking for a job, you will be asked to take many tests duringyour lifetime. Thus, learning how to take a test is a very important skill to master. One way ofpreparing to take a test is to write a test yourself. Writing a test is a good way of reviewingwhat you need to know to do well on a test.

Directions: Read the passage below and answer the questions that follow.

A law restricting the amount of interest that can be charged for credit is called a usury law. Some states set up differ-ent maximum rates for different types of consumer credit. Maximum rates on charge accounts and credit cards, forexample, are often about 18 percent a year or 1 percent a month. Consumer finance agencies, in contrast, are oftenallowed to charge higher rates because their loans involve higher risks.

Some states once set interest rate ceilings as low as 6–10 percent. During the early 1970s, when interest rates werevery high, many lenders cut back on the amount of credit they offered. Others stopped lending completely. Many consumers, particularly those with bad credit ratings, found it hard to obtain credit.

1. Write a true/false question that tests whether readers understand what a usury law is.

2. Write a multiple choice question that tests whether readers recall what a typical maximum rate is on a credit card.

3. Write a test question that tests whether readers understand the consequences for borrowers of credit ceilingsthat are too low.

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C OMPARING FISH CONSUMPTION IN DEVELOPEDAND DEVELOPING COUNTRIES

A bar graph is a good way to show comparisons.

Directions: Read the following facts from a report issued by the Food and Agriculture Organization of theUnited Nations. Then complete the bar graph comparing the percentage of fish consumption in differentparts of the world. Use the figures in brackets.

“Worldwide men, women and children eat more fish than any other type of animal protein. It is estimated thatbetween 15 and 20 [16.4] percent of all animal proteins come from aquatic animals. Fish is highly nutritious andserves as a valuable supplement in diets lacking essential vitamins and minerals.”

From “Fisheries and Food Security”

“In general people in developing countries are much more dependent on fish as part of their daily diets than those living in the developed world. Figures for 1995 show that while fish provide slightly over 7 [7.4] percent of animal protein in North and Central America and more than 9 [9.2] percent in Europe, in Africa they provide over 17 [17.4]percent, in Asia over 26 [26.2], and in the low-income food-deficit countries (LIFDCs) . . . they provide nearly 22 [21.8]percent.”

From “Fisheries and Food Security”

How much more than people in the world in general do people in low-income food-deficit countries depend on fishfor protein?

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Fish as Percentage of Total Animal Protein Intake

World

Asia

Africa

Europe

North and Central America

LIFDCs

0 155 10 20 25 30

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E CONOMIC GROWTH IN DEVELOPING COUNTRIESThe economies of developing nations may be at different stages, but they share certain charac-teristics that identify them. In Chapter 20 you learned what characterizes a developed countryand a developing country.

Directions: Write developed or developing beside each characteristic listed below.

1. Has a low Gross Domestic Product (GDP)

2. Requires a great deal of foreign aid assistance

3. Heavily industrialized

4. High standard of living

5. Lacks the equipment to put its many natural resources to use

6. Per capita GDP below $5,000

7. Rapid population growth

8. Economy is based on more than agriculture

9. A wide variance in standards of living among its citizens

10. Exports a significant part of what it produces

11. Much of its population exists through subsistence agriculture

12. Donates money for distribution to poorer countries

13. Health conditions for its population are poor

14. Property rights may be weak

15. Receives assistance from such organizations as the Agency for International Development and the International Monetary Fund

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Critical Thinking Activity 24 Reteaching Activity 20

Reinforcing Economic Skills 30

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D ECISION MAKING IN A DEVELOPING COUNTRYAs you have learned, consumer decisions come in many forms. Groups as well as individualsmake consumer decisions. One type of group decision concerns how a community shouldspend government grants. There may be many important projects that need money to beimplemented, but only a limited amount of money is available.

Directions: Read the passage below, which describes the situation in a mountain village in a developingcountry. The people of the village must decide how to spend grant money from the government. Thenanswer the questions that follow.

The village of Sanjar is part of the country’s Rural Development Program. Under the program, the government pro-vides money for improvements that the village could not have made otherwise. The village council decides whatimprovements will be made each year and uses the money to buy the necessary materials. The villagers provide volun-teer labor to complete the project.

Last year, the village rebuilt a bridge that connects the village to the main highway. This year, the council mustchoose between two worthy projects. The first is to improve the road that leads to the market town. The second is toimprove the system that brings water to the village.

The road needs to be strengthened so that cars, trucks, and buses can travel over it during the rainy season. Thiswould require the village to buy tons of gravel. The villagers would need to grade the road and spread the gravel. Theimproved road would allow the villagers to transport their goods to market. It would also provide access to much-needed medical care, available only in the market town.

Improving the town’s water supply requires rebuilding storage tanks, replacing pipes, and moving the water tapsto a more convenient site. This would require the purchase of cement of the tanks, and new pipes and taps. Thecleaner water would reduce disease in the village. It would also make hauling water to homes much easier.

1. What are the major problems that the village faces? List at least four of them.

2. If you were on the village council, which project would you vote for? Why?

3. What would be the opportunity costs of completing the project you would vote for?

4. Relate the experience of Sanjar to your own community. Name two or three important projects that are competing for scarce funds. Then explain the opportunity costs of each project.

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F UNDING ECONOMIC GROWTH IN DEVELOPING NATIONS

Developing nations may seek investments from foreign companies to finance new enterprises,such as steel mills and mines, to build railroads and highways, and to modernize agriculture.Developing nations may also seek foreign aid from other governments. Such aid may take thefollowing forms:

Economic assistance: loans and grants that add to a nation’s capital resourcesHumanitarian aid: food, clothing, medical suppliesTechnical assistance: services of engineers, technicians, teachers, health care professionals, and others to teach skills in developing nationsMilitary assistance: economic and technical assistance given to a nation’s armed forces

Directions: Use the information above to complete the following exercises.

1. What is the difference between foreign investment and foreign aid?

2. How might each kind of foreign aid encourage investment in a developing country?

3. Study the following chart. Identify two statistics for each country that indicate that country’s greatest needs.Then identify the type of aid that would help the most and explain why.

Sources: The World Almanac and Book of Facts, 1999

a. Haiti:

b. Burkina Faso:

c. China:

d. Nigeria:

Statistic Haiti Burkina Faso China Nigeria

Infant mortality (deaths per 1,000 births) 99 109 45 71

Population per physician 9,846 27,158 628 4,496

Per capita GDP (dollars) 1,000 740 2,800 1,380

Adult literacy rate 53% 19% 82% 57%

Percent of labor force in agriculture 57% 80% 54% 54%

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Economic Concepts 11

Hawaii

Honolulu

Miami

Tampa

JacksonvilleSavannah

Charleston

New Orleans

Alaska(No-Interstate

Highways)

HoustonSan Antonio

Fort Worth Dallas

Little Rock

El Paso

OklahomaCity

Tucson

Salt LakeCity

San DiegoLos Angeles

SanFrancisco

Portland

Seattle

ButteBillings

Cheyenne

DenverKansas City

Omaha

Sioux Falls

Fargo

Minneapolis

Detroit

Lousiville

Nashville

BirminghamAtlanta

MontgomeryMobile

Columbus

CincinnatiIndianapolis

Chicago

St. Louis

Charlotte

Pittsburgh

Washington, D.C.

New York

Boston

Major InterstateHighway

0

0 250 500 kilometers

250 500 miles

The Interstate Highway System consists of more than 45,000 miles of freeways.The cost of freeway construction can approach $5 million per mile.The total cost of the system is about $100 billion.The federal government pays about 90 percent of the cost and the states pay about 10 percent of the cost.

M ARKET FAILURESThe map depicts a public good provided by the federal government to compensate for a market failure.

The Federal Interstate Highway System

1111

Economic Concepts Transparency 11

Consumer ApplicationsActivity 24

Free Enterprise Activity 24

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C OMPUTING PER CAPITA GROSS DOMESTIC PRODUCT (GDP)

Which three countries have the highest GDP? (32)The highest per capita GDP? (33)Which three countries have the lowest GDP? (34)The lowest per capita GDP? (35)Compare the data on life expectancy with the per capita GDP:

Afghanistan 44 Cambodia 49 China 70 Ecuador 69

France 78 Gabon 53 India 57 Japan 79

Madagascar 53 Portugal 74 Saudi Arabia 66 United States 75

[Source: World Almanac 1994, pp. 736ff.; mean of male and female]

Which have the lowest life expectancy? (36)Which have the highest life expectancy? (37)

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Per capita Gross Domestic Product is often used as a rough measure of a nation’s prosperity.Source estimates vary, but the United States and other developed countries have per capitaGDP that ranges between $12,000 and $27,000 annually. Per capita GDP in developingnations is considerably less, and in the world’s poorest nations it is extremely low.

Try computing the per capita GDP for selected countries. The table below provides the data you need. You alsoneed to know a few things before getting started. The abbreviations mln, bln, and trl in the GDP column stand for million, billion, and trillion. To simplify the math, round the population to the nearest million and the GDP to millions of dollars, as in the examples done for you. Then to get per capita GDP, you can divide, using this equation:

Per Capita GDP � GDP � Population

Directions: Fill in the table.

Rounded RoundedCountry Population (millions) GDP (millions) Per Capita

Afghanistan 16,100,00 16 $3.1 bln 3,100 $194

Cambodia 7,300,00 7 $930 mln 950 (21) _________

China 1,169,600,000 (1) _________ $393 bln (11) _________ (22) _________

Ecuador 10,930,000 (2) _________ $11.5 bln (12) _________ (23) _________

France 57,300,000 (3) _________ $1 trl (13) _________ (24) _________

Gabon 1,100,000 (4) _________ $5.3 bln (14) _________ (25) _________

India 886,400,000 (5) _________ $328 bln (15) _________ (26) _________

Japan 124,500,000 (6) _________ $2.3 trl (16) _________ (27) _________

Madagascar 12,600,000 (7) _________ $2.4 bln (17) _________ (28) _________

Portugal 10,448,000 (8) _________ $87 bln (18) _________ (29) _________

Saudi Arabia 16,900,000 (9) _________ $104 bln (19) _________ (30) _________

United States 256,000,000 (10) _________ $5.6 trl (20) _________ (31) _________

EXAMINING THE CARTOON

Multiple Choice

1. What has the artist chosen the pyramid to represent?

a. corrupt rulers b. elaborate attempts at economic improvementc. all ancient monuments d. complex and well-planned building projects

2. Who is the cartoon criticizing?

a. Arabs b. tourists c. Egyptians d. developers

Critical Thinking

3. Analyzing the Cartoon Imagine a similar cartoon that pictured another famous monument in its setting—like the Eiffel Tower or Taj Mahal. How would this change the point of the cartoon?

4. Expressing Your Opinion Do you think tourist attractions can help developing nations? Why or why not?

�

PYRAMID SCHEMEAbout three out of every four people in the world today live in developing countries. Locatedmostly in Africa, Asia, and Latin America, these countries have tried many programs toimprove their economies, with varying degrees of success.

Directions: Study the cartoon below. Then answer the questions that follow.

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Jim Borgman / Reprinted with special permission of King Features Syndicate

redistributing to the community as a whole the foodstuffsbrought back by its more fortunate members, thusstrengthening the social fabric.

There are also rules of sharing whereby “one good turndeserves another” throughout life, as with theArviligjuarmiut Inuits when they share a seal they have killedas a team working together. Each member of the teamalways receives the same part of the beast and indeed takeshis name from it—“my shoulder,” “my head,” and so on.

Some of the peoples living in the Arctic and sub-Arcticregions believe that the animals caught by a hunter havegiven themselves to him, so it is not surprising, for exam-ple, that among the Cree Indians of Quebec the hunter’sgenerosity to his companions in the hunt should matchthat of his quarry. If the favor was not returned, the cyclewould be broken and the animals would not let themselvesbe caught. Similarly, when a feast is given everything mustgo, a custom that astonished those who first observed theAlgonquins’ way of life and is still maintained today. When

the whole village—visitors included—is invited to a feast,guests will find a plastic bag by the side of their plates, aninvitation to them to take away anything left over whenthey have eaten enough, to be shared with those whocould not be present.

Many peoples—the Mbuti of the former Zaire, theCanadian Cree and Inuit, the Batck of Malaysia andNayaka of southern India, to name but a few—are igno-rant of the Western dichotomy between nature andnurture. In many cases, they see their relationship with thenatural world of animals, plants and places from whichthey receive gifts as a genuine child-parent relationship.They therefore regard sharing—nature giving to humansor humans giving to one another—as an essential part oftheir lives, expressing an outlook on the world that couldbe described, in Nurit Bird-David’s words as a “cosmiceconomy of sharing.”

Roué, Marie. “An Economy of Sharing.” UNSECO Courier, January 1998.

48 Primary and Secondary Source Readings

ANALYZING THE READING

1. How could a hunter-gatherer society be seen as an “affluent society”?

2. At what times in a hunter-gatherer society is sharing especially important?

3. What are the reasons that the ablest hunters provide food for the rest of their people?

4. How does the rule “one good turn deserves another” support the economy of these societies?

5. How does the “cosmic economy of sharing” differ from Western individualism?

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Cooperative Learning Simulations and Problems 24

Primary and Secondary Source Reading 24

Math Practice for Economics Activity 24

Economic Cartoons Activity 24

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R EGIONAL COOPERATION

GROUP PROJECT

In recent years a growing number of countries have formed regional groups that promoteeconomic cooperation. As the global economy becomes more integrated, these countries hope their regional cooperation will create healthy economic growth. Two major regionalalliances are the North American Free Trade Agreement (NAFTA) and the European Union(EU). In the following activity, your group will compare and contrast these two economicagreements.

▼MATERIALS:

Library resources such as newspapers, magazines, and the Internet

1. Group Work Stage 1: Students work in groups offour or more. Discuss your knowledge and impres-sions of NAFTA and the European Union. Assignone member to record answers to the followingquestions. What is the purpose of the alliance?When was the organization formed? What countriesare members? Do you believe the agreement isbeneficial or harmful to the region’s residents?

2. Paired Work Stage 2: Students work in pairs.Research each agreement using resources such asnewspapers, magazines, and the Internet. Verify andsupplement the information compiled in Stage 1.What positive and negative effects have economistsidentified stemming from each agreement?

3. Individual Work Stage 3: Students work individually. Choose either NAFTA or the EU andresearch public opinion about the agreement in theregion it affects. What was public opinion when the

agreement first took effect? What is public opinionabout the agreement today? Did opinions change?If so, why?

4. Group Work/Analysis Stage 4: Students return tooriginal groups. Using the information gathered, fillin a table like the one above. Then compare yourresearch with your group’s initial responses. What differences exist? Did members change their opinions about the effectiveness of each organization? If so, why?

Group Process QuestionsWere the goals of the assignment clear?

Did members come prepared to group meetings?

Did members work well together?

Did members respect each other’s point of view?

COOPERATIVE GROUP PROCESS:

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NAFTA European Union

Purpose

Year Founded

Member Nations

Positive Effects

Negative Effects

Current Public Opinion

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

Resource ManagerCHAPTER 20

here are two radically different ways for members of asociety to satisfy all their needs: by producing a lot, as inWestern societies, or by not wanting a lot, as in those theAmerican anthropologist Marshall Sahlins has called “Zen”societies. The “Zen” way chosen by hunter-gatherer soci-eties is to stop producing food as soon as they considerthat the quantity in hand has reached a level sufficient fortheir needs.

It has been shown, and statistically confirmed, that,contrary to a widespread misconception, populationgroups who live by hunting, fishing and gathering do notlive in utter privation, nor are they constantly in search ofpermanently inadequate food. On the contrary, they maybe said to have created “the first affluent society,” spend-ing only a few hours a day on meeting their material needsand keeping the rest of their time free for recreational andsocial activities. It is only observers who are unaware ofthese people’s cultural values who find their few plain pos-sessions so inadequate. Nomads, for instance, setparticular store by light, portable objects, but this does notmake them poor. One observer has testified that “theirextremely limited materials possessions relieve them of allcares with regard to daily necessities and permit them toenjoy life.”

However, not all hunter-gatherers live in an earthlyparadise where they need only to stoop to pick fruit andvegetables and where game animals give themselves upvoluntarily. There are some groups or families within thesesocieties who can never manage, or can manage only atcertain times, to meet all their needs, while any group isbound at times to include individuals who are too sick, tooyoung, or too old to take part in productive activities, anddisaster can sometimes befall the harvest or the hunt. It isin such circumstances that the sharing of resourcesbecomes especially important.

What is the point of sharing? Some observers claimthat it fulfills the same function—that of risk limitation—in “traditional” societies as insurance policies do inWestern societies. By sharing a surplus that in any case

could not be consumed in the immediate future, individu-als or families are ensuring that other members of thegroup will do the same for them when the time comes.Other observers, however, are not entirely satisfied withthe materialist explanation, since it presupposes an egali-tarian, turn-and-turn-about system, when in fact that isfar from being the case, and it is rare for those who arenever on the giving end to be excluded from the benefitsof sharing. Why, in that case, do the ablest hunters who,as everyone knows, produce more that they can consume,continue to hunt large animals when nearly all the meatwill be consumed by people other than their own kith andkin? For prestige and the attendant social advantages, toqualify as a husband, a son-in-law, a partner in someundertaking or simply an envied neighbor—these aresome of the possible reasons.

What is the point of sharing? Some

observers claim that it fulfills the

same function—that of risk

limitation—in “traditional” societies

as insurance policies do in Western

societies.

Beyond these reasons of self-interest, however,underlying the good hunters’ generosity is a whole out-look that is intolerant of selfish individualism. In the past,Western missionaries and travellers often misinterpretedattitudes quite unlike those that prevailed in the villageswhere they themselves grew up. Seeing how Eskimos andBushmen feasted when food was abundant, so thatsometimes there was nothing left over for lean times tocome, they reproached them for their lack of foresightand their gluttony. But in fact feasting is another way of

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Primary and Secondary Source Readings 47

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A N ECONOMY OF SHARINGWestern society’s emphasis on producing surplus goods and saving for future needsdoes not apply in many hunter-gatherer societies. In these societies, the individual’sneeds are a part of the whole groups’ needs. Author Marie Roué call this an econo-my of sharing. As you read, consider the social implications of such an economyand compare it to the one in which you live. Then answer the questions that follow.

24

T

You and your students can visit ett.glencoe.com—the Web site companion to Economics Today andTomorrow. This innovative integration of electronic andprint media offers your students a wealth of opportuni-ties. The student text directs students to the Web site forthe following options:

• Chapter Overviews • Student Web Activities

• Self-Check Quizzes • Textbook Updates

Answers are provided for you in the Web ActivityLesson Plan. Additional Web resources and InteractivePuzzles are also available.

Use the Glencoe Web site for additional resources. All essential content is covered in the Student Edition.

ECONOMICS

Reading for the StudentSpencer, William. The Challenge of World Hunger.

Hillside, NJ: Enslow Publishers. Data on social, economic,and political causes of hunger.

Multimedia MaterialOikonomos: The Economist, 1997. Brighter Paths™. 20200

Nine Mile Road, St. Clair Shores, MI 48080. CD-ROM.Students simulate a developed and a developing nation.

Additional Resources

Spanish Economic Concepts Transparency 11

Spanish Vocabulary Activity 20

Spanish Reteaching Activity 20

Spanish Section Quizzes for Chapter 20

Spanish Chapter 20 Audio Program, Activity, and Test

Spanish Resources

Vocabulary PuzzleMaker CD-ROM

Interactive Tutor Self-Assessment Software

ExamView® Pro Testmaker

NBR Economics & You Video Program (English/Spanish)

Presentation Plus!

Glencoe Skillbuilder Interactive Workbook CD-ROM,Level 2

TeacherWorks CD-ROM

MindJogger Videoquiz

Interactive Economics! CD-ROM

Audio Program (English or Spanish)

Technology and Multimedia

Assessment and Evaluation

ExamView® Pro Testmaker

PROCEDURE

1. Organize the class into five groups. Assign each group a region—Latin America and the Caribbean, the MiddleEast and North Africa, Africa south of the Sahara, South Asia, or East Asia and the Pacific. Have each memberresearch a children’s issue in the region’s developing nations.

2. Explain to students that the United Nation’s Children’s Fund (UNICEF) has a statistical yardstick called the ChildRisk Measure (CRM) that is based in part on economy-related factors such as prevalence of HIV/AIDS in children,underweight children, under-five mortality, primary school attendance, and immunization against major diseasessuch as polio. Suggest that students find information about these issues at the UNICEF Web site athttp://www.unicefusa.org or by writing to United States Committee for UNICEF, 333 East 38 Street, New York,NY 10016. (Note: If students write to UNICEF for information, they should include stamped, self-addressedenvelopes with their requests.)

3. Point out that students should also consider ways to fund improvements in the lives of children. For example,one UNICEF report notes that Africa south of the Sahara spends more on servicing its $200 billion debt than onthe health and education of its children; therefore, the report calls on developed nations to cancel these debts todeveloping nations.

Assessment

1. Have each group create a booklet describing the children’s issues in its region.

2. Ask students to write persuasive letters to their U.S. senators or representatives championing a specific way thatdeveloped nations can help children in developing nations.

▼BACKGROUND

A major indicator of growth in a developingnation’s economy is improvements in the well-being of its children.

▼MATERIALS

Access to the Internet and desktop publishingprograms

▼OBJECTIVES

After completing this activity, students will beable to• Specify economy-related issues concerning

children in developing nations.• Identify ways developed nations can help

children in developing nations.

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RUBRICSbooklet, an issuecontroversy

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Performance Assessment Activity 24

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Name Date Class

20, A

14. Out of more than 185 nations in the world, how many nations are considered developed?

a. 27 b. 42c. 35 d. 56

15. One factor limiting the ability of developing countries to grow is

a. lack of domestic savings. b. excessive foreign investment.c. overreliance on minerals and other d. corporate control over foreign resources.

natural resources.

CRITICAL THINKING QUESTIONS

Directions: Answer each of the following sets of questions on a separate sheet of paper.Answer in short paragraphs.

16. Making Comparisons How does population growth differ in developed and developing nations?

17. Synthesizing Information What are some of the reasons poor countries are poor?

APPLYING SKILLS

Using Charts and Tables: Read the table and answer the questions below.

U.S. Government Foreign Grants and Credits, by Region 1992 and 1996(in millions of dollars)

Source: Statistical Abstract of the United States

18. Which region received the largest share of U.S. foreign aid?

19. Which region received the smallest share of U.S. foreign aid?

20. What happened to aid in all regions between 1992 and 1996?

Region 1992 1996

Africa 1,624 1,431

Far East and Pacific 801 747

Western Hemisphere 2,462 328

Near East and South Asia 8,121 7,322

Chapter 20 Test Form A

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SCORE

20, A


RECALLING FACTS AND IDEAS

Multiple Choice: In the blank at the left, write the letter of the choice that best completesthe statement or answers the question.

11. High living standards almost always depend on a

a. low rate of infant mortality. b. high level of industrialization.c. high rate of population growth. d. high level of foreign aid.

12. Which of the following is not a developing nation?

a. Bolivia b. Botswanac. New Zealand d. Thailand

13. Which of the following is not a characteristic of developing countries?

a. low rates of literacy b. poor health conditionsc. low population growth d. weak property rights

A1. developing nation

2. nationalization

3. economic assistance

4. subsistence agriculture

5. bureaucracies

6. foreign aid

7. military assistance

8. infant mortality rate

9. capital flight

10. technical assistance

USING KEY TERMS

Matching: Match each item in column A with the items in column B. Write the correctletters in the blanks.

Ba. raising of just enough food by a family to take care of its

own needs

b. placement of railroads, businesses, and so on under govern-ment ownership

c. money, goods, and services given by governments and privateorganizations to help other countries and their citizens

d. nation with little industrial development and low standard ofliving

e. death rate of infants during their first year of life

f. offices and agencies of the government that deal with a spe-cific area

g. aid in the form of professionals, such as engineers, teachers,and technicians supplied by nations to teach skills to people inother nations

h. economic or technical assistance to a country’s armed forces

i. export of capital from a nation

j. loans and grants of money or equipment to other nations

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Name Date Class

20, B

14. Indonesia’s economy under Sukarno was unsuccessful because of

a. lack of national security. b. lack of mineral and oil reserves.c. overpopulation. d. bad economic policies.

15. The most common characteristics of developing nations include rapid population growth, low literacyrates, and

a. poor health conditions. b. stable governments.c. well-defined property rights. d. well-trained labor pools.

CRITICAL THINKING QUESTIONS

Directions: Answer each of the following sets of questions on a separate sheet of paper.Answer in short paragraphs.

16. Making Predictions Why is it risky for a developing nation to build its economy around a single naturalresource, such as coffee or oil?

17. Recognizing Ideologies Why do some people oppose foreign aid and others support it?

APPLYING SKILLS

Using Charts and Tables: Read the chart and answer the questions below.

U.S. Government Foreign Grants and Credits, by Region, 1992 and 1996(in millions of dollars)

Source: Statistical Abstract of the United States

18. Which region receives the greatest share of U.S. aid?

19. Which region’s foreign aid allocation changed the most between 1992 and 1996?

20. What happened to overall foreign aid between 1992 and 1996?

Region 1992 1996

Africa 1,624 1,431

Far East and Pacific 801 747

Western Hemisphere 2,462 328

Near East and South Asia 8,121 7,322

Chapter 20 Test Form B

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RECALLING FACTS AND IDEAS

Multiple Choice: In the blank at the left, write the letter of the choice that best completesthe statement or answers the question.

11. Which of the following countries is not a developing country?

a. Thailand b. Malaysiac. Italy d. Peru

12. Which of the following is not considered a stage of economic development?

a. technology stage b. manufacturing stagec. agricultural stage d. service stage

13. The more advanced developing nations today are in which stage of development?

a. manufacturing b. agriculturec. service d. mixed agriculture and manufacturing

A1. capital flight



4. foreign aid

5. bureaucracies




9. developed nation

10. nationalization

USING KEY TERMS

Matching: Match each item in column A with the items in column B. Write the correctletters in the blanks

Ba. offices and agencies of the government that deal with a

specific area

b. loans and grants of money or equipment to other nations

c. money, goods, and services given by governments and privateorganizations to help other countries and their citizens

d. nation with relatively high standard of living and economybased more on industry than agriculture


f. raising of just enough food by a family to take care of its ownneeds

g. aid in the form of professionals, such as engineers, teacher,and technicians supplied by nations to teach skills to people inother nations

h. economic or technical assistance to a country’s armed forces

i. the export of capital from a nation

j. placement of railroads, businesses, and so on under government ownership

516B

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tx.ett.glencoe.com

http://tx.ett.glencoe.com

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516C

Blackline Master

Transparency

Software

CD-ROMVideodisc

Audiocassette

Videocassette

Reading Objectives Reproducible Resources Technology/Multimedia Resources

Section 1Characteristics of Developing Nations• About how many nations in the world

are considered developed?• What are five economic characteristics

of developing nations?• Why have poorly defined property

rights been a problem in developingcountries?

Section 2The Process of Economic Development• Where do developing nations obtain

outside sources of financing foreconomic development?

• What agencies channel aid from majorindustrial nations to developingnations?

• Why do nations give foreign aid?

Section 3Obstacles to Growth in DevelopingNations• What are the main obstacles to

economic growth in developingnations?

• Why did Indonesia fail to sustain rapideconomic growth?

Section 4Industrialization and the Future• What are four problems of rapid

industrialization in developingnations?

• In addition to poverty, what factorsinfluence economic development?

• What is the relationship between theincreased flow of information andinternational economic cooperation?

Reproducible Lesson Plan 20-1Daily Lecture Notes 20-1Guided Reading Activity 20-1Reading Essentials and Study Guide 20-1Daily Focus Activity 86Section Quiz 20-1*



Reproducible Lesson Plan 20-4Daily Lecture Notes 20-4Guided Reading Activity 20-4Reading Essentials and Study Guide 20-4Daily Focus Activity 88Section Quiz 20-4*Reinforcing Economic Skills 30

Daily Focus Transparency 86Vocabulary PuzzleMaker CD-ROMInteractive Tutor Self-Assessment SoftwareMindJogger Videoquiz

NBR's Economics & You*Presentation Plus!ExamView® Pro Testmaker

Daily Focus Transparency 87Vocabulary PuzzleMaker CD-ROMInteractive Tutor Self-Assessment SoftwareMindJogger Videoquiz

NBR's Economics & You*Presentation Plus!ExamView® Pro Testmaker

Daily Focus Transparency 89

Economic Concepts Transparency 11Vocabulary PuzzleMaker CD-ROMInteractive Tutor Self-Assessment SoftwareMindJogger VideoquizPresentation Plus!ExamView® Pro Testmaker

Daily Focus Transparency 88Vocabulary PuzzleMaker CD-ROMInteractive Tutor Self-Assessment SoftwareMindJogger VideoquizPresentation Plus!ExamView® Pro Testmaker

*Also available in Spanish

Section Resources

Block Schedule

516D

Nancy PetersonGilbert Junior-Senior

High SchoolGilbert, Iowa

Pizza To Go—Very Far!Students, working in groups, act as marketing managers

in a national pizza chain. The goal is for each group tochoose five developing countries in which to locate pizzarestaurants. Have groups decide on the important itemsthey should know about the countries before they maketheir decisions about locating in them. Then, based on theirfindings, each group presents its list of countries and rea-sons for wanting to locate pizza restaurants in them to theclass as a whole, which acts as the CEO of the pizza chain.The CEO votes on whether to locate a pizza restaurant inany of the countries presented.

ACTIVITYFrom the Classroom ofACTIVITYFrom the Classroom of

Activities that are particularly suited to use within the blockscheduling framework are identified throughout this chapterby the following designation: BLOCK SCHEDULING

Block Schedule

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■


Teaching strategies have been coded for varying learning styles and abilities.L1 BASIC activities for all studentsL2 AVERAGE activities for average to above-average

studentsL3 CHALLENGING activities for above-average students

ENGLISH LANGUAGE LEARNER activitiesELL

Key to Ability Levels

Voluntary Standards Emphasized in Chapter 20Content Standard 15 Students will understand thatinvestment in factories, machinery, new technology, and thehealth, education, and training of people can raise futurestandards of living.

Content Standard 18 Students will understand that anation’s overall levels of income, employment, and pricesare determined by the interaction of spending and produc-tion decisions made by all households, firms, governmentagencies, and others in the economy.

Resources Available from NCEE• Capstone: The Nation’s High School Economics Course• Geography: Focus on Economics• Economics and the Environment• Focus: International Trade

To order these materials, or to contact your StateCouncil on Economic Education about workshops andprograms, call 1-800-338-1192 or visit the NCEE Web siteat http://www.nationalcouncil.org

516D

Timesaving Tools

• Interactive Teacher Edition Access your TeacherWraparound Edition and your classroom resourceswith a few easy clicks.

• Interactive Lesson Planner Planning has never been easier!Organize your week, month, semester, or year with all the lessonhelps you need to make teaching creative, timely, and relevant.

Use Glencoe’s Presentation Plus! multimediateacher tool to easily present dynamic lessonsthat visually excite your students. Using MicrosoftPowerPoint® you can customize the presenta-tions to create your own personalized lessons.

ECON: 10B, 22A, 23A,23C-D, 24D, 25B

http://www.nationalcouncil.org

516

Why It’s ImportantHow can developing countries become industrialized? Why should Americans be concerned about the economies of these countries? This chapter will explain how developing countries work to become part of the global economy.

To learn more aboutthe economic chal-lenges of developingnations, view the

Economics & You Chapter 26 videolesson: Developing Countries

Chapter Overview Visit the Economics Today and Tomorrow Web site at tx.ett.glencoe.com and click on Chapter 20—Chapter Overviewsto preview chapter information.

IntroducingCHAPTER20

516

Chapter OverviewChapter 20 outlines the charac-

teristics of developing nations,describes the obstacles to growththat developing nations face, andreviews the possible future fordeveloping nations.

CHAPTER LAUNCH ACTIVITY

IntroducingCHAPTER20

Use MindJogger Videoquiz to preview Chapter 20content.

Introduce students to chaptercontent and key terms by havingthem access Chapter 20—ChapterOverviews at ett.glencoe.com

Point out to students that many developed nations provide aid to promote economicdevelopment in poorer nations. Then have students work in groups to draw up the crite-ria they think foreign nations should meet to receive aid from the United States. Askgroups to identify the kind of aid they think the United States should provide—money,equipment, education and training, and so on. Call on group representatives to presentand discuss their ideas. Conclude by informing students that foreign aid is one of thesubjects covered in Chapter 20.

ECONOMICS & YOU

Developing Countries

!9aj." Chapter 26 Disc 1, Side 2

ASK: Why are manufacturersinterested in developingnations? Developing nationshave lower labor costs. Asnations develop, the citizens willspend more money on items.

Also available in VHS.

tx.ett.glencoe.com

ECON: 22A, 23A, 23C, 24D, 25B

http://www.glencoe.com/sec/socialstudies/economics/econtt2003/tx/chapter20/overview.shtml


517

517Economic Growth in Develop ing Nat ions

Terms to Know• developed nations• developing nations• subsistence agriculture• infant mortality rate

Reading Objectives1. About how many nations in

the world are considereddeveloped?

2. What are five economiccharacteristics of develop-ing nations?

3. Why have poorly definedproperty rights been a problem in developing countries?

READER’S GUIDE

Many Americans may not realize it, but even the poorestfamilies in the United States usually have an income farabove the average income in much of the rest of the

world. About one-half of the world’s population lives at or close tosubsistence, with just enough to survive. As you read this section,you’ll learn about the characteristics of these developing countries.

1

THE COLUMBUS DISPATCH, JUNE 30, 1999

For coffee drinkers with a social conscience, a shareof each coffee dollar now goes to fill the pockets of poorfarmers instead of corporations. An importer called EqualExchange pays coffee growers [in developing countries] a

guaranteed minimum price for their beans, while cut-ting out middlemen to deliver the coffee from tree to table.

Before they began sell-ing to Equal Exchange,some farmers earned aslittle as 20 cents a poundfor their coffee. . . . Now theyreceive a minimum price of

$1.26 a pound, plus a 15-cent premium for coffee grown without

the use of chemicals.

CHAPTER 20SECTION 1, Pages 517–521


Reproducible MastersReproducible Lesson Plan 20–1Reading Essentials and Study Guide 20–1Guided Reading Activity 20–1Section Quiz 20–1Daily Focus Activity 86Daily Lecture Notes 20–1

MultimediaDaily Focus Transparency 86Vocabulary PuzzleMaker CD-ROMInteractive Tutor Self-Assessment SoftwareExamView® Pro Testmaker

MindJogger VideoquizNBR’s Economics & You

Presentation Plus!

SECTION 1 RESOURCE MANAGER

OverviewSection 1 compares developed

nations and developing nations anddiscusses the factors that econo-mists use to measure economicdevelopment.

Answers to the Reading Objectivesquestions are on page 521.

Preteaching VocabularyHave students locate the defini-

tions of the Terms to Know in theGlossary. Then have them use allfour terms in a brief paragraphthat describes what a developingnation is.

Vocabulary PuzzleMaker

READER’S GUIDE

Project Daily FocusTransparency 86 and have students answer the questions.

Available as blackline master.

Daily Focus Transparencies

E CONOMIC ASSISTANCE

1. What region of the world received the most money in UnitedStates aid?

2. What inferences can you make from the graph?

Middle East38%

Africa South ofthe Sahara 20%

Latin America 12%

New IndependentStates (formerSoviet Union)11%

Europe 10%

Asia 8%Oceania andothers 1%

U.S. Economic Assistance to Foreign Countries in a Recent Year*

8686

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*aid distribution varies annually

BELLRINGERMotivational Activity


Page 517: 10B, 22A-B, 23A, 24A

Student Edition TEKS

ECON: 24A



developed nations: nations withrelatively high standards of livingand economies based more onindustry than on agriculture

developing nations: nations withlittle industrial development andrelatively low standards of living

Developed vs. Developing NationsOf the more than 192 nations in the world, only about 35 are

considered developed nations. These nations include the UnitedStates, Canada, all European countries, Japan, Australia, and New Zealand.

The remaining parts of the world’s population live in developingnations. These are nations with less industrial development and arelatively low standard of living. Within this general definition, how-ever, nations differ in many ways. Figure 20.1 compares two devel-oping nations, Madagascar and Mexico. The average income perperson in Mexico is only 30 percent that of the United States. YetMexico is much more developed and prosperous than almost allother developing nations.

Besides differences in the standard of living among developingnations, great differences often exist within a nation. For example,about 26 percent of India’s population lives and works in urbanareas, many of which are like those in developed nations. In ruralIndia, however, many families live three to a room, often in mudhouses. Only a fraction of these homes have running water andelectricity.

Two Developing NationsAmong developing nations thereis a wide variance in standards of living. How does the per capitaGDP of Madagascar compareto that of Mexico?

Source: The World Factbook, 2000

Two Developing Nations

Madagascar Mexico

28

$8,500

11.62

71.5 years

90

$780

0.46

54.9 years

Percent employedin agriculture

Average per capitaGDP

Telephones per 100population

Life expectancy atbirth

FIGURE 20.1FIGURE 20.1

Mexico

Madagascar

518

518

Answer: Mexico’s average percapita GDP is much larger—morethan 10 times greater—than that ofMadagascar.

L ECTURE LAUNCHERLThe United Nations has several projects that provide economic and humanitarian aid fordeveloping countries. One project for Gambia aims to build 120 new wells, improve and fix60 other wells, and develop and install pipes for water supplies in larger villages. How important is availability of water to the citizens of a country?

I. Developed vs. Developing Nations

A. Only 35 of the 185 world nations are considered developed nations; the rest are developing nations.

B. The only common factors of developing nations are that they have less industrial devel-opment and a relatively low standard of living

• Discussion Question

Why do you think that the lack of industrial development goes together with a lowstandard of living? (Possible response: An increased standard of living comes from econom-ic growth and development. Industry creates such growth. Without the industry base, thecountries might be meeting basic needs and their economy may not grow at all, or may onlygrow at a very slow pace.)

II Economic Characteristics

20-1

PAGE 518

PAGES 519–521

Daily Lecture Notes 20–1

Reading Disability Students with various reading and organizational difficulties mayhave problems relating graphics and the main text. Before students read Section 1, askthem to review the graphics. Have students identify what the graphics illustrate. Thendirect students to read the section, restate what the graphics illustrate, and suggest whythe graphics were included in the section.

Refer to Inclusion for the Social Studies Classroom Strategies and Activities forstudents with different learning styles.

Meeting Special Needs

Guided PracticeL2 Illustrating Ideas Call on vol-unteers to identify the characteristicsof developing nations. Note theirresponses on the board. Then havestudents work in small groups toproduce some form of teaching aid—poster, graphic organizer, illustratedflash cards, and so on—that will helpstudents learn the major features ofdeveloping nations. Have groupspresent and explain their teachingaids. BLOCK SCHEDULINGELLECON: 10B, 22A, 23A, 23D, 23F, 24C-D

ECON: 23F

519


subsistence agriculture: grow-ing of just enough food by a fam-ily to take care of its own needs;no crops are available for exportor to feed an industrial workforce

Economic Characteristics Economists often use per capita GDP as a rough measure of a

nation’s prosperity. Estimates of per capita GDP in the UnitedStates and other industrial nations range from $12,000 to about$45,000 per year.

Low GDP Per capita GDP in developing nations, in contrast, isconsiderably less, and in the world’s poorest nations it is extremelylow. Look at Figure 20.2, which shows per capita GDP for a num-ber of developing countries. While developing nations may havemany natural and human resources, they lack the equipment,financing, and knowledge necessary to put those resources to use.

An Agricultural Economy Agriculture is central to theeconomies of developing nations. Much of the population existsthrough subsistence agriculture, in which each family growsjust enough to take care of its own needs. This means that nocrops are available for export or to feed an industrial workforce.

Measuring GDPThere is a huge differ-ence in per capita GDPbetween developingand developed coun-tries. What do youthink this differencemeans in terms ofeveryday life?

Sources: OECD, 2000; The World Factbook, 2000

0 2 4 16 18 20 22 2826246 8 10 12 14 30 32 34

United States $32,184

Japan $30,107

Germany $26,217

United Kingdom $23,810

Italy $20,680

Malaysia $10,700

China $3,800

Indonesia $2,800

Pakistan $2,000

Haiti $1,340

U.S. Dollars (in thousands)

Developed Countries


Per Capita GDP Around the World

For an online update of this graph, visit tx.ett.glencoe.com and click on Textbook Updates—Chapter 20.

FIGURE 20.2FIGURE 20.2CHAPTER 20SECTION 1, Pages 517–521


Answer: Answers may vary butshould point out that most people indeveloping countries can only affordbasic necessities.

For use with the textbook pages 517–521

C HARACTERISTICS OF DEVELOPING NATIONS

OUTLINING

Directions: Locate the heading in your textbook. Then use the information under the heading to help youwrite each answer.

I. Developed vs. Developing Nations

A. What constitutes a developed nation?

B. How would one describe a developing nation?

II. Economic Characteristics

A. Introduction—What do economists use as a rough measure of a nation’s prosperity?

B. Low GDP—What do developing nations most often lack?

C. Agricultural Economy—What is subsistence farming?

D. Poor Health Conditions—Why is the infant mortality rate so high in developing countries?

Name Date Class

20-1

Guided Reading Activity 20–1

ECONOMICS & YOU



ASK: On what are most devel-oping economies based? agriculture


Inform students that in some developing nations, governments have taken steps to bringthe rapid population growth under control. Then organize students into several groups, andhave groups research the population control programs established by the governments ofIndia and China. Ask groups to present their findings in a brief illustrated report. Suggestthat group members undertake particular tasks—research, writing the report, illustrating thereport, and presenting the report to the class. BLOCK SCHEDULING

Cooperative Learning

Page 518: 22A, 23A, 23F-G, 24APage 519: 10B, 12A, 22A, 23A,

23F-G, 24A


ECON: 22A, 23A, 23C, 24B-D

http://www.glencoe.com/sec/socialstudies/economics/econtt2003/tx/chapter20/txtupdate.shtml



520 CHAPTER 20

infant mortality rate: death rateof infants who die during the firstyear of life

Poor Health Conditions Poor health conditions are alsocommon in many developing nations. Many people die from mal-nutrition or illness due to lack of food. Developing nations mayalso suffer from a shortage of modern doctors, hospitals, andmedicines. The result is often a high infant mortality rateand a low life expectancy among adults. See Figure 20.3.

Low Literacy Rate A fourth characteristic of developing nationsis a low adult literacy rate—the percentage of people who are able toread and write. Governments have few resources to build and main-tain schools. Many children miss school to help their families farm.The lack of a large pool of educated workers makes it difficult totrain the population for needed technical and engineering jobs.

Source: World Bank, World Development Indicators, 2000

Economic and Social Statistics for Selected Nations

Lifeexpectancy

at birth

Country Percentageof populationwith accessto safedrinkingwater

77

81

75

79

79

71

72

63

63

38

60

45

7

4

5

8

6

29

26

38

65

140

72

101

United States

Japan

Australia

Israel

Italy

China

Mexico

Brazil

India

Mozambique

Bangladesh

Ethiopia

97

99

99

96

98

83

91

85

56

43

40

37

100

96

99

99

99

75

83

87

78

19

97

24

Literacy(% of peoplewho can read

& write)

Infant mortality:deaths per 1,000

live births

FIGURE 20.3FIGURE 20.3 Comparing Nations Basic needs such as food and shelter are not metin many developing nations. What relationship between literacy rates andinfant mortality rates is apparent from the chart?

For an online update of this graph, visit tx.ett.glencoe.com and click on Textbook Updates—Chapter 20.

520

IndependentPracticeL2 Creating Maps Have studentsuse library resources to develop a listof developed and developingnations. Then ask students to labelthe countries on a world map, color-coding the countries according toeach one’s designation. Direct stu-dents to title the map and write acaption that makes a generalizationabout the locations of developed anddeveloping nations. Call on studentsto display and discuss their maps.

BLOCK SCHEDULINGELL

Answer: There is an inverse rela-tionship—as literacy rates rise,infant mortality tends to fall.

GNP versus GDP Many economists prefer to use GNP rather than GDP for purposes ofinternational comparisons. GNP is a measure of the total income earned by all citizens ina country, whereas GDP is a measure of the total output produced within a country.Economists point out that when using GDP as a measure, a country with large foreign-owned investments may appear much more prosperous than it really is.

Extending the Content

Meeting LessonObjectives

Assign Section 1 Assessment ashomework or an in-class activity.

Use Interactive Tutor Self-Assessment Software to review Section 1.

ECON: 22A, 23A, 23C, 23F, 24C-D

ECON: 16B

http://www.glencoe.com/sec/socialstudies/economics/econtt2003/tx/chapter20/txtupdate.shtml

521521


Rapid Population Growth A fifth characteristic of developingnations—rapid population growth—is often the source of manyother problems, such as lack of food and housing. The popula-tion in the United States grows at a rate of about 1 percent a year. The growth rate in many developing nations is three andsometimes four times this rate. With a growth rate of 3.6 percent,a nation may double its population in 20 years.

Weak Property RightsPerhaps the most important aspect of many developing nations

is weak property rights. Economists have generally found that governments in developing countries do not support a systemof strong, well-defined private property rights.

A good example is Peru. Only 20 percent of Peru’s land islegally owned. On the remaining 80 percent—which has no truelegal ownership—peasant farmers till the land as they have done forgenerations. Without specifically defined private property rights,individuals cannot exchange land. As a result, no large-scale farm-ing has occurred in Peru, and peasant families have little incentiveto improve the value of the property on which they farm.

Understanding Key Terms1. Define developed nations, developing nations,

subsistence agriculture, infant mortality rate.

Reviewing Objectives2. About how many nations in the world are con-

sidered developed?

3. Graphic Organizer Create a diagram like theone below to explain five economic characteris-tics of developing nations.

4. Why have poorly defined property rights been aproblem in developing countries?

Applying Economic Concepts5. Developing Nations Of the five characteris-

tics of developing nations, which do you thinkwould be most difficult to change? Why?

6. Categorizing Information Using Figure20.3 for your data, input the information in adatabase. Sort the data by infant mortality,by life expectancy, and then by access tosafe drinking water. Print out the new tables.Which country in your database has thehighest infant mortality rate? Which countryhas the lowest life expectancy? Which twocountries’ populations have the highestaccess to safe drinking water?

Critical Thinking Activity

Practice and assesskey skills with

Skillbuilder InteractiveWorkbook, Level 2.

1

Characteristicsof Developing

Nations



ReteachHave students write a main idea

sentence for each of the headingsand subheadings in the section.

1. All definitions can be found in the Glossary.2. about 353. The following labels should be placed in outer

ovals: Low GDP, Agricultural Economy, PoorHealth Conditions, Low Literacy Rate, RapidPopulation Growth.

4. Governments in developing countries tend notto support a system of strong, well-definedproperty rights. Without ownership rights, farm-

ers have little incentive to improve the landthey work.

5. Answers will vary. Ensure that students supporttheir answers with valid reasons.

6. Mozambique has the highest infant mortalityrate. Ethiopia has the lowest life expectancy.Australia and Israel have the highest percent-age of population with access to safe drinkingwater.

ASK: Based on information inSection 1, how do you think youreveryday life compares to that of ayoung person living in a develop-ing nation? Have students sharetheir responses.

Name Date Class

20, 1

developed nations Nations with relatively high standards of living and economies based more on industrythan agriculture (page 518)

developing nations Nations with little industrial development and low standards of living (page 518)

subsistence agriculture Growing just enough food by a family to take care of its own needs. No cropsare available for export or to feed an industrial workforce (page 519)

infant mortality rate Death rate of infants who die during the first year of life (page 520)

For use with textbook pages 517–521


DRAWING FROM EXPERIENCE

When someone asks you to think about a developing country, what images come to mind? Howdo you think people live in developing countries? Do all people within a developing country havethe same standard of living? Are there any similarities between the way that people live in adeveloping country and the U.S.?

In this section you will learn how developing nations use foreign investment and aid to movethrough the three stages of economic development.

ORGANIZING YOUR THOUGHTS

Use the diagram below to help you take notes as you read the summaries that follow. Thinkb t th i h t i ti f d l i ti

KEY TERMS

Reading Essentials and Study Guide 20–1

Name Date Class

20, 1


Multiple Choice: In the blank at the left, write the letter of the choice that best completes the statement or answers the question. (10 points each)

6. Of the more than 185 nations in the world, about how many are considered developed?

a. more than half b. about 35c. about 25 percent d. fewer than 10

7. The basic economic activity of developing nations centers on

a. manufacturing. b. service industries.c. agriculture. d. financing.

SCORE

A1. developed nations

2. developing nations



5. adult literacy rate

Ba. raising of just enough food by a family to take care

of its own needs

b. nations with relatively high standards of living andeconomies based on industry

c. nations with little industrial development and lowstandards of living

d. percentage of people who can read and write


Matching: Place a letter from Column B in the blank in Column A. (10 points each)

Section Quiz 20–1

Page 520: 22A, 23A, 23F-G, 24APage 521: 10A, 22A-B, 23A, 23D,

23F, 24A


ECON: 23A

ECON: 23A, 23D

■ Professor of politi-cal economy andmodern history atthe college of theEast India Companyat Haileybury from1805 until his death

■ Served briefly as anAnglican minister inthe late 1700s andearly 1800s

■ Major publicationsinclude An Essayon the Principle ofPopulation (1798),An Inquiry Into the Nature andProgress of Rent(1815), andPrinciples ofPolitical Economy(1820)

Thomas Malthus foresaw futureworld problems caused by a

world population that was growingfaster than food production. In AnEssay on the Principle of Population,Malthus concludes that populationgrowth will always outpace thesupply of food:

“. . . I say, that the power ofpopulation is infinitely greater thanthe power in the earth to producesubsistence for man.

Population, when unchecked,increases in a geometrical ratio.Subsistence increases only in anarithmetical ratio. A slight acquain-tance with numbers will show theimmensity of the first power incomparison of the second.

By that law of our nature whichmakes food necessary to the life ofman, the effects of these two unequalpowers must be kept equal.”

Malthus argues that peoplewill always struggle to survive,and no social system can improvethis condition:

“. . . This natural inequality ofthe two powers of population andof production in the earth and thatgreat law of our nature which mustconstantly keep their effects equalform the great difficulty that to meappears insurmountable in theway to the perfectibility of society.All other arguments are of slightand subordinate consideration incomparison of this. I see no way bywhich man can escape from theweight of this law which pervadesall animated nature. . . . And itappears, therefore, to be decisiveagainst the possible existence of asociety, all the members of whichshould live in ease, happiness, andcomparative leisure; and feel noanxiety about providing the meansof subsistence for themselves andfamilies.”Checking for Understanding

1. What is Malthus’s principle, statedsimply?

2. According to Malthus, why can therebe no happy, worry-free society?

Thomas MalthusECONOMIST (1766–1834)

522

522

BackgroundMalthus’s Essay on the Principle of

Population summarizes the observa-tions he made while traveling in for-eign countries. In the second editionof the essay, Malthus declared thathumanity was doomed to povertyunless the rate of population growthwas brought under control.

Answers to Checking for Understanding1. World population is growing faster than food production.2. The inequality in population growth and food production, since it is a law of nature,

cannot be overcome.

Have volunteers read theexcerpts from Malthus’s essay andsummarize them in their ownwords. You may want to explain thedifference between a geometric rate(1, 2, 4, 8, 16, . . . ) and an arith-metic rate (1, 2, 3, 4, 5, . . .).

Mention that one argumentoffered against Malthus’s ideas wasthat every mouth to be fed had apair of hands that could work. Askstudents to express their opinionsof this view.

Nineteenth-century essayist andhistorian Thomas Carlyle foundMalthus’s Essay on the Principle ofPopulation so depressing that helabeled economics “the dismal science.”

ECON: 19A

ECON: 23A, 23D, 23G

523


Terms to Know• nationalization• foreign aid• economic assistance• technical assistance• military assistance

Reading Objectives1. Where do developing coun-

tries obtain outside sourcesof financing for economicdevelopment?

2. What agencies channel aid from major industrialnations to developingnations?

3. Why do nations give foreign aid?

READER’S GUIDE

Most nations pass through three stages of economicdevelopment. The first is the agricultural stage, whenmost of the population has jobs in farming. The second

is the manufacturing stage, when much of the population hasjobs in industry. In the third stage, many workers shift into theservice sector—sales, food service, repair work, and computer andInternet services. As you read this section, you’ll learn how devel-oping nations use foreign investment and aid to move throughthe three stages of economic development.

2

THE COLUMBUS DISPATCH, SEPTEMBER 14, 1999

After a turbulent year in which the InternationalMonetary Fund disbursed a record $30 billion to helpbeleaguered countries cope with economic troubles,

the agency says the globalfinancial crisis finally seems

to be ebbing.In its annual report,

the 182-nation lendingorganization said thatthere have been encour-

aging signs, including aresumption of growth in

some of the hardest hit nations.




MultimediaDaily Focus Transparency 87Vocabulary PuzzleMaker CD-ROM Interactive Tutor Self-Assessment SoftwareExamView® Pro Testmaker

MindJogger VideoquizNBR’s Economics & You

Presentation Plus!


OverviewSection 2 examines ways of

financing economic development,identifies the major sources of for-eign aid, and analyzes the reasonsfor giving foreign aid.


Preteaching VocabularyVocabulary PuzzleMaker

READER’S GUIDE


This activity is also availableas a blackline master.


E CONOMIC DEVELOPMENT

1. Which countries in the list do you think qualify as developingcountries?

2. What is Morocco’s foreign debt, in billions of dollars?

Leading Debtor Countries

Country Foreign Debt*

ChinaBrazilMexicoIndiaArgentinaIndonesiaTurkeyPolandEgyptVenezuelaPhilippinesPakistanMoroccoPeruThailandSyriaMalaysia

102,25794,58493,43574,40362,38960,10548,16839,21528,91528,45027,93423,69220,77120,41217,03716,69615,697

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Page 522: 19A, 23A, 23GPage 523: 22A, 23A, 24A




Financing Economic DevelopmentMost developing nations are still in the agricultural stage. As

Figure 20.4 shows, three factors are evident in this stage. A basicproblem for many developing nations is how to finance the equip-ment and training necessary to improve their standard of living.

One source of money capital is domestic savings. Many peoplebelieve that citizens of developing nations cannot save because theyare barely subsisting. In fact, even very poor people do save some-thing for their future. For example, in a traditional economy, savingmay involve storing grain that can later be traded for other goods.Although this is saving, it does not provide a pool of money capitalfrom which businesses can borrow for investment. Therefore, manydeveloping nations must look to outside sources for investment capital. The two major outside sources of capital are investment by foreign businessesand foreign aid from developed nations.

The Agricultural Stage Manydeveloping nations have a large laborforce and the natural resources neces-sary for an industrial economy. Theysometimes lack the financing, capital,and trained personnel to put theseresources to work, however. Whatare two basic needs of nations inthe agricultural stage?

Possess large labor force(usually untrained)

1.

Have natural resources2.

Lack financing, capital,training

3.

Nations in the AgriculturalStage of DevelopmentFIGURE 20.4FIGURE 20.4

Corporate Control Over Foreign Resources During the late1970s, the Gulf and Western Corporation (later Paramount) owned 264,000acres, or 8 percent, of the Dominican Republic’s available farmland. It producedone-third of the nation’s sugar and had investments in livestock, tobacco, andfruit and vegetable production as well. The corporation was accused of convert-ing farmland used for local crops to the more profitable production of sugarcane.

20.520.5

524

Answer: money capital and education

L ECTURE LAUNCHERLAccording to a recent poll 80% of Americans agree that the United States should provide foreign aid. A strong majority, however, say that the United States is spending too much. Butthis attitude is based on the assumption that the U.S. is spending 15% of its budget on for-eign aid. When informed that the U.S. is currently spending about 1% of the national budgeton foreign aid, 46% said the amount was about right, 18% said it was still too much, and33% said it was “too little.” Another poll showed that Americans think that helping develop-ing countries will improve world prosperity (84%), ensure world peace (80%), and help theUS economy (72%). How can foreign aid promote the process of economic development?What are the three stages of economic development?

I. Financing Economic Development

A. A basic problem for many developing nations is how to finance the equipment andtraining necessary to improve their standard of living.

B. Even very poor people save, but their savings is not in form of money capital that canbe invested.

C. Foreign corporations set up branch offices or companies in the developing nation.

D. However the foreign investor takes a risk because there may be political instability in the country, and citizens of the developing nation lose economic control when foreigners control their resources.

E. Foreign aid can be given to the developing nation by governments and private

20-2

PAGES 523–526


Study Strategy Students who have difficulty with reading comprehension might benefitfrom writing summaries of what they have read. Have students read one subsection ofSection 2 at a time. After reading, have them summarize the information in two or threesentences. After the reading has been completed, pair students and have partners com-pare their summaries, noting which are more effective and why.



Guided PracticeL1 Organizing Ideas Draw a three-column chart on the board, using“Source of Money Capital,” “Impacton Economic Growth,” and “Poten-tial Problems” as column headings.Have students copy the chart intotheir notebooks. Review and discusswith students the information underthe heading “Financing EconomicDevelopment” on pages 524–26.Have students use points raised during the discussion to completethe chart. ECON: 23A, 23F

ECON: 23A, 24D

525


nationalization: placement ofindustries under government ownership

foreign aid: money, goods, andservices given by governmentsand private organizations to helpother nations and their citizens

economic assistance: loansand outright grants of money orequipment to other nations

technical assistance: aid in theform of engineers, teachers, andtechnicians to teach skills to indi-viduals in other nations

military assistance: aid given toa nation’s armed forces

Foreign Investment: Attractions and RisksInvestors are attracted to developing countriesbecause of their low wage rates, few regulations,and abundant raw materials. Investment mayinclude a corporation’s setting up branch officesand fully owned companies, or buying into compa-nies already established in developing nations.

Besides attractions, there are also risks to invest-ing in developing countries. Political instabilitywithin a nation’s borders leads to uncertainty. Ifthe government changes often, or if terroristgroups threaten stability, foreign businesses maylose their investment. In some cases, the govern-ment in developing nations has taken control ofprivate firms—a practice called nationalization—forcing the firm’s owners out of the country.

Problems exist from the developing nation’sviewpoint as well. In nations with heavy foreigninvestment, citizens often criticize the economiccontrol these foreign companies have over their resources. See Figure 20.5. What these critics may not consider is that factors of production remain idle unless such firms organize the materials and skills of the country’s inhabitants.

Foreign Aid Foreign aid is a second type of financing availableto nations. Sometimes it plays an important role in economicdevelopment. Foreign aid is the money, goods, and servicesgiven by governments and private organizations to help othernations and their citizens. Several kinds of foreign aid exist.

Economic assistance consists of loans and outright grants ofmoney or equipment to other nations. One use of such aid is tohelp build transportation and communications systems. A seconduse for economic assistance is to purchase basic producer goods,including machinery that will increase a nation’s productivity.

Technical assistance includes providing professionals suchas engineers, teachers, technicians, and consultants to teachskills. Such training is designed to strengthen a nation’s humanresources in the same way economic assistance increases anation’s capital resources.

Military assistance involves giving either economic or techni-cal assistance to a nation’s armed forces. For example, a countrymay lend a developing nation the money to purchase airplanes ortanks, or it might make a gift of such goods.

Economic Assistance



L2 Making Inferences Review Figure 20.4 with students. Thenhave them use the information in theillustration to write a paragraphexplaining why it might be difficultfor a nation in the agricultural stageof development to progress to anindustrial economy. Call on volun-teers to read and discuss their paragraphs.

Have students work in small groups to research the founding of the Peace Corps andthe history of its efforts to aid developing nations. Suggest that groups use their findings tomake wall posters showing the countries where the Peace Corps has operated, the kindsof programs the Corps offers, and its major achievements. Call on groups to display andgive an oral presentation on their posters. BLOCK SCHEDULINGELL


Name Date Class


T HE PROCESS OF ECONOMIC DEVELOPMENT

FILLING IN THE BLANKS

Directions: Use your textbook to fill in the blanks using the words in the box. Some words may be usedmore than once.

nationalization military assistance foreign aideconomic assistance technical assistance agricultural stagemanufacturing stage service sector developing nationscapital raw materials industrial nationsAgency for International Development United Nations humanitarianismnational security

Introduction/ Financing Economic DevelopmentMost nations pass through three stages of economic development; the first stage is the

1 __________________________ , when most of the population is farming. The second stage is the

2 __________________________ , when much of the population works for companies and factories. The last stage is

when a nation shifts to the 3 __________________________ —sales, food service, repair work, and computer and

Internet services. Most 4 __________________________ are still in the agricultural phase of economic development.

Many developing nations look for outside sources for investment 5 __________________________. Two major sources

of outside financing are investment by foreign businesses and 6 __________________________. Investors are attracted

to developing countries because of low wages, few regulations, and 7 __________________________. There are risks

involved as well, such as political instability and 8 __________________________ , where a firm’s owner is forced out of

20-2


ECONOMICS & YOU



ASK: How has the UnitedStates traditionally helpeddeveloping countries? with for-eign aid—grants of money or low-interest loans


Page 524: 10A, 12A-B, 21A, 23A,23F

Page 525: 12A, 24A


ECON: 23A, 24D

ECON: 23A, 24C-D



Emergency shipments of food, clothing,and medical supplies to victims of drought,earthquakes, floods, and other disasters arealso considered foreign aid. Governments,many private organizations, and several agen-cies of the United Nations provide such assis-tance. This type of foreign aid, however, is notdirected toward economic development.

Who SuppliesForeign Aid?

Many of the developed nations offer sometype of foreign aid to developing nations.After World War II, the United States devotedmost of its foreign assistance to help rebuildEurope’s war-torn economy through theMarshall Plan. Today, most American foreignaid is sent to developing nations in theMiddle East and Southeast Asia. Nations in Africa receive about 11 percent, LatinAmerica about 14 percent, and East Asia and the Pacific about 5 percent.

Comparing Aid Many other major industrial nations also giveforeign aid. France and Great Britain, for example, have concen-trated most of their aid programs on their former colonies inAfrica and Asia. Germany and Japan both began giving aid todeveloping nations after their own economies had recovered from World War II.

The dollar amount of American foreign aid may sound high—$7.4 billion in 2001. When viewed as a percentage of GDP, how-

ever, that amount is just a fraction of whatmany other nations give in foreign aid.Norway’s foreign aid, for example, is 0.9percent of that nation’s GDP. By compari-son, foreign aid given by the United States is less than 0.1 percent of its GDP.

Channels of Aid The United States chan-nels much of its foreign aid to other nationsthrough the Agency for InternationalDevelopment (AID). Funds are also chan-neled through United Nations agencies,

Job Description■ 2-year assign-

ment to liveoverseas

■ Working withthe people of a

host country to

improve foodproduction,health care,and other basic

needs

Qualifications■ College degree

helpful

■ 8–14 weeks of

training in thehistory, culture,

and languageof the hostcountry

—Occupational Outlook Handbook, 1998–99

Salary: Allowance for living costs

Job Outlook: Average

CAREERS

Peace CorpsWorker

Student Web Activity Visit the Economics Today and Tomorrow Web site at tx.ett.glencoe.comand click on Chapter 20—Student WebActivities to keep abreast of developments in foreign aid.

526 CHAPTER 20

526

See the Web Activity LessonPlan at ett.glencoe.com for anintroduction, lesson description,and answers to the Student WebActivity for this chapter.

Point out to students that foreign investment by American companies helps finance eco-nomic development in developing nations. Then have students work individually or in smallgroups to research an American company’s investment in developing nations. Suggestthat they begin their research by consulting the Reader’s Guide to Periodical Literature orthe Internet. Direct students to find such information as the amount of money invested,how the investments were used, and the outcomes for the company and the developingnations. Have students present their findings in an oral report. BLOCK SCHEDULING

Free Enterprise Activity

IndependentPracticeL2 Applying Ideas Have studentswork in small groups to play theroles of officials in the foreign aidagency of a developed country. Havegroups create a plan for the agency,noting the amount, type, and distri-bution of aid to developing coun-tries. Encourage groups to write anintroduction to their plans explain-ing the reasons for giving aid. Callon group representatives to presenttheir plans to the class. BLOCKSCHEDULING

L3 Debating Organize the classinto two groups: one to brainstormreasons the United States shouldgive foreign aid to developingnations, the other to brainstorm whywe should reduce foreign aid. Thenhave members of the two groupsdebate the following: Resolved thatthe United States should reduce for-eign aid to developing nations.

BLOCK SCHEDULING

tx.ett.glencoe.com

ECON: 23A, 23C-D, 24D

ECON: 4A-B, 22B, 23A, 23C, 24C-D, 27A

ECON: 23A

http://www.glencoe.com/sec/socialstudies/economics/econtt2003/tx/chapter20/webact.shtml

http://www.glencoe.com/sec/socialstudies/economics/econtt2003/tx/chapter20/walp.shtml

527


including the International Bank for Reconstruction andDevelopment—usually called the World Bank. The World Bankwas set up in 1945 to make loans to developing nations at lowinterest rates. Two affiliates of the bank are the InternationalDevelopment Association (IDA), which lends money to nationsthat are the least able to obtain financing from other sources, andthe International Finance Corporation (IFC), which encouragesprivate investment in developing nations.

Recently, the International Monetary Fund (IMF) has become amajor foreign aid agency. It has offered a variety of loans to Russia,Thailand, South Korea, Indonesia, Malaysia, Brazil, and Mexico.

These foreign aid agencies have grown increasingly alarmed asmany developing nations find themselves unable to repay theirforeign debts. By the late 1990s, the level of indebtedness hadbecome extremely high, with about 40 of the most heavilyindebted nations owing the IMF and World Bank more than $127billion. In 1999 the leaders of the majorindustrial nations proposed a plan thatwould cancel some of this debt. By 2001,23 countries had received $54 billion indebt relief under this plan.

Reasons for GivingForeign Aid

Humanitarianism is the basis of someforeign aid. The relief of human sufferingis a major goal in particular of many privateaid organizations. See Figure 20.6 onpage 528. At least three other reasons are also given for providing government-sponsored foreign aid.

The first reason involves economics. It is usually in the best interests of devel-oped nations to encourage internationaltrade. Foreign aid expands a nation’s markets for exports and provides newopportunities for private investment.

Politics is also a reason for giving foreign aid. From 1947–1991, an impor-tant objective of American foreign aid wasto enhance the appeal of democracy andprevent Communists from coming to

Data collected by the Organization for EconomicCooperation and Development (OECD) shows that thetop five suppliers of foreign aid—in total dollars—for2000 were as follows:

Japan $13.1 billionUnited States $9.6 billion

Germany $5.0 billionGreat Britain $4.5 billion

France $4.2 billionWhen foreign aid is presented as a percentage of

GDP, however, the “top five” table has a very differentlook:

Denmark 1.06%Netherlands 0.82

Sweden 0.81Norway 0.80

Luxembourg 0.70 ■

Leading Suppliers ofForeign Aid





6. In the first stage of economic development, most of a nation’s workers

a. are unemployed. b. have jobs in farming.c. have jobs in industry. d. have jobs in the service sector.

7 Investors are attracted to developing countries because of the

SCORE

A1. nationalization

2. foreign aid




Ba. either economic or technical assistance to a nation’s

armed forces

b. loans and outright grants of money or equipment toother nations to add to their capital resources

c. placement of railroads, businesses, and so on undergovernment ownership

d. aid in the form of professionals supplied by nationsto teach skills to individuals in other nations

e. money, goods, and services given by governmentsand private organizations to help other nations andtheir citizens


Name Date Class

20, 2

Section Quiz 20–2

World Bank Loans The World Bank makes loans only to its member nations. Beforegetting a loan, a nation must show that it meets particular conditions set by the bank. First,the nation must show that it cannot get the loan from any other source on reasonableterms. Second, it must demonstrate that the project for which the loan will be used is prac-ticable in economic terms and is of benefit to the nation. Third, the nation must show that ithas the ability to repay the loan. The World Bank also requires the borrower nation tomake periodic reports on the progress of the project.

Extending the Content




“How Much Do IndustrialCountries Give?

The United Nations has askedindustrial countries to give 0.7 percent of GDP in official develop-ment assistance. Only Denmark,Luxembourg, the Netherlands,Norway, and Sweden havereached the goal, however. Of the22 countries that provide foreignaid through the Organization forEconomic Co-operation andDevelopment (OECD), the averagecountry gave just 0.39 percent ofGNP in 2000. The United Statesprovided 0.10 percent of GNP, thelowest percentage of the 22 donornations. In dollar terms, however,the United States provided moreforeign aid than any other countryin the world except Japan.”

Page 526: 23A, 23GPage 527: 4B, 13C, 23A, 23F-G


ECON: 22A, 23A, 23G

ECON: 23A



528 CHAPTER 20

power. The United States has also usedforeign aid to build political friendsthat will support it in such interna-tional bodies as the United Nations.

A final reason for providing foreignaid is to help protect a nation’s ownsecurity. Economic aid is often a downpayment on a military alliance with adeveloping nation. Through alliances,the United States has gained overseasmilitary bases and observation poststhat it can use to gather informationabout other nations. This type of plancan backfire, however, if a friendly gov-ernment loses power. In such a situa-tion, the military equipment given tothat nation would fall into the hands of the new government, one that maybe hostile.

Understanding Key Terms1. Define nationalization, foreign aid, economic

assistance, technical assistance, military assistance.

Reviewing Objectives2. Where do developing countries obtain outside

sources of financing for economic development?

3. What agencies channel aid from major industrialnations to developing nations?

4. Graphic Organizer Create a diagram like theone in the next column to explain why nationsgive foreign aid.

Applying Economic Concepts5. Foreign Aid Why do you think United States

foreign aid—as a percentage of its GDP—hasdeclined in recent years?




2

6. Distinguishing Fact From OpinionBased on the information under the heading“Reasons for Giving Foreign Aid,” write anopinion article entitled “The Most ImportantReason for Giving Foreign Aid.”

Reasons for ProvidingForeign Aid

Humanitarianism Many industrialized nations havedecided that they have a responsibility to help end worldhunger and disease.

20.620.6

528

ReteachProvide the following as the main

ideas for an outline of Section 2:Financing Economic Development;Who Supplies Foreign Aid?; Reasonsfor Giving Foreign Aid. Direct stu-dents to complete the outline.

1. All definitions can be found in the Glossary.2. through investments by foreign businesses and

foreign aid from developed nations3. Agency for International Development (AID); the

World Bank and its affiliates, the InternationalDevelopment Association (IDA) and theInternational Finance Corporation (IFC); and theInternational Monetary Fund (IMF)

4. The following labels should be placed belowarrows: Humanitarian Reasons, Economic

Reasons, Political Reasons, National SecurityReasons.

5. Answers will vary. Students may suggest thatthe United States may have changed itsspending priorities, or that the failure of somecountries to repay their loans has made theUnited States less inclined to offer aid.

6. Answers will vary. Ensure that students supporttheir answers with valid reasons.

Have students discuss the follow-ing statement: Money that goes forforeign aid would be better spenton societal and economic problemsat home.

Name Date Class

20, 2

nationalization A process where government takes over ownership of railroads, businesses, or otherindustries (page 525)

foreign aid Money, goods, and services given by governments and private organizations to help othernations and their citizens (page 525)

economic assistance Loans and outright grants of money to other nations to add to their capitalresources (page 525)

technical assistance Aid supplied by nations to teach skills to individuals in other nations. Professionals,such as engineers, teachers, and technicians, usually provide this assistance (page 525)

military assistance Economic or technical aid given to a nation’s armed forces (page 525)




What can you do if you need more money? In what ways can you obtain money?

In this section, you will learn how developing nations use foreign investment and aid to movethrough the three stages of economic development.


Use the diagram below to help you take notes as you read the summaries that follow. Thinkabout why nations give foreign aid.

KEY TERMS


ECON: 23A

ECON: 21A, 23A, 23D

529


Terms to Know• bureaucracies• capital flight

Reading Objectives1. What are the main obsta-

cles to economic growth indeveloping nations?

2. Why did Indonesia fail tosustain rapid economicgrowth?

READER’S GUIDE

T he successful rebuilding of Europe’s economy followingWorld War II convinced many economists that injections ofmoney capital into a nation could achieve rapid economic

growth. As a result, billions of dollars flowed into developingnations during the 1950s and 1960s. Aid to many of these nations,however, failed to produce the same growth as Europe experi-enced. In this section, you’ll learn why developing nations have notfollowed the same path of recovery as Europe did in the 1940s.

Four Obstacles to GrowthMany developing nations face a number of obstacles to growth

that are not immediately solved by injections of money capital.

3

BUSINESS WEEK, SEPTEMBER 20, 1999

Although the sheer numbers of people living in povertyseem overwhelming—at least 3 billion subsist on lessthan $2 a day—[economist] Amartya Sen is optimisticthat real progress can be made over the next few

generations. . . . The world’s “rich” nations can help by moving

ahead with debt-pardoning schemes. . . . But governments in developing countries also must

cut back on military spending and corruptionand spend more on health and education,

especially for women.




MultimediaDaily Focus Transparency 89Economic Concepts Transparency 11Vocabulary PuzzleMaker CD-ROM Interactive Tutor Self-Assessment SoftwareExamView® Pro Testmaker

MindJogger VideoquizPresentation Plus!


OverviewSection 3 describes the obstacles

to economic growth in developingnations and investigates whyIndonesia was unable to sustainrapid economic growth.


Preteaching VocabularyVocabulary PuzzleMaker

READER’S GUIDE




O BSTACLES TO DEVELOPMENT

1. Which four nations in the first column have the lowest per capitaGDP? Will their population ranking increase or decrease in theyear 2050?

2. What can you conclude about population growth and development from this?

The World's Ten Most Populous Countries by Rank

2050(projected)

1999

Country GDP Per Capita

1. China

2. India

3. United States

4. Indonesia

5. Brazil

6. Russia

7. Pakistan

8. Japan

9. Bangladesh

10. Nigeria

$ 2,800

$ 1,600

$28,600

$ 3,770

$ 6,300

$ 5,200

$ 2,300

$22,700

$ 1,260

$ 1,380

1. India

2. China

3. Pakistan

4. United States

5. Nigeria

6. Indonesia

7. Brazil

8. Bangladesh

9. Ethiopia

10. Iran

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Page 528: 21A, 23A, 23D, 23F, 24APage 529: 22A-B, 23A, 24A




bureaucracies: offices andagencies of the government thateach deal with a specific area

capital flight: the legal or illegalexport of currency or money capi-tal from a nation by that nation’sleaders

Europe’s rapid recovery after World War II was a special case. In1945 countries in Europe already had skilled labor forces, advancedorganizations such as corporations and trade groups, and experi-enced government bureaucracies, or specialized offices and agen-cies. This is not the case in developing nations.

Attitudes and Beliefs One obstacle to economic growthresides in people’s attitudes and beliefs, which are usually slow tochange. In many developing nations, people live and work muchas their ancestors did hundreds of years before. Innovation of anysort is often viewed with suspicion. Farmers, for example, may bereluctant to accept a new way of plowing, even though it meansbetter soil conservation and a larger harvest.

Continued Rapid Population Growth A high populationgrowth rate may reduce the rate of growth of a nation’s standardof living. Even if a nation’s economy is growing, per capita GDPwill decrease if its population is growing at a faster rate.

Misuse of Resources Development in some nations has beenslowed by the misuse of resources. For example, aid to the militaryinstead could be spent on agricultural development or on training.

Corruption among government and military leaders alsoweakens the economies of many developing nations. Local currency may be legally exported or illegally sent from thecountry into leaders’ private bank accounts, a practice knownas capital flight. Even if new, honest leaders take over, they mayhave inherited crushing debts from previously corrupt regimes.

T here are now over 6 billion people living on the earth. More than 80 per-

cent live in the less developed nations, anddemographers (scientists who study popula-tion) say the imbalance will get worse.

Population in developing nations is grow-ing at a rate of 1.7 percent a year—or

nearly 82 million people. In contrast, thepopulation of developed nations is increas-ing at a growth rate of 0.1 percent—whichadds 1.5 million people annually. If growthrates remain unchanged, demographersproject that the world’s population will growby some 2 billion over the next 25 years. ■

The World’s People

Economic Connection to... GeographyEconomic Connection to...

530 CHAPTER 20

The World’s People

530

Demographers often use ameasure called doubling time tomake population projections.Doubling time is the number ofyears it will take for a populationto double at present growth rates.To figure out how long it will takea population to double in size,divide the number 70 by itsannual growth. (The number 70comes from the natural log of 2,which is .70.) Given the world’scurrent annual growth rate ofabout 1.3 percent, the populationwill double in 54 years.

L ECTURE LAUNCHERLIn 1970, 60 percent of Indonesians lived below the poverty line. By 1996, that numberdecreased to 11 percent. Unfortunately, 1997–1998 brought several economic setbacks thatbrought to light the need for meaningful political and economic reforms. The new govern-ment has promised to allow the formation of new political parties, allowed greater freedomof the press, released numerous political prisoners, and punished high-ranking officers for thekidnapping of activists and other misdeeds. Worker rights are now officially recognized butthe enforcement of labor standards remains weak. Why is financial investment more effectivein promoting growth in some countries than others? Must a strong government that supportshuman rights be in place before the obstacles to economic growth can be removed?

I. Four Obstacles to Growth

A. People don’t trust innovation and technology, they are comfortable with the old wayof doing things.

B. The population is growing faster than the nation’s GDP.

C. Corrupt governments and poor allocation of resources (capital flight)

D. Trade restrictions in developed nations make it difficult or impossible to increaseexports.


Which of the four obstacles do you think is the most detrimental to development?

20-3

PAGES 529–531


Reading Disability Reading comprehension is greatly influenced by decoding skills. Forstudents with weak decoding skills, the effort needed to comprehend often is overshad-owed by the energy expended in decoding. By the time such students have finished read-ing a paragraph, they may have forgotten the beginning. To assist students with poordecoding skills, use the following strategy. Have a good reader tape-record the material,and have the students follow the text while listening to the tape. Remind the students toview textbook visuals when prompted.

Refer to Inclusion for the Social Studies Classroom Strategies and Activities.


Guided PracticeL2 Writing News Stories Call onvolunteers to identify and brieflydescribe the obstacles to economicdevelopment. List their responses onthe board. Then tell students that thelist is an outline for a newspaper arti-cle on the endeavor of developingnations to achieve economic growth.Have students use the outline towrite the news story. ECON: 14A-B,22A-B, 23A, 24B, 24D

ECON: 23G

ECON: 23A

531

Trade Restrictions To develop domestic industries,many developing nations have used import restrictionssuch as quotas and tariffs. These trade restrictions preventconsumers from purchasing cheaper foreign substitutes.

Case Study: IndonesiaWhen Indonesia won independence from the Netherlands in

1949, it seemed well equipped for economic growth. It was theworld’s sixth most populous nation. It was also rich in minerals, andhad vast oil reserves as well as valuable farmland and rain forests.During his regime, President Achmed Sukarno obtained foreign aidtotaling more than $2 billion from both capitalist and communistnations. Yet Indonesia’s economy was a disaster.

The reasons behind this failure reveal some of the problems oftrying to bring rapid growth to developing nations. One probleminvolved attitudes. Indonesians lacked a sense of national identity.The country had been formed from several former Dutch colonies,and its people were divided by nationality, religion, and politics.The major blame for economic failure, however, can be placed onSukarno’s economic policies. See Figure 20.7.

Indonesia’s Economy Under Sukarno and Suharto

President Sukarno’s Regime(1949–1965)

General Suharto’s Regime(1965–1998)

1. Loss of foreign aid from the UnitedStates resulted from strong oppositionto capitalism.Foreign aid from former Soviet Union andothers was often wasted on projects forthe rich such as sports stadiums anddepartment stores. Mineral resourceswere not developed, and decaying roadsand rail lines went without repairs.Nationalization of businesses placed themunder government ownership, discour-aging foreign investment.Heavy regulation of business, a hugegovernment bureaucracy, and widespreadcorruption hurt the economy.Inflation soared out of control. Thenation’s price index rose from 100 in 1953to 3,000 only 10 years later. By the mid-1960s, the national debt was $2.5 billion.

1. Control of the money supply was tight-ened and confidence in governmentincreased. Initially, corruption was reducedand bureaucracy decreased.Alliances with some Western nations weremade.Foreign aid and investment increased, andresources were focused on improvingagricultural output and oil production.Industry was developed. More funds couldbe spent on industry because fewer funds were needed to import food.A system of “crony” capitalism developed—family members and close friends owned or controlled major businesses.The economy declined dramatically in 1998,forcing the resignation of General Suhartoas the nation’s leader. He was replaced byB.J. Habibie.

2.

3.

4.

5.

2.

3.

4.

5.

6.

Gecko from Indonesia’srain forest

FIGURE 20.7FIGURE 20.7



Project Economic ConceptsTransparency 11 and have studentsdiscuss the accompanying questions.

IndependentPracticeL2 Conducting Research Have stu-dents choose a developing nationwith a large base of naturalresources—Brazil, for example. Havethem research and evaluate theirselected country’s economic develop-ment from the mid-1900s to thepresent day. Have them present theirfindings in a chart similar to that inFigure 20.7. Encourage students toshare and compare their charts.

BLOCK SCHEDULING


O BSTACLES TO GROWTH IN DEVELOPING NATIONS

OUTLINING

Directions: Locate the heading in your textbook. Then use the information under the heading to help youwrite each answer.

I. Four Obstacles to Growth

A. Introduction—What is a government bureaucracy?

B. Attitudes and Beliefs—How might innovations be viewed by people in developing nations?

C. Continued Rapid Population Growth—How is per capita GDP affected by population growth?

D. Misuse of Resources—What is capital flight?

E. Trade Restrictions—How have trade restrictions hurt developing nations?

II. Case Study: Indonesia

A. Introduction—What hindered Indonesia’s economic development?

Name Date Class

20-3


Have students work in groups of three or four to create a bulletin-board display titled“Indonesia—An Economic Portrait.” Tell groups that their displays should include chartsand graphs showing economic statistics. Suggest that they also include some demo-graphic information—total population, infant mortality rate, life expectancy, literacy rate,and urbanization rate, for example. Encourage groups also to include maps and otherappropriate illustrations. Have groups exhibit and discuss their displays. ELL





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Page 531: 10A-B, 12B, 14A-B,21A-B, 22A-B, 23A, 23F


ECON: 12B, 22A, 23A, 23F, 24C-D

ECON: 22A-B, 23A, 23C, 23F-G, 24C-D


CHAPTER 20SECTION 3, Pages 529–532 Subsequent improvements in Indonesia’s economy were credited

to General Suharto, who replaced Sukarno in 1965. Suharto’s initialeconomic policies, as listed in Figure 20.7 on page 531, madeIndonesia one of the fastest-growing economies among developingnations by the end of the 1970s.

Unfortunately, Indonesia found that reliance on a few productscould be dangerous. In the early 1980s, the world “oil glut” cutdeeply into the nation’s trade income. When an economic crisis hitSoutheast Asia in 1997–1998, Indonesia’s economy tumbled. Riotsensued and General Suharto resigned.

Indonesia’s value as a case study lies in the variety of lessons itteaches about foreign aid. It illustrates that simply pouring moneycapital into a developing nation will not guarantee economicgrowth. Indonesia also shows that growth can occur if governmentrestrictions on economic activity are reduced.

Foreign aid must be used wisely in combination with domesticsavings, foreign investment, and government policies that ensureeconomic stability. Finally, the case study points out that growth ofa developing nation’s economy may prove temporary if it dependson only one or two products.

532 CHAPTER 20

Understanding Key Terms1. Define bureaucracies, capital flight.

Reviewing Objectives2. Graphic Organizer Create a diagram like the

one below to explain the main obstacles to eco-nomic growth in developing nations.

3. Why did Indonesia fail to sustain rapid eco-nomic growth?

Applying Economic Concepts4. Economic Policy What economic policies

exhibited by a foreign government would dis-courage you from investing money capital inthat nation’s businesses?




3

5. Understanding Cause and EffectExplain why import restrictions are an obsta-cle to growth in a developing nation. Why dodeveloping nations impose import restrictionssuch as quotas and tariffs in the first place?

Obstacles to Growth

532

ReteachOrganize students into pairs, and

have partners analyze how societalvalues affect economic growth indeveloping nations.

1. All definitions can be found in the Glossary.2. The following should be inserted in the dia-

gram: Attitudes and Beliefs, Continued RapidPopulation Growth, Misuse of Resources,Trade Restrictions.

3. President Sukarno’s policies of nationalizationand regulating business caused economicproblems. These were made worse by a hugegovernment bureaucracy and rampant corrup-tion. Also, Indonesia’s reliance on a few prod-ucts made the economy vulnerable.

4. Answers will vary but may include such policiesas nationalization, heavy regulation of busi-ness, or reliance on a few products. Most stu-dents will suggest that such policies mightmake their investment unsafe.

5. Import restrictions prevent consumers frombuying cheaper substitutes. Competition fromforeign companies might make domestic com-panies more efficient. However, developingnations impose import restrictions to protectthese domestic companies.

ASK: Which of the obstacles toeconomic growth do you thinkdeveloping nations will have thegreatest trouble overcoming? Why?Have students discuss theiranswers.

Name Date Class

20, 3

bureaucracies Offices and agencies of the government that each deal with a specific area (page 530)

capital flight The legal or illegal export of currency or money capital from a nation by that nation’s leaders (page 530)




Have you ever tried to take care of a plant or a pet? What tasks did you have to perform? Do allplants or pets require the same care? Why do some plants or pets need different care?

In this section you will learn why developing nations have not followed the same path of recoveryas Europe did in the 1940s.


Use the diagram below to help you take notes as you read the summaries that follow. Thinkabout the four obstacles to growth faced by developing nations.

KEY TERMS


Name Date Class

20, 3



6. Traditional attitudes in developing nations

a. are an obstacle to economic growth. b. do not affect a nation’s economy.c. encourage economic growth. d. support change.

7. A high population growth rate

a. increases the per capita GDP. b. raises the standard of living.c. encourages economic growth. d. decreases the per capita GDP.

SCORE

A1. bureaucracies

2. capital flight

3. traditional attitudes

4. innovations

5. trade restrictions

Ba. beliefs based on ancestors’ ways of life

b. offices and agencies of the government that dealwith a specific area

c. new ways of doing things

d. legal or illegal export of currency or money capitalfrom a nation by that nation’s leaders

e. quotas or tariffs that prevent consumers from purchasing cheaper foreign substitutes


Section Quiz 20–3

ECON: 22A, 25A

ECON: 22A, 23D, 25A

SPOTLIGHT

533


SPOTLIGHT ON THE ECONOMY

Whatever the motives of the hardenedmen who run Indonesia, it is clear

that the damage to this Asian giant will beimmense. Nothing is certain any longer—thecountry’s passage into democracy, its economicrecovery, even who is running the governmentnow. With relations with the InternationalMonetary Fund already inflamed over a bank-ing scandal, Indonesia is on the verge of beingcut off from new loans that are needed to stabi-lize the financial system. Economists have low-ered forecasts for this fiscal year, from 2% growth

to negative 0.8%. Ethnic Chinesebusinessmen, still trauma-

tized by deadly riotingin 1998, are moving

funds offshore again.As the internationalbacklash mounts,Indonesia is close to being branded apariah state.

. . . The buildup of anger does not bode wellfor business in Indonesia. Standard & Poor’shas downgraded Indonesia’s currency rating,citing political tension and the risk that interna-tional aid may be cut. On Sept. 10, a group ofethnic Chinese businessmen from Indonesiamet in Singapore to compare notes on howmuch capital they were pulling out.—Reprinted from September 27, 1999 issue of Business Week by special

permission, copyright © 1999 by The McGraw-Hill Companies, Inc.

Think About It1. What economic actions resulted from Indonesia’s

massacre of East Timor citizens?

2. Why is it significant that capital is being removedfrom Indonesia?

Check It Out! In this chapter you learned aboutIndonesia’s struggle to become a developed nation. Inthis article, read to learn about the economic backlashit faced as a result of a 1999 government-approvedmassacre against civilians in Indonesia’s formerprovince of East Timor.

Looting in East Timor

Indonesian military

Indonesia—A Pariah State?Indonesia—A Pariah State?

Answers to Think About It1. The International Monetary Fund (IMF) considered cutting off new loans to

Indonesia. Standard & Poor’s downgraded Indonesia’s currency rating. EthnicChinese business leaders pulled out their investments in Indonesia.

2. Without capital investment, Indonesia will not be able to sustain healthy economicgrowth.

Inform students that some peo-ple feel that the United States’s eco-nomic dealings—trade agreements,foreign aid, and so on—should berelated to the human rights recordsof other nations. Have students dis-cuss if they think human rightsshould be a factor in internationaleconomic decisions.

A new government, led byPresident Abdurrahman Wahid,undertook political and economicreforms shortly after elections latein 1999. These reforms, observerssuggested, would help Indonesia’sinternational reputation.

To find up-to-date news andanalysis on the economy, busi-ness, technology, markets,entrepreneurs, investments,and finance, have studentssearch feature articles and spe-cial reports on the BusinessWeek Web site.www.businessweek.com

Page 532: 7A, 12B, 14A, 22A-B,23A, 23D, 23F, 24A

Page 533: 22A-B, 23A


ECON: 21A, 23D

ECON: 23A

http://www.businessweek.com




MultimediaDaily Focus Transparency 88Vocabulary PuzzleMaker CD-ROM Interactive Tutor Self-Assessment SoftwareExamView® Pro Testmaker

MindJogger VideoquizPresentation Plus!


534 CHAPTER 20

Terms to Know• vicious cycle of poverty

Reading Objectives1. What are four problems of

rapid industrialization indeveloping nations?

2. In addition to poverty, whatfactors influence economicdevelopment?

3. What is the relationshipbetween the increased flow of information andinternational economiccooperation?

READER’S GUIDE

The high standard of living of any developed nation is usu-ally a result of its high level of industrialization. As youread earlier in this chapter, industrialization is the second

stage of economic development. As a result, many developingnations have tried to improve their standard of living by shiftingtheir resources away from agriculture to industry. As you readthis section, however, you’ll learn that attempts at rapid industri-alization can prove a wasteful use of scarce resources.

4

THE NEW YORK TIMES, SEPTEMBER 13, 1998

Developing countries face a fundamental choice. Theycan mimic the industrial countries, and go through adevelopment phase that is dirty and wasteful andcreates an enormous legacy of pollution.Or they canleapfrog oversome of thesteps followed by industrial countries andincorporate modern, efficienttechnologies.

534

OverviewSection 4 reviews the problems

associated with rapid industrializa-tion in developing countries andexplains the factors that determinethe various routes to economicdevelopment.


Preteaching VocabularyAsk students to suggest ways to

illustrate the term vicious cycle ofpoverty. Call on volunteers to pre-sent and discuss their illustrationideas.

Vocabulary PuzzleMaker

READER’S GUIDE




F OREIGN TRADE AND ECONOMIC DEVELOPMENT

1. What is the approximate total amount of trade the United Statesconducts with developing countries?

2. What do you think is traded?

EXPORTS

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about$160

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United StatesTrade withDevelopingCountries

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about 25%of

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ECON: 24A, 24C-D

535


Problems of RapidIndustrialization

There are four problems of rapid industrialization: investingunwisely, not adapting to change, using inappropriate technol-ogy, and rushing through the stages of development.

Unwise Investments Some developing nations have investedin steel factories and automobile plants. These nations do notnecessarily have a comparative advantage in producing steel orautomobiles, however. As a result, the people in these nations are worse off. Citizens receive less economic value from theirresources than they would have received from other investments.In India, for instance, steel mills produced steel 2–3 times moreexpensively than what it would have cost if it had been imported.

Not Adapting to Change Rapid economic change also canbe harmful if a nation’s population does not have time to adapt tonew patterns of living and working. Suppose much of a nation isconverted from subsistence farming to growing one crop forexport. This may displace large numbers of people who are nolonger needed for farming. Unable to find work in the country-side, many will migrate to already overcrowded cities.

Using Inappropriate Technology Another aspect of indus-trialization and balanced growth is the need to use technologythat is appropriate, or suitable, to a culture. See Figure 20.8.For example, instead of buying tractors, it may be better for anation using wooden plows to first replace them with ones madeof steel. The benefits of modernization can bedistributed more widely because steel plowsare cheaper than tractors.

Rushing Through the Stages ofDevelopment Many economists believeindustrialization is generally more beneficial ifit comes about naturally. Time allows nationsto adapt successfully to one stage of develop-ment before moving on to the next. Gradually,the developing nation increases its income andsavings and its number of skilled and educatedworkers. Economic conditions reach the pointwhere businesspeople freely decide to buildfactories instead of increasing farm output.

Technological ChangeMany people fear change. Thesestorekeepers in Russia still usean abacus to tally receipts asthey move slowly toward capitalism.

20.820.8



Name Date Class


I NDUSTRIALIZATION AND THE FUTURE

RECALLING THE FACTS

Directions: Use the information in your textbook to answer the questions.

1. What is the normal cause of a high standard of living?

2. What are the four main problems with rapid industrialization?

a.

b.

c.

d.

3. What types of investments are unwise for nations to make?

4. Why is important not to rush through the stages of industrialization?

5. What are some factors that influence economic development?

a.

b.

20-4


L ECTURE LAUNCHERLIn a period of only three decades the breakdown of the Black Sea’s ecosystem reached crisisproportions. Problems included uncontrolled sewage pollution, irrational exploitation of fishstocks, and the accidental introduction of a jellyfish-like species whose total mass reached 900 million tons—ten times the annual fish harvest of the entire world! In 1992, elevennations that were part of the former Soviet Union joined a cooperative and began to take the urgent steps needed to restore the Black Sea as a natural resource. Why does rapid industrialization often lead to the wasteful use of scarce resources?

I. Problems of Rapid Industrialization

A. Unwise investments

B. People need time to adapt to new patterns of living and working.

C. Countries need to use technology that is best suited for its culture.

D. The economy itself needs time to adapt to the change, build savings, and increase thenumber of educated and skilled workers


Why do you think people need time to adapt to industrialization? Explain. (People’sentire lifestyles change when their work becomes specialized and nonagricultural. Before,their lives centered on providing for basic needs. Now they will make money to provide forthose needs.)

20-4

PAGE 535


Learning Disability Students with reading-associated learning disabilities often do notpractice or use good self-appraisal and self-management skills while they read. Encouragethe development of these skills by making students aware of the processes they use tohelp them understand the material they read. For example, as they study Section 4, havethem note the number of times they reread phrases and sentences. Explain that rereadingis an important tool for understanding and memorizing information.



Guided PracticeL2 Understanding Ideas Call onvolunteers to identify the problemsrelated to rapid industrialization in developing countries. Noteresponses on the board. Then askstudents to imagine they are mem-bers of a government commissionfor a developing country. Havethem use the information on theboard to write a report describingthe dangers to avoid during theprocess of industrialization.

Page 534: 5A, 22A-B, 23A, 24A,25A

Page 535: 13A-B, 22B, 23A, 25A


ECON: 23A, 25A

ECON: 23A



536 CHAPTER 20

vicious cycle of poverty: situa-tion in which a less-developedcountry with low per capitaincomes cannot save and investenough to achieve acceptablerates of economic growth andthus is trapped

Economic DevelopmentSeveral major factors influence economic development, as

shown in Figure 20.9. These include trade with the outsideworld, an appropriate incentive structure, and a supportive politi-cal structure. Natural resources such as trees and minerals andreduced population growth are important factors as well.

Not having one of these factors, however, does not mean that aless developed country will be trapped in underdevelopment or inthe vicious cycle of poverty. This theory states that developingnations are poor because they cannot save and invest, but theycannot save and invest because they are poor.

Economic development normally depends on entrepreneurswho are able to perceive opportunities and then take advantageof those opportunities. The political system must be such thatrisk-taking entrepreneurs are rewarded, however. That requireswell-established property rights and no fear of governmentnationalization of business.

The more certain private property rights are, the more invest-ment there will be. When people have property rights that are

Factors Influencing EconomicDevelopment Three major factorsaffect how nations develop economically.

20.920.9 B Appropriate Incentive Structure The incentive structure in any economydetermines how fast that economy willgrow and develop. For example, develop-ing countries need tax rates that arenot too high and a legal system thatprotects private property rights.

A Supportive PoliticalStructure Typically, in countries inwhich government-ownedbusiness accounts for a smallpercentage of GDP, moreeconomic development canbe found. If, however, thepolitical system supports andenforces any types of pricecontrols, there will be lessincentive for entrepreneurs to enter business.

C Trade With theOutside WorldThe more a countrytrades with the outsideworld, the faster it willgrow. Therefore, develop-ing nations can developmore quickly if they stoprestricting trade.

536

IndependentPracticeL3 Conducting Research Have stu-dents conduct research on theimpact of rapid industrialization ona developing country of their choice.Encourage them to present theirfindings in a brief illustrated report.

Refer students to Figure 20.9and discuss with them the factorsthat influence economic develop-ment. Call on volunteers to iden-tify the factor that they think isthe most important. Have themexplain their choices.

Have students imagine they are successful entrepreneurs in the United States, and thatthey wish to open a branch of their business in a developing country. Encourage studentsto prepare a business plan that discusses the opportunities and challenges presented byopening a business in that developing nation. Call on volunteers to present and discusstheir plans. BLOCK SCHEDULING

Free Enterprise Activity




ECON: 22A-B, 23D

ECON: 22A-B, 23A, 23C, 24B, 24D

ECON: 19D, 23A, 23C, 24D

537537


supported and enforced by the government, they feel confidentabout making investments.

Information Leads to CooperationBecause of the media and the Internet, information about the

higher standards of living of developed countries is known todayeven in the most remote villages of developing nations. One effectof this increased flow of information has been to convince devel-oping nations of the benefits of working together. These nationshave come to realize that, compared to large developed nationssuch as the United States, each developing nation has little influ-ence over world trade. Together, however, the developing nationscan and do have power in the international economic community.

A second trend in recent years has been toward more coopera-tion between developed and developing nations. Since 1981, leadersof both developing and developed nations have met many times. Amajor purpose of these meetings is to establish global negotiationsaimed at a more equal distribution of the world’s wealth andresources. Some suggestions to achieve this goal have included lowtariffs for developing nations and an “income tax” on developednations to pay for international assistance programs.

Understanding Key Terms1. Define vicious cycle of poverty.

Reviewing Objectives2. Graphic Organizer Create a diagram like the

one below to describe four problems of rapidindustrialization in developing nations.

3. In addition to poverty, what factors influenceeconomic development?

4. What is the relationship between the increasedflow of information and international economiccooperation?

Applying Economic Concepts5. Economic Development Assume that you

are the president of a developing country. Whatpolicies would you propose to improve thenation’s chances of attracting entrepreneurs?

6. Understanding Cause and Effect Howdo you think the economic growth and devel-opment of developing countries will affectyou in the future?




4

Rapid Industrialization

Leads to . . .



ReteachHave students write a summary

paragraph for each of the mainheadings in Section 4. Then havethem reread the section and anydetails they missed and correct anymistakes in their paragraphs.

1. All definitions can be found in the Glossary.2. These labels should be attached to the ends of

arrows in the diagram: Unwise investments;Failure to adapt to change; Using inappropriatetechnology; Rushing through the stages ofdevelopment.

3. supportive political structure, appropriate incen-tive structure, trade with the outside world

4. Increased flow of information encouragesdeveloping nations to work together to achieveeconomic power.

5. Answers will vary. Typical answers will stressthe strengthening of private property rights.

6. Answers will vary. Make sure that students givereasons for their answers.

Ask students to make predictionson the future of developing nationsin the twenty-first century. Havestudents discuss their predictionsand explain what they are basedon.

Name Date Class

20, 4

vicious cycle of poverty A situation that keeps developing countries trapped in poverty. A less-developedcountry with low per capita incomes cannot save and invest enough to achieve acceptable rates of economic growth (page 536)




Have you ever tried to put something together without following the instructions? Did you makeany mistakes? Did you have the right equipment to perform the task? Did anyone try to tell youabout a better way to do it? How did you feel when the other person gave you advice?

In this section, you will learn that attempts at rapid industrialization can prove a wasteful use ofscarce resources.


Use the diagram below to help you take notes as you read the summaries that follow. Thinkabout the four reasons why rapid industrialization often fails.

KEY TERMS




6. Many developing nations have tried to improve their standard of living by shifting their resources from

a. agriculture to industry. b. industry to agriculture.c. imports to exports. d. agriculture to services.

7. Many economists believe that industrialization is more beneficial if it

a. happens rapidly. b. displaces much of the work force.c. uses the most modern technology available. d. comes about naturally.

SCORE

A1. vicious cycle of poverty

2. industrialization

3. entrepreneurs

4. nationalization

5. comparative advantage

Ba. second state of economic development in which

most workers have jobs in manufacturing

b. ability of a country to produce a product at a loweropportunity cost than another country

c. government takeover of an industry

d. people who are willing to take a financial risk tomake a profit

e. trap in which a less-developed country with low percapita incomes cannot save and invest enough toachieve acceptable rates of economic growth


Name Date Class

20, 4

Section Quiz 20–4

Page 536: 4A, 12B, 14A, 19D, 23A,23D, 24A, 25A

Page 537: 12A, 14A-B, 23A, 23D,23F, 24A, 27A


ECON: 23A

ECON: 23A, 23D

Study &Writing Skills

538

Learning how to take a test is an important skill. Whether you are in school or looking for a job, you willbe asked to take many tests during your life.

Study & Writing Skills

Taking a Test

• Start studying several daysbefore the test. In particu-lar, review your notes andbecome familiar with newvocabulary terms.

• Read the test directionsand the questions carefully.

• Pace yourself so that you leave enough time to answer all of the questions.

• Skip the more difficultquestions, then comeback to them after you’veanswered the other questions.

• Do not leave any answerblank. A good guess maybe the correct answer.

• Some essay questionsstart with the words dis-cuss, describe, or explain.This means that you mustgive full answers, usuallywritten in complete sentences.

Learning the SkillWhen your teacher announces that you will be

tested soon, follow the guidelines for taking a testlisted on the left.

Practicing the SkillOn a separate sheet of paper, answer the following

questions.

1. The most important rule in taking a test is to a. read the directions and the questions carefully;b. work as fast as you can; c. answer all the questions.

2. Which of the following may be caused by the otherthree? a. failure on a test; b. not enough studying; c. going to bed late the night before a test; d. taking poor notes in class.

3. True or False? A true or false question is false if anypart of it is false.

Application ActivityLearning the proper way to take a test is important,

but writing the actual test questions yourself is aneffective way to study for the test. Reread Section 4—Industrialization and the Future—in this chapter.Practice writing five multiple-choice questions and fivetrue/false questions for this section.Practice and assess

key skills withSkillbuilder InteractiveWorkbook, Level 2.

538

Taking a TestPoint out the important role that

tests play in students’ lives. Testsare a major part of school activities.They have a role in the world ofwork, too. Students may be askedto take tests as part of the interviewprocess for a job. Tests may also beused to gauge how well they havelearned or are able to apply new jobskills.

Work through the guidelines fortaking tests, and assist students asthey answer the Practicing the Skillquestions. Then assign theApplication Activity.

Glencoe SkillbuilderInteractive Workbook,Level 2

This interactive CD-ROM rein-forces student mastery of essen-tial social studies skills.

Answers to Practicing the Skill1. a2. a3. True

Application Activity Pair students, and have partners exchange and complete their tests.Remind them to follow the guidelines for test taking.

T AKING A TESTWhether you are in school or looking for a job, you will be asked to take many tests duringyour lifetime. Thus, learning how to take a test is a very important skill to master. One way ofpreparing to take a test is to write a test yourself. Writing a test is a good way of reviewingwhat you need to know to do well on a test.

Directions: Read the passage below and answer the questions that follow.

A law restricting the amount of interest that can be charged for credit is called a usury law. Some states set up differ-ent maximum rates for different types of consumer credit. Maximum rates on charge accounts and credit cards, forexample, are often about 18 percent a year or 1 percent a month. Consumer finance agencies, in contrast, are oftenallowed to charge higher rates because their loans involve higher risks.

Some states once set interest rate ceilings as low as 6–10 percent. During the early 1970s, when interest rates werevery high, many lenders cut back on the amount of credit they offered. Others stopped lending completely. Many consumers, particularly those with bad credit ratings, found it hard to obtain credit.

1. Write a true/false question that tests whether readers understand what a usury law is.

2. Write a multiple choice question that tests whether readers recall what a typical maximum rate is on a credit card.

Name Date Class

30

Reinforcing Economic Skills 30

539


Characteristics ofDeveloping Nations

• Developing nations are those with less industrialdevelopment and a relatively low standard of living.

• Five characteristics of developing nations include alow GDP, an economy based on subsistence agri-culture, poor health conditions (including a highinfant mortality rate), a low literacy rate, and rapidpopulation growth.

• Many developing nations have governments that donot support private property rights.

The Process of Economic Development

• The three stages of economic development are theagricultural stage, the manufacturing stage, and theservice sector stage.

• A basic problem for developing nations is how tofinance the equipment and training necessary toimprove their standard of living.

• Developing nations receive financing through for-eign investment and foreign aid. Foreign aid canbe given in the form of economic assistance,technical assistance, and/or military assistance.

• International agencies, including the World Bankand the International Monetary Fund, channel fundsto developing nations.

• Developed countries provide foreign aid for human-itarian, economic, political, and military reasons.

Obstacles to Growth inDeveloping Nations

• Four obstacles hamper economic growth in devel-oping nations: traditional attitudes and beliefs, continued rapid population growth, a misuse ofresources (including capital flight), and traderestrictions.

• The economic failure of Indonesia highlights someof the problems associated with rapid economicgrowth—lack of a national identity, massive gov-ernment corruption and bureaucracies, reliance on a single product, and government interferencein trade.

Industrialization and the Future

• There are four problems of rapid industrialization:unwise investments, not enough time to adapt tonew patterns of living and working, use of inappro-priate technology, and inadequate time to movethrough the stages of development.

• Factors that spur economic growth include tradewith the outside world, an appropriate incentivestructure, a supportive political structure, naturalresources, and reduced population growth.

• Developing countries can get out of the viciouscycle of poverty if their political system rewardsentrepreneurs and promotes private propertyrights.

C H A P T E R

SECTION 1

SECTION 2

SECTION 3

SECTION 4

Chapter Overview Visit the Economics Today and Tomorrow Web site at tx.ett.glencoe.comand click on Chapter 20—Chapter Overviewsto review chapter information.

20

Use the Chapter 20 Summary to preview, review, condense, orreteach the chapter.

Preview/ReviewVocabulary PuzzleMaker

CD-ROM reinforces the key termsused in Chapter 20.

Interactive Tutor Self-Assess-ment Software allows students toreview Chapter 20 content.

CondenseHave students listen to the

Chapter 20 Audio Program (alsoavailable in Spanish) in the TCR.Assign the Chapter 20 Audio Pro-gram Activity and give students theChapter 20 Audio Program Test.

ReteachHave students com-

plete Reteaching Activity 20 in theTCR (Spanish Reteaching Activitiesare also available).

C H A P T E R 20

ECONOMICS & YOU




Developing Nations For one week, have students keep track of all the foreign coun-tries they read about in newspapers and magazines or hear about on the radio and tele-vision. Have them list these countries, briefly describe the economy of each country, andnote whether the country is developed or developing. At the end of the observationperiod, have students enter their information into a two-column chart with “DevelopedNations” and “Developing Nations” as column headings. Direct students to annotate theircharts with an explanation of the factors they used to decide whether a country wasdeveloped or developing.

Economics Journal

Page 538: 23A, 24A-BPage 539: 4A, 12A, 14A-B, 19A,

21A-B, 22A-B, 23A, 24A


ECON: 10A-B, 22A, 23A, 23D, 23F, 24C


CHAPTER 20Assessment and ActivitiesCHAPTER 20

Assessment and Activities

Identifying Key TermsWrite the letter of the definition in Column Bthat correctly defines each term in Column A.

Column A1. foreign aid2. subsistence agriculture3. developing nations4. technical assistance5. developed nations6. bureaucracies7. nationalization

Column Ba. raising enough food sufficient for family

needs onlyb. nonindustrialized countriesc. money, goods, and services given by gov-

ernments and private organizations tohelp other nations and their citizens

d. aid in the form of professional expertisefrom engineers, doctors, teachers, andother specialists

e. placement of railroads, businesses, andother industries under governmentownership

f. nations with relatively high standards of living and economies based more on industry than on agriculture

g. offices and agencies of the governmentthat each deal with a specific area

Recalling Facts and IdeasSection 1

1. The per capita income in countries such as the United States, Japan, andGermany is approximately how manythousands of dollars?

2. What characteristics identify most devel-oping nations?

Section 23. List two affiliates of the World Bank.4. What is the difference between military

assistance and technical assistance?5. In what stage of development are most

developing nations?6. What are some reasons for giving foreign

aid?

Section 37. How is rapid population growth an

obstacle to economic development?8. How do international trade restrictions

hinder economic growth in developingnations?

Section 49. Why are property rights a factor in eco-

nomic development?10. How can a developing nation’s govern-

ment influence foreign investment?

20

Self-Check Quiz Visit the Economics Today and Tomorrow Web site at tx.ett.glencoe.comand click on Chapter 20—Self-Check Quizzesto prepare for the Chapter Test.

540 CHAPTER 20

540

Identifying KeyTerms1. c2. a3. b4. d5. f6. g7. e

Recalling Facts and Ideas1. between $12,000 and $45,0002. low per capita GDP, an agricul-

tural economy, poor health con-ditions, a low literacy rate, andrapid population growth

3. International DevelopmentAssociation (IDA), InternationalFinance Corporation (IFC)

4. Military assistance involves pro-viding technical or economicassistance to a nation’s armedforces. Technical assistanceinvolves providing profession-als, such as engineers, teachers,and technicians, to teach skillsto people in developing nations.

5. agricultural stage6. humanitarian reasons, eco-

nomic reasons, political rea-sons, national security reasons

7. It reduces the rate of growth of per capitaGDP.

8. They may prevent the purchase of cheaperforeign substitutes for inefficiently pro-duced domestic products of lower quality.

9. The more certain property rights are guar-anteed, the more investment there will be.

10. by limiting its role in the economy, bylimiting tax rates and ensuring privateproperty rights, and by encouraging foreign trade

Thinking Critically1. Not necessarily, because other factors

such as a nation’s international trade, itsinfrastructure, and its political structureall contribute to economic growth anddevelopment.

2. Diagrams should indicate an understand-ing that the greater the certainty of privateproperty rights, the greater the level ofinvestment.

Have students visit theEconomics Today and TomorrowWeb site at ett.glencoe.com toreview Chapter 20 and take the Self-Check Quiz.

MindJogger Videoquiz

Use MindJogger to reviewChapter 20 content.

tx.ett.glencoe.com

http://www.glencoe.com/qe/qe59.php?qi=1561&ch=20

http://www.glencoe.com/qe/qe59.php?qi=1561&ch=20

CHAPTER 20Assessment and ActivitiesCHAPTER 20

Assessment and Activities

541


Thinking Critically1. Making Inferences Is an abundance of

natural resources required in order for a country to have economic growth anddevelopment? Explain.

2. Determining Cause and Effect Create a dia-gram like the one below to explain therelationship between well-defined and gov-ernment-enforced private property rightsand the incentive structure for investmentin a nation.

Applying Economic ConceptsForeign Aid Developed countries gave muchforeign aid to Russia during the 1990s. Usethe information you have obtained in thischapter about the problems facing develop-ing countries and the difficulty of using for-eign aid wisely. Make a list of the obstaclesthat Russia faces in putting to good use theforeign aid it receives.

Cooperative Learning Project

Organize into at least five groups. Eachgroup will study one part or region of theworld, such as northern Africa, CentralAfrica, Southeast Asia, Central America, or western Europe.

The goal of each group is to determinethe percentage of the economy devoted toagriculture and the percentage devoted toindustry. Each member of each group willobtain the relevant information for one ormore countries in his or her chosen region.Compare the information obtained, select-ing one person to prepare summary statis-tics for your group’s region.

Reviewing SkillsTaking a Test Write 10 questions that couldbe used on a test for this chapter. Write 3multiple-choice questions, 3 true/false ques-tions, 3 matching questions, and 1 short-answer question. Include short directionsfor each type of question. Exchange yourtest with another student. After taking eachother’s test, analyze the questioning strate-gies used. Were wrong choices obvious?Which type of questions were the most diffi-cult to answer? Why?

TechnologyActivityUsing E-Mail Choose a developing countryto investigate. E-mail the embassy of thatcountry in Washington, D.C. To do so, youwill first need to use the Internet to locatethe embassy’s E-mail address. Using asearch engine, type in the name of the coun-try. Then explore the sites listed until youfind the E-mail address. Finally, write an E-mail asking for information on the country’shistory as well as current statistics on thecountry’s economic development. Share theresponses you receive with the class.

Select a developing nation and write aresearch report about the economic andsocial conditions of that nation by collectingfacts on housing, food production, trans-portation, medical care, and the role of thegovernment. The most reliable sources arethe International Monetary Fund Reports,United Nations reports, and governmentstatistical bulletins.

Reviewing SkillsAnalyze the test questions in a

class discussion.

Technology ActivityIf students have difficulty finding

E-mail addresses, suggest that theyvisit the Electronic Embassy Website at www.embassy.org and clickon the link to Foreign Embassies ofWashington, D.C.

Analyzing theGlobal Economy

Encourage students to compareand contrast their reports. Havethem predict which developingnations are likely to experiencemajor economic growth in the nearfuture.

ASK: How does rapid popula-tion growth contribute to otherproblems for developingnations? It can contribute to foodshortages and the lack of ade-quate housing.

Chapter BonusTest Question

Page 540: 10B, 14A-B, 22A, 23A,24A, 25A

Page 541: 10B, 12B, 21A, 22A-B,23A, 23D, 23F, 24C-D,25A, 27A


Applying EconomicConcepts

Answers should reflect an understandingof the obstacles to economic growth and theproblems that can result from rapid industrialization.

Cooperative LearningProject

Encourage groups to use circle graphs toillustrate their findings.

ECON: 22B

http://www.embassy.org

chapter 20: economic growth in developing nations nations. e conomic growth in developing countries...

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