What you'll learn
This theme examines the uneven distribution of wealth and resources across the world, exploring why some countries are more economically developed than others. You'll study different ways to measure development, understand the causes and consequences of the development gap, and evaluate strategies used to reduce global inequalities.
Key terms and definitions
Development — the process of improvement in people's quality of life, standard of living and well-being, measured through economic and social indicators.
Development indicator — a statistic used to measure and compare levels of development between countries, such as GDP per capita, literacy rate or life expectancy.
GDP (Gross Domestic Product) — the total value of goods and services produced by a country in one year, often divided by population to give GDP per capita.
HDI (Human Development Index) — a composite indicator combining life expectancy, education level and income per capita to rank countries' levels of development on a scale of 0 to 1.
Trade — the exchange of goods and services between countries, involving exports (goods sold abroad) and imports (goods bought from abroad).
Transnational corporation (TNC) — a large company that operates in multiple countries, with production facilities, offices or services in more than one nation.
Aid — assistance given by one country or organisation to another, which can be bilateral (country to country), multilateral (through organisations like the UN) or voluntary (through NGOs).
Infant mortality rate — the number of deaths of children under one year of age per 1,000 live births per year.
Core concepts
Measuring development
Development is measured using various indicators, each with advantages and limitations. Understanding multiple indicators provides a fuller picture than relying on economic measures alone.
Economic indicators:
- GDP per capita measures average income but hides inequality and doesn't account for informal economies
- GNI (Gross National Income) includes income from abroad but shares GDP's limitations
- Percentage employed in different sectors (primary, secondary, tertiary, quaternary) shows economic structure
Social indicators:
- Life expectancy reflects healthcare quality and living conditions
- Infant mortality rate indicates healthcare access and maternal health
- Literacy rate shows educational provision and opportunities
- Access to clean water and sanitation reveals infrastructure quality
- Doctors per 1,000 people indicates healthcare provision
Composite indicators: The HDI combines three dimensions: health (life expectancy), education (mean and expected years of schooling) and standard of living (GNI per capita). It ranges from 0 to 1, with higher values indicating greater development. Countries are classified as: very high (above 0.8), high (0.7-0.799), medium (0.55-0.699) and low (below 0.55) human development.
Limitations of indicators include: data may be unreliable in less developed countries, averages hide regional and wealth disparities, and they don't capture environmental sustainability or happiness.
The development gap
The development gap refers to the widening difference in levels of development between the world's richest and poorest countries. Countries can be classified in several ways:
Classification systems:
- HICs (High Income Countries), MICs (Middle Income Countries), LICs (Low Income Countries) based on GNI per capita
- More Economically Developed Countries (MEDCs) and Less Economically Developed Countries (LEDCs) — older terminology
- Newly Industrialised Countries (NICs) like South Korea, Taiwan and Singapore that have rapidly industrialised
Physical factors affecting development:
- Landlocked countries face higher transport costs and trade difficulties (e.g. Mali, Chad)
- Tropical climates can limit agriculture and increase disease burden
- Natural hazards cause destruction requiring reconstruction funds
- Natural resource distribution creates wealth for some nations (oil in Middle East) but not others
- Poor soils and unreliable rainfall limit agricultural productivity
Economic and historical factors:
- Colonial history often left countries dependent on exporting raw materials
- Terms of trade disadvantage primary product exporters as commodity prices fluctuate
- Debt repayments drain resources from development spending
- Limited access to markets in HICs due to trade barriers
- Lack of infrastructure hinders economic growth
- Political instability deters investment and disrupts development
International trade patterns
Trade connects economies globally but patterns reflect and perpetuate inequalities. Most trade occurs between HICs, while LICs often export primary products and import manufactured goods.
Characteristics of trade:
- HICs trade mainly manufactured goods, services and high-value products
- Many LICs depend on primary product exports (agricultural goods, minerals, oil)
- Prices of primary products are volatile and generally decline relative to manufactured goods
- This deteriorating terms of trade means LICs must export more to buy the same imports
Factors affecting trade:
- Transport costs favour countries with good port infrastructure
- Trade agreements (e.g. CARICOM in Caribbean, EU single market) reduce barriers between members
- Tariffs, quotas and subsidies protect domestic industries but can harm trading partners
- Exchange rates affect competitiveness of exports
Fairtrade: A movement ensuring producers in LICs receive fair prices, better working conditions and investment in community projects. Products carry the Fairtrade mark (coffee, bananas, cocoa, cotton). Benefits include guaranteed minimum prices, social premiums for community projects, and long-term trading relationships. Limitations include higher consumer prices and only helping farmers who can meet standards.
Transnational corporations and development
TNCs are major players in globalisation, bringing both opportunities and challenges to host countries, particularly MICs and LICs.
Why TNCs locate in different countries:
- Lower labour costs in MICs and LICs increase profit margins
- Access to raw materials and resources
- Growing markets in populous countries (e.g. India, China)
- Fewer environmental and labour regulations
- Government incentives like tax breaks and infrastructure provision
- Avoiding trade barriers by producing inside trading blocs
Positive impacts:
- Create employment, both direct and indirect (suppliers, services)
- Introduce new technologies and skills through training
- Improve infrastructure through investment
- Generate tax revenue for governments
- Increase exports, improving balance of payments
- Stimulate multiplier effect as employees spend wages locally
Negative impacts:
- Profits often repatriated to headquarters in HICs
- May employ relatively few local workers in capital-intensive operations
- Can exploit workers with low wages and poor conditions
- Environmental damage through pollution and resource extraction
- May force local companies out of business
- Decisions made abroad can lead to sudden factory closures
Case study example: Manufacturing TNCs in Bangladesh employ over 4 million workers, mainly in garment factories. While providing income (especially for women), concerns persist about building safety, wages below living standards, and long working hours.
Tourism as a development strategy
Tourism is the world's largest industry and an important development strategy, particularly for countries with limited natural resources or manufacturing bases.
Reasons for tourism growth:
- Rising incomes in HICs enable more international travel
- Cheaper air travel and package holidays
- Improved infrastructure in destination countries
- Effective marketing and online booking platforms
- Longer holidays and earlier retirement in HICs
- Growing interest in diverse experiences (ecotourism, adventure tourism, cultural tourism)
Economic benefits:
- Foreign exchange earnings improve balance of payments
- Employment creation in hotels, restaurants, transport, attractions
- Multiplier effect stimulates other sectors
- Tax revenue for government spending
- Infrastructure improvements benefit local populations
- Encourages investment in preservation of heritage sites
Economic and social costs:
- Economic leakage when TNCs repatriate profits and imports are needed
- Seasonal employment creates income insecurity
- Inflation in property and food prices affects local residents
- Low-skilled, low-paid jobs may predominate
- Cultural erosion and conflicts with traditional lifestyles
- Crowding and loss of amenities for local communities
Environmental impacts:
- Habitat destruction for resort construction
- Water consumption and pollution strains resources
- Increased waste and litter
- Damage to coral reefs, beaches and wildlife from tourist activities
- Carbon emissions from air travel contribute to climate change
Sustainable tourism strategies:
- Limiting visitor numbers to sensitive areas
- Ecotourism focusing on conservation and education
- Employing local people and using local suppliers
- Community-based tourism where residents control and benefit
- Environmental management (water conservation, renewable energy, waste management)
- Protection of cultural heritage and traditions
Aid and development strategies
Aid aims to promote development but its effectiveness varies greatly depending on type, conditions and implementation.
Types of aid:
- Bilateral aid: government to government, often tied to purchasing goods from donor country
- Multilateral aid: channelled through international organisations (World Bank, UN agencies, IMF)
- Voluntary aid: provided by NGOs (charities like Oxfam, CAFOD, WaterAid) funded by public donations
- Short-term emergency aid: immediate relief after disasters
- Long-term development aid: projects improving infrastructure, health, education, agriculture
Appropriate/intermediate technology: Small-scale, sustainable technology suited to local skills, resources and needs. Examples include:
- Solar panels for electricity in remote areas
- Hand pumps for clean water rather than complex treatment plants
- Improved fuel-efficient stoves reducing firewood consumption
- Simple irrigation systems using local materials
Advantages include: affordable maintenance by local people, uses local resources, creates local employment, environmentally sustainable, and appropriate to cultural context.
Microfinance: Small loans (typically $50-$500) enabling people, especially women, in LICs to start small businesses. The Grameen Bank in Bangladesh pioneered this approach. Benefits include: no collateral required, high repayment rates (over 95%), empowers women, creates employment, and breaks cycle of poverty. Limitations include: high interest rates in some schemes, pressure to repay, and may benefit better-off rather than poorest.
Arguments for and against aid:
Aid supporters argue it:
- Saves lives in emergencies
- Funds essential infrastructure poor countries cannot afford
- Improves health and education
- Promotes economic growth through investment
Critics contend that aid:
- Creates dependency rather than self-reliance
- Can be wasted through corruption
- May be tied to donor country interests
- Doesn't reach those most in need
- Can undermine local markets (e.g. food aid reducing prices for farmers)
Most effective when: recipient country controls priorities, supports locally-led development, promotes good governance, and focuses on long-term capacity building.
Worked examples
Question 1: Explain why GDP per capita alone is not a reliable measure of development. [4 marks]
Model answer: GDP per capita is an average figure that hides inequalities within a country [1], so a country might have a high GDP per capita but many people living in poverty [1]. GDP doesn't measure non-economic aspects of development such as healthcare quality or freedom [1]. GDP doesn't account for the informal economy, which is significant in many developing countries, meaning actual economic activity is underestimated [1].
Examiner guidance: This question requires explanation (why/how), so each point needs development. Four developed points gain full marks.
Question 2: Study Figure 3, which shows the value of primary and manufactured exports from a developing country between 1990 and 2020.
Describe the changes shown. [3 marks]
Model answer: The value of primary exports increased gradually from approximately $2 billion to $4 billion over the period [1]. Manufactured exports grew much more rapidly, rising from $1 billion in 1990 to $12 billion by 2020 [1]. By 2020, manufactured exports were worth three times as much as primary exports, whereas in 1990 primary exports had been worth twice as much [1].
Examiner guidance: "Describe" requires you to state what the data shows. Use figures from the resource and identify trends. Three separate points or comparisons needed for 3 marks.
Question 3: Assess the view that transnational corporations bring more advantages than disadvantages to developing countries. [6 marks]
Model answer: TNCs bring significant advantages to developing countries, particularly through employment creation. For example, manufacturing TNCs employ millions in countries like Bangladesh and Vietnam, providing regular income [1]. They also bring new technology and skills through training programmes, which can improve productivity in the wider economy [1]. Additionally, TNCs generate tax revenue for governments and foreign exchange through exports, helping fund development projects [1].
However, there are also considerable disadvantages. Profits are often repatriated to headquarters in developed countries rather than being reinvested locally, representing economic leakage [1]. TNCs may also exploit workers through low wages and poor conditions, as seen in some garment factories where workers earn below living wage [1]. Environmental damage from pollution and the use of resources can harm local communities and ecosystems [1].
Overall, the balance depends on government regulation and negotiation. Where governments ensure fair labour standards, environmental protection and technology transfer requirements, advantages are more likely to outweigh disadvantages.
Examiner guidance: "Assess" requires evaluation and judgement. Present both sides with specific examples, then reach a balanced conclusion. Aim for roughly equal coverage of both perspectives.
Common mistakes and how to avoid them
Confusing GDP and HDI: GDP measures only economic output; HDI is a composite indicator including health and education. Use HDI when discussing overall development, not just wealth.
Describing rather than explaining: Questions using "explain" or "why" require reasons and causes, not just statements. Always link cause to effect: "Tourism creates employment which provides income for families therefore improving standards of living."
Generalising about "developing countries": LICs, MICs and NICs have very different characteristics. Use specific country examples and appropriate terminology for the development level you're discussing.
One-sided answers to "assess" or "evaluate" questions: These command words require balanced consideration of multiple perspectives before reaching a conclusion. Structure: advantages/one view, disadvantages/alternative view, then judgement.
Listing points without development: A point must be explained or exemplified to earn marks. "TNCs create jobs" needs development: "TNCs create jobs both directly in factories and indirectly through suppliers and services, providing income for thousands of families."
Ignoring data in resource-based questions: If figures, graphs or maps are provided, you must reference specific data. "Increased significantly" is vague; "increased from 45% to 78%" demonstrates engagement with the resource.
Exam technique for Theme 3: Economic Development
Master command words: "Describe" = say what you see; "Explain" = give reasons (use because/therefore); "Assess/Evaluate" = consider both sides and reach a judgement; "To what extent" = discuss the degree/limitations of a statement.
Develop points fully for higher mark questions: For 4+ mark questions, use the PEE structure: make a Point, provide Evidence/Example, then Explain the significance. "TNCs create employment (P), for example garment factories in Bangladesh employ 4 million workers (E), providing regular income that improves living standards (Ex)."
Use specific case study details: Generic answers score poorly. Name countries, companies, schemes or projects you've studied. "Fairtrade coffee in Kenya" beats "Fairtrade helps farmers in Africa."
Allocate time proportionally: Spend approximately one minute per mark. A 6-mark question deserves 6 minutes and a structured response; a 2-mark question needs brief, focused points only.
Quick revision summary
Development is measured through economic indicators (GDP per capita), social indicators (life expectancy, literacy rate, infant mortality) and composite measures (HDI). The development gap persists due to physical factors (landlocked location, climate, natural hazards), economic factors (debt, trade patterns, lack of infrastructure) and historical factors (colonialism). International trade often disadvantages LICs exporting primary products. TNCs, tourism and aid offer development opportunities but bring challenges including profit repatriation, environmental damage and dependency. Effective development strategies include appropriate technology, microfinance and sustainable tourism that benefit local communities while protecting environments.