Chapter 2

Chapter 2 continues the overall introduction to the text and its subject matter. The major topics include:

• A classification of countries according to the level of income • An overview of the great diversity that exists among developing countries. • An overview of the common development problems faced by many developing

• A discussion on the relevance of the historical experience of the developed countries
for the less developed countries Developing countries are not homogeneous but are enormously diverse in their structure. In particular it is stressed that the developing world differs in:

• • • • • • • •

Population and geographic size. Language and religion. Experiences in the colonial era. Levels of education. Natural resource endowments. Types of industry. Role of government and degree of democracy. Degree of dependency in international economic and political affairs.

The developing countries have several common features and problems, despite the differences mentioned above. Seven similarities among developing countries are considered, with considerable emphasis being placed on the first two:

• • • • • •

Low levels of living. Low levels of productivity. High population growth and dependency burdens. Dependence on agriculture and primary exports. Imperfect markets and incomplete information. Dependence and vulnerability in international relations.

The low levels of living section under common features contains a discussion of the meaning of GNP, and what could be termed the GNP comparison problem. The common method of classifying countries in terms of their level of development is to compare the GNP for each country and rank them accordingly, as the World Bank does. To convert each country's GNP to a common currency (dollars) the text discusses the exchange rate method and the purchasing power parity method. A holistic measure of economic development the Human Development Index is introduced. This index takes into account not only per capita income but also educational attainment and life expectancy. A description of how the index is calculated is presented, as are tables that present the value of the index for selected countries. The chapter concludes with a discussion on the relevance of the historical experience of the developed countries to today's LDCs. In comparison to the position of the developed countries, many LDCs are said to have:

• More limited natural resource endowments

• Lower per capita incomes • Larger population sizes and growth rates • Fewer migration possibilities. but a larger brain drain problem among those who do • • • • • • migrate Fewer benefits from international trade Greater cultural heterogeneity A less temperate climate Limited scientific and technological research capacity Less stable and flexible institutions The contemporaneous presence of developed countries This indicates that not everything we need to know to encourage development is to be found in the historical experience of the now developed countries. .