Quick Summary

• Development = progress towards a better quality of life (physical, social, psychological, economic) — it's not smooth, and it can reverse.
• The cycle of wealth shows how economic growth → jobs → taxes → investment → more growth, feeds itself.
• We measure development with GDP, GNP, GNI, HDI, and the Gini coefficient — each has strengths and serious blind spots.
• The development gap exists between and within countries, caused by physical geography, demography, technology, social factors, and government.
• Cumulative causation explains why some regions (the "core") pull ahead while others (the "periphery") fall behind.
• Economic activity splits into four sectors — primary, secondary, tertiary, quaternary — and their balance is a strong clue to a country's development stage.
• The Clark-Fisher model shows employment shifting from primary → secondary → tertiary/quaternary as a country develops.
• Globalisation has "shrunk the world" through time-space compression, driven by TNCs, trading blocs, transport, and the internet.
• TNCs bring both huge benefits (jobs, skills, infrastructure) and real costs (exploitation, profit leakage, loss of control) to host countries.

1. Levels of Development

What actually is "development"?

Here's the thing most students get wrong straight away: development is not the same as being rich. Development means a country's progress towards a better quality of life and greater independence for its population. Quality of life includes things you can't put a price tag on — like happiness, security, and freedom — as well as things you can measure, like income and healthcare access.

Think of development as four interconnected "layers" of a person's life. Pull on one thread and the others move too:

These are interconnected — for example, higher income (economic) can mean better healthcare and environment (physical), which in turn affects happiness (psychological). It's a web, not four separate boxes.

The Cycle of Wealth

The cycle of wealth is described in the chapter as the key indicator of development. It's essentially a self-reinforcing loop: a stable, effective government helps the economy grow → as the economy grows, more people work and earn money → the government collects more tax from this → that tax (plus business profits) gets ploughed back into infrastructure, healthcare, education, and further growth → which fuels the next round of growth.

Notice this is a positive feedback loop — each stage feeds the next. But it also cuts the other way: if a government is unstable or corrupt, this cycle can break down, and a country can get trapped in a "cycle of poverty" instead.

Measuring National Income: GDP, GNP, GNI

These three measures are the traditional way economists measure a country's wealth. Don't panic about telling them apart perfectly — focus on understanding what they hide, because that's what exam questions actually probe.

Dividing by population matters because raw GDP varies hugely just because of country size — dividing by population lets you compare fairly between a huge country and a small one.

The big problem: GDP is an average, so it completely hides wealth disparity. Picture two countries with identical average GDP:

• Country A: lots of people in poverty, a tiny number of extremely wealthy people
• Country B: wealth spread much more evenly across everyone

Same GDP average — completely different lived reality. GDP also can't tell you what the money is spent on. A rebuilding effort after an earthquake actually makes GDP rise (because of all the construction activity) — but that doesn't mean people's quality of life has improved or that the country is "more developed."

GNP per capita is often a better comparison tool because it accounts for differing populations. But it has its own blind spot: it ignores cost of living — a dollar goes much further in Bangladesh than in the USA. To fix this, economists calculate GNP per capita at Purchasing Power Parity (PPP), which adjusts for what money can actually buy locally.

Even GNP per capita at PPP fails to show two crucial things: how wealth is distributed within a country (the wealth gap), and how much a government actually invests in its people.

Levels of development vary at local, national, and international scales — comparisons can be made using indicators like literacy, life expectancy, infant mortality, doctors per 1,000 people, energy consumption per capita, internet access, and car ownership.

The Human Development Index (HDI)

Created by the UN in 1990, HDI was designed specifically to fix the "GDP only measures money" problem. It combines four indicators:

• Life expectancy at birth
• Mean years of schooling for adults aged 25+
• Expected years of schooling for children starting school
• Gross National Income (GNI) per capita (PPP$)

Countries are grouped into four bands using HDI: Very High Human Development (VHHD), High Human Development (HHD), Medium Human Development (MHD), and Low Human Development (LHD).

The Gini Coefficient Index

HDI and GNP are both great at comparing between countries, but neither can tell you about disparities within a country. That's exactly the gap the Gini coefficient fills — it measures how unequally wealth is distributed.

The highest inequality currently is in South Africa, Central Africa, Namibia, Zambia, and Suriname. The lowest inequality is in the Czech Republic and Croatia.

Indices of Political Corruption

Corruption matters for development because money that should go to infrastructure, welfare, or development often ends up with wealthy elites instead — this erodes trust between governments and populations.

Transparency International ranks 180 countries out of a maximum score of 100 — the lower the corruption, the higher the score. Denmark, New Zealand, Finland, and Singapore score 85+/100 (lowest corruption). South Sudan, Syria, and Somalia score below 15/100 (highest corruption).

2. Inequalities in Development

Stages of Development

All countries move through similar stages over time. The UN identifies four main stages, moving up and to the right on a graph of economic development against time:

The Development Gap

The development gap is the difference in development levels between the least developed and most developed countries in the world. It doesn't just happen — it's caused by a whole web of interacting factors:

Differences Within Countries

The development gap isn't only between countries — it exists within countries too, whether developed, emerging, or developing. Development is often concentrated in particular regions rather than spread evenly.

Cumulative causation theory is the key explanation for why regional gaps widen over time. Here's the logic, step by step:

1. A new large business sets up in a "core" region.
2. This creates more jobs, attracting increased population and more skilled labour.
3. More businesses and investment arrive to meet the demands of the growing population.
4. More service industries appear, and average incomes rise.
5. This raises tax revenue, which funds increased investment — attracting even more skilled labour and businesses.

Meanwhile, the "periphery" (areas outside the core) suffers — skilled labour drains away towards the core, and investment concentrates where the growth already is. The gap between core and periphery widens.

Eventually, growth in the core region may stimulate growth in the periphery too, because the core creates demand for raw materials. There are three recognised stages of regional inequality:

• Pre-industrial stage: regional differences are at their lowest
• Period of rapid economic growth: regional differences increase sharply
• Regional economic convergence: wealth from the core starts spreading to other parts of the country

Causes of Regional Inequalities

3. Economic Sectors

An economic activity is the production, purchase, or selling of goods and services. Every job in the world can be grouped into one of four economic sectors:

4. Employment in Economic Sectors

Economic sectors aren't just a classification system — they're a genuine indicator of a country's development. We measure this two ways: how much each sector contributes to GDP, and what percentage of the population each sector employs.

The Clark-Fisher Sector Model

This model tracks how the balance between sectors shifts as a country develops through three phases:

• Pre-industrial: Primary sector dominates; secondary and tertiary sectors slowly increase.
• Industrial: Secondary sector's share of GDP/employment rises to become dominant, then starts to decrease. Primary keeps declining. Tertiary keeps rising.
• Post-industrial: Tertiary and quaternary sectors increase while secondary and primary decrease. Tertiary ends up dominating both employment and GDP.

Notice the pattern: the more developed a country, the smaller its primary sector and the larger its tertiary sector. A newly industrialised country (like China) tends to have fairly balanced amounts across each sector.

Causes of Changes Over Time

• Increasing mechanisation in agriculture reduces the number of jobs available in farming.
• People move to urban areas to find jobs in secondary and tertiary sectors.
• Increasing mechanisation and global change also decrease secondary employment in some countries (as machines replace factory workers too).
• Technological improvements increase tertiary and quaternary employment.

There's a clear, testable link between a country's employment structure and its broader development indicators (GDP, HDI, etc.) — the more a country shifts towards tertiary/quaternary work, the more developed it tends to be.

5. Globalisation

What is Globalisation?

Globalisation is where the world has become more interconnected through the processes of economics, culture, politics, trade, and tourism. Environmental globalisation counts too — think about how global warming affects the whole planet regardless of borders.

Globalisation itself is nothing new — trade between people, businesses, and countries has always existed. What's changed is the speed. Modern transport and communications have made trading and interaction almost instantaneous, a phenomenon called time-space compression.

As transport got faster, the "effective size" of the world shrank — the same journey that once took months now takes hours. Globalisation has effectively removed the political borders of countries, making them more interdependent, with powerful countries and business empires now able to affect decisions in other parts of the world. This has led to a rise in global inequality.

Drivers of Globalisation

Four major developments have driven these network flows across the globe:

• Appearance of large Transnational Corporations (TNCs)
• Growth of regional economies and trading blocs
• Development of modern transport networks
• Advances in IT and communications — particularly the WWW and the internet

Other contributing factors include low labour costs and less regulation in emerging countries, improvements in internet/mobile communications, improvements in transport (container ships — faster and cheaper), and freedom of trade promoted by the World Trade Organisation.

The Global Production Chain

These developments have created the global economy — almost every country in the world is "networked" in some way. There are five different network flows that make this happen:

These flows combine to form the global production, supply, or commodity chain, pulling raw materials through stages of production to create a finished product. At every stage, value is added. Despite the huge distances and number of countries involved, the finished product is often still cheaper than making it in one place — this is called economies of scale (the cost per item falls the larger the scale of production). Container ships reduce transport costs, and labour is often cheaper with fewer legal restrictions in developing/emerging countries.

Global Investment

Investment isn't just monetary — it can also be in people, research, or products. Foreign investment is when individuals or firms from abroad invest their resources in another country. This takes several forms:

• Service investment — e.g. call centres located in India: investment is made building the centre and paying taxes, local people are trained and employed, and the service benefits the "donor" country (e.g. the UK).
• Manufacturing relocation — moving production from developed to developing/emerging countries, e.g. investment in China to manufacture goods that are then shipped back to Germany.
• Investment in people — either for cheap labour (e.g. Dubai's construction attracting Indian migrants) or for expertise (e.g. a specialist surgeon moving from the USA to Australia), or for R&D (e.g. Tesla's investment in fuel-efficient/electric car technology).
• Aid investment — e.g. rebuilding funding after a disaster or conflict. Aid can go directly to governments (risking corruption) or directly to affected areas as goods/services (e.g. refugee camps after a natural hazard).

Transnational Corporations (TNCs)

Transnational Corporations (TNCs) operate in foreign countries individually and not through a centralised management system. TNCs and countries are the two main elements of the global economy — while governments and global institutions set the rules, the main driver of investment is TNCs themselves.

TNCs directly invest in one country and later expand into others (usually developing countries) to take advantage of lower labour costs and government incentives. Crucially, TNCs may have no loyalty to the values of the country they operate in — they exist purely to expand their business.

Impacts of Globalisation on People — Local, National & International

Globalisation has generated both benefits and costs, but they aren't distributed evenly — the poorest have tended to benefit the least. That said, it can be argued the poorest would actually be worse off without globalisation, since they'd lose job opportunities and income from inward TNC investment. Countries like China, Brazil, and India have transformed from developing to emerging economies largely because of it.

Impacts of Globalisation on Countries — TNC Benefits & Costs

TNCs link raw materials with manufacturers, R&D opportunities, and global markets — global marketing establishes them as "the brand" to have. But TNCs answer to shareholders and must maximise profits, usually at the cost of their workers.

What to Memorise

Concepts Checklist

Exam Tips & Common Mistakes