Edexcel A-Level Economics A (9EC0) · Theme 4
Specification points
- Measures of development; factors influencing growth and development.
- Barriers to growth and development.
- Strategies to promote growth and development (market-oriented and interventionist).
Measuring development
Development is broader than growth. Measures include GDP/GNI per capita (PPP), the Human Development Index (HDI) — combining income, health (life expectancy) and education — and other indicators such as access to clean water and mobile phones.
Factors and barriers
Growth and development depend on savings and investment, human capital, infrastructure, institutions, trade and political stability. Common barriers include:
- Primary product dependency — reliance on volatile commodity prices.
- The savings gap (Harrod-Domar) — low incomes → low savings → low investment.
- Foreign currency gap and high debt.
- Poor infrastructure, human capital and institutions; corruption and conflict.
- Capital flight and rapid population growth.
Key definitions
| Term | Definition |
|---|---|
| HDI | A composite measure of income, health and education. |
| Primary product dependency | Reliance on exports of raw materials with volatile prices. |
| Savings gap | A shortfall of domestic savings needed to fund investment. |
| Microfinance | Small loans to poor entrepreneurs lacking access to banks. |
Strategies
- Market-oriented — trade liberalisation, promoting foreign direct investment (FDI), removing subsidies, privatisation, microfinance.
- Interventionist — investment in human capital and infrastructure, managed exchange rates, protecting infant industries, development of tourism.
- Other — aid, debt relief, and the roles of the World Bank and IMF.
Each has trade-offs: FDI brings capital but may exploit resources; aid can help or create dependency.
Worked example
A developing country relies on exporting one crop (primary product dependency). When world prices crash, export earnings and investment collapse. Diversifying into manufacturing and services, supported by investment in education and infrastructure, reduces this vulnerability — but requires funding the economy lacks (the savings gap), which FDI or aid might fill.
Common exam mistakes
- Equating development with growth alone.
- Listing barriers without linking them to specific strategies.
- Ignoring the trade-offs of aid and FDI.
Exam technique
Use the HDI and specific barriers, then match strategies to barriers and evaluate their costs (dependency, exploitation, conditionality).
Quick revision
- Development measured by HDI, not just GDP.
- Barriers: primary product dependency, savings gap, debt, weak institutions.
- Strategies: market-oriented (FDI, trade) vs interventionist (human capital, infrastructure).