Lesson-6-Phases-of-Economic-Growth.pptx

Economic

1. PHASES OF ECONOMIC DEVELOPMENT are the distinct stages involved in the total process of economic development in a particular country

2. OBJECTIVES: Define economic development Differentiate the phases of economic development and its impact to business environment Appreciate the importance of studying economic development

3. ACTIVITY: Instruction: Based on the images below, identify which among the picture shows; an economic growth or economic development. Explain.

4. Key Differences between Economic Growth and Economic Development Economic growth means change in value of goods and conomic growth services over time normally for a period of one year. Economic development means changes in the socio-economic structure of country that relates to growth to human development indexes (HDIs), decrease in equality, changes in standard of living of public

5. Economic growth is measured through gross domestic product (GDP), GDP per capita, gross national product (GNP), and net national product (NNP). Economic development is measured through human development index (HDI), gender-related index (GDI), human poverty index (HPS), literacy rate, infant mortality, socio-economic development

6. Economic growth brings only quantitative changes in the economy while Economy development brings both qualitative and quantitative changes in the economy

7. To measure the performance of two countries economic growth is used as a parameter while economic development is only used to measure the progress of developing countries or nations. ● Economic growth deals with the

8. Economic growth deals with the change in the country’s economy output while economic development deals with the structural changes in the economy.

9. Phases/Stages of Economic Development 1. Traditional Society The first stage of Rostow's model and the one in which societies begin. This stage was prevalent prior to the 1700s, when most societies operated in a relatively stable state and productivity didn't rise or fall dramatically. Trade existed, such as the spice route between Asia and Europe, but it was timely, costly, and more of a luxury than a necessity. Technology was very limited.

10. 1. Traditional Society Humans had access to little more than handmade tools, transportation, and the printing press. That meant that producing goods was very human capital intensive, which created large gaps in income inequality. These societies also relied heavily on agricultural labor because a tremendous amount of labor was required to grow enough food to sustain the societies.

11. 1. Traditional Society This stage is characterized by a subsistent, agricultural-based economy with intensive labor and low levels of trading, and a population that does not have a scientific perspective on the world and technology..

12. 2. Preconditions for Take-Off A period of transition between the traditional society and a society that takes off, and for a certain time that society is establishing the preconditions for take-off. It is mostly marked by an increase in productivity, such as was found in Europe during the 1700s and 1800s. A number of factors came together to make productivity increase; for example, population hit a critical mass that made agriculture take up such a high percentage of labor, which provided opportunities for the establishment of educational institutions, banks, and a market for luxury goods.

13. 2. Preconditions for Take-Off Here, a society begins to develop manufacturing and a more national/international—as opposed to regional—outlook. This generally described as “prerequisites for rapid economic growth.” It is the intermediary step between a traditional, agrarian society and industrial explosion. It primarily involves external investment and a much greater exploitation of natural resources.

14. 3. Take-Off When the preconditions for take-off are met, a society can take off. Educated individuals start inventing new processes and tools, and access to capital through financial markets and banks make it possible to produce goods and services on a larger scale. This requires a different type of skill set from human laborers, so the economy shifts from agriculture to production.

15. 3. Take-Off This increases wages for everyone, taking the economic structure from a structure of kings and servants to a wealthy class, middle class, and lower class. A lower class still exists at this stage, either because of social norms that discriminate against people or simply because the number of middle class jobs are fewer than the total number of people.

16. 3. Take-Off Rostow describes this stage as a short period of intensive growth, in which industrialization begins to occur, and workers and institutions become concentrated around a new industry. This is where the societies move toward full industrialization in certain specific ways, such as technological innovations, urbanization, production of secondary goods such as textiles, and intense growth in specific sectors.

17. 4. Drive to Maturity The next of Rostow's five stages has a general length of time associated with it, the drive to maturity. It is about a 60-year period between the take-off and the final stage, the age of mass consumption. During this short period, an economy (the collective of all consumers and producers) is able to reinvest 10-20% of what it creates into more production.

18. 4. Drive to Maturity Processes are improved, quality of life is improved, and technology and new ideas continue to become more central to society, while the cost of producing the needs for survival (like food and shelter) becomes a smaller part of the economy. More importantly, the middle class grows at the quickest rate of any economic class.

19. 4. Drive to Maturity For the modern-day U.S., this stage really took place from after WWI, from about 1915, until around 1980, when the technology era began. This stage takes place over a long period of time, as standards of living rise, the use of technology increases, and the national economy grows and diversifies.

20. 5. Age of Mass Consumption After the drive to maturity, an economy reaches maturity and begins the final stage, the age of mass consumption. The quantity and quality of products and services increase. A society or economy in this stage is able to export production, bringing in money from other countries that help the economy grow larger beyond actual consumption.

21. 5. Age of Mass Consumption Rostow believed that Western countries, most notably the United States, occupied this last "developed" stage. Here, a country's economy flourishes in a capitalist system, characterized by mass production and consumerism.

22. 5. Age of Mass Consumption In the age of high mass-consumption, a society is able to choose between concentrating on military and security issues, on equality and welfare issues, or on developing great luxuries for its upper class..

23. ASSIGNMENT : Scenario: World leaders gathered for the Millennium Summit, and thus adopted the United Nations Millennium Declaration. They had committed their nations to a global partnership in the pursuit of Millennium Development Goals (MDG). 1. Make a research on the goals of MDG to be fulfilled to a global partnership. Scenario: In the Philippines, the National Economic and Development Authority (NEDA) has laid out the Philippine Development Plan (PDP) 2011-2016, which “adopts a framework of inclusive growth, which is high growth that is sustained, generates mass employment, and reduces poverty.” The PDP is focused on economic and industrial goals of the Philippines but also the social, environmental, and peace and security aspects. 2. Research also on the focused of the PDP to sustain a high growth, generate a mass employment and reduces poverty? 3. What are the four main Economic Forces or Trends that affect modern business markets?