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Developed Country

Developed country

A developed country is a nation that enjoys a relatively high standard of living through a strong high-technology diversified economy. Most countries with a high per capita gross domestic product (GDP) are considered developed countries. Some countries, however, have achieved a (usually temporarily) high GDP through natural resource exploitation (e.g., Nauru through phosphate extraction) without developing the diverse industrial and service-based economy necessary for "developed" status. Synonyms include industrialised countries, more economically developed countries (MEDC) and the First World. Other terms sometimes used to describe the developed/developing country dichotomy are first world/third world (the term second world referred to communist states during the Cold War); North/South; and industrialized countries/non-industrialized countries. The term Western countries has a similar meaning, but its connotations restrict its usage, especially in Asia. Different observers and theorists often see different reasons for why certain countries (and not others) enjoy a high level of economic development. Many argue that economic development requires some combination of representative government (or democracy), a free market economic model, and a general lack of corruption. Some hold that rich countries grew wealthy by exploitation of poorer countries in the past, through imperialism and colonialism, or in the present, through the process of globalization. According to the United Nations Statistics Division: :In the United Nations system there is no established convention for the designation of "developed" and "developing" countries or areas. In common practice, Japan in Asia, Canada and the United States in North America, Australia and New Zealand in Oceania, and Europe are considered "developed" regions or areas. In international trade statistics, the Southern African Customs Union is also treated as a developed region and Israel as a developed country; and countries of eastern Europe and the former U.S.S.R. countries in Europe are not included under either developed or developing regions. The UN HDI is a statistical measure that gauges a country's level of human development. Countries with an HDI of 0.8 or more — largely corresponding to what the conventional definition of being a 'developed' country is — exhibit high development, and those with an HDI between 0.6 and 0.8 (including many of the former Soviet and Eastern Bloc states) exhibit moderate development.

Developed countries

Organizations such as the World Bank, the International Monetary Fund (IMF) and the Central Intelligence Agency, generally agree that the group of developed countries include: The following European Union member states: The following non-EU European countries: The following non-European countries:

Other cases

- Some organizations consider the remaining countries of the European Union — those added in 2004, especially Cyprus, Malta, and Slovenia — among the developed countries, but these mostly former-Communist countries are rather newly industrialized nations and some of them (such as Latvia, Lithuania and Poland) remain significantly less affluent than EU-15 countries. All European Union members, however, have a GDP per capita greater than the global average.
- South Korea, another relatively newly industrialized country, does not consider itself as developed. This has led to accusations that it prefers to avoid the obligations placed upon developed nations, and some organizations do not consider it developed.
- Singapore similarly meets most benchmarks of a developed country, but its authorities have consistently resisted being classified as such, citing its lack of development outside the economic and physical infrastructural fields. Like South Korea, this has also led to speculation that the young country is reluctant in playing a bigger role in international humanitarian efforts expected of developed countries.
- Taiwan, Hong Kong and Macau are considered developed by some organizations; however, the People's Republic of China, a developing country, claims the land of the first, and exercises sovereignty over the latter two.
- South Africa and Turkey are considered developed by some sources; however their GDP per capita clearly places them among the developing countries.
- Despite their high per capita GDP, Brunei and the Middle Eastern countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates are generally not considered developed countries because their economies depend overwhelmingly on oil production and export. Some of these countries, especially Bahrain, have begun to diversify their economies and democratize. Similarly, the Bahamas, Barbados, Antigua and Barbuda, Trinidad and Tobago, and Saint Kitts and Nevis enjoy a high per capita GDP, but these economies depend overwhelmingly on the tourist industry.

References

- [http://www.worldbank.org/data/countryclass/classgroups.htm#High_income World Bank]
- [http://www.cia.gov/cia/publications/factbook/appendix/appendix-b.html The World Factbook]
- [http://unstats.un.org/unsd/cdb/cdb_dict_xrxx.asp?def_code=491 United Nations Statistics Division] (definition)
- [http://unstats.un.org/unsd/mi/developed_new.htm United Nations Statistics Division] (developed regions)
- [http://www.imf.org/external/pubs/ft/weo/2005/01/data/groups.htm#1 IMF]

Standard of living

The Standard of living refers to the quality and quantity of goods and services available to people. It is generally measured by real (i.e. inflation adjusted) income per person, although sometimes other measures may be used; examples are access to certain goods (such as number of refrigerators per 1000 people), or measures of health such as life expectancy. The idea of a 'standard' may be contrasted with the quality of life, which takes into account not only the material standard of living, but also other more subjective factors that contribute to human life, such as leisure, safety, cultural resources, social life, mental health, environmental quality issues etc. More complex means of measuring well-being must be employed to make such judgements, and these are very often political, thus controversial. Even among two nations or societies that have similar material standards of living, quality of life factors may in fact make one of these places more attractive to a given individual or group. However, there can be problems even with just using numerical averages to compare material standards of living, as opposed to, for instance, a Pareto index. Standards of living are perhaps inherently subjective. As an example, countries with a very small, very rich upper class and a very large, very poor lower class may have a high mean level of income, even though the majority of people have a low "standard of living". This mirrors the problem of poverty measurement, which also tends towards the relative. This illustrates how distribution of income can disguise the actual Standard of living.

External links

- [http://www.econlib.org/library/Enc/IndustrialRevolutionandtheStandardofLiving.html Industrial Revolution and the Standard of Living] by Clark Nardinelli Category:Socioeconomics

Gross domestic product

Gross Domestic Product (GDP) is the total value of final goods and services produced within a country's borders in a year. It is one of the measures of national income and output. It may be used as one indicator of the standard of living in a country, but there may be limitations with this view. GDP is often abbreviated as Y.

Definition

GDP is defined as the total value of goods and services produced within a territory during a specified period (or, if not specified, annually, so that "the UK GDP" is the UK's annual product). GDP differs from gross national product (GNP) in excluding inter-country income transfers, in effect attributing to a territory the product generated within it rather than the incomes received in it. Whereas nominal GDP refers to the total amount of money spent on GDP, real GDP adjusts this value for the effects of inflation in order to estimate the actual quantity of goods and services making up GDP. The former is sometimes called "money GDP," while the latter is termed "constant-price" or "inflation-corrected" GDP -- or "GDP in base-year prices" (where the base year is the reference year of the index used). See real vs. nominal in economics. GDP measures only final goods and services, that is those goods and services that are consumed by their final user, and not used as an input into other goods. Measuring intermediate goods and services would lead to double counting of economic activity within a country. This distinction also removes transfers between individuals and companies from GDP. For instance, buying a Renoir doesn't boost GDP by $20m. (If it did, buying and selling the same painting repeatedly to a gallery would imply great wealth rather than penury.) Note that the Renoir purchase would affect the GDP figure, but not as a $20m receipt, the auctioneer's fees would appear in GDP as consumption expenditure, because this is a final service. The most common approach to measuring and understanding GDP is the expenditure method: : GDP = consumption + investment + exports − imports Consumption and investment in this equation are the expenditure on final goods and services. The exports minus imports part of the equation (often called net exports) then adjusts this by subtracting the part of this expenditure not produced domestically (the imports), and adding back in domestic production not consumed at home (the exports). Economists (since Keynes) have preferred to split the general consumption term into two parts; private consumption, and public sector spending. Two advantages of dividing total consumption this way in theoretical macroeconomics are:
- Private consumption is a central concern of welfare economics. The private investment and trade portions of the economy are ultimately directed (in mainstream economic models) to increases in long-term private consumption.
- If separated from endogenous private consumption, Government consumption can be treated as exogenous, so that different government spending levels can be considered within a meaningful macroeconomic framework. Therefore GDP can be expressed as: : GDP = private consumption + government + investment + net exports : (or simply GDP = C + G + I + NX)

The components of GDP

Each of the variables C, I, G, and NX :
- C is private consumption (or Consumer expenditures) in the economy. This includes most expenditures of households such as food, rent, medical expenses and so on.
- I is defined as business investments in capital. Examples of investment by a business include construction of a new mine, purchase of software, or purchase of machinery and equipment for a factory. 'Investment' in GDP is meant very specifically as non-financial product purchases. Buying financial products is classed as saving in macroeconomics, as opposed to investment (which, in the GDP formula is a form of spending). The distinction is (in theory) clear: if money is converted into goods or services, without a repayment liability it is investment. For example, if you buy a bond or share the ownership of the money has only nominally changed hands, and this transfer payment is excluded from the GDP sum. Although such purchases would be called investments in normal speech, from the total-economy point of view, this is simply swapping of deeds, and not part of the real economy or the GDP formula.
- G is the sum of government expenditures on final goods and services. It includes salaries of public servants, purchase of weapons for the millitary, and any investment expenditure by a government. It does not include any transfer payments, such as social security or unemployment benefits. The relative size of government expenditure compared to GDP as a whole is critical in the theory of crowding out, and the Keynesian cross.
- NX are "net exports" in the economy (gross exports - gross imports). GDP captures the amount a country produces, including goods and services produced for overseas consumption, therefore exports are added. Imports are subtracted since imported goods will be included in the terms G, I, or C, and must be deducted to avoid counting foreign supply as domestic. It is important to understand the meaning of each variable precisely in order to:
- Read national accounts.
- Understand Keynesian or neo-classical macroeconomics.

Examples of GDP component variables

Examples of C, I, G, & NX: If you spend money to renovate your hotel so that occupancy rates increase, that is private investment, but if you buy shares in a consortium to do the same thing it is saving. The former is included when measuring GDP (in I), the latter is not. However, when the consortium conducted its own expenditure on renovation, that expenditure would be included in GDP. If the hotel is your private home your renovation spending would be measured as Consumption, but if a government agency is converting the hotel into an office for civil servants the renovation spending would be measured as part of public sector spending (G). If the renovation involves the purchase of a chandelier from abroad, that spending would also be counted as an increase in imports, so that NX would fall and the total GDP is unaffected by the purchase. (This highlights the fact that GDP is intended to measure domestic production rather than total consumption or spending. Spending is really a convenient means of estimating production.) If you are paid to manufacture the chandelier to hang in a foreign hotel the situation would be reversed, and the payment you receive would be counted in NX (positively, as an export). Again, we see that GDP is attempting to measure production through the means of expenditure; if the chandelier you produced had been bought domestically it would have been included in the GDP figures (in C or I) when purchased by a consumer or a business, but because it was exported it is necessary to 'correct' the amount consumed domestically to give the amount produced domestically. (As in Gross Domestic Product.).

Difference from Aggregate expenditure

An alternative measure of the economy to GDP is the Aggregate expenditure measure, which is identical to GDP except that it excludes items produced but not purchased (net inventory/stock level growth). If the economy produces more goods than are sold, the increase in inventory would generally be included in the GDP figure (as "Investment"). GDP counts these changes in inventory levels as investment.

The GDP Income account

Another way of measuring GDP is to measure the total income payable in the GDP income accounts. This should provide the same figure as the expenditure method described above. The formula for GDP measured using the income approach, called GDP(I), is: : GDP = Compensation of employees + Gross operating surplus + Gross mixed income + Taxes less subsidies on production and imports
- Compensation of employees (COE) measures the total remuneration to employees for work done. It includes wages and salaries, as well as employer contributions to social security and other such programs.
- Gross operating surplus (GOS) is the surplus due to owners of incorporated businesses. Often called profits, although only a subset of total costs are subtracted from gross output to calculate GOS.
- Gross mixed income (GMI) is the same measure as GOS, but for unincorporated businesses. This often includes most small businesses. The sum of COE, GOS and GMI is called total factor income, and measures the value of GDP at factor (basic) prices.The difference between basic prices and final prices (those used in the expenditure calculation) is the total taxes and subsidies that the Government has levied or paid on that production. So adding taxes less subsidies on production and imports converts GDP at factor cost to GDP(I).

Measurement

International Standards

The international standard for measuring GDP is contained in the book System of National Accounts (1993), which was prepared by representatives of the International Monetary Fund, European Union, Organisation for Economic Co-operation and Development, United Nations and World Bank. The publication is normally referred to as SNA93, to distinguish it from the previous edition published in 1968 (called SNA68). SNA93 sets out a set of rules and procedures for the measurement of national accounts. The standards are designed to be flexible, to allow for differences in local statistical needs and conditions.

National Measurement

Within each country GDP is normally measured by a national government statistical agency, as private sector organisations normally do not have access to the information required (especially information on expenditure and production by governments).
- Australia: Australian Bureau of Statistics (ABS).
- Austria: [http://www.statistik-austria.at Statistik Austria].
- Canada: Statistics Canada (StatCan).
- Russia: [http://www.gks.ru/eng/ Federal State Statistics Service]
- United States: Bureau of Economic Analysis (BEA). GDP can measure spending on all goods and services. GDP can also measure all income earned.

Interest rates

Net interest expense is a transfer payment in all sectors except the financial sector. Net interest expenses in the financial sector is seen as production and value added and is added to GDP..

Cross-border comparison

The level of GDP in different countries may be compared by converting their value in national currency according to either
- current currency exchange rate: GDP calculated by exchange rates prevailing on international currency markets
- purchasing power parity exchange rate: GDP calculated by purchasing power parity (PPP) of each currency relative to a selected standard (usually the United States dollar). The relative ranking of countries may differ dramatically between the two approaches.
- The current exchange rate method converts the value of goods and services using global currency exchange rates. This can offer better indications of a country's international purchasing power and relative economic strength. For instance, if 10% of GDP is being spent on buying hi-tech foreign arms, the number of weapons purchased is entirely governed by current exchange rates, since arms are a traded product bought on the international market (there is no meaningful 'local' price distinct from the international price for high technology goods).
- The purchasing power parity method accounts for the relative effective domestic purchasing power of the average producer or consumer within an economy. This can be a better indicator of the living standards of less-developed countries because it compensates for the weakness of local currencies in world markets. The PPP method of GDP conversion is most relevant to non-traded goods and services. There is a clear pattern of the purchasing power parity method decreasing the disparity in GDP between high and low income (GDP) countries, as compared to the current exchange rate method. This finding is called the Penn effect. For more information see measures of national income.

GDP and standard of living

GDP per capita is often used as an indicator of standard of living in an economy. While this approach has advantages, many criticisms of GDP focus on its use as an indicator of standard of living. The major advantages to using GDP per capita as an indicator of standard of living are that it is measured frequently, widely and consistently. Frequently in that most countries provide information on GDP on a quarterly basis, which allows a user to spot trends more quickly. Widely in that some measure of GDP is available for practically every country in the world, which allow crude comparisons between the standard of living in different countries to be compared. And consistently in that the technical definitions used within GDP are relatively consistent between countries, and so there can be confidence that the same thing is being measured in each country. The major disadvantage of using GDP as an indicator of standard of living is that it is not, strictly speaking, a measure of standard of living. GDP is intended to be a measure of particular types of economic activity within a country. Nothing about the definition of GDP suggests that it is necessarily a measure of standard of living. For instance, in an extreme example, a country which exported 100 per cent of its production would still have a high GDP, but a very poor standard of living. The argument in favour of using GDP is not that it is a good indicator of standard of living, but rather that (all other things being equal) standard of living tends to increase when GDP per capita increases. This makes GDP a proxy for standard of living, rather than a direct measure of it. There are a number of controversies about this use of GDP.

Controversies

Although GDP is widely used by economists, its value as an indicator has also been the subject of controversy. Criticisms of GDP include:
- GDP doesn't take into account the black economy, where the money spent isn't registered, and the non-monetary economy, where no money comes into play at all, resulting in inaccurate or abnormally low GDP figures. For example, in countries with major business transactions occurring informally, portions of local economy are not easily registered. Bartering may be more prominent than the use of money, even extending to services (I helped you build your house ten years ago, so now you help me).
- Very often different calculations of GDP are confused among each other. For cross-border comparisons one should especially regard whether it is calculated by purchasing power parity method or current exchange rate method.
- Quality of life is determined by many other things than physical goods (economic or not).
- In 'poor' countries, it may just be that everything is cheap, except for a few western goodies. So one may have little money, but if everything is cheap that evens out nicely. Thus, the standard of living may be quite reasonable, it's just that there are, say, fewer TV-sets, meaning people have to share them (which may actually increase the quality of life in a social sense).
- If many products are of low quality in terms of durability then people will have to (unnecessarily) buy them again and again, thus boosting GDP without increasing their satisfaction. (On the other hand, if products were very durable then that would hamper innovation because people would be less inclined to buy new products, giving producers less of an incentive to develop them.) Similarly, if many products are of low quality in terms of usability and people don't know beforehand which products are the best choice for them, then they will either have to make do with an inferior product or buy again and again until they find something more satisfying. Furthermore, if products have a short lifespan in the market (eg because of fast innovation or fashion) then this process starts all over again when people need a replacement. Note that in a capitalist society these factors working together can easily cause a very high GDP combined with low customer satisfaction.
- GDP doesn't measure the sustainability of growth. A country may achieve a temporary high GDP by over-exploiting natural resources or by misallocating investment. Oil rich states can sustain high GDPs without industrializing, but this high level will not be sustainable past the point that the oil runs out. Economies experiencing a housing bubble or a low private saving rate tend to grow faster due to higher consumption, at the expense of reduced pensions in future.
- GDP counts work that produces no net change. For instance, a hurricane destroying thousands of homes would not be counted by GDP, but the rebuilding of those homes would be. A good recent example would be the aftermath of 2005 Katrina hurricane, which is poised to become the most expensive hurricane in history. GDP would capture the rebuilding activity and suggest a rising living standard, but we're only working toward restoring what was lost for the most part. Therefore, GDP growth would over-estimate the increase in the standard of living. See Negative externalities.
- As a measure of actual sale prices, GDP does not capture the economic surplus between the price paid and subjective value received.
- the annual growth of real GDP is adjusted by using the "GDP deflator", which tends to underestimate the objective differences in the quality of manufactured output over time. (The deflator is explicitly based on subjective experience when measuring such things as the consumer benefit received from computer-power improvements since the early 1980s). Therefore the GDP figure may underestimate the degree to which improving technology and quality-level are increasing the real standard of living.
- Some economists such as Herman Daly consider GDP to be a poor measure even of material well being, especially in developed countries. They argue that GDP only measures production and consumption, not however the level of utility people gain from producing and consuming. This idea is expressed in the theory of uneconomic growth, which states that GDP growth above a certain "economic limit" actually decreases material well being. An extreme example of this is a major war. Historically, GDP growth was often boosted in war time while material living standards fell considerably.
- GDP does not take inequality into account. Some economists have attempted to create a replacement for GDP called the Genuine Progress Indicator (GPI), which attempts to address many of the above criticisms.

Lists of countries by their GDP

- List of countries by GDP (nominal)
- List of countries by GDP (PPP)
- List of countries by GDP (nominal) per capita
- List of countries by GDP (PPP) per capita
- List of African countries by GDP
- List of Asian countries by GDP
- List of European countries by GDP

External links

- [http://www.wie.org/business Frank Dixon from Innovest Partners writes about Why Gross National Happiness is a better indicator of National Happiness and the failures of GNP and Western Economic Systems]
- [http://www.abs.gov.au/Ausstats/abs@.nsf/66f306f503e529a5ca25697e0017661f/3f880ee1d366198cca2569a400061616!OpenDocument Australian Bureau of Statistics Manual on GDP measurement]
- [http://perso.wanadoo.fr/pgreenfinch/eoblpib.htm GDP-indexed bonds]
- [http://www.bea.doc.gov/bea/dn/home/gdp.htm Bureau of Economic Analysis GDP data]

Data

- Complete listing of countries by GDP: [http://aol.countrywatch.com/includes/grank/globrank.asp?TBLS=PPP+Method+Tables&vCOUNTRY=17&TYPE=GRANK Purchasing Power Parity Method] and [http://aol.countrywatch.com/includes/grank/gdpnumericcer.asp?TYPE=GRANK&TBL=NUMERICCER&vCOUNTRY=17 Current Exchange Rate Method ]

Articles

- [http://dieoff.org/page11.htm What's wrong with the GDP?]
- [http://ingrimayne.saintjoe.edu/econ/Measuring/GNP2.html Limitations of GDP Statistics by Schenk, Robert.]
- [http://pages.stern.nyu.edu/~nroubini/MEASURE.HTM whether output and CPI inflation are mismeasured, by Nouriel Roubini and David Backus, in Lectures in Macroeconomics]
- [http://william-king.www.drexel.edu/top/prin/txt/EcoToC.html Ch. 22. Measuring the National Economy, by Dr. Roger A. McCain] Category:Economic indicators Category:Macroeconomics Category:Socioeconomics ko:국내총생산 ja:国内総生産 simple:Gross Domestic Product th:ผลิตภัณฑ์มวลรวม

Nauru

The Republic of Nauru (pronounced //), formerly known as Pleasant Island, is an island republic in the South Pacific Ocean. It is one of the world's smallest independent countries both in terms of population and land area and the smallest independent republic in both terms. It is also the smallest non-European country (in terms of land area). Much of its past prosperity derived from the large amount of phosphate deposits on the island, believed to be either of guano or of marine origin. Superphosphate is used as a fertilizer around the world in aerial topdressing and the majority of it has been exported to Australia. With the exhaustion of the phosphate supplies, Nauru faces an uncertain future. In the 1990s, it tried to gain new sources of income by introducing itself as a tax haven, but this story came to an end in July 2004. Nauru currently houses a detention centre, which holds and processes asylum seekers as part of Australia's Pacific Solution.

History

Pacific Solution Nauru was first settled by Polynesian and Melanesian settlers. The first European to arrive was Captain John Fearn who was a whale hunter in 1798, but Nauru continued as an independent island society, reigned by a king (the most widely known being King Auweyida), until it was annexed by Germany in 1888 to German New Guinea. Mining of its extensive phosphate reserves began in 1905. Following World War I, Nauru became a League of Nations Mandate territory in 1920, administered by Australia. In 1947, a trusteeship was approved by the United Nations. Nauru achieved independence in 1968. The founding president was Hammer DeRoburt. Nauru is a special member of the Commonwealth and joined the United Nations as a member state in 1999. In 2001, the MV Tampa, a ship which had rescued 460 refugees (from various countries including Afghanistan) from a stranded 20-metre boat and was seeking to dock in Australia, was diverted to Nauru as part of the Pacific Solution. The refugees were housed in a detention center in Nauru. As of 2005, all women and children have been granted asylum in Australia. Only 2 Iraqi men, who have been deemed a security risk by the ASIO, remain.[http://www.news.com.au/story/0,10117,17112734-29277,00.html]

Politics

ASIO The 18-member Parliament is elected every three years. The Parliament elects a president from amongst its members, who appoints a Cabinet of five to six people. The President is both the head of state and head of government. There is a loose multiparty system; the two main parties are the Democratic Party and Nauru Party (informal). Between 1999 and 2003, a series of no-confidence votes and elections resulted in two people, René Harris and Bernard Dowiyogo, leading the country for alternating periods. Dowiyogo died in office on March 10, 2003 in Washington, DC after heart surgery. Ludwig Scotty was elected President on May 29, 2003; however, in August 2003 there was another no confidence vote. Harris regained support and was re-elected president. On October 1, 2004, Scotty declared a state of emergency and dissolved parliament after it failed to pass a national budget. On June 1, 2005 Nauru severed diplomatic ties with the People's Republic of China and re-established links with Taiwan (Republic of China), which had existed for 22 years prior to 2003. Taiwan (Republic of China)

Districts

Nauru has 14 districts:
- Aiwo
- Anabar
- Anetan
- Anibare
- Baiti
- Boe
- Buada
- Denigomodu
- Ewa
- Ijuw
- Meneng
- Nibok
- Uaboe
- Yaren

Geography

Yaren Nauru is a small phosphate rock island in the South Pacific Ocean, south of the Marshall Islands. The island is a raised atoll, with a surrounding reef exposed at low tide. Most of the population live on the narrow coastal belt. A central plateau, covering approximately four-fifths of the land area, rises 70 metres above sea level. There are limited natural fresh water resources. Roof storage tanks collect rainwater, but islanders are mostly dependent on a single, aging desalination plant. Intensive phosphate mining during the past 90 years - mainly by a UK, Australia, and New Zealand consortium - has left the central 90% of Nauru a wasteland and threatens limited remaining land resources. Nauru's climate is extremely humid year-round because of its proximity to the Equator.

Economy

Equator Equator Equator Revenues of Nauru have come from exports of phosphates, but reserves are now almost exhausted. Phosphate production has declined since 1989, as demand has fallen in traditional markets and as the marginal cost of extracting the remaining phosphate increases, making it less internationally competitive. While phosphates previously gave Nauruans one of the highest per capita incomes in the Third World, few other resources exist, with most necessities being imported, including fresh water from Australia. The rehabilitation of mined land and the replacement of income from phosphates are serious long-term problems. The government has been borrowing heavily to finance fiscal deficits. Another source of revenue was office rents from Nauru House, one of the tallest buildings in Melbourne, built on the profits from phosphates. Unfortunately, in the 1990s, mismanagement and corruption ruined the once-substantial savings of the island government. The huge earnings from the phosphates mining have been wasted, and now Nauru faces a very uncertain future. In November 2004, in an effort to pay off some Nauru's creditors, the nation's largest assets in Melbourne, including Nauru House, were sold for over $150 million. In the 1990s, Nauru introduced itself as a tax haven, soon becoming one of the favourite spots for dirty money of the Russian mafia. A no-questions-asked policy enabled 70 billion dollars of assets belonging to Russian gangsters to be funneled to Nauru (an estimate by Central Bank of the Russian Federation). This led the FATF to identify Nauru as one of fifteen non-cooperative countries in its fight against money laundering. For example, a bank could be established with as little as $25,000 without visiting the island or maintaining records. At present, Nauru's days as a banking centre are waning, with anti-avoidance legislation having been introduced and foreign hot money leaving the country. In October 2005 this legislation - and its effective enforcement - led the FATF the lifting of the "non-cooperative" designation. Nauru is currently involved in an Australian lawsuit against the United States over a failed underground agreement. Allegedly, representatives of the United States offered billions of dollars worth of economic recovery to the island. In exchange, Nauru enacted legislation limiting the efficacy of overseas money laundering and tax evasion. Simultaneously, they established a Nauruan "stooge" embassy in China (actually functioning under United States control), assisting defecting North Korean scientists and officials across the border. This supposedly included Kyong Won-ha, the scientist allegedly responsible for much of Pyongyang's nuclear program. This initiative was termed "Operation Weasel." When news of this agreement surfaced after Nauru faithfully followed through with the necessary legislation and the preliminaries of the embassy (which rightfully drew suspicion from China as it was staffed entirely by westerners), the United States responded that the agents who made the deal with Nauru never had the authority to make such a contract, and Nauru has not yet received the promised aid. Nauru's case against the United States is still pending, but preliminary judgments favor the island nation over the superpower.

Demographics

The official language is Nauruan. English is widely understood, spoken, and used for most government and commercial purposes. The main religion is Christianity (two-thirds Protestant, one-third Roman Catholic). There is also a sizeable Bahá'í community.

Culture

Bahá'í The island's traditional culture is all but vanished: Nauru is considered to be one of the most Westernized of the Pacific islands. The national sport is Australian Rules Football. Nauru has also had international success in weightlifting. Marcus Stephen has been the most successful lifter to date, winning several Commonwealth Games medals. He was elected to Parliament in 2003. There is a stadium under construction in the district of Meneng.
- Nauruan indigenous religion

External links

- [http://www.cenpac.net.nr CenPacNet], the country's Internet service provider
- [http://www.cia.gov/cia/publications/factbook/geos/nr.html CIA World Factbook] - Information and statistics
- [http://travel.state.gov/travel/cis_pa_tw/cis/cis_979.html Consular Information Sheet]
- [http://news.bbc.co.uk/1/hi/world/asia-pacific/country_profiles/1134221.stm Country Profile] BBC News
- [http://www.janeresture.com/nauru_home/index.htm Jane's Nauru Home Page]
- [http://www.monitor.net/monitor/0304a/nauru.html "Nauru Island: Far Side Of Paradise"], Albion Monitor, 26 April, 2003
- [http://www.economist.com/displaystory.cfm?story_id=884045 "Paradise well and truly lost"], The Economist, 20 December 2001
- [http://207.70.82.73/pages/descriptions/03/253.html Radio program "This American Life" featured a 30-minute story on Nauru"]
- [http://www.spc.int Secretariat of the Pacific Community] - Official site of the Pacific Community
- [http://www.vanuatu.usp.ac.fj/paclawmat/Nauru_legislation/Nauru_Constitution.html The Nauru Constitution]
- [http://travel.yahoo.com/p-travelguide-473702-nauru_vacations-i Yahoo! Travel Informations Nauru]
- [http://www.uniya.org/research/view_nauru.html "View on Nauru: Between a mined-out rock and a hard place"] Uniya View on the Pacific briefing series, July 2005
- [http://www.gavinfinlaysmith.com/video/Cine%20Film%20-%20Nauru%201978%20-%201979.wmv Cine Film footage of Island Life in 1979, Including Phosphate Excavation]
- [http://media.tvnz.co.nz/news/nauru_081104_56k.wmv Report about asylum seekers in Nauru on Television New Zealand] Category:Micronesia Category:Nauru Category:Oceanic countries als:Nauru zh-min-nan:Nauru ko:나우루 ms:Nauru ja:ナウル simple:Nauru th:สาธารณรัฐนาอูรู

Developing country

A developing country is a country with a low income average, a relatively undeveloped infrastructure and a polopment index]] when compared to the global norm. The term has tended to edge out earlier ones, including the Cold War-defined "Third World". Development entails developing a modern infrastructure (both physical and institutional), and a move away from low value added sectors such as agriculture and natural resource extraction. Developed countries usually have economic systems based on continuous, self-sustaining economic growth. The application of the term 'developing country' to all of the world's least developed countries could be considered innappropriate in the cases of a number of poor countries, due to the fact that they are not improving their economic situation as the term implies, but have experienced prolonged periods of economic decline.

Measure of development

The term "developing country" often refers mainly to countries with low levels of economic development, but this is usually closely associated with social development, in terms of education, healthcare, life expectancy, etc. The development of a country is measured with statistical indexes such as income per capita (GDP), the rate of illiteracy, and access to water. The UN puts forth a compound indicator using these lists of statistics, to create, a "human development index" which gives a sense of how developed countries are. Developing countries are in general countries which have not achieved a significant degree of industrialization relative to their populations, and which have a low standard of living. There is a strong correlation between low income and high population growth, both within and between countries.

Nature of development

Even though a good part of the world seems to aspire to development, the term itself is criticized by those who think it is too centered on Western countries. The term implies a direction and a movement that the countries must follow; it implies an inferiority of the developing countries.Developing coutries are those which need to be sustained by foreign aid The terms utilized when discussing developing countries refer to the intent and to the constructs of those who utilize these terms. Other terms sometimes used are lesser developed countries (LDCs), less economically developed countries (LEDCs), "underdeveloped nations" or "undeveloped nations", Third World nations, the South and "non-industrialized nations". Conversely, the opposite end of the spectrum is termed developed countries, more economically developed countries (MEDCs), First World nations and "industrialized nations". The United Nations allows each nation to decide for itself whether it will be designated as "undeveloped" or "developing" (though many economists and other observers ignore the UN rule about self-designation). To moderate the euphemistic aspect of the word developing, international organisations have started to use the term least developed countries (LLDCs) for the poorest nations which can in no sense be regarded as developing. That is, LLDCs are the poorest subset of LDCs. This also moderates the naïve tendency to believe that the standard of living in Somalia or Ethiopia is comparable to that in Brazil or Mexico. The concept of the developing nation is found, under one term or another, in numerous theoretical systems having diverse orientations — for example, theories of decolonization, liberation theology, marxism, anti-imperialism, and political economy.

Sources of (under)development

According to different theories, sources of underdevelopment include:
- Low saving which may lead to low investment according to Harrod-Domar model but large amount of saving and investment still does not imply strong development
- Intrinsic attitudes and aptitudes, real or used as justification
- attitudes and culture of the people;
- aptitudes and behavior of the elites and leaders;
- High rates of fertility
- Legal structures and institutions
- a breakdown in the rule of law
- high corruption
- Extrinsic factors, real or used as justification
- geopolitical or commercial interest that it creates compared to other countries;
- place of the country in a historical and cultural system;
- inadequate reforms imposed in counterpart with financing of last resort, by multilateral organizations (like the International Monetary Fund and the World Bank) to get out of situations of deficit and indebtedness in which the country is placed (see Developing countries' debt).
- lack of interest in and comprehension for the specific dynamics of a nation, by multinational companies.

Typology and names of countries

Countries are often loosely placed into four categories of development: # Developed countries, and their dependencies (For a list of countries, see developed country.) # Countries with an economy consistently and fairly strongly developing over a longer period (China, Mexico, India, Brazil, South Africa, Turkey, the Philippines, Egypt, much of South America, Malaysia, Thailand, Possibly the former Warsaw Pact, etc.) # Countries with a patchy record of development (most countries in Africa, Central America, and the Caribbean excepting Jamaica (category 2); much of the Arab world falls in this category); also most of Southeast Asia, falls under this category excepting Singapore, Philippines, Brunei, Malaysia and Thailand (category 2). 76% of the world's nations fall under this category. # Countries with long-term civil war or large-scale breakdown of rule of law or non-development-oriented dictatorship ("failed states") (e.g. Haiti, Somalia, Sudan, Burma, perhaps North Korea) The term "developing nation" is not a label to assign a specific, similar type of problem. Designation of these nations depends on the angle at which one approaches them, and according to the solutions envisoned to solve their problems. Each one of these terms has meanings beyond its first appearance:
- Third World :The term was used for the first time by demographer Alfred Sauvy and refers to the Third Estate. The Third world does not include the nations of the liberal West ("First World") nor of the Soviet bloc ("Second World"), and to some extent were ignored because they could not throw strong support behind either. A Cold War era term which is increasingly deprecated.
- Countries of The South and The North :These terms originate from the fact that most developing countries (including many of the poorest) are in the southern hemisphere (south of the Equator), and most developed countries are in the northern hemisphere. However, the geographic distinction is not perfect — for example, Australia and New Zealand, both developed, are in the southern hemisphere, but not included in "the South". "North" and "South" are essentially euphemisms for "developed country" and "developing country", but are alternatives which are often preferred by people from the South because they avoid the loaded reference to "development".This is shown in the Brandt report.
- Rich and poor countries :These terms suggest a greater focus on income per capita. It should be noted that this statistic only reflects the statistical average wealth of a country's citizens; when income is distributed very unequally (as measured for example by the Gini coefficient) this figure may be misleading (see also kleptocracy).
- Industrialized and non-industrialized countries :Most countries that are currently being industrialized or are in advanced phases of industrialization, also have characteristics of a post-industrial economy.

External links

- [http://www.worldbank.org/data/countryclass/classgroups.htm List of developing countries according to the World Bank] Category:Country classifications Category:Development ko:개발도상국 ja:開発途上国

First World

The terms First World, Second World, and Third World were used to divide the nations of Earth into three broad categories. The three terms did not arise simultaneously. After World War II, people began to speak of the NATO and Warsaw Pact countries as two major blocs, often using such terms as the "Western bloc" and the "Eastern bloc." The two "worlds" were not numbered. It was eventually pointed out that there were a great many countries that fit into neither category, and in the 1950s this latter group came to be called the Third World. It then began to seem that there ought to be a "First World" and a "Second World." Eventually, it became common practice to refer to nations within the Western European and United States' sphere of influence (e.g. the NATO countries) as the First World. Besides North America (USA and Canada) and Western Europe, the First World also included other industrialized capitalist countries such as Japan and some of the former British colonies, particularly Australia, New Zealand, and South Africa. There were a number of countries that did not fit comfortably into this neat definition of partition, including Switzerland, Sweden, and the Republic of Ireland, who chose to be neutral. Finland was under the Soviet Union's sphere of influence but was not communist, nor was it a member of the Warsaw Pact. Austria was under the United States' sphere of influence, but in 1955, when the country became a fully independent republic, it did so under the condition that it remain neutral. Turkey, which joined NATO in 1952, was not predominantly in Western Europe and was not industrialized. Spain did not join NATO until 1982, towards the end of the Cold War and after the death of the authoritarian dictator Francisco Franco. In recent years, as many "developing" countries have industrialized, the term Fourth World has been coined to refer to countries that have lagged behind and still lack industrial infrastructure. Category:Country classifications

Second World

The terms First World, Second World and Third World can be used to divide the nations of Earth into three broad categories. The term Second World has largely fallen out of use because the circumstances to which it referred largely ended with the 1991 collapse of the Soviet Union. The three terms did not arise simultaneously. After World War II, people began to speak of the NATO and Warsaw Pact countries as two major blocs, often using such terms as the "Western bloc" and the "Eastern bloc". The two "worlds" were not numbered. It was eventually pointed out that there were a great many countries that fit into neither category, and in the 1950s this latter group came to be called the Third World. It then began to seem that there ought to be a "First World" and a "Second World". Eventually, it became common practice (though not in the United Kingdom and only infrequently in the United States) to refer to nations within the Soviet Union's sphere of influence (e.g. the Warsaw Pact countries) as the Second World. Besides the Soviet Union proper, most of Eastern Europe was run by satellite governments working closely with Moscow. The term "Second world" may or may not also refer to Communist countries whose leadership were at odds with Moscow, i.e., Albania, China and Yugoslavia. There were a number of countries which did not fit comfortably into this neat partitioning of the world, including Switzerland, Sweden, and the Republic of Ireland, who chose to remain neutral. Finland was under the Soviet Union's sphere of influence but was not communist, nor was it a member of the Warsaw Pact. Austria was within the United States' sphere of influence, but in 1955, when it became a fully independent republic, it did so under the condition that it remain neutral. Yugoslavia, a communist east European country, was a founding member of the Non-Aligned Movement. Albania was a communist east European country which withdrew from the Warsaw Pact over ideological differences in 1968 and had stopped supporting the Pact as early as 1962. Alternatively, First World countries may be defined as having developed market economies, Second World as having developed planned economies, and Third World as having developing economies that may follow either the market or (less often) the planned model, often characterized more by many features in common with feudalistic economies, than by either free-market or planned economies. In recent years, as many "developing" countries have industrialized, the term Fourth World has been coined to refer to countries that have lagged behind and still lack industrial infrastructure. Category:Country classifications

The North

The North may refer to:
- A geographical section of the world (see latitude).
- The wealthy and technologically advanced nations of the world, as opposed to the South, which is poorer and less developed (see North-South divide).
- In the study of politics and international relations, the term the North is often used as a more theoretically coherent replacement for the earlier notion of the West.
- The northern part of a particular country or geographical region. Within this region, if places with a common characteristic are mostly found in the north, then the North becomes a synonym for places with that characteristic. Among the countries and regions with this designation are: :
- Italy, which has a north-south divide where the wealthier regions are in the north. The North is the richer industrial and commercial heartland of the country, whilst the South is mainly agricultural. Lega Nord (the Northern League) campaigns for the secession of northern Italy from the rest of the country. :
- United Kingdom, where "the North" is used as a non-sectarian synonym for Northern Ireland, as opposed to "the north of Ireland," which is used by many Catholics in the North to refer to Northern Ireland. :
- England, where the North is relatively poor. It is the home of many of the traditional heavy industries that have become run-down in recent years. :
- The United States of America, where the North is used to refer to those states which did not secede at the time of the American Civil War (see: U.S. Northern states). :
- Canada where the North refers to the arctic region, as opposed to the southern areas close to the border with the United States. The North is usually understood as the Yukon, Northwest Territories, northern parts of British Columbia, and Nunavut, which is populated mostly by First Nations and Inuit. It can also refer to the northern parts of some of the provinces.
- The North can also refer to the Nordic countries of Denmark, Finland, Iceland, Norway, Sweden.
- In addition, before 17th century, Nordic or Northern was used to mean Northern Europe, including European Russia, the Baltic countries (at that time Livonia and Courland) and Greenland.

Economic development

Economic development is the development of economic wealth of countries or regions for the well-being of their inhabitants. The study of economic development is known as development economics. Public policy generally aims at continuous and sustained economic growth and expansion of national economies so that 'developing countries' become 'developed countries'. The economic development process supposes that legal and institutional adjustments are made to give incentives for innovation and for investments so as to develop an efficient production and distribution system for goods and service.

Overview

Development economics emerged as a branch of economics because economists - after World War Two - become concerned about the low standard of living in so many countries of Latin America, Africa, and Asia. The first approaches to development economics assumed that the economies of the less developed countries (LDCs), were so different from the developed countries that basic economics could not explain the behavior of LDC economies. Such approaches produced some interesting and even elegant economic models, but these models failed to explain the patterns of no growth, slow growth, or growth and retrogression found in the LDCs. Slowly the field swung back towards more acceptancance that the opportunity cost, supply & demand, etc. apply to the LDCs also. However, this only cleared the ground for better approaches. Straight economics still couldn't explain the weak and failed growth patterns. What was required to explain poor growth were influences beyond firms and individual preferrences and endowments. These influences were found in institutions: political institutions, ideological beliefs, etc. Institutions have been able to explain the poor growth patterns much better than the market failure theories did. However, there is no generally accepted institutional theory of economic development that a large share of development economists agree upon. There is not even agreement on as fundamental an issue as, "How much do political institutions explain?"

Models of economic development

The three building blocks of most growth models are: (1) the production function, (2) the saving function, and (3) the labor supply function (related to population growth). Together with a saving function, growth rate equals s/ß (s is the saving rate, and β is the capital-output ratio). Assuming that the capital-output ratio is fixed by technology and does not change in the short run, growth rate is solely determined by the saving rate on the basis of whatever is saved will be invested.

Harrod-Domar Model

The Harrod-Domar Model delineates a functional economic relationship in which the growth rate of gross domestic product (g) depends directly on the national saving ratio (s) and inversely on the national capital/output ratio (k) so that it is written a g = s / k. The equation takes its name from a synthesis of analyses of growth process by two economists (Sir Roy Harrod of Britain and E.V. Domar of the USA). The Harrod-Domar model in the early postwar times was commonly used by developing countries in economic planning. With a target growth rate, the required saving rate is known. If the country is not capable of generating that level of saving, a justification or an excuse for borrowing from international agencies can be established. An example in the Asian context is to ascertain the relationship between high growth rates and high saving rates in the cases of Japan and China. It is more difficult to introduce the third building block of a growth model, the labor and population element. In the long run, growth rate is constrained by population growth and also by the rate of technological change.

Exogenous growth model

The exogenous growth model (or neoclassical growth model) of Robert Solow and others places emphasis on the role of technological change. Unlike the Harrod-Domar model, the saving rate will only determine the level of income but not the rate of growth. The sources-of-growth measurement obtained from this model highlights the relative importance of capital accumulation (as in the Harrod-Domar model) and technological change (as in the Neoclassical model) in economic growth. The original Solow (1957) study showed that technological change accounted for almost 90 percent of U.S. economic growth in the late 19th and early 20th centuries. Empirical studies on developing countries have shown different results (see Chen, E.K.Y.[1979] Hyper-growth in Asian Economies). Also see, Krugman (1994), who maintained that economic growth in East Asia was based on perspiration (use of more inputs) and not on inspiration (innovations) (Krugman, P., [1994] The Myth of Asia’s Miracle, Foreign Affairs, 73).

Surplus labor

The Lewis-Ranis-Fei (LRF) Model of Surplus Labor (LRF) is an economic development model and not a economic growth model. Economic models such as Big Push, Unbalanced Growth, Take-off, and so forth, are only partial theories of economic growth that address specific issues. It is a model taking the peculiar economic situation in developing countries into account: unemployment and underemployment of resources (especially labor) and the dualistic economic structure (modern vs. traditional sectors). This model is a classical model because it uses the classical assumption of subsistence wage. Here it is understood that the development process is triggered by the transfer of surplus labor in the traditional sector to the modern sector in which some significant economic activities have already begun. The modern sector entrepreneurs can continue to pay the transferred workers a subsistence wage because of the unlimited supply of labor from the traditional sector. The profits and hence investment in the modern sector will continue to rise and fuel further economic growth in the modern sector. This process will continue until the surplus labor in the traditional sector is used up, a situation in which the workers in the traditional sector would also be paid in accordance with their marginal product rather than subsistence wage. The existence of surplus labor gives rise to continuous capital accumulation in the modern sector because (a) investment would not be eroded by rising wages as workers are continued to be paid subsistence wage, and (b) the average agricultural surplus (AAS) in the traditional sector will be channeled to the modern sector for even more supply of capital (e.g., new taxes imposed by the government or savings placed in banks by people in the traditional sector). In the LRF model, saving and investment are driving forces of economic development. This is in line with the Harrod-Domar model but in the context of less-developed countries. The importance of technological change would be reduced to enhancing productivity in the modern sector for even greater profitability and to promote productivity in the traditional sector so that more labor would be available for transfer.

Harris-Todaro Model

The Harris-Todaro (H-T) model of rural-urban migration is usually studied in the context of employment and unemployment in developing countries. In the H-T model, the purpose is to explain the serious urban unemployment problem in developing countries. The applicability of this model depends on the development stage and economic success in the developing country. The distinctive concept in the H-T model is that the rate of migration flow is determined by the difference between expected urban wages (not actual) and rural wages. The H-T model is applicable to less successful developing countries or to countries at the earlier stages of development. The policy implications are different from those of the LRF model. One implication in the H-T model is that job creation in the urban sector worsens the situation because more rural migration would thus be induced. In this context, China's policy of rural development and rural industrialization to deal with urban unemployment provides an example.

External links

- [http://www.iedconline.org/ International Economic Development Council] International association of community/economic development professionals
- [http://econ.worldbank.org/programs/macroeconomics/ Macroeconomics and Growth]
- [http://www.bris.ac.uk/Depts/Economics/Growth/ Economic Growth Resources]
- [http://gsociology.icaap.org/research.html Social Change Project: page of Research Resources on Economic Growth]
- [http://rru.worldbank.org/ World Bank Group Private Sector Development]
- [http://psdblog.worldbank.org/ World Bank Group PSD Blog] Category:Development Category:Economics Category:Sociology

DemocracY

Democracy

Corruption

Corruption can refer to:
- Official corruption, the misuse of an offical position for private advantage
- Political corruption, corruption of the polical system through bribery, intimidation, extortion, vote buying, destabilization, or influence peddling
- Police corruption
- Corporate crime
- Data corruption, the receiving of data which is different from that which was transmitted or otherwise intended
- Corruption (linguistics) of language or a text into a broken form or a different meaning

Exploitation

:For exploitation movies, see Exploitation film This article discusses the economic concept of exploitation. Two standard definitions of exploitation are
- the value-neutral synonym for use
- the negative concept of unfairly using of another for one's own advantage / "abusing" them. Almost everyone agrees that in a division of labor economy (whether capitalist, Marxist, etc.) some economic interactions are of the first type: people utilize services provided by other people. As there is no disagreement, and no moral urgency on this topic, there is little to be said about it. Almost everyone agrees that in certain political and sociological situations, there is exploitation under color of law: under a dictatorship, the State can abuse citizens, under (some varieties of) a monarchy, nobles can abuse serfs, etc., acting with in the law, and with out fear of repercussions. Finally, almost everyone agrees that in some situations, some economic interactions are of the second (abusive) type. There is massive disagreement as to what situations lead to something that can be accurately called exploitation. This article attempts to cover both major branches of the disagreement.

Two Theories

The two major families of theories (and the two branches of the disagreement) boil down to this:
- pro-market people say that as long as the political climate allows a reasonable level of economic competition and a free flow of labor and goods, workers are free to accept jobs (or not accept jobs), and consumers are free to purchase goods, or not purchase goods
- anti-market people say that even in the absence of physical compulsion to work (slavery or serfdom) — there are inherent power imbalances between some or all employers, on the one hand, and some or all workers, on the other.

Pro-market theory

Various pro-market theories assert that absent physical compulsion — the only way that an employer may hire a worker is by offering a basket of goods (wages, working conditions, and benefits) sufficient to "bribe" him or her away from existing work options and leisure. Q.E.D. any employment relation that does not involve physical force or threats is – ipso facto – not exploitative: both sides gain from the interaction. This theory is held by conservatives, classical liberals, libertarians, Austrian-school economists, Chicago-school economists and anarcho-capitalists.

Some possibility for exploitation in semi-free societies

Pro-market theorists admit that some degrees of exploitation can exist in markets that are less than free because of government regulation. For example, in the United States, there exists a large corpus of labor law restricting companies from freely interacting with their employees, and restricting employees ability to freely interact with their employers, and restricting their ability to freely interact with each other (e.g. there exist laws that mandate some employees must join a certain union; there exist other laws forbidding employees from forming a competing union; in some locales an employee need not join a union, but must pay mandatory dues to the union anyway; etc.). Because the State exerts physical compulsion on people (e.g. if an individual attempted to form a competing union in a locale where the State forbids it, he would be subject to arrest, fines, and/or jail time), the preconditions for exploitation exist, and exploitation may occur.

Other points

Pro-market theory also argues that technological change is a disruptive force, and tends to abolish monopoly and monopsonistic power in mature business sectors, as with the shrinkage of the Western Union corporation and its power. Pro-market theory argues that even if a one capitalist found a way to purchase labor for less than the prevailing rate, an even vaguely efficient market, (a result of free market competition) would attract other employers in search of profits, increasing demand for labor, thus driving labor costs up to the equilibrium level.

Criticism of opposing theories

Criticisms of anti-market exploitation theory include:
- power, skill, and wealth imbalances exist, but that does nothing to undercut the consensual nature of voluntary trades in a free market (general example: a billionaire with a Harvard degree and a long family history hires a gardener to work at a given wage. The billionaire and the gardener both enter into the agreement voluntarily.)
- all actual examples of "exploitation under a free market" turn out, after inspection, to either not be exploitation, or not to be under a free market (general example of the former: an individual accepts one job over another, but wishes that he earned more, yet he does not not seek additional training, skills, etc., nor does he relocate to an area offering better jobs; general example of the latter: an individual is not free to trade his labor to the highest bidder because of a market kept unfree by a government in the pocket of aristocrats who value cheap labor).
- The anti-market assertion that work for pay is exploitation whenever the employee objects to the terms (but not to the point of quitting) (a) is grossly subjective: anyone, despite pay or conditions can merely assert exploitation, and it becomes, by definition, true; (b) ignores the fact that every party to every transaction can imagine terms which they would prefer: in the limit, consumers want everything to be free, employees want wages to be infinite and hours to be zero, etc.

Anti-market theory

Various anti-market theories assert that there are inherent power imbalances between some or all employers, on the one hand, and some or all workers, on the other. Anti-market theories assert that exploitation is a characterization of the work for pay system (wage labor), when it is applied with cruelty, or on terms that are objectionable to the employee.

Historical References

Given market and legal conditions at the time Adam Smith was writing Wealth of Nations, there was a power imbalance between employers and workers. He wrote: :"The masters [i.e., employers], being fewer in number, can combine much more easily; and the law, besides, authorizes, or at least does not prohibit their combinations, while it prohibits those of the workmen. We have no acts of parliament against combining to lower the price of work; but many against combining to raise it. In all such disputes the masters can hold out much longer. A landlord, a farmer, a master manufacturer, or merchant, though they did not employ a single workman, could generally live a year or two upon the stocks which they have already acquired. Many workmen could not subsist a week, few could subsist a month, and scarce any a year without employment. In the long-run the workman may be as necessary to his master as his master is to him, but the necessity is not so immediate." (volume I, ch. 8, paragraph 12) Besides notions of "corporate exploitation" (developed below), neoclassical theories of exploitation follow in this tradition. Furthermore, Marxist theories of exploitation are probably the best known of this category. They are also discussed later in this article. This theory is held by social-liberals, progressives, populists, anarchists (other than Anarcho-capitalists), and Marxists

Marxist theory

In Marxist theory, corporate exploitation is often called "super exploitation" — exploitation that goes beyond the normal standards of exploitation prevalent in capitalist society, resulting in super profits. While other theories emphasize the exploitation of one individual by an organization, the Marxist theory concerns the exploitation of an entire segment or class of society by another. This kind of exploitation is seen as being an inherent feature and key element of capitalism and free markets. Any class society, Karl Marx argues, is based on the exploitation of surplus labour, but in capitalist society, the surplus product takes the form of surplus value which becomes the source of capital accumulation. Although equality and freedom of market access may be guaranteed, the real market power of workers and capitalists is structurally unequal. In Das Kapital, Marx typically assumed the existence of purely competitive markets, rather than monopoly or oligopoly. In general, he argues that the greater the "freedom" of the market, the greater the power of capital, and the greater the scale of exploitation. The perceived problem is with the structural context in which free markets operate (detailed below). The proposed solution is the abolition of capitalism and its replacement by a better, non-exploitative, system of production and distribution (first socialism, and then, after a certain period of time, communism). The exact role of markets would have in the transition to such a new system is strongly disputed, but most serious Marxian theorists such as Brus, Lange, Horvat, and Mandel have agreed that regulated markets would continue to exist for a large portion of outputs. The aim of the socialist system would however be to replace allocation via the market increasingly by a direct allocation of resources satisfying needs. In turn, this would require a change in the consciousness and morality of people. In the standard Marxist view, the basis of "normal" exploitation consists of three structural characteristics of capitalist society: #the ownership of the means of production by a small minority in society, the capitalists; #the inability of non-property-owners (the workers, proletarians) to survive without selling their labor power to the capitalists (in other words, without being employed as wage laborers); #the state, which uses its strength to protect the unequal distribution of power and property in society. This means that the exploitation of surplus labour can occur and continue regardless of market fluctuations, because it occurs primarily external to market exchange. However, in the distribution of incomes and products new forms of exploitation could also occur, in the sense that workers were underpaid, or had to pay more for goods than they were really worth; as well as capitalists exploiting each other. Marxist theories include two major types of exploitation theory:
- Organizational or "micro-level" exploitation: in the broad tradition of liberal economic thinking, most theories of exploitation center on the market power of economic organizations within a market setting. Some neoclassical theory points to exploitation not based on market power.
- Structural or "macro-level" exploitation: "new liberal" theories focus on exploitation by large sections of society even (or especially) in the context of free markets. Marxist theory points to the entire capitalist class as an exploitative entity, and to capitalism as a system based on exploitation.

Organizational exploitation

The focus of most assertions about the existence of exploitation is the socio-economic phenomenon in which people trade their labor or allegiance to a powerful entity, such as the state, a corporation or any other private company, or a trade union. In this line of thought, there are two primary viewpoints on the reality of exploitation within capitalist societies: #organizational exploitation is an inherent feature of capitalism. #organizational exploitation cannot coexist with capitalism. (in the absence of criminal activity) On the theoretical level, these two different viewpoints are diametrically opposed, and irreconcilable. Since many people see "capitalism" or "free markets" as existing in some parts of the world but not others, it can be argued that both viewpoints may hold validity in different places at different times. Though obviously over-simplified, the first view will be termed the "anti-capitalist" theory while the second view will be termed the "pro-capitalist" theory.

New liberal theories

For others, i.e., a minority of "new liberals", exploitation naturally coexists with free markets. As in Marxist theory, the problem is structural rather than organizational and can coexist with free markets: given their special position in society (controlling an important asset), an interest group can shift the distribution of income in its direction, impoverishing the rest, even though their role serves no reasonable purpose. While Henry George pointed to land-owners, John Maynard Keynes saw rentiers (non-working owners of financial wealth) as fitting this picture. The first receive land-rent while the second receive interest, even though, according to the proponents of this theory, they contribute nothing to society. They merely own a certain asset and have the ability to make money from that asset without actually doing any work themselves. While George argued for a "single tax" on land-rent to solve this problem, Keynes hoped that interest rates could be driven to zero. In some ways, these theories are similar to the Marxist one discussed above. However, they deal with the power and influence of special interests in society (and within the capitalist class) rather than dealing with a structural difference in class position of the Marxian sort. Further, while Marx saw exploitation as raising the total amount of production in capitalist society, in these theories exploitation represents a form of waste or inefficiency, hurting growth under capitalism. Therefore, according to this view, abolishing rent or interest would make capitalism operate better.

Other points

Strangely, there is sometimes convergence between "pro-capitalist" and "anti-capitalist" thinkers. The view that the state is an exploitative organization run by or for a special-interest group is shared by Marxists and anarchists (also known as libertarian socialists). They see the state as being operated either for the capitalist class or in coalition with it, while capitalists are seen as a special interest group, exploiting the working class both through economic means and through their control of the state.

Criticisms of opposing theories

The pro-market school postulates that exploitation can only exist where physical force is used as a tool of coercion. They deny that imbalances of power, concentration of wealth, unequal knowledge or lack of any alternatives for the workers can lead to exploitation. Following this train of thought, they argue that because only criminals and states arrogate to themselves the use of force as a tool of coercion, then only criminals, governments, and states are exploitative (in their view, labor unions are either criminal or sponsored by the state). The pro-market advocates claim that a state is a monopoly run by a special interest group, regularly interfering with markets and other processes which they see as free and natural, thus being a "parasite" on society. Their proposed solution is to move to a minimal state and absolute free market.

External links

- [http://www.foxnews.com/story/0,2933,119125,00.html Third World Workers Need Western Jobs by Radley Balko]
- [http://plato.stanford.edu/entries/exploitation/ Stanford Encyclopedia of Philosophy entry]
- [http://www.benbest.com/polecon/exploit.html Thoughts on Exploitation Theory] by Ben Best

Colonialism

Colonialism is the extension of a nation's sovereignty over territory and people outside its own boundaries, often to facilitate economic domination over their resources, labor, and markets. The term also refers to a set of beliefs used to legitimize or promote this system, especially the belief that the mores of the colonizer are superior to those of the colonized. Advocates of colonialism argue that colonial rule benefits the colonized by developing the economic and political infrastructure necessary for modernization and democracy. They point to such former colonies as the United States of America, Canada, Australia, New Zealand, Hong Kong and Singapore as examples of post-colonial success. These nations do not, however, represent the normal course of colonialism in that they are either settler societies, or tradepost cities. Dependency theorists such as Andre Gunder Frank, on the other hand, argue that colonialism actually leads to the net transfer of wealth from the colonized to the colonizer, and inhibits successful economic development. Critics of colonialism such as Frantz Fanon and Aime Cesaire argue that colonialism does political, psychological, and moral damage to the colonized as well. More critically, Indian writer and political activist Arundhati Roy said that debating the pros and cons of colonialism/imperialism "is a bit like debating the pros and cons of rape". Critics of the alleged abuses of economic and political advantages accruing to developed nations via globalised capitalism have referred to them as neocolonialism, and see them as a continuation of the domination and exploitation of ex-colonial countries, merely utilizing different means.

Developed country

Developed countries

Other cases

References

See also

Standard of living

See also

External links

Gross domestic product

Definition

The components of GDP

Examples of GDP component variables

Difference from Aggregate expenditure

The GDP Income account

Measurement

International Standards

National Measurement

Interest rates

Cross-border comparison

GDP and standard of living

Controversies

Lists of countries by their GDP

See also

Calculation

External links

Data

Articles

Nauru

History

Politics

Districts

Geography

Economy

Demographics

Culture

See also

External links

Developing country

Measure of development

Nature of development

Sources of (under)development

Typology and names of countries

See also

External links

First World

Second World

The North

Economic development

Overview

Models of economic development

Harrod-Domar Model

Exogenous growth model

Surplus labor

Harris-Todaro Model

See also

Institutions

External links

DemocracY

Corruption

Exploitation

Two Theories

Pro-market theory

Some possibility for exploitation in semi-free societies

Other points

Criticism of opposing theories

Anti-market theory

Historical References

Marxist theory

Organizational exploitation

New liberal theories

Other points

Criticisms of opposing theories

External links

See also

Colonialism

See also