The global economy: development and globalization
What this domain tests
Development economics and globalization. You must distinguish growth from development, use indicators such as HDI, explain poverty/inequality, and evaluate trade, aid, FDI and globalization.
Core rules
- Economic growth is rising real GDP; development is broader: living standards, health, education, freedom, sustainability.
- HDI combines income (GNI per capita PPP), education (mean/expected years), health (life expectancy) as a geometric mean, not a simple average.
- Poverty can be absolute or relative; inequality measured by Lorenz curve/Gini coefficient.
- Globalization increases flows of goods, capital, people and information; benefits depend on institutions, terms of trade and distribution.
Worked example
Country A: income index 0.8, education 0.7, health 0.9. HDI = (0.8 × 0.7 × 0.9)^(1/3) = (0.504)^(1/3) ≈ 0.796. Country B has the same income index 0.8 but education 0.5 and health 0.6: (0.8 × 0.5 × 0.6)^(1/3) = (0.24)^(1/3) ≈ 0.621. Reasoning: HDI penalises weak education/health, so equal GDP per capita does not mean equal development.
Traps
Do not equate GDP per capita with development. Use PPP for comparisons, not market exchange rates. HDI ignores inequality and environmental damage. Globalization is not zero-sum; gains are uneven. Aid can be tied or fungible, and remittances are not the same as FDI.