International development

I. Read and memorize the following words, word-combinations and word-groups:

LDC (less developed country) – країна, що розвивається

E.g. Most less developed countries (LDCs) are characterized by both low GNP per capita and slow income growth.

productivity – продуктивність

E.g. Output per unit of input; output per labor hour is a productivity.

subsistence level – прожитковий рівень

E.g. Most of the population in Haiti lives at the subsistence level.

hard currency – тверда конвертована валюта

E.g. Governments need «hard» currencies to buy new capital and other imported resources.

debt servicing – обслуговування боргу, капітальної суми боргу або відсотків

E.g. The interest required to be paid each year on out­standing debt is a debt servicing.

market shortage – недостатня ринкова пропозиція

E.g. The amount by which the quantity demanded exceeds the quantity supplied at a given price; excess demand.

infrastructure – інфраструктура

E.g. Infrastructure consists of the physical and institutional features that facilitate economic activity.

World Bank – Світовий банк

E.g. The most prominent lending agency is the World Bank.

II. Give English equivalents of the following:

світовий банк країни, що розвиваються

задовольняти потреби людини високий рівень народжуваності

швидке зростання чисельності населення

іноземні інвестиції нестача кваліфікованої робочої сили середній прибуток позики

іноземна допомога

III. Fill in the blanks with appropriate words:

problem nonmarket prices to increase foreign aid poor

discouraged limit shortage

1. It is difficult to comprehend just how _______ the Third World is.

2. High birth rates _______ a country's ability to raise GNP per capita.

3. In LDCs there is typically a _______ of skilled labor and managers.

4. Foreign investment is often _______ by LDC governments.

5. Debt servicing requires an LDC _______ its export potential.

6. Another _______ in LDCs is a lack of infrastructure.

7. Most LDCs prefer to use _______.

8. All LDCs could benefit from _______.

IV. Read and translate the text:

This text provides some perspective on the global gap between rich and poor. As Professor Theodore Schultz has written «Being rich makes it hard to comprehend behaviour of poor people». It is difficult to comprehend just how poor the Third World is.

Most less developed countries (LDCs) are characterized by both low GNP per capita and slow income growth. They are also far less able to satisfy basic human needs (e.g. food, shelter, medical care). High birth rates limit a country's ability to raise GNP per capita. Rapid population growth also tends to retard education, saving and investment. Rapid population growth is only one dimension of the labor problem. Ironically, the other dimension consists of a labor shortage. In LDCs there is typically a severe shortage of skilled labor and managers. Sixty percent of the population is illiterate.

A lack of capital resources poses a second major barrier to growth. The LDCs are desperate for plants and equipment that will raise the productivity of labor. But their average incomes are so low that they can rarely afford to save enough to finance the required investments. Most of the population lives at the subsistence level. Domestic saving can finance only some of the inputs, that is why external financing is usually required. Foreign investment, loans, and aid are all sources of external financing. The improvements in management, technology and labor training accompany foreign investment. Despite its substantial benefits, foreign investment is often discouraged by LDC governments. The resistance reflects a fear of becoming dependent on foreign investors.

Like foreign investment, loans represent an opportunity to increase current investment without reducing current consumption. The most prominent lending agency is the World Bank. Even in the best of political and economic situations, there is a limit to the ability of LDCs to borrow. A loan requires repayment. Hence LDCs that borrow must have the capability to service (repay) that debt. The economy of the LDCs must grow enough to generate a surplus for debt servicing. Debt servicing requires an LDC to increase its export potential in order to earn hard currency.

Unlike loans, foreign aid refers to money or resources given to LDCs for which no repayment is required. Foreign aid is given on a bilateral basis or through multinational agencies.

Technology. Capital and labor are basic factors of production. However, technology is also a primary determinant of production possibilities. LDCs could greatly increase their growth with improved technology.

Institutional Structure. Another problem in LDCs is a lack of infrastructure. Roads, telephones, schools, hospitals and electricity are all essential ingredients of a viable economy.

Finally, many LDCs are reluctant to rely on the market mechanism to allocate resources and distribute incomes. They prefer to use nonmarket prices to pursue specific economic or political objectives. The end result is a market shortage. This distortion of market process has been a barrier to growth.

Growth strategies. Many economists have concluded that the LDCs will not be able to achieve sustained economic growth until they can master enough resources to overcome all of these barriers simultaneously. Many of the poorest LDCs must choose between agricultural development and industrialization. Agricultural development promises a greater payoff because the vast majority of the population works in agriculture, at low productivity. Improved farm productivity can create food, labor and capital surpluses for industrialization.

There is no «correct» strategy for economic development. Each country confronts a unique set of barriers and growth possibilities. All LDCs, however, could benefit from more foreign aid.

V. Answer the following questions:

1. What are the most common features of the LDCs?

2. What are the barriers to the growth?

3. What does the labor problem consist of?

4. What does a lack of capital result in?

5. Can domestic saving finance the whole of inputs?

6. What are the sources of external financing?

7. What is the difference between loan and foreign aid?

8. What is the role of the market mechanism?

9. What are the growth strategies?

VI. Define the terms:

debt servicing

market shortage

nonmarket prices

market mechanism

foreign investment

foreign aid

infrastructure

subsistence level

GNP per capital

loan

II. Translate into English:

1. Багато міжнародних кредитних установ надають фінансову допомогу країнам третього світу. 2. Низькі прибутки та повільний економічний розвиток є характерними рисами країн третього світу. 3. Населення багатих країн зростає дуже повільно. 4. У бідних країнах чисельність населення зростає дуже швидко, що сповільнює підвищення добробуту. 5. Селяни в країнах, що розвиваються, не довіряють банкам і паперовим грошам. 6. Деякі країни скорочували виробництво споживчих товарів, аби змусити споживачів заощаджувати більше грошей. 7. Експорт допомагає заробляти необхідну валюту. 8. ООН запропонувала розвиненим країнам використовувати 1 відсоток валового національного продукту як іноземну допомогу.

VIII. Read and dramatize the following dialogue:

A.: Most countries continue to experience economic growth. But the relationship between GNP growth is very different in rich and poor countries.

B.: What are the differences?

A.: The populations of rich countries are growing very slowly and gains in per capita GNP are easily achieved. In the poorest countries, population is increasing rapidly, making it difficult to raise living standards.

B.: Which countries are rich and which are poor?

A.: Rich countries are the United States, Sweden, Japan and Germany. Peru, Nigeria, Thailand, Honduras, Egypt, Philippines are poor countries, and Pakistan, Kenya, China, Haiti, India, Ethiopia are the poorest.

B.: What is the reason for that?

A.: As I have already told, it is low growth. Before growth can accelerate, though, the present barriers to growth must be identified and overcome.

B.: What are the barriers?

A.: Some of the major barriers are lack of labor and capital resources.

B.: As far as I know the World Bank makes loans to LDCs for specific development projects.

A.: Yes, the other multinational banks provide financial and technical assistance.

B.: But a loan requires repayment.

A.: During the 1980s the LDCs nearly doubled their external debt. Annual servicing on these loans exceeded $170 billion.

B.: And then, some of the major debtor nations declared a moratorium on debt repayment.

A.: First Mexico, then Brazil and Peru announced that they were stopping or reducing debt servicing. It gave some of the LDCs some «breathing room». They could use this temporary relief to channel more of their export earnings into investment.

B.: Do the United States and other developed countries lose from the debt crises?

A.: The developed (creditor) countries and the developing (debtor) nations had a joint interest in resolving the debt crises. The resolution has included increased exports by developing countries, a reduction in imports of developing countries, greater priority to investment and growth in LDCs, more loans and aid from developed countries.

B.: It's very convenient, isn't it? And beneficial to both parties, I'm sure.

IX. Make up your own dialogue using the following expressions:

low incomes developing countries

loans foreign investments

slow growth to raise living standards

to accelerate the growth foreign aid

a lack of capital a lack of trained labor

X. Change the following sentences according to the models:

Model A: I insist that he should examine the documents.

I insisted on his examining the documents. 1. We insist that government should favor foreign invest­ment. 2. We insist that government should increase current investment without reducing current consumption. 3. We insist that the lending agencies should give loans to the LDCs. 4. We insist that the LDCs should rely on the market mechanism to allocate resources. Model В: You should think it over before you give an answer. You should think it over before giving an answer.

1. You should visit the country before you analyze its eco­nomic situation. 2. You should make an appointment before you see him. 3. You should think the offer over before you accept it. 4. You should inform the manager of the hotel be­fore you leave.

XI. Complete these sentenses using Gerunds:

1. He is busy (to look through documents). 2. I am fond of {to travel by air). 3. She is afraid of (to be alone). 4. We are sorry for (to be late). 5. They couldn't help (to smile). 6. It is a pleasure (to see you again).

XII. Translate into English using Gerunds:

1.Він захоплювався читанням пригодницьких книжок. 2. Ми наполягали на повторенні досліду. 3. Ми зайняті: обговорюємо шляхи економічного розвитку. 4. Пробачте, що ми турбуємо вас знову. 5. Вони не могли не погодитися з ним.

XIII. Communicative situations:

1. Identify an LDC and discuss its recent growth experience.

2. Speak about external financing.

3. Speak about debt servicing and debt crisis.