Why are some economies still developing, and what strategies promote growth and development?
Measures of development, the factors influencing growth and development, market-oriented and interventionist strategies, and the role of aid, trade and institutions.
An Edexcel A-Level Economics A answer to emerging and developing economies, covering the difference between growth and development, the Human Development Index, the barriers to development such as primary product dependency and the savings gap, and market-oriented and interventionist strategies including aid, trade and microfinance.
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What this dot point is asking
Edexcel wants you to distinguish growth from development, explain measures of development such as the HDI, explain the barriers to development, and evaluate market-oriented and interventionist strategies including aid and trade.
Growth, development and measurement
The HDI is widely used but limited: it ignores inequality, the environment and political freedom, which is why measures such as the inequality-adjusted HDI and the Multidimensional Poverty Index supplement it.
Barriers to development
Strategies to promote development
Market-oriented strategies rely on freeing up markets: trade liberalisation, attracting foreign direct investment by multinationals, removing government subsidies and price distortions, floating the exchange rate and using microfinance to lend small sums to the poor.
Interventionist strategies rely on government action: developing human capital (education and health), investing in infrastructure, protecting infant industries, managing the exchange rate, and using buffer stocks to stabilise commodity prices.
Other approaches include aid (which can fill the savings gap but risks dependency and corruption), debt relief, fair-trade schemes, and the role of institutions such as the World Bank and IMF, whose structural adjustment conditions are themselves debated.
Examples in context
- China. Decades of export-led growth and FDI lifted hundreds of millions out of poverty, the strongest market-oriented success story, though with rising inequality and pollution.
- Botswana. Diamond revenue managed through good institutions delivered development, contrasting with the "resource curse" elsewhere.
- Grameen Bank. Microfinance in Bangladesh shows small loans raising incomes, especially for women, a flagship market-oriented tool.
- Dutch disease and Nigeria. Oil dependency illustrates primary product dependency, volatile revenue and an over-valued currency hurting other exports.
Try this
Q1. Explain why a country might have high economic growth but low economic development. [4 marks]
- Cue. Output can rise while gains are unequally shared, or health, education and the environment fail to improve, so welfare lags behind GDP.
Q2. Explain one barrier to development caused by primary product dependency. [4 marks]
- Cue. Volatile commodity prices make export earnings and government revenue unstable, and the terms of trade may decline over time.
Exam-style practice questions
Practice questions written in the style of Pearson Edexcel exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
Edexcel 20184 marksA country's HDI rises from to . Calculate the percentage increase and explain what it suggests about development.Show worked answer →
A short calculate question on the HDI.
Percentage increase .
A rise in the HDI suggests broad-based development: improvements across income, life expectancy and education, not just output. It would move the country up the HDI bands toward medium or high human development.
Markers reward (1) the percentage-change method, (2) , (3) noting the HDI captures development beyond GDP.
Edexcel 202215 marksEvaluate the view that trade liberalisation is more effective than foreign aid in promoting development in low-income countries.Show worked answer →
A 15 mark evaluate question (around 9 KAA, 6 evaluation).
KAA: explain that trade liberalisation can raise growth through comparative advantage, FDI, technology transfer and larger markets, while aid can fill the savings gap (Harrod-Domar), fund infrastructure and human capital.
Evaluation: trade can entrench primary product dependency and harm infant industries; aid can create dependency, fund corruption or distort markets. The best mix depends on institutions, governance and the type of aid (project versus tied). Reach a justified conclusion.
Markers reward applied examples, the savings-gap model and balance.
Related dot points
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An Edexcel A-Level Economics A answer to exchange rates and the balance of payments, covering floating, fixed and managed exchange rate systems, the determinants of a floating rate, the effects of appreciation and depreciation, the Marshall-Lerner condition and J-curve, the structure of the balance of payments, and international competitiveness.
- The role of financial markets, market failure in the financial sector, the role of central banks, and the regulation of the financial system.
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Sources & how we know this
- Pearson Edexcel A-Level Economics A (9EC0) specification — Pearson Edexcel (2015)