HEROES IN ACTION

KIVA: SMALL LOANS, BIG CHANGEStarting or growing a small business takes

money. When people have assets, such as

a house, they can often access money in

the form of a loan from a bank. The asset

is used as a guarantee for the repayment

of the loan. Unfortunately, many people

around the world cannot access loans from

banks. This is how an organization like

KIVA can help.

KIVA is a nonprofit organization. It

connects any person or

group that wants to lend

at least $25 to people

who need small loans (or

microloans) around the

world. KIVA does this in

partnership with 279 small

local organizations through

their website. Since 2005, KIVA has lent

more than US$637 million to more than

2 million people in 83 countries. Of the loans

provided by KIVA, 98.8 percent have been

paid back.

KIVA believes that low-income

individuals can lift themselves out of

poverty if given access to small loans to

help them support their businesses. These

businesses, in turn, increase economic

activity for the whole community. KIVA’s

co-founder Jessica Jackley says, “At

the heart of KIVA was the realization

that a lot of the ways I had previously

encountered poverty were through stories

that were one-sided or incorrect … KIVA

reframes stories of poverty into stories of

entrepreneurship.”

In 2013, the organization started a

program called KIVA U. Through KIVA U,

KIVA educates students

and teachers in high

schools about microloans

(Figure 6.11). Students who

want to found their own

KIVA club receive training

and materials to help them

get started. They can also

connect with other students around the

world to share fundraising ideas.

KIVA U has now expanded to 60 high

schools and 67 colleges and universities.

In its first year, tens of thousands of

students and teachers took action to help

entrepreneurs around the world start

businesses. A total of 66 000 microloans

were given, worth US$4.8 million.

“KIVA REFRAMES STORIES OF POVERTY INTO STORIES OF

ENTREPRENEURSHIP.”

A CALL TO ACTION 1. With a classmate, brainstorm different

ways that a KIVA loan could increase

economic opportunities for other

people in a community besides the

small business owner.

2. Suppose that Grade 8 students are

debating whether or not they should

support an organization that provides

small loans like KIVA. Produce a

list of questions they should ask

the organization before they make

their decision.

The largest single factor that influences our ability to meet our needs and wants is economic activity. Economic activity is everything that we do to produce, distribute, and consume goods and services. For example, attending school is an economic activity. Education helps you learn skills and discover ideas that will help you meet your needs and wants in the future. Working in a part-time job, going to a movie, and buying lunch are also economic activities.

Increasing wealth in developing countries can be a challenge. But even a small amount of economic activity can get an economy going in a developing country. Starting a new small business can help to strengthen a local economy and improve the quality of life in a community (Figure 6.10). Large organizations, such as the World Bank, lend money to developing countries to fund new development projects. Smaller organizations and lending companies also loan money to help people start small businesses.

HOW DOES ECONOMIC ACTIVITY

AFFECT PEOPLE’S LIVES?

economic activity actions that involve producing, distributing, or consuming goods and services

FIGURE 6.10 This is a floating market in the Solomon Islands. Hundreds of small business owners travel by canoe from island to island to sell their locally grown fruits and vegetables.

FIGURE 6.11 The first ever KIVA U Summit was held in San Francisco in 2013. It brought together over 150 students and educators from around the world.

I wonder how all of these small businesses affect the local economy?

CHAPTER 6: Quality of Life and the Economy 175NEL174 UNIT 2: Global Inequalities: Economic Development and Quality of Life NEL

A traditional economy is most often seen in small, isolated

communities. Most people are farmers who grow, hunt, or

fish just enough to survive. They are guided by past practices,

ecological knowledge, and tradition. Traditional economies have

existed around the world for thousands of years. People meet

their needs through their own efforts. For example, they may

plant crops or herd animals for food. Examples of traditional

economies are Inuit of Canada, the Fulani people of Nigeria and

Chad, and the Saami of northern Europe (Figure 6.12).

• Advantage: People develop knowledge and skills suited to

survival in their local environment.

• Disadvantages: There is little interaction with other people.

Some communities have a lower quality of life because of

little healthcare, poor nutrition, and a low literacy rate.

• Government control: None

In a command economy, the government owns or controls all

the resources, goods, and services, and makes all the economic

decisions. Citizens have little freedom to contribute to decisions

that affect their country. The government forces people to do

as they are told. Examples of command economies are China,

Cuba, and North Korea (Figure 6.13).

• Advantage: The government can focus all of its

resources on one goal, such as China’s push to increase

economic development.

• Disadvantage: Government decisions are not always made

in the best interests of the citizens. For example, during the

1990s, government mismanagement led to famine in North

Korea. About 1 million people died of starvation because the

government would not accept food aid from other countries.

• Government control: Full

In a market economy, producers and

consumers make all the economic

decisions. Producers decide what goods

and services to offer. Consumers are free

to decide how they will spend their money.

The government tries not to interfere in

businesses. Instead, it provides only the

services that are necessary to ensure that

the economy can work effectively. For

example, a government might provide

national defence, road building, policing,

and fire protection, but not own and run

industries. The United States (Figure 6.14)

and Taiwan have market economies.

• Advantage: When many businesses

compete for the same market, they tend

to keep prices down to attract consumers.

• Disadvantage: Because profit is the

single driving motive of businesses,

they generally avoid taking measures

to protect the environment or increase

social services.

• Government control: Little

ECONOMIC SYSTEMSThe economic system of a country is the structure of its economy, including the ownership of resources. An economic system can have positive and negative effects on the economy of a country and can impact the quality of life of the people. Economic systems vary from country to country. Economists identify four different economic systems: traditional, command, market, and mixed. Each one is a different way of achieving the same goal: economic activity. The main difference among the four economic systems is the level of government control. Some governments want full control of their economy and full control of their citizens. Other governments want to give businesses and citizens some freedom to make their own choices.

economic system the structure of a country’s economy, including the ownership of resources, and how those resources are used to satisfy people’s needs and wants

FIGURE 6.12 The Saami people have a traditional economy. This woman is a reindeer herder from northern Finland. Reindeer herding is part of their economy.

FIGURE 6.14 Traders buy and sell stocks (shares of a business) on the floor of the New York Stock Exchange. In a market economy, people are free to buy and sell whatever stocks they choose.

FIGURE 6.15 The Sorbonne is part of the University of Paris in France. In a mixed economy, many educational institutions are funded by the government.

FIGURE 6.13 Kim Jong-un (right) runs a command economy in North Korea with the support of the army. He inherited his position as supreme leader and has been called a dictator. He controls the economy because his government owns everything.

Traditional Economy

Command Economy

Mixed Economy

Market Economy

In a mixed economy, individuals and businesses

are free to make many decisions. However,

the government makes some decisions to

encourage or regulate businesses or to improve

people’s quality of life. For example, the

government may set regulations, or rules, that

businesses must follow. The government tries

to strike a balance between protecting quality

of life and encouraging the economy, without

slowing it down. Most countries, including

Canada and France (Figure 6.15), have mixed

economies.

• Advantage: The government can make

regulations to protect the environment,

workers, and the consumer.

• Disadvantage: The government sometimes

strikes the wrong balance. It may either

fail to encourage business or fail to protect

the people.

• Government control: Some

176 UNIT 2: Global Inequalities: Economic Development and Quality of Life CHAPTER 6: Quality of Life and the Economy 177NEL NEL

THE FOUR ECONOMIC SECTORSAll types of economic activity fit into four economic sectors, or categories. The four economic sectors are organized according to the type of activity needed to create and distribute products and services (Figure 6.16).

FINDING ECONOMIC PATTERNSGeographers have identified differences between economies that are developing and economies that are more developed (Figure 6.18). For example, the proportion of primary, secondary, tertiary, and quaternary industries varies with different levels of economic development. The quality of life indicators also vary. There are a range of countries in between these two levels of development.

Figure 6.17 uses Styrofoam as an example in each economic sector. Styrofoam has many uses around the world, such as fast-food and electronics packaging. It is considered a convenient product and has helped to make everyday life easier. However, Styrofoam is not a sustainable product.

Sector Description

primary industry industry that harvests natural resources from nature,

such as forestry

secondary industry industry that uses natural resources to make consumer

products, such as packaging for food

tertiary industry industry that provides services or sells goods, such as

accounting or retail stores

quaternary industry industry that focuses on the application of ideas and

knowledge, such as software development or education

FIGURE 6.16 The four economic sectors

FIGURE 6.18 Characteristics of developing and more developed economies

FIGURE 6.17 The four economic sectors shown here all relate to the production, use, and recycling or disposal of Styrofoam.

What impacts does Styrofoam or the creation of Styrofoam

have on the environment in each economic

sector?

Primary industry: An oil company drills and pumps oil out of the ground.

Tertiary industry: A fast-food restaurant sells food and drinks in Styrofoam containers.

Secondary industry: After the oil is processed, a manufacturer makes Styrofoam, a petroleum-based plastic. The Styrofoam is sold to restaurants and packaging companies.

Quaternary industry: Styrofoam takes over 1 million years to decompose. Scientists research ways to recycle Styrofoam. Others research alternatives for more environmentally friendly products.

Characteristics of Developing Economies

Characteristics of More Developed Economies

• growing number of industries

• few wealthy citizens

• many workers unemployed

• low incomes, shortages of

food, and poor housing

• low levels of technology

• many people who work on

farmland outside of the city

• many industries

• many wealthy citizens

• few workers unemployed

• high incomes, abundance

of food, good housing, and

luxury items

• high levels of technology

• many people who work in the

service industry

PATTERNS IN EMPLOYMENT OVER TIMECountries’ economies change over time as governments change, as industries grow and shrink, and as the population becomes more educated. Canada, for example, was not always a more developed country. Just 150 years ago, most Canadians farmed the land. Over many decades, Canada gradually changed. Fewer people worked in agriculture. More people moved to cities and found jobs in manufacturing. Eventually services became the main source of employment. Most countries that move from less economic development to more economic development go through the same changes in employment. You can see these changes in Figure 6.19. FIGURE 6.19 This model shows how

the percentage of employment tends to change over time as a country develops.

least developed more developed

60

20

0

40

80

100

Per

cen

tag

e o

f em

plo

ymen

t b

y ty

pe

of

ind

ust

ry

Economic development

Primary

Secondary

Tertiary

Quaternary

Percentage of Employment and Economic Development over Time

CHAPTER 6: Quality of Life and the Economy 179NEL178 UNIT 2: Global Inequalities: Economic Development and Quality of Life NEL

COUNTRIES WITH LEAST DEVELOPED ECONOMIES

Countries with the least economic development are

developing countries that tend to rely on primary

industries. For the most part, this means small rural

farms. Burkina Faso is an example of a country with

little economic development. About 90 percent of

its workforce farms the land and contributes little to

the GDP. The farmers sustain themselves and their

families, but most do not have jobs with a salary. The

infographic below shows that access to medical care is

exceedingly low. This reflects the access to healthcare

indicator of the country. How does this affect life

expectancy? What other patterns can you see?

COUNTRIES WITH MORE DEVELOPED ECONOMIES

In countries with more economic development, services such as healthcare

and education (tertiary industries) have grown. Canada is at this

stage of economic development. About 76 percent of workers are

employed in service and knowledge industries, such as research

and development. In most of the more developed economies,

primary industries play a very minor role but are generally

very efficient. In Spain, for example, only 4.2 percent of

the workforce is employed in primary industries, which

contribute little to the GDP. The infographic below shows

the impact on quality of life when a large portion of the

workforce works in services. How would you compare

the GDP per capita with those of Burkina Faso and

Thailand? How might this affect life expectancy?

COUNTRIES WITH DEVELOPING ECONOMIES

In countries with some economic development, secondary and tertiary

industries play a larger role. People tend to have jobs in both manufacturing

and service industries. They get a regular salary, and they pay taxes. Their extra

income means that they can buy more consumer goods and services. The

extra government revenue allows the government to increase spending on healthcare.

The effects are evident in Thailand, where

a relatively small 38 percent of workers

are farmers. Many more (48 percent) are

employed in the service industry (largely

tourism). How does the GDP per capita

compare with that of Burkina Faso? How

has the economy affected the average

life expectancy?

Burkina Faso, 2013

Spain, 2013

Thailand, 2013

$

$

$

+

+

+

COMPARING LEVELS OF ECONOMIC DEVELOPMENTA country’s level of economic development has a variety of effects on its citizens’ well-being. These effects can be seen in indicators such as life expectancy, GDP, and access to medical care.

Figure 6.20 gives examples of three countries in three different levels of economic development as categorized by the United Nations.

FIGURE 6.20 The quality of life indicators of Burkina Faso demonstrate a least developed economy, while those of Thailand demonstrate a developing economy, and those of Spain, a more developed economy.

Life Expectancy (years)

Life Expectancy (years)

Life Expectancy (years)

GDP per Capita (US$)

GDP per Capita (US$)

GDP per Capita (US$)

Access to Medical Care(hospital beds per 1000 people)

Access to Medical Care(hospital beds per 1000 people)

Access to Medical Care(hospital beds per 1000 people)

54.8

81.5

74.2

1500

30 100

9900

0.4

3.2

2.1

1. INTERRELATIONSHIPS Make a table with two

columns. Label one column “Economic Activity”

and the other column “Effect on Quality of Life.”

Complete the table for three types of economic

activity that you might see in a typical day.

2. GATHER AND ORGANIZE Create a Compare/Contrast

Matrix comparing a command economy with a

market economy.

3. GEOGRAPHIC PERSPECTIVE A bias is a preference

that may distort our judgment of a situation.

With a partner, review the indicators used to

measure economic development and quality

of life. Discuss whether there are any biases

in these measures. Are there other ways to

measure development or well-being that are not

considered by these indicators?

4. COMMUNICATE What are the advantages and

disadvantages of a mixed economy? Make notes

on this question using ideas from the chapter.

Hold an informal debate with a partner about

whether or not a mixed economy is the best

economic system.

5. EVALUATE AND DRAW CONCLUSIONS Why is it likely

that a country with a high level of employment

in the tertiary and quaternary sectors will rank

higher on the Human Development Index than a

country with an economy that is dominated by

the primary sector?

CHECK-IN

Spain is an example of a country with a more developed economy.

Burkina Faso is an example of a

country with a least developed economy.

AFRICA

ASIA

EUROPE

INDIAN OCEAN

Thailand is an example of a

country with a developing economy.

CHAPTER 6: Quality of Life and the Economy 181NEL180 UNIT 2: Global Inequalities: Economic Development and Quality of Life NEL