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“Why Do Less Developed Countries Face
Obstacles to Development?” KEY
Note: This exercise will provide some further insight into the reasons behind the
disparities between the Top Ten countries on the Human Development Index versus the
Bottom Ten. The Top Ten belong to a group of nations referred to as the “Most Developed
Countries” (MDCs) while the Bottom Ten belong to a group called the “Least Developed
Countries” (LDCs).
Unless otherwise stated, utilize the packet to answer the following questions. You may
answer in point form but make sure that your points are sufficient and clear.
1) Find the definition of gross domestic product (GDP) in your Counterpoints textbook.
The total value of all goods and services
produced in a country, and excluding
transactions with other countries, such as
income from overseas investments.
2)
LDCs
MDCs
Increase in GDP per capita during the past quarter
century
$3000
$16 000
Decrease in Infant Mortality Rate (i.e. the number of
deaths of infants under age 1 per 1000 lives births in a
year)
1/2
2/3
3)
1/5 of the world’s people living in MDCs consume 5/6 of the world’s goods,
whereas the
14% of the world’s people who live in Africa consume about 1%.
4a) According to the article, to reduce disparities between rich and poor countries, LDCs
must
develop more rapidly.
b) What two fundamental obstacles do LDCs face in trying to accomplish this goal?
- adopting policies that successfully promote
development
- finding funds to pay for development
5) Two Major Approaches have been utilized to try to improve the economies of LDCs.
Complete the chart below using point form notes.
Elements
of the
Approach
Examples
Development Through Self-
Development Through
Sufficiency
International Trade
- protect domestic
industry and keep
out foreign
competition i.e.
high duties /
tariffs at the
border, quotas on
imports, require
licences to restrict
legal imports
- try to spread
investment
equally across the
country
- focus on key economic
economic assets and sell
a particular product(s)
on the international
market mostly to
MEDCS
- India tried this for
a number of years
but eventually
switched to the
other approach due
to the problems
- The original Newly
Industrialized
Countries (NICs) [i.e.
S. Korea, Singapore,
Taiwan, and Hong
Kong] followed this
mentioned below
Note: Canada also
tried this under PM
Sir John A.
MacDonald’s
National Policy.
Problems
- protects inefficient
industries: little
incentive to improve
quality, production,
or lower costs due to
lack of competition
- creates large
government
bureaucracy to
administer controls
over imports
- keeps prices high
for domestic
consumers
- can encourage the
development of a
black market for
foreign goods
development model
starting with basic
manufactured products
such as clothing and
then higher value
products
(eg electronics)
- Persian Gulf
countries: oil exports
- increased dependency
on MEDCs for markets
- development tends to
be focused in major
urban centres
- too much dependency
on the sale of one or a
few products may leave
a country vulnerable
during economic
downturns
6) According to the article, most countries have converted from the self-sufficiency to
overwhelming
evidence that international trade better promotes
development”.
international trade approach for one simple reason: “
7) Since 1990, those countries using the international trade approach have seen their GDP
4% annually whereas countries using the self-sufficiency
model have grown at a rate of 1% annually.
per capita grow at a rate of
8) Describe the two principal ways in which the World Trade Organization (WTO) works
to reduce barriers to international trade.
- promote global free trade (i.e. get countries to
cut duties / tariffs , quotas) and eliminate
government subsidies for exports (subsidy =
government financial aid to a business – viewed
as an unfair advantage by the WTO)
- enforce trade agreements and settle trade
disputes
9) What are some of the criticisms of the WTO?
- potential loss of autonomy / sovereignty by individual
countries as the WTO can overrule domestic laws
eg the WTO ruled against the European Union
keeping hormone treated beef out of its market; EU
forced to either change their law to allow the beef in or
face retaliatory trade restrictions on some of its
products or pay compensation to the North American
beef producers for lack of access to the EU market
- lack of labour and environmental protections
- favouring of large multi-national corporations
10) LDCs lack the money needed to finance development.
a) What do LDCs use loans for?
- build infrastructure (i.e. roads, hydroelectric dams,
power lines, water supplies, etc.); major lenders =
World Bank and International Monetary Fund
b) What is the theory behind using the money in this fashion?
- will promote the establishment of manufacturing and
other industries by domestic or foreign businesses
c) Give an example where this turned out to be a problem.
- World Bank estimates that about half of the projects
it funded in Africa were failures|
eg in Mali, a French sponsored project to pump water
from the Niger r. using solar energy worked for one
month. Even if it worked, it would have cost $1
million and would have produced no more water than
could two diesel pumps costing $6000.
d) Outline what happens when LDCs are unable to repay the interest on their loans.
- no further loans and historically told to cut
government spending including on meager social
programs; in recent years more emphasis on MEDCs
forgiving LEDC debt
11) Define transnational corporation / multinational corporation.
- a business that operates in countries other than the
one in which its headquarters are located.
12) In 2001, 25%of foreign investment went from a more developed country to a less
developed country, while 75% went from one MDC to another MDC.
13) 50% of all international investment in LDCs occurred in what countries?
Brazil, China (incl. Hong Kong), and Mexico = NICs
14) Read the supplemental handout, “Legacy of Colonialism in Africa” and list three
positive outcomes and three negative outcomes of European colonialism.
Positives:
- exposure to new languages (i.e. English =
international language of business)
- new medical technology to wipe out diseases such as
small pox and measles
- establishment of internationally recognized
education systems = aids economic development
Negatives:
- towards the end of colonialism, the way the borders
were drawn created problems:
 landlocked countries = hinders international trade
opportunities
 rival tribes in the same country = potential civil
strife or a minority tribe being given the dominate
power position in the post-colonial government =
creates tension (eg Rwanda)
 tribes separated in different countries