Download 1980–2004

Development Models and
Theories
Income and Demographic Change,
1980–2004
Fig. 9-19: Per capita GDP has increased more in MDCs than in LDCs during this
period, while population growth and infant mortality have declined
more rapidly in MDCs than in LDCs.
How can LDCs develop more rapidly?
• LDCs need to increase per capita GDP more
rapidly and use the additional funds to make
more rapid improvements in people’s social
and economic conditions.
• LDCs chose one of two models to promote
development
1. Emphasizes international trade
2. Advocates self-sufficiency
Development Through Self-Sufficiency
• Most popular approach for most of 20th century
– Used in India and China
1. Country would invest equally-sectors and region
2. Isolates businesses from international
competition
3. Sets barriers to limit the number of foreign
goods
4. Businesses are discouraged from producing
goods to be exported
Development through International Trade
• A country can develop economically
by concentrating scarce resources on
expansion of its distinctive local
industry. The income from these
products would bring funds into the
country that can be used to finance
other development.
• Pioneering advocate for this approach
was W.W. Rostow
• Rostow’s model was implemented in
several countries during the 1960s
Examples of International Trade Approach
• Two groups of countries
chose the international
trade approach during
the mid-twentieth
century.
– Arabian Peninsula
– Four Asian Dragons
Modernization Theory
• 1940s-1960s
• Former colonies should follow the path taken by Western
Europe and North America during the Industrial Revolution
• Modernization was made possible by
1.
2.
Building the physical infrastructure of transport, energy, and
water systems
Building the social institutions needed for capitalism, such as
currency, private property, taxes, banks, etc.
• The key to creating wealth were seen as mass production,
specialization, and substitution to capital and inanimate
energy for human labor.
• The World Bank, IMF and other agencies were created to
facilitate investment and technology transfers.
Dependency Theory
• 1970s
• Core-Periphery Model
– Industrialization begins in a single, strong core usually
involved in secondary, tertiary and quaternary activities at
the expense of the traditional periphery dominated by
primary economic activities.
• Leads to neocolonialism
– Previously colonized country has become politically
independent but remains economically dependent on
exporting the same commodities as it did during
colonialism
• Uses capitalism and business globalization to influence a country
Financing Development
• Regardless of model used, LDCs need money
to finance development
• International Monetary Fund (IMF)
• The World Bank
– International Development Association
– International Bank for Reconstruction and
Development
• What is the theory behind borrowing money?
• What are the problems with loans?
Fair Trade
• A variation of the
international trade model
• Fair Trade: products are
made and traded
according to standards
that protect workers and
small businesses in LDCs.
• Producer Standards
• Worker Standards