Download Economic Geography 3 B

Economic Geography 3 B
Growth and development theories
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The time perspective 1
Growth theories: quantitative orientation
 Useful for purely economic issues
 Important for economic geography in
assessing the spatial impact of growth
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Time perspective 2
Development theories: qualitative orientation
 Incorporate economic, cultural and social
aspects
 One element among others in economic
geography, equally important for social and
cultural geography
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Methodological approach
 Linear-causal theories: deterministic, simplified, unrealistic (e.g.: trade creates growth
that creates development that creates trade
that ...). Macro-scale
 Theories of economic stages (from neolithic
to modern). Macro-scale
 Non-linear theories, probabilistic, systems
oriented (multiple causes of low degree of
development). Macro and micro scale
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Growth
Absolute (real)
GDPt1  GDPt0
2000-2001: GDP + 0.3 %
Relative
(per capita)
GDPt1 GDPt 0

Popt1
Popt 0
2000-2001: Pop. + 1 %, GDP + 1.2 %
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Neoclassical theory 1
 Capital accumulation drives the economy
and is an indicator of development
 Existing wage disparities are automatically
compensated by labour migration
 The free market regulates everything and
eliminates disparities (total competition)
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Neoclassical theory 2
 Condition: the freedom of mobility must be
guaranteed (total mobility, no state intervention)
 Mechanistic, promotes the law of the jungle
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Postkeynesian theory 1
 State investment creates jobs
 Four effects result from such investment:
multiplier, complementary, trickle-down and
polarization effect
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Postkeynesian theory 2
 Multiplier effect: the money earned will be
spent and circulates, thus inviting for more
 Complementary effect: investment may initiate further investments (e.g. firm B processes the output of firm A, or firm B produces a
component for firm A)
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Postkeynesian theory 3
 Trickle-down effect: the positive achievements diffuse through space, leading to
improved well-being (increase of consumer
goods, incentive to investments)
 Polarization effect: the point of investment is
the only region to profit, the regional disparities will continue to exist
Closer to reality, but still very mechanistic
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Theories of economic stages
 Historically oriented
 Evolution of human society has passed
through different stages until the present (end
stage)
 Key element: progress
 What is progress?
 High variety of stages and explanations, depending on the perspective of the individual
author
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W. Rostow
 Traditional society (agricultural, no growth)
 Transitional society (slow technological change,
slight growth)
 “Take-off” society (self-propelled growth, iron and
steel industry)
 Mature society (high growth, efficient resourceuse, new industries, new labour requirements)
 Society of mass consumption (high income, consumption and leisure society)
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E. Friedrich
 Reflexive economy (focus: spontaneous needs;
subsistence)
 Instinctive economy (adaptation to nature, decline of pure subsistence economy)
 Traditional economy (less dependence from nature, division of labour, market economy)
 Scientific economy (independent from nature
thanks to science and technology, market
economy)
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M. Friedman
 Pre-industrial (isolated settlements, spatial equilibrium, no competition)
 Transitional (industrialization, spatial inequalities, primary cities as growth poles, dependent
and exploited peripheries, competition)
 Industrial (urban networks, more growth poles,
less peripheries, competition)
 Post-industrial (functional interdependence,
equilibrium situation, less competition)
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K. Marx
 Primitive society
 Slave society
 Feudalism
 Capitalism
 Socialism/communism
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Critique
 Retrospective and descriptive
 Created from a Northern perspective
 They suggest that history has come to an end
(the end-state of the “present”, whatever this
means)
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An alternative model for the
African context
 Tribal society: subsistence and low surplus economy
 Colonial society: economic exploitation, Africa
as dependent and exploited periphery
 Postcolonial society: economic exploitation under a new/old system
 Independent society of the future: development
of autochthonous forms of the economy
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Arguments
 The economy is part of every society, hence
has to be seen in context (culture)
 The alternative model emphasizes the road
from local/regional to global relations, both
in the social and economic domain
 The look into the future (different for every
society) incorporates development as a constant process
 The model is open to discussion
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Development
 A process that never ends
 Meaning: to unfold, to unroll, i.e. to open up
 Friedman: ‘a discontinuous cumulative process, which manifests itself in series of innovations and will eventually lead to a structu-ral
transformation of the social system.’
 WL: ‘a process leading from an original situation (which is judged as unsatisfactory) to a
new situation, judged as better or satisfactory’
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Attention
 Development is not a final state of things but a
process
 Development is a social, political and economic
issue (help towards self-help), not simply the
provision of material goods
 In many theories, it is understood as something
static, to be achieved, as a ‘final’ state
 The legacy of the economic stages can be detected in a number of theories
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Dependency theory
(Dependencia)
 Latinamerican theory, developed from the
feeling of C-P-type dependency
 Leading figure: Argentinian economist Raúl
Prebisch (chair of UN Economic Commission for Latin American)
 Key arguments: terms of trade and investments are in favour of the industrialized
world
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Terms of trade 1
 The exchange-value of an export commodity to
an import commodity
 If prices are negotiated according to supply and
demand, neutral terms of trade will emerge
 If prices are determined at a commodity exchange outside the country of supply, there will
be distortion and the terms of trade will be
unfair to the export country
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Terms of trade 2
 The South furnishes a lot of raw materials and
food products
 Most commodity exchanges are situated in the
North, where prices are made according to the
consumers’ demands, not to the suppliers’ needs
 Prices of imported good into the South are based
on the cost structure of the North and thus independent from prices for export goods
 Real exchange is therefore not possible
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Example
 Time 1: for 1 ton of bananas I can import 10
bicycles
 Time 2: for 1 ton of bananas I can import 5
bicycles because the production cost of
bicycles has risen in the North
 In order to import 10 bicycles, I have to
export 2 tons of bananas
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Consequence
1. More people have to walk, or
2. The production of bananas has to be doubled in
order to satisfy the import needs
 1) less comfort,
 2) ecological consequences: a) more land for
export-bananas = less land for food; b) higher
intensity = more fertilizers (imported), hence
higher threat to the environment and more dependency on exports to supply the foreign currency for imports
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Characteristics of the
dependencia
 It suggests a vicious cycle in several fields:
terms of trade, export and import dependency,
decapitalization (transfer of profits by foreign
investors, of capital by native upper class)
 This dependency results from too strong an
inte-gration into the world market which
creates different kinds of dependency (economic, political, cultural)
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Root of dependency
 It can also be seen as the result of long-lasting
foreign (colonial) domination
 The colonial regime was geared to the needs of
the ‘motherland’ and did not allow endogenous
econo-mic development
This theory originated out of the specific Latinamerican situation vs. the economic (etc.) power
of the US, but its general value can be demonstrated in our time
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Modernization theory
 A Northern theory based on the idea that modernization (in the western style) will automatically lead to development
 ‘Modern‘ is a situation after a long evolutionary process
 Only western civilization is modern, the rest
are cultures with a folkloristic value that require modernization
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Characteristics
 Internal conditions in ‘ill-developed’ societies are
the cause of ‘underdevelopment’
 Exogenous influences are per se positive
 The dualistic situation (modern vs. traditional
sectors) is detrimental to ‘development’
 Once this dualistic pattern has been overcome, a
country will be ‘developed’
 A beautifully simplistic theory. If only it would
work…
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Polarization theory
 Developed by G. Myrdal (1898-1987), Swedish economist (Nobel Prize 1974)
 Basis: Cumulative causation, i.e. ‘poverty
breeding poverty‘ or the positive feedback
loop in a system (vicious cycle)
 Root of the evil: the free market is the source
of disparities
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Polarization vs. Neoclassics
Neoclassics
 Total competition
 Free market economy
 Free mobility
 Disparities disappear
 Far from reality:
homo oeconomicus
Polarization
 Oligpolistic situation
 Monopoles
 Obstacles to mobility
 Disparities remain
 Close to reality: man
as an irrational actor
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Cumulative causation
 Positive and negative processes tend to
reinforce themselves independently
 A positive feedbackloop in a system means
that an existing process continues
 Once a person has become poor, he/she will
have difficulties to come out of poverty as its
stigma acts negatively on his/her chances
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A factory burns down
Factory
Workers
less taxes
Authorities
less tax income
no salaries
less
shopping
Retail trade
less
investment
s
emigration
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Effects
 Regional disparities are inherent in the free
market economy
 The cumulative causation process results in a
spatial differentiation into growth regions and
declining regions
 This process takes place in a parallel way in rich
and poor populations: the rich become richer
while at the same time the poor become poorer
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The role of the state
 The unregulated free economy behaves in the
way Myrdal showed
 The state can intervene through various
measures
 Economic and development policy and
planning restrict the free market forces in
favour of the less fortunate
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Comment
 A system cannot change from ist own will, it
need some form of external energy
 The poverty-vicious cycle can hardly be broken
by the poor themselves
 Disparities are inevitable: the earth is not uniform, nor are the human being
 Disparities can be reduced through a change of
attitude
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Endogenous development
 Every region and every country has a certain
potential of its own
 Economic circuits are often limited in space
(local, regional)
 The world-market must not be considered as
the only outlet for products but must be
integrated into a wider economic philosophy
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Endogenous vs. exogenous
development
Exogenous
Endogenous
 The North as exclusive
model
 Orientation towards the
global market
 Primary aim: modernization
 Result: dependency
from the outside world
 Appreciating southern values and local knowledge
 Local, regional, national
and global markets side by
side
 Primary aim: autonomy in
survival
 Result: interaction with
outside world
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Requirements
 Endogenous development requires to be
compatible with a number of factors
 These factors can be seen in isolation, but in
reality they are all interrelated
 They comprise space (environment, local and
regional activity space) and society (social
organization, economic needs and cultural
life)
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Compatibilities of endogenous
development
local/regional
compatibility
social
compatibility
Endogenous
development
cultural
compatibility
ecological
compatibility
economic
compatibility
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Commentary
 Development theories can explain everything and
nothing.
 Their application depends on the (ideological)
position of the researchers and the politicians
 Development is modernization, but not in the
sense of westernization
 Modernization is a continuous process that takes
place in every society according to its own
rhythm
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A provocative statement (IMF)
The provision of greater trade opportunities by
increasing access to the markets of advanced
economies is a necessary condition for breaking
the vicious circle of stagnation, poverty and weak
governance
(The Honorable Nicolás Eyzaguirre, Minister of Finance of Chile,
Washington, D. C., April 20, 2002)
Do you agree?
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