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Road to Development Balanced Growth • through Self-Sufficiency • A country should spread investment as equally as possible across all sectors of its economy and in all regions. – Incomes in rural areas keep pace with urban incomes – Businesses remain independent of foreign corporations – Limit imports through tariffs and quotas Different Routes to Success • India followed this policy – Made imports difficult – Discouraged Indian businesses from exporting – Could not convert Indian money into other currencies – Encouraged production of consumer goods for Indian citizens – Provided subsidies for struggling companies Problems • Inefficiency: without true competition, companies have little incentive to improve techniques, technology, products, etc • Large Bureaucracy: needed to administer the controls – complex and corrupt Rostow’s Development (Modernization)Model • through International trade • A country can develop economically by concentrating scarce resources on expansion of its distinctive local resources • Developed by W.W. Rostow (1950s) Rostow - Stages of Growth 1. Traditional Society • Village in Lesotho. 86% of the resident workforce in Lesotho is engaged in subsistence agriculture. Copyright: Tracy Wade, http://www.sxc.hu/ Characterised by – subsistence economy – output not traded or recorded – high levels of agriculture and labor intensive agriculture – Wealth allocated to nonproductive activities (religious, military Rostow - Stages of Growth 2. Pre-conditions: – An elite group initiates development – Investments in technology and infrastructure – Commercialization of agriculture The use of some capital equipment can help increase productivity and generate small surpluses which can be traded. Copyright: Tim & Annette, http://www.sxc.hu Rostow - Stages of Growth 3. Take off: – Increasing industrialization in limited areas (food or textiles) – Foreign investment increases – Infrastructure improvements – Some regional growth – Economy still dominated by traditional practices At this stage, industrial growth may be linked to primary industries. The level of technology required will be low. Copyright: Ramon Venne, http://www.sxc.hu Rostow - Stages of Growth 4. Drive to Maturity: – Develops broad manufacturing and commercial base – Industry more diversified – Increase in levels of technology utilized As the economy matures, technology plays an increasing role in developing high value added products. Copyright: Joao de Freitas, http://www.sxc.hu Rostow - Stages of Growth 5. High mass consumption – High output levels – Mass consumption of consumer durables – High proportion of employment in service sector Service industry dominates the economy – banking, insurance, finance, marketing, entertainment, leisure and so on. Copyright: Elliott Tompkins, http://www.sxc.hu USA Path to Development • Stage 5: early 20th century • Stage 4: late 19th century • Stage 3: middle of 19th century • Stage 2: first half of 19th century • Stage 1: prior to independence Criticisms • Assumes LDCs will achieve each level of development before advancing • Uneven resource distribution (Zambia’s one commodity market of copper developed trouble when world copper price fell) • Market Stagnation – MDCs market are saturated, need to increase sales in LDCs • Increased dependence on MDCs – when concentrating resources in a “takeoff” industry, then buy necessities from MDCs Criticisms • Does not account for – – – – – – – Global politics Colonialism Physical geography War Culture Ethnic conflict Deindustrialization • Cannot compare Nepal (stage 1) to Denmark (stage 5) to Saudi Arabia • Development does not necessarily lead to high consumption, can mean social welfare • Possible 6th stage – Postindustrial – Service replaces industry – Information replaces energy as key resource International Trade Approach • Some countries have switched from selfsufficiency approach to international trade – according to the World Bank – international trade countries have seen 4% growth, selfsufficiency countries 1% • LDCs are exporting more manufactured goods rather than agriculture or mining goods International Trade Approach • World Trade Organization (1995) works to reduce barriers to international trade by – Negotiate reductions in trade restrictions, such as quotas & tariffs – Enforces trade agreements • WTO has been criticized for being undemocratic (favor large corps over poor nations) and for threatening sovereignty International Trade Approach • Foreign Direct Investment (FDI) – investment made by a foreign company in the economy of another country • Only 1/3 went from a MDC to a LDC (only 10% went to African nations) • Transnational Corporations are major sources of FDI Models of Development • Liberal Models by definition – Rostow’s Model – All countries are capable of development – All countries follow the same model of development • For countries that have developed in modern times – only China has followed THE model of development – Economic disparities are a result of short term inefficiencies in local or regional market forces Models of Development • Structuralist Models – Dependency Theory – Regional disparities are a structural feature of the global economy • Neo-Colonialism – Things have come to be organized or structured in a certain way and cannot be changed easily – Old method of industrializing is no longer possible because other factors have changed Dependency Theory • Structuralist alternative to Rostow’s model • Political and economic relationships between countries and regions control and limit the economic development of less affluent regions • Dependency helps sustain the prosperity of the dominant regions and the poverty of the lesser regions Dependency Theory • Little hope for economic prosperity in regions and countries that have traditionally been dominated by external power (colonialism) • Based on generalizations that pay little attention to regional differences in culture, politics, and society World-Systems Theory • Immanuel Wallerstein • Divide world into – Core – Semi-periphery – Periphery Three Tier Structure Core Periphery Processes that incorporate higher levels of education, higher salaries, and more technology * Generate more wealth in the world economy Processes that incorporate lower levels of education, lower salaries, and less technology * Generate less wealth in the world economy Semi-periphery Places where core and periphery processes are both occurring. Places that are exploited by the core but then exploit the periphery. * Serves as a buffer between core and periphery Core Periphery Model • Core Regions – High levels of socioeconomic prosperity – Dominant players in global economic game Anglo America HDI .94 Japan and the South Pacific HDI .93 Western Europe HDI .92 Core Periphery Model • Periphery – Poor regions – Dependent on the core – Do not have much control over their own affairs Periphery Regions Latin America HDI .78 East Asia HDI .72 Southeast Asia HDI .71 Middle East HDI .66 South Asia HDI .58 Sub Saharan Africa HDI .47 Core Periphery Model • Semi Periphery – Regions that exert more power than periphery regions but are – Dominated to some degree by the core Development Indicators • Economic: GNP, PPP, per capita energy consumption • Noneconomic: HDI, gender equity, calorie intake Four Dragons • Aka Four Tigers or Gang of Four • S. Korea, Singapore, Taiwan, and Hong Kong • Lacked natural resources • Strongly influenced by Japan’s success • Concentrated on handful of manufactured goods • Low labor costs • Sell to MDCs Millennium Development Goals • Adopted by world leaders in the year 2000 and set to be achieved by 2015, the Millennium Development Goals (MDGs) provide concrete, numerical benchmarks for tackling extreme poverty in its many dimensions. The MDGs also provide a framework for the entire international community to work together towards a common end – making sure that human development reaches everyone, everywhere. If these goals are achieved, world poverty will be cut by half, tens of millions of lives will be saved, and billions more people will have the opportunity to benefit from the global economy. Millennium Development Goals The eight MDGs break down into 21 quantifiable targets that are measured by 60 indicators. • • • • • • • • Goal 1: Eradicate extreme poverty and hunger Goal 2: Achieve universal primary education Goal 3: Promote gender equality and empower women Goal 4: Reduce child mortality Goal 5: Improve maternal health Goal 6: Combat HIV/AIDS, malaria and other diseases Goal 7: Ensure environmental sustainability Goal 8: Develop a Global Partnership for Development http://www.undp.org/mdg/basics.shtml