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Theories Regarding Development A. Development Theories 1. “Liberal” Models (Modernization Theory) Ex: Rostow’s Model 2. “Structuralist Models” (Dependency Theory) - Cores & peripheries 3. World-Systems Theory (Immanuel Wallerstein) Minerals in Africa Although several African countries have important minerals, the world prices of many of these have lagged the prices of industrial products, services, and energy. A. Dependency Theory: Sub-Saharan Africa 1. Despite resources, sub-Saharan Africa severely lacks development 2. legacy of the colonial era – Mining companies – Lack of Political institutions – Ethnic problems 3. Biggest problem: imbalance between number of people & the food supply B. Modernization Theory: The Rostow Model 1. 5 stages of economic development 2. American economist 3. Developed model in 1950-60s (geopolitical context?) 4. Studied 15 European countries 5. Believed ALL countries have the ability to break the cycle of poverty 1. Subsistence farming economy - 1. 2. 3. labor intensive limited technology & capital Agriculture more mechanized Emerging transport infrastructure Entrepreneurs emerge 1. Industrialization increases…more secondary jobs 2. Growth concentrated in a few regions of the country… in one or two industries 3. New political & social institutions evolve 4. Infrastructural development (airports, roads & railways) 1. Technological innovation 2. Economic development spreads 3. Increase types of industry 4. Continued rapid urbanization 1. Rapid expansion of tertiary industries 2. Industry shifts to production of consumer goods C. Criticisms of Rostow 1. Outdated and oversimplified (take your pill and blast off…) 2. Assumes all countries have same level of resources, population, climate 3. Ignores “foreign aid” & “development loans” 4. Underestimates effects of colonization & imperialism Comparing Rostow’s Model to the DTM Model D. Development Strategies 1. Create economic “self-sufficiency” 2. Development through “international trade” – Ex: Rostow’s model 3. Financing development – Ex: FDI (foreign direct investment) – loans Self-Sufficiency – For most of 20th-century: self-sufficient “balanced growth” – China, India & E. Europe India: government owned businesses, trade barriers & subsidies to promote domestic manufacturing The International Trade Approach – development calls for a country to use its comparative advantage to trade its scarce resources Exs: Oil-rich regions (Persian Gulf , Russia, Mexico) E. & S.E. Asia? – Problem of dependency? – Embraced by most countries for stimulating development – Countries converted from “self-sufficiency” to “international trade” during the 1990s – Past 25 years world trade has tripled Exs: India’s GDP: 7% per year during 1990s China: 10% growth per year 2000-2010 Petroleum-Rich Persian Gulf States Four Asian Tigers (or Dragons…) – South Korea, Singapore, Taiwan, & Hong Kong World Trade Organization (WTO) – Established in 1995 – Works to reduce barriers to international trade – Enforces trade agreements Financing Development – LDCs borrow money to build new infrastructure – 2 major international lenders are: World Bank & IMF – Foreign Direct Investment – Microcredit loans to small businesses & women Debt as Percent of Income Many developing countries have accumulated large debts relative to their GDPs. Much of their budgets now must be used to finance their debt. Foreign Investment Flows 3/4ths of foreign investment flows from one MDC to another… E. What is “sustainable” development? 1. Global Partnerships 2. Conservation 3. Renewable resources 4. Women Empowerment • Almost half the world — over 3 billion people — live on less than $2.50 a day. • According to UNICEF, 22,000 children die each day due to poverty. • Less than one per cent of what the world spent every year on weapons was needed to put every child into school by the year 2000 and yet it didn’t happen. Student-Teacher Ratio Physicians per Person Human Development Index ( life expectancy at birth, GDP per capita, indices of schooling & literacy) Literacy rate of women Gender Differences in School Enrollment Economic Indicators of Gender Differences Women as Legislators Over 20% of legislative seats are held by women in China, some European nations, and several LDCs.