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Development Part 2:
“Paths to Development”
What is Development?
• Reread/review prior information (Part 1)
• Criticisms of the “development” concept:
– One single path/trajectory toward development?
• Is “industrialization” always necessary?
– Western bias (values materialism, is industry good?)
– discounts international influence
• See Wallerstein’s World System’s Theory
• See p 464 – 465 for alternative discussion
– Bhutan measures Gross National Happiness (GNH)
based on psychological well-being, time use, community
vitality, culture, health, education, environmental
diversity, living standard and governance.
UN Millennium Development Goals
Paths to Development
• self-sufficiency model
– Characteristics:
• Barriers are established to protect local businesses
– Three most common barriers = (1) tariffs (tax on imported
goods), (2) quotas, and (3) restricting # of importers
– “protectionism”
• Distribution/pace of development = even but modest
– Investment spread across economy
– Goal is to develop national industries and
– reduce poverty over consumerism
• Two major problems with this approach:
– Inefficient businesses are protected
– A large bureaucracy is needed to regulate/monitor barriers
» costly
» could lead to corruption
» growth of black market
Paths to Development?
• International Trade Model
– Rostow’s model of development
• Five stages
Paths to Development?
• International Trade Model
– Rostow’s model of development
• Five stages
• Why optimistic?
– Eastern/Southern European growth, Japan
– LDCs have tons of resources to exploit
– Examples of international trade approach
• The “four Asian dragons”
– Taiwan, Singapore, South Korea, Hong Kong
• Petroleum-rich Arabian Peninsula states
Paths to Development?
• International Trade Model
– Problems/criticisms (diff. from text)
• single commodity
– depends on world price
– could lead to loan default if price collapses
– therefore, commodities are often leased/controlled by
outsiders who keep lion’s share of profits
• with reliance on cash crops must buy necessities
• income inequality
– result of both model and structural reform programs (later)
Self-sufficiency vs. Int’l trade approach
• International trade approach triumphs
– Countries switch because evidence indicates that
international trade is the more effective path
toward overall development
– Example: India
– made easier by globalization
– “Neo-liberalism”
• Dominant economic/political theory by end of 20th c.
• Reduce government intervention in markets
– Multinational corps., Big Business, Wall St. = Republicans
– Bill Clinton, Pres. Obama, Rahm Emanuel = Democrats
» NAFTA, TPP (Trans-Pacific Partnership)
Triumph of International Trade Approach
Rostow’s “modernization”, “ladder of
development” or “int’l trade” approach to
development
Winners
• Multinational corporations
– Low wages, higher profits,
higher stock prices
– Stockholders
• Consumers
– Lower prices
• In LDCs
– People/regions connected
to int’l trade or the “core”
• BIG Q? Will low prices
continue to offset wage
stagnation?
Losers
• Low skill workers (MDCs)
– Highly paid union workers in
manufacturing
• Small businesses/domestic
manufacturing
• Prices are undercut
• Downward wage pressure
– Will wages decrease or
stagnate for skill workers as
well?
• can tertiary jobs be
outsourced, globalized?
International Organizations
– World Trade Organization (WTO)
• Helps negotiate reductions in trade barriers = “free trade”
• Eliminate restrictions on the movement of capital
• Enforces trade agreements
– by allowing non-penalized retaliation or fines.
• Criticisms:
– Left = anti-democratic, favors wealthy corporations, ignores the poor
– Right = national sovereignty is violated (see TPP)
– Nongovernmental organizations (NGOs)
• Independent non-profits (Gates Foundation, Clinton
Foundation, Carter Center)
– Some funds can be misappropriated → admin. salaries, travel, etc.
• example of a successful policy = microcredit program
– Loans to small entrepreneurs in LDCs (largely women) which are
guaranteed by other’s in village = 98% repayment rate
Barriers and Costs of Development
• Structure and geography of the world economy
(World Systems Theory)
• Social conditions
– Demographic trap
• high CBR, IMR, dependency ratio leads to a lack of
funds for development which in turns leads to high CBR
– Lack of education (overall and gendered)
– Trafficking (domestic servants, street vendors, prostitution)
• Disease
– weak labor force, orphans
• Political Corruption and Instability
– dictatorship, coups, corruption discourage investment
• Financing Development!!!
Biggest problem =
Financing development
• LDCs require money to fund development
– FDI = foreign direct investment
• Major source = transnational corps
Foreign Direct Investment
Figure 9-30
Financing development
• LDCs require money to fund development
– FDI = foreign direct investment
• Major source = transnational corps
• Int’l organizations as lenders:
– The World Bank
• Loans to make reforms, strengthen financial institutions,
infrastructure projects
– IMF (International Monetary Fund)
• Provides loans to countries with debt payment issues
• Goal = protect international trade
– demand “structural adjustment programs”
» realign spending priorities
» eliminate govt. bureaucracy
» cut jobs, pensions, reduce taxes
Public Debt by Country
Costs of Development
• est. of Export Processing Zones (EPZs)
– Favorable tax, regulations, etc. for foreign firms
• Maquiladoras (Mexico), Special Economic Zones (China)
• Agriculture
– Diff. of modern agriculture to produce cash crops
• ↑ intensification → ↑ desertification
– Sahel (south of Sahara, shatterbelt) lost 270k sq. miles
• Tourism (mixed impact)
– Brings in huge $, now > than oil
•
•
•
•
requires infrastructure spending that could be spent on natives
creates jobs but largely low-paying, “dehumanizing”?
profits go to multinational corps.
harsh juxtaposition of tourist wealth and native poverty marks cultural
landscape
Uneven Development within States
• Govt. policies can create or lessen economic
differences between regions
– Infrastructure, education, subsidies, taxes and quotas
• Int’l trade benefits more “connected” regions
Uneven Development within States
• Govt. policies can create or lessen economic
differences between regions
– Infrastructure, education, subsidies, taxes and quotas
• Int’l trade benefits more “connected” regions
• Core-periphery thinking can also apply within states
– reflects weakness of using per capita GNI
– Cities/capitals/ports = Islands of Development
• concentrated economic development, foreign inv. $
• Forward capitals built to draw investment to interior or
to be a centripetal force.
– Brasilia (Brazil), Islamabad (Pakistan), Abuja (Nigeria)
Fair trade approach
• Products are made and traded in a way that
protects workers and small businesses in LDCs
• Two sets of standards
– Fair trade producer standards
• Must be “small”, democratic, high product quality, use
ecologically friendly growing methods, etc.
– Fair trade worker standards
• Collective bargaining, working conditions, minimum
wage, etc.
• Producers and workers usually earn more
• Consumers usually pay higher prices
Fair Trade Coffee
• Fair trade coffee: Shade-grown coffee produced by
certified fair-trade farmers, who then sell the coffee
directly to coffee importers
– Often organically grown
• Guarantees a “fair trade price”
– At least 40% goes to grower
• Over 500,000 registered farmers
– Produced in more than 20 countries
– commitment by Starbucks, Dunkin Donuts and other chains
• Demand must come from the consumer!