Download Road to Development

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
– Investment is spread equally throughout
country
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
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
• 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