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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 – 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