Road to Development

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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
                                                       •    Characterised by
                                                           – subsistence economy
                                                              – output not traded or
                                                              recorded
                                                           – high levels of
                                                              agriculture and labor
                                                              intensive agriculture
                                                           – Wealth allocated to
                                                              nonproductive
Village in Lesotho. 86% of the resident workforce in
Lesotho is engaged in subsistence agriculture.
                                                              activities (religious,
Copyright: Tracy Wade, http://www.sxc.hu/                     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 self-
  sufficiency approach to international trade
  – according to the World Bank – international
    trade countries have seen 4% growth, self-
    sufficiency 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     Processes that incorporate lower
   levels of education, higher           levels of education, lower
   salaries, and more technology         salaries, and less technology
* Generate more wealth in the         * Generate less wealth in the world
   world economy                         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

				
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