Transcript 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
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
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
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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 selfsufficiency approach to international trade
– according to the World Bank – international
trade countries have seen 4% growth, selfsufficiency 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
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
• 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.
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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