Transcript Why do ldc’s face obstacles to development?

Why do ldc’s face
obstacles to
development?
Chapter 9: Development Key Issue 4
The problem:
• LDC’s need to develop rapidly
• Trying to increase the per capita income as quickly as possible
• Also reinvesting in social and economic changes
• 2 main problems:
• Successful policies for development
• Finding $ to pay for policies
Self-sufficiency
• Encourage growth of industries (both
rural and urban) within the country
• Accomplished by:
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making it difficult to export goods
High import taxes
Quotas on imports
Requiring licensing to sell products within
the country
• Ultimately this controlled GLOBAL
competition
• India used self-sufficiency policies for
growth
• Businesses that struggled may get subsidies
Self-sufficiency
• Problems with Self-Sufficiency
• Encouraged inefficient business practices
• Businesses didn’t have to innovate, adapt, grow, etc.
• Successful no matter how good you did
• Large role of government
• Corruption and abuse of power
• Illegal importing & black market goods
International
trade
• Rostow’s Development model
• Traditional Society
• Most people in agriculture
• Government $ goes to military (protection) & religion
• Pre-Takeoff
• Educated elites identify innovative economic activity
• New activities (infrastructure, new technologies, etc.)
promotes eventual growth
• Takeoff
• Rapid growth in limited, identified activities
• Leads to technical advances that can be used
elsewhere
• Drive to Maturity
• Diffusion of new technologies (i.e. Industrial
Revolution)
• Skilled & specialized workforce
• Mass consumption
• Consumer goods become the focus of economy
• Tertiary jobs take the forefront
Problems with
Rostow
• Assumes that economies will
naturally pass through these
stages
• Global politics, war, colonialism,
ethnic conflict, etc.. Go
unaccounted for
• Characterizes the final stage by
high mass consumption, this
makes environmentalists sad.
• Assumes development is
economic
• Does not account for
deindustrialization
Models of
Development
• Dependency Theory is another
Structuralist Model
• Political & economic
relationships between countries
& regions limit the
development of the less well
off areas
• Colonial dependencies are still
in place from long ago.
• Dependency theory sees little
hope for economic prosperity
in some traditional parts of the
world
International trade
• Ex. of IT approach
• 4 dragons: S. Korea, Singapore, Taiwan, &
Hong Kong
• Limited resources but produced clothing &
electronics with cheap labor
• Produced for MDC markets not for their own
• Arabian Peninsula
• Used oil profits to expand infrastructure and
expand manufacturing abilities
• Problems with International Trade
• Uneven resource distribution
• don’t have what people want
• Increased dependence on MDC’s
• Can’t get everything needed from revenues
from takeoff industries
• Market decline
• Change in demographics = decrease in need
for cheap goods
International Trade
Triumphs
• Trade has grown faster than wealth
• 1990’s – many self-sufficient countries converted to international
trade
• GDP per capita grew faster in IT countries than in SS countries
• World Trade Organization (est. 1995)
• Encourage trade by: 1) removing blocks (e.g. removing subsidies)
and 2) enforcing agreements (including copy right laws today)
• Critics say it is too powerful and favors rich corporations
• Foreign Direct Investment – investment made in the economy of
another country
• FDI is not distributed evenly
• Transnational corporations – invest outside the their headquarter
country
Fair trade
• Alternative to International Trade
• Goods and services produced and sold according to standards
that protect LDC’s
• Producer Standards
• Cooperatives help small business owners by banding together
and having more strength
• Producers make more per product than commercial businesses
• Worker Standards
• International trade doesn’t address worker conditions
• Fair trade requires minimum working conditions
Financing
development
• LDC’s get money from MDC’s
• Loans
• UN developed World Bank & IMF
following WWII
• World Bank:
• International Bank for Reconstruction
and Development (IBRD) – loans for
improvement from bonds & investors
• International Development Association
(IDA) – riskier loans from government
contributions
• International Monetary Fund
• Loans used to protect currency & buying
power
• Goal of loans is to improve infrastructure
and development
Financing
development
• Structural Adjustment Programs
• LDC’s plan for using a loan:
• Economic goals, strategies for achieving those goals, &
external financing requirements
• Include several conditions (page 300)
• Critics:
• Cuts $ to health care, ed., & social service programs
• Higher unemployment
• Less support for those that need it most
Sustainable Development
• Global environmental change
• Environmental economics
• Women and development
• Children and development
Real-World Strategies:
• Partnership with
developed countries
• Market mechanisms for
environmental regulation
• Resource conservation
• Renewable resources
• Loans to women and
very poor (microcredit)
• Women’s and children’s
rights
• Appropriate technology
1990s
The Globalization
Tapes