Transcript Chapter 12: Development

Chapter 13:
Development: The Glue
that holds together the
Global Economy
Where are we going, what, how, why,
spatially where, and for whom
Link between Resource Curse &
Development
Chap 12 Development
http://www.npr.org/2011/02/25/134048260/Libyas-Economy
2
7 points on Development
1. Definining Developing Countries

Moral High Ground
2. Goals of Development

Greed isn't enough
3. Characteristics of Less Developed Countries

What baggage they bring to the table
4. LDCs debt crisis
5. Measuring Economic Development

Divining the future
6. Defining Economic Development
7. Core--Periphery Concepts vs. Growth Pole
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But first reality check
Development for who???
Remember the Four major questions of the World Economy
(chapter one)
1.
2.
3.
4.
What to produce given limited resources
How to produce it… labor, capital, technology
Where to produce it … why might it be in a give place
Who benefits and how … rich, poor, both
The most important promise held out by the Global Economy
is that all countries will “develop” as a result
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1. What's in
the Word
“Developing”
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1. What's in the Word Developing
Why are words important? Words as social/political
indicators, words as power…Example:








Mailman
Mailwoman
Mail carrier
Letter Carrier
Mailer
Letterer???
Soldier
Soldierette???
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A. Neoclassical school's
current favorite Definitions
LDCs = Less Developed Countries

early step on inevitable path


"there but for the grace of God go I"
Old terms: underdeveloped, developing,
primitive, traditional
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A. Neoclassical school's
current favorite Definitions
IACs = Industrially Advanced Countries



further step on path based on industrial
age
allows for future post-industrial acronym
Old terms: developed, more-developed,
modern, advanced
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A. Neoclassical school's
current favorite Definitions
IACs and LDCs
NOTE: Both terms are apologetic and yet
hopeful


Some are better off
But you too can "own your own modern
economy“… someday
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B. Marxist School View of
the Situation
Underdevelopement
 An active state that results from outside
exploitation and impoverishment
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B. Marxist School View of
the Situation
Capitalist (Hegemonic Imperial)
Countries
 parasitical exploiters
 economic colonial powers
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B. Marxist School View of
the Situation
“Socialist” Countries -- supposedly the solution
 appear to have disappeared (if they ever existed)
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B. Marxist School View of
the Situation
New rich are party's new role models
By Antoaneta Bezlova May 8, 2002
atimes.com
BEIJING - Newly rich entrepreneurs, despised as exploiters for much of China's
communist era, have become the new role models for the Communist Party, which
once defined itself as the "political party of the proletariat".
Marking Labor Day on May 1, China
canonized private entrepreneurs
as "model workers" - an honor that in the past was
deserved solely by state-sector workers. On that day, the All China
Federation of Trade Unions awarded Labor Medals to four private businessmen, and
declared another 17 entrepreneurs in the northwestern province of Shaanxi "model
workers".
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B. Marxist School View of
the Situation
 implied fraternal nations neither exploiter
nor exploited
 Is this possible???
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Conclusion
 How an Issue is Framed in Words Reflects
Much about the agenda underlying the
Solution
www.olive.kiev.ua/pro/americandream.jpg
http://www.affordableamericandream.us/images/housewithfamily.
gif
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2. Goals of Development
What is the Agenda???
 "More!" Samuel Gompers,
President AFL
 "Love!" Timothy Leary,
PhD, LSD
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2. Goals of
Development
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2. Goals of Development
 What exactly is the good life and the just
society and the proper stance towards
nature?
 Very different answers will be given by
people with different belief systems, or
philosophies of life, or cultural
explanations of the meaning of life and
death. (Does this sound like
Hoefstede???)
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http://www.ted.com/talks/tim_jackson_s_economic_reality_check.html
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2. Goals of Development – Denis
Goulet’s Approach
A New Ethics Of Development
Denis Goulet examines alternatives to one-eyed views of the good
life, the just society, and our relationship with nature in his
interview with Mike Gismondi of Aurora Online Magazine.
A pioneer in the study of development ethics, Denis Goulet
began exploring this new inter-disciplinary realm in 1956. For ten
years he served apprenticeships in France, Spain, Algeria, Lebanon, and Brazil to become
familiar with the sociology and anthropology of underdevelopment. He has lived among
nomadic tribesmen in the Sahara; worked as a factory hand and laborer in the United
States, France, and Spain; served on development planning teams for national
governments; and studied social change planning at universities and research institutes. He
presently holds concurrent appointments in the Kellogg Institute for International Studies,
the Department of Economics, and the Institute for International Peace Studies at the
University of Notre Dame.
http://www.gateway.hr/index.php?folder=119&article=24
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2. Goals of Development
Goulet's Three
 1) Life Sustenance -- Guarantee basic
needs
 (See textbook #s 1,2,3,7,8)
 2) Esteem -- Individual Worth
 (See textbook #s 5,9 note that doesn't perfectly
fit)
 3) Freedom -- Pursuit of one's own dream
to the level of one's own potential
 (See textbook #s 4,6)
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Conclusion:
Development has both economic and
humanistic goals, but at times they are in
a dynamic tension.
 More care for the human side can result in
less current term economic gain
 More emphasis on the economic side can
lead to greater inequality and
unsustainable gains
 How might either of these effect the
environment or the future??? NO EASY
ANSWER, MORE BELIEF SYSTEM
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3.
Characteristics
of LDCs
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3. Characteristics of LDCs
1) Rapid Population Growth -- result of declining death
rate not yet accompanied by declining birth rate
Or in the case of China -- Demographic Momentum
still results in crushing large additions to the
Population
2) Unemployment/underemployment
3) Low labor productivity
4) Adverse climate and/or lack of natural resources
5) Lack of capital and Investment
6) Lack of technology
7) Local Cultural Factors can impede capitalist growth
8) Political Factors can also impede capitalist growth
9) Vicious Cycle of Poverty (see model next slide)
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Model of the Vicious Cycle of
Poverty
 Fig 13.16a Basically the argument here is
that low incomes are both caused by and
cause rapid population growth. Why? You
explain.
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Escaping the Vicious Cycle of Poverty
To escape different groups offer different
solutions:
 Direct investment perhaps FDI (capitalist –
resource mobilization approach)
 Crash program in literacy (more
socialist/humanist – human capital theory)
 Redistribution of existing capital
(socialist/communist – end exploitation)
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Model of escape
Example of the Human Capital
Approach
 Fig. 13.16b Basically High
Education and Good Health
are mutually reinforcing and
lead to greater productivity and
hence maintain our
Environment.
Question remains how do we START?
Who pays for the investment in:
• Education
• Health Services
• Resource Management
• Enhanced Earning Capacity -- like new labor
intensive industries for Export market
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Model of Escape
Each school would answer with its own bias
 Capitalist – foreign investment
 Humanist – local sources would be martialled
and humanitarians and foreign aid would help
 Marxists – redistibution of existing capital
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Conclusions:
Many pitfalls face
LDCs where, by
some
accounts, "The
rich get richer and
the poor have
babies“
 Some LDCs’ pitfalls a
result of their own
problems others not
 Export lead growth
can cause
wealth production,
but for whom? Four major
questions of the World Economy
 Cont….
www.rivertowns.net/rustad/xru015.gif
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Conclusions:
Many pitfalls face LDCs where by some
accounts "The rich get richer and the poor
have babies“
 Others argue Sharing
helps all
 For others nothing
short of revolution
will work
www.rivertowns.net/rustad/xru015.gif
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Move to Lecture 14
 Mechanisms to start the development
process
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4. LDCs
debt crisis
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4. LDCs debt crisis
 Basically over-extended selves in 70s and
couldn't repay in high price 80s of low oil
year 90s
 Included oil rich and oil poor alike
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4. LDCs debt crisis
 The Issue -- the crisis is like the person
with so much credit card debt that they
can't even make the minimum payment -and even if they did they are still enslaved
to debt
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4. LDCs debt crisis
 Result of the past by mid 80s more capital
flow from LDCs to AICs than reverse
 IMF sets conditions for bail-out




Goal: Restore LDC growth
Reduce LDC Govt. involvement (more free
mrkt)
Expand exports
Reduce imports (seen as luxury)
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G-8 Agrees to some debt
relief
Aid to Africa and debt cancellation
The traditional meeting of G8 finance ministers before the summit took
place in London on 10 and 11 June 2005, hosted by Chancellor Gordon
Brown. On 11 June, agreement was reached to write off
the entire US$40 billion debt owed by 18 Highly
Indebted Poor Countries to the World Bank, the
International Monetary Fund and the African Development Fund.
The annual saving in debt payments amounts to just over US$1 billion.
War on Want estimates that US$45.7 billion would be required for 62
countries to meet the Millennium Development Goals. The ministers
stated that twenty more countries, with an additional US$15 billion in
debt, would be eligible for debt relief if they met targets on fighting
corruption and continue to fulfill structural adjustment conditionalities
that eliminate impediments to private investment. The agreement,
which required weeks of intense negotiations led by Brown, must be
approved by the lending institutions to take effect.
http://en.wikipedia.org/wiki/31st_G8_summit#Aid_to_Africa_and_debt_cancellation
Some argue this doesn’t go far enough
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Conclusion
 Success or failure still open question,
Arguments against debt relief
Opponents of debt relief argue that it is a blank cheque to
governments, and fear savings will not reach the poor in
countries plagued by corruption. Others argue that countries
will go out and contract further debts, under the belief that
these debts will also be forgiven in some future date. They
use the money to enhance the wealth and spending ability of
the rich… http://en.wikipedia.org/wiki/Debt_relief
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Wild card what happens when the
Western World Economy is
Threatened?
CHINA A NEW
SOURCE OF LOANS
AND GRANTS????
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5. MEASURES OF
ECONOMIC
DEVELOPMENT
or how do we tell who is “developed”
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5. MEASURES OF ECONOMIC
DEVELOPMENT
A. PER CAPITA INCOME (GDP/Capita)
 1. An easy to determine measure. How do
you calculate this???
Chap 12 Development
http://upload.wikimedia.org/wikipedia/en/e/ea/GDP_nominal_per_capita_world_map_IMF_figures_for_year_2005.png
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Criticism per capita income
Five criticisms
1) distribution not included
2) exchange rate problems
3) value of goods not always comparable
across nations
4) goods and bads both included (what does
this mean?)
5) growth may not be sustainable -measures current consumption patterns
not level of investment in the future
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B. Consumer Purchasing power -- an alternate
measure – addressed criticism #3 from above slide.
 Referred to as “PPP per capita”
Purchasing Power Parity
 What is the difference of
purchasing power and "per capita income"?
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Geographic Comparison
Per capita Income
Note the subtle differences in
PPP
• Europe more complex
• Africa more uniform,
• S.America splits in two
• US – Canada same
Chap 12 Development
PPP
per capita
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GDP – PPP table top 16
GDP ($)
Rank
Country
GDP
Rank
(PPP)
Country
per capita
$ per capita
1
Luxembourg
80,288
1
Luxembourg
69,800
2
Norway
64,193
2
Norway
42,364
3
Iceland
52,764
3
United States
41,399
4
Switzerland
50,532
4
Ireland
40,610
5
Ireland
48,604
5
Iceland
35,115
6
Denmark
47,984
6
Denmark
34,740
7
Qatar
43,110
7
Canada
34,273
8
United States
42,000
8
Hong Kong
33,479
9
Sweden
39,694
9
Austria
33,432
10
Netherlands
38,618
10
Switzerland
32,571
11
Finland
37,504
11
Qatar
31,397
12
Austria
37,117
12
Belgium
31,244
13
United Kingdom
37,023
13
Finland
31,208
14
Japan
35,757
14
Australia
30,897
15
Belgium
35,712
15
Netherlands
30,862
16
Canada
35,133
16
Japan
30,615
The table below includes data for the year 2005 for all 16 members of the International Monetary Fund. Data are in United
States dollars.
http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita
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Bottom dozen or so quite similar
GDP ($)
Rank
GDP
Country
Rank
(PPP)
Country
per capita
$ per capita
170
Afghanistan
300
170
Zambia
931
171
Madagascar
282
171
Madagascar
908
172
Niger
274
172
Sierra Leone
903
173
Rwanda
242
173
Niger
872
174
Sierra Leone
223
174
Eritrea
858
175
Myanmar
219
175
Ethiopia
823
176
Eritrea
209
176
Democratic Republic of the
Congo
177
Guinea-Bissau
190
177
Yemen
751
178
Liberia
161
178
Burundi
739
179
Malawi
161
179
Guinea-Bissau
736
180
Ethiopia
153
180
Tanzania
723
181
Democratic Republic of
the Congo
181
Malawi
596
182
Burundi
119 [3]
774 [2]
107
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C. ECONOMIC STRUCTURE
1. What kinds of jobs that appear under each of the
four categories listed below?




PRIMARY EMPLOYMENT
SECONDARY
TERTIARY
QUATERNARY
 Which types of employment predominates in
developed countries?
 Which in less developed?
 What type of job will most of the students in class
hope to obtain?
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D. PRODUCTIVITY –
or more with less
What is productivity? Output/input
Why is it so important? Squeeze more from limited
resources
 How does this relate to the effectiveness
of the workforce?
 Are AICs always more productive?


Consider energy use in Russia
Or in China vs India
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E. RAW MATERIALS -- country's
inheritance – Development Or
Windfall Wealth
 E. RAW MATERIALS -- country's
inheritance

Does this guarantee development?
Explain.
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E. RAW MATERIALS -- country's
inheritance
 1. Does this guarantee development? Petro State
trap or Dutch disease.

Consider Nigeria, Venezuela, or Native Americans

Can be resource rich, income poor
 2. Development vs Sustainable Development
 3. Two approaches:
 a. Sell it off
 b. Combine it with technology to increase national
wealth
 Example countries:
 Canada, Australia, S. Arabia
 What happens when the Aussies sell their last
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load of iron ore to
the Chinese?
F. HUMAN DEVELOPMENT
INDEX
 -- This basically the same process as is done in
the United States to rank best cities or
universities (or for you sports fans, the same
college football teams, only the variables are
changed but the technique is the same)
 What variables are used to create the Human
Development Index (HDI). What does it describe.
 What continent generally has the lowest HDI
measures? What two continents have the highest
level? Compare HDI to per capita income

Leave these for you to read about
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Chap 12 Development
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G. Other measures
There is basically a "cottage industry" in
creating additional measures of
development. Here is one for
Happiness. Compare Mexico and US for
Happiness. (next slide)
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A Plateau of Happiness
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Conclusions
 There is no single measure that fully
describes development. A combination of
measures provides a more complete picture
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7. Core--Periphery
Concepts vs.
Growth Pole
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Expanding Pattern of Core
7. Core--Periphery Concepts vs.
Growth Pole
I. The two camps
 A. Negative -- Marxian Approach
 B. Positive -- Perroux and Growth Poles
(not dealt with in text)
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Core--Periphery
A. Negative -- Marxian Type Approach
1. World contains few small wealthy Cores
surrounded and supplied by large poor
Periphery (see Figures 14.1,18, 20, 25, 26
for international & national spatial
examples)
2. Core acts as parasitical appendage on the
landscape
3. Cores occur at various international,
national, & local levels
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7. Core--Periphery Concepts vs.
Growth Pole
B. Positive -- Perroux and Growth Poles (not
dealt with in text) -- more NeoClassical
Approach
“Growth does not appear everywhere at the
same time; it becomes manifest at points
or poles of growth, with variable intensity;
it spreads through different channels with
variable terminal effects on the whole
economy.” Francois Perroux
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Growth Poles
Agrees that
1.World contains few small wealthy Cores
surrounded and supplied by large “less
developed” Periphery
2. Core acts and draws upon periphery for
resources, labor, and capital
3. Cores occur at various scales
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Growth Poles
Difference
1. This theory assumes Growth Poles are a
natural evolution of world economies
2. Assumes that they are episodic and
temporary – not permanent or predatory
3. Stresses the benefits to the Global
Economy of such spatial constructs
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Growth Poles -- Background
François Perroux, 1903-1987
François Perroux belongs to that small, strange group of unique
Frenchmen who, in spite of the Anglophone dominance of
economics, still manage to occasionally infect the
imagination of the economics world with their novel ideas.
At Collège de France, Perroux studied under Etienne Antonelli, the last
lingering shadow of the Lausanne School. In many ways, Perroux
inherited the mantle of Leon Walras and carried it to perhaps where the
failed engineering student would have liked to have taken it. Like
Walras, he was a Cartesian in method, a socialist in sentiment and an
evolutionist in vision. His early acquaintance and interaction with other
independent thinkers, such as Pantaleoni, Aftalion, Schumpeter,
Morgenstern and Allais, added even more streams of flavor into his
unique blend of thinking. After setting up the Institut de Sciences
Economiques Appliqueées (ISEA) in 1944, he had a chance to
encounter and absorb the ideas of the younger economists which
converged upon it.
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Growth Poles -- Background
Regional growth has been the subject of research going back
to Francois Perroux' work on growth poles in the 1950s. In
the US such research currently goes on under the label of "clusters" –
Michael Porter of the Harvard Business School talks of the 'Diamond of
Competitive Advantage'. The early literature on growth poles was
concerned with the transport of physical goods and, for this reason,
stressed the importance of physical proximity to the eventual success
of a given growth pole. Work on clusters also stresses the importance
of physical proximity, but with a much greater stress on face-to-face
knowledge flows than on the flow of physical goods. (Growth-Nodes in
a Knowledge-based Europe (G-NIKE), Researchers: Dr. Bertram
Konert, Dirk Hermanns,
http://www.eim.org/DigWorld/Projects/ViewDigworld.php3?ID=35 )
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Growth Poles & Their Impacts
1. Centers of Technology & Innovation
suddenly appear on the landscape (ex.
Silicon Valley)
2. Surrounding region benefits in a distance
decay function (further away less benefit)
3. As original technology ages, Growth Pole
faces crises


Can decline (Detroit, Cleveland,... Seattle in
the future???)
Can create new technology & rebirth
(Boston: textiles to computers)
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The continuing Debate
 Marxian critique of Growth
Poles: Continued existence of Pole
indicates unequal, parasitical nature of
Core
 Perrouxian response: Can not
"engineer or create" Poles, therefore
impossible to maintain them through
inefficient, non-competitive relationships

Simply the rich aren’t always going to be
rich
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Another View from the Left
II. Wallerstein... & World Systems:
Monopolies are the name of the game
 "All monopolies great and small will fall...
but not too far"
1. International Core(s) in a Dynamic system,
alternates between:


Single Hegemonic Power with few colonies
Many smaller Hegemonic Powers with many
colonies
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World Systems
2. Neither state is stable


Single Super Power becomes overextended, as it polices the world then
secondary powers save policing costs and
bide their time
Many smaller Powers results in rising
tensions and emergence of new great
power through conflict
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World Systems
3. Periphery


During period of one Super Power –All
countries are informally tied to Hegemonic
Single Power -- few colonies
During period of many Powers -- smaller
countries are formally tied to many Small
Powers -- many colonies
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World Systems
4. World Today (parting
questions)
Is there a single
Hegemonic Super
Power?
b. b. Are there many
Smaller Powers waiting
in the wings?
c. Are Colonial spheres
being mapped out?
a.
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Another View from the Right
 III. Myrdal & Hirschman and the Local
Regional Core--Periphery Mechanism – a
way to explain the birth, growth and death
of cores (growth poles)
1. "In the Beginning...“ (birth) there are two
regions A and B each with ample factors
 Labor
 Capital
 Resources
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Local Regional Core--Periphery
Mechanism
2. "After the Fall..." Region A emerges as a
Core (growth)



jumps ahead technologically
causing it to fully, efficiently use its factors
of production
gets "rich"
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Local Regional Core--Periphery
Mechanism
3. "Meanwhile back at the ranch..." (other
region fails to grow)


Region B workers and capitalists start
moving to Region A to get "rich"
Resources soon follow higher demands in
Region A
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Local Regional Core--Periphery
Mechanism
4. "As the rich get richer..." (final stage of
growth)





More and more flows to Region A
All new technology created in Region A
"Circular and cumulative causation" sets in
Few benefits "trickle down" to Region B
Region B despairs and fails to create new
technology
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Local Regional Core--Periphery
Mechanism
5. "The Second Coming...“ (death and
rebirth)


Government brings technology and capital
to Region B
Region B with lower labor and resource
costs catches-up
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EXAMPLES:
6. Case 1: Appalachia:



New Government Interstates were built to
lure industry into the mountains
Instead enabled labor to leave more easily
So does Government intervention work? If
not why do we subsidize Boeing so
much??? What about Bonneville
Power???
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Examples
Case 2: Asian Tigers & China
 Government "Developmental State" policies
adopted






Technology imported
Walls of trade barriers created
Cheap labor exploited
Mobilization of resources has proven highly
effective
Creation of new technologies is still illusive (but
for how long???)
Does China trade fairly???
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Future???
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Closing shot
 As you read the textbook and review the
study notes be sure that you look at the
following issues discussed about
Development Theory:



Dependency
Modernization
World Systems
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Conclusions
 Development is not evenly spread across the
landscape.
 There are core and periphery regions
 The cause of core regions is open to debate
 At time in history there are single super
powers and at others many powers, this
difference effect the status of the core and
periphery
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