Transcript Road to Development

Road to Development
• U.S. Health Worse Than Nearly All Other
Industrialized Countries
• Bin Laden blames Industrialized countries
for climate change
• These are headlines from past news
stories. What is meant by the word
industrialized?
• What does it mean for a country to be
called industrialized?
• What does it mean to a developed
country?
• Can all countries become developed
countries?
• Do you think all countries will have a large
number of factories?
• What does it mean for a country to be called
industrialized?
– It is more than the country has factories – Industrialized implies
MDC.
• What does it mean to a developed country?
– Almost a synonym for Industrialized – MDC – good HDI, tertiary
sector of economy
• Can all countries become developed countries?
– Can all kids go to college? Technically, yes. Should all kids go to
college? Are all students above average? Will all countries
become MDCs? Will all countries have a good quality of life for
their people? These are really 2 different sets of questions – can
you tell the difference?
• Do you think all countries will have a large number of
factories?
– In other words, do you have to have manufacturing to be
developed?
Schools of Thought
• Look up what is meant by “Schools of Thought”
• There are 2 schools of thought about economic
development
– Liberal Models
• All countries can become developed
• A liberal model is Rostow’s Model
– Structuralist Models
• There is a structure in place which prevents LDCs from
achieving development
• A structuralist model is Dependency Theory
Models of Development
• Liberal Modernization Models by definition
– All countries are capable of development
– Economic disparities are a result of short term
inefficiencies in local or regional market forces
– Focus on International trade
Rostow’s Modernization
Model of Development
• Developed by W.W. Rostow (1950s)
• develop economically by concentrating
scarce resources on expansion of its
distinctive local resources – to trade
internationally
• aka Ladder of Development
Rostow’s Modernization
Model of Development
• Developed by W.W. Rostow (1950s)
• 1950s Rostow analyzed success of Industrialized
nations – US, Can, UK, FR, etc. They developed a
certain way – he used this to pattern his Ladder of
Development
• develop economically by concentrating scarce resources
on expansion of its distinctive local resources – to trade
internationally
• In other words, capitalize on available resources to trade
internationally
• aka Ladder of Development Only one path to
development – follow the ladder in order only
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
– high levels of
agriculture and labor
intensive agriculture
– Wealth allocated to
nonproductive
activities (religious,
military)
Rostow - Stages of Growth
1. Traditional Society
•
Characterised by
– subsistence economy – the crops grown for the
year are consumed by years’ end, for example – a
mom with a subsistence job her bills for a month
take her whole month’s pay check
– high levels of agriculture and labor intensive
agriculture
– Wealth allocated to nonproductive activities
(religious- like building temples & monuments,
military – like N. Korea’s building nuclear bombs
while the people are starving)
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
2. Pre-conditions:
– An elite group initiates development – Investments in technology and infrastructure
– Commercialization of agriculture – growing
cash crops like cotton or wheat, which can be
stored, transported, and profited from
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
3. Take off:
– Increasing industrialization in limited areas (food or textiles) –
• either processing the cash crop from Stage 2 Take off or
– For example, Mozambique grew cashews then developed cashew processing (value
added!)
• Or hosting a textile plant
– Good beginning factory because relies on unskilled labor
– Foreign investment increases
• Foreign companies would be the ones to open the textile factory
– Infrastructure improvements
• Construct roads, electricity, running water in the area of the factory
– Some regional growth
• Around the area of the factory
– Economy still dominated by traditional practices
• For example, 20 miles out there are dirt roads, no electricity, and
subsistence agriculture
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
4. Drive to Maturity:
– Develops broad manufacturing and commercial
base
• Begin manufacturing a variety of goods
– Industry more diversified
• ditto
– Increase in levels of technology utilized
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
Rostow - Stages of Growth
5. High mass consumption
– High output levels
– Mass consumption of consumer durables
• Consumer durables are big, last for several years products
like refrigerators, dishwashers, cars
– High proportion of employment in service sector
USA Path to Development
•
Stage 5: early 20th century
– 1920s or 40s? More shop keepers, restaurants, etc.
•
Stage 4: late 19th century
– 1880s Variety of manufacturing such as textiles, steel, food production
•
Stage 3: middle of 19th century
– 1850s the north has some manufacturing but there is regional growth only
•
Stage 2: first half of 19th century
– 1800s commercialization of agriculture, like cotton, tobacco
•
Stage 1: prior to independence
– Subsistence agriculture
• Possible 6th stage – Postindustrial
– Service replaces industry
– Information replaces energy as key resource
Rostow con’t
• Origin of common use “industrialized”
country
• All countries follow the same model of
development
– However, for countries that have developed in
modern times – only China has followed THE
model of development
Criticisms
• Western bias that urban and industrial = a better
life.
• Development does not necessarily lead to high
consumption, can mean social welfare
Scandinavian countries have high taxes which
are used to invest in health care and education =
high quality of life
• 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)
Criticisms
• Does not account for
– Colonialism as in countries which became
independent after 1950s
– Culture – not all cultures value western style
life & business
– Deindustrialization MDCs are using LDCs for
manufacturing
– Increased dependence on MDCs – when
concentrating resources in a “takeoff”
industry, then buy necessities from MDCs
Balanced Growth
• through Self-Sufficiency
• Think 1960s-ish – Colonies have just become
independent and don’t want to be entangled with foreign
countries so discourage trade.
• A country should spread investment as equally as
possible across all sectors of its economy and in all
regions – as opposed to Rostow which has regional
growth
– Incomes in rural areas keep pace with urban incomes
– Businesses remain independent of foreign
corporations
– Limit imports through tariffs and quotas
• 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
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, self-sufficiency
countries 1%
• LDCs are exporting more manufactured goods
rather than agriculture or mining goods
International Trade Approach
• Dollarization: abandoning existing currency in
favor of an industrialized countries (In 2001, El
Salvador abandoned the colon and now uses
American dollars)
International Trade Approach
• Foreign Direct Investment (FDI) –
investment made by a foreign company in
the economy of another country – so BMW
opening a factory in S. Carolina is FDI
• Only 1/3 of investments went from a MDC
to a LDC (only 10% went to African
nations)
• Transnational Corporations are major
sources of FDI
PBS learning media – Ethiopia Going Global
Models of Development
• Structuralist Models
– Dependency Theory
– Regional disparities are a structural feature of
the global economy unlike Rostow who said
disparities are short term
• Neo-Colonialism – MDCs controlling LDCs
economically
– Gabon – interior forest (plywood producing region)
connected by rail with capital; 2nd largest city and capital
are not connected by road or rail (deBlij 247)
– Old method of industrializing is no longer
possible because other factors have changed
Dependency Theory
• Dependency helps sustain the
prosperity of the dominant regions and
the poverty of the lesser regions
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The inner circle is 1990 data, the outer 2003.
How did China’s economic sectors change from 1990 to 2003?
How did India’s economic sectors change from 1990 to 2003?
Which country followed Rostow’s Modernization Model?
Tertiary India
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Inda is known for call centers – (look up call center if you need to) – Why was India a
good place for call centers?
India has priced itself out of call centers – call centers are now moving to less
expensive countries.
India has moved to higher skill tertiary jobs, such as
– Preparing American tax returns – sometimes if you take your taxes to an
American accountant, the tax filing is completed by a qualified, Indian accountant
in India. This a good thing because the work is done cheaper and the American
accountant has time to work with customers on more difficult accounting
situations.
– Reading x-rays and images – MRI facilities can let qualified Indian doctors in
India read the image and alert your personal doctor of issues.
– Medical tourism – When the doctor tells a patient that a kidney transplant will be
necessary, the next stop is with the financial advisor. The financial advisor works
with the insurance company, looks at your income, etc. and determines the
patient’s part of the transplant costs. If the surgery is considered “optional” then
the surgery is not scheduled until payment is made. The average cost of a kidney
transplant in 2011 was $262,000. But the patient can fly to India, stay in a worldclass hospital and save 70-90% http://www.worldmedassist.com/india/kidneytransplant-surgery/ Check it out!
World-Systems Theory
• Review…
• Immanuel Wallerstein
• A development theory that includes
geography, scale, place and culture in
addition to economics
• 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
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
Latin America HDI .78
East Asia HDI .72
Eastern Europe HDI .80
Core/periphery
• Can be applied at the local scale
– LA is the core of S. California region
– Alaska is in the periphery of the US
– Johannesburg is core of South Africa
• Can refer to the different level of
processes in the same country
– Most of the US operates with core processes,
however the rural mountain regions of WVa
operate with periphery processes
Development Indicators
• Economic: GNP, PPP (Purchasing Power
Parity), per capita energy consumption
• Noneconomic: HDI, gender equity, calorie
intake
Four Dragons
• Aka Four Tigers or Gang of Four
• S. Korea, Singapore, Taiwan, &
Hong Kong
• Lacked natural resources
• Strongly influenced by Japan’s
success
• Concentrated on handful of
manufactured goods
• Low labor costs; Sell to MDCs
• Focusing on research & hi-tech
industries
Four Dragons
• Aka Four Tigers or Gang of Four anything 4, Asian, &
economic
• S. Korea, Singapore, Taiwan, & Hong Kong know these
places
• Lacked natural resources – so couldn’t do Rostow
• Strongly influenced by Japan’s success
• Concentrated on handful of manufactured goods
• Low labor costs; Sell to MDCs – Got into manufacturing
cheap, easy to sell to MDCs stuff. Over time, have
improved quality. For ex. Japanese cars used to be
cheap cars but over time became top of the line. Kia (a
Korean company) use to advertise how inexpensive.
Now becoming nicer
• Focusing on research & hi-tech industries – reinvested
profits in research
BRIC
• Brazil, Russia, India, and China
• aka “the big four” – these should be the next big
economies. All are big & populated
• At a similar stage of advanced economic
development
• There has been a shift away from the G7
economies (Fr, Ger, It, UK, US, Jap, Can)
• BRICs have begun meeting to coordinate global
economies – similar to EU
• Some include South Africa for BRICS
GDP
10 Largest Economies
(measured in USD)
More fun …
• MIKT
• N – 11 – id by
Goldman Sachs as
high potential of
becoming world’s
largest economies –
in addition to BRICs
• Mex, Indonesia, S.
Korea, Turkey
• Bangladesh, Egypt,
Indonesia, Iran,
Mexico, Nigeria,
Pakistan,
Philippines, Turkey,
S. Korea, Vietnam
These are the next set of countries to watch – carefully examine the
N-11 List. Usually countries wouldn’t be on a list with Bangladesh but
this time it is because they are in the right place to develop a
booming economy.
Millennium Development Goals
• Adopted by world leaders during a United Nations
summit 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
Ghana & MDG
• In 2005, predicting will not accomplish goals
for 2006-2009 period.
Ghana & MDG
Goal
Measure
½ Poverty & Hunger
Target 2015 – 14%
Underweight children
1992 – 27%; 2003 – 23%
Projected 2015 – 21 %
Universal Education
Target 2015 – 100%
Primary School Enrollment
1999 - 58%; 2003 – 69%
Projected 2015 – 83%
Improve Maternal Health Reduce Maternal Mortality Levels
Target 2015 – 54/100,000 1993 – 280; 2003 – 230
live births
Projected 2015 – will not be met
Ghana & MDG
Africa Rising: Jeffrey Sachs says Ghana's
future looks bright
• Because of good governance in the past, and
now oil production, Ghana is likely to reach
all of the Millennium Development Goals
toward ending extreme poverty and child
mortality.
• By Clair MacDougall, Correspondent / January
11, 2012
• News reports now say Ghana will reach MDG by
2015.
Core Periphery Model