Transcript Challenges to Development

CHALLENGES TO DEVELOPMENT
DEPENDENCE THEORY

Definition:


Argues that LDCs are
locked into a cycle of
underdevelopment by the
global economic system
that supports and unequal
structure
Argues that the political
and economic relations
among countries limit the
ability of LDCs to
modernize and develop
LDCs are dependent on
MDCs for financial and
economic support
 MDCs are dependent on
LDCs to remain on top of
the world economy


According to theory many
countries are poor today
because of their
colonization by
Europeans


Extracted valuable
resources from colonies
but did not develop lasting
infrastructures
Dependency theory views
the world’s countries as
existing in a system of
interlocking parts

Each country’s actions
impact other countries
CORE-PERIPHERY MODEL

core-periphery model states
that the world’s countries are
divided into three groups
 Core

Consists of industrialized
countries with the highest percapita incomes and standard of
living
 Examples: U.S., Canada,
Australia, New Zealand,
Japan, and Western Europe

Semi-periphery

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Consists of countries that
are newly industrialized
and have not caught up to
core countries in level of
development
 Examples: Brazil, India,
China
Periphery

Consists of LDCs with low
levels of industrialization,
infrastructure, per capita
income, and standards of
living
 Examples: most Africa
countries, parts of Asia
and South America
WALLERSTEIN’S WORLD SYSTEMS


Immanuel Wallerstein’s world
systems analysis looks at the
world as a capitalistic system of
interlocking states connected
through economic and political
competition
Argues unequal positions of
countries grew out of early
exploration and colonization that
began to create a network, or
system, of interrelated economies
in the world

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Wallerstein argued that
colonization by western
European countries led to
economic and political
interactions among different
regions (or systems) in the
world and the inequalities that
resulted from domination and
exploitation by core countries of
the semi-peripheral and
peripheral regions
Wallerstein theorized that the
global core, semi-periphery, and
periphery grew out of the
competitive interactions among
different countries
DEVELOPMENT THROUGH SELF-SUFFICIENCY

To promote
development, LDCs
choose one of two
models:
One advocates selfsufficiency
 One emphasizes
international trade

DEVELOPMENT THROUGH SELF-SUFFICIENCY
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To reduce the development gap
between rich and poor countries,
LDCs must build economies more
rapidly
The self-sufficiency approach
pushes under-developed countries
to provide for their own people,
independent of foreign economies
According to this approach, a
country should spread its
investments and development
equally across all sectors of its
economy and regions

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Rural areas must develop along
with urban areas
 Poverty must be reduced
across the entire country
Self-sufficiency approach favors a
closed economic state
 Imports are limited and
heavily taxed so that local
businesses can flourish
without having to compete
with foreign companies
Critics argue that self-sufficiency
and closed economies stifle
competition
 Competition leads to higher
efficiency and innovation
EXAMPLE: INDIA

India employed the selfsufficiency approach
To import goods into India, most
foreign companies had to secure a
license which had to be approved
by the government
 Once a company received a
license, the government severely
restricted the quantity it could
sell in India
 Government imposed heavy taxes
on imported goods
 Indian businesses were
discouraged from producing goods
for export

Exposed two main problems
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Indian business required to get
government approval for new
products, set prices, etc.
Protection of inefficient
businesses
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Businesses could sell all they
made, at high-government
controlled prices, to customers on
long waiting lists
No need to improve quality, reduce
prices, or increase production
Also not forced by international
competition to keep up with
technology
Need for large bureaucracy

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The complex administrative system
needed to adminster the controls
encouraged abuse and corruption
Easier to get around system than
try to struggle to produce goods
 More money made on blackmarket
DEVELOPMENT THROUGH INTERNATIONAL TRADE
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International trade approach
pushes under-developed countries
to identify what it can offer the
world then direct investment
towards building on that industry
Eventually a country will develop
an advantage over the rest of the
world in producing that good or
service

A country has a compartive
advantage when it is better at
producing a particular good or
offering some service than
another country
 The place with a comparative
advantage can fill the
market’s need for a good or
service at a lower production
cost than other places can
 Example:

Japan invested much money
and power into developing a
comparative advantage in
high-tech products
ROSTOW’S DEVELOPMENT MODEL


Walt Rostow set out in the
1950s to explain and predict
countries’ patterns of economic
development
Rostow’s model consists of five
stages through which all
countries move as they
improve their economic
development
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MDCs exist in stages 4 and 5
LDCs exist in stages 1 through 3
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According to Rostow, once a
country starts investing in
capital, it will begin to
develop
ROSTOW’S DEVELOPMENT MODEL
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Rostow’s Moderization Model
assumes that all countries
follow a similar, five-stage
process of development

Stage One- Traditional Society
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As a region begins to develop, a small
(elite) group of people initiates innovative
“takeoff” economic
 Country starts to invest in new
technology and infrastructure
 These projects will ultimately
stimulate an increase in productivity
Stage Three- Takeoff
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Economic activity is mainly subsistence
farming with little investment in
innovation
 Called “non-productive” activities
Has not yet started a process of
development
Stage Two- Preconditions for
Takeoff
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Stage Four- Drive to Maturity
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The small # of new industries that begin to
emerge in Stage Two begin to show rapid
economic growth
In this stage, industrialization increases and
subsistence farming decreases in the regions
where “takeoff” industries exist
At this stage, more advanced technology
and development begins to spread to a
wider region and other industries (not just
“take-off”) begin to experience rapid
growth and workers become more skilled
and educated
Stage Five- High Mass Consumption
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The economy shifts from the dominance of
secondary factory jobs to the dominance of
service-oriented jobs that require higher
levels of education
In this stage, Rostow predicted that a
country experiencing higher economic
development would lead to higher levels of
consumption
ROSTOW’S MODERNIZATION MODEL
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Critics
 Some geographers do not think
the Rostow model can be used
to explain and predict all
countries’ economic
development because Rostow
based his projections on the
pattern of western European
and Anglo-American countries

Rostow’s model does not
consider structural issues
might limit a country’s ability
to develop, such as postcolonial dependency
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Rostow’s model also considers
each country an independent
agent, rather than one piece of
an interlocking system of
countries
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Stage five assumes that higher
economic productivity leads to
high mass consumption of
goods and services
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Some geographers argue that a
highly productive economy might
not lead to such consumption levels
but could led to higher levels of
social welfare activities or more
sustainable activities
INTERNATIONAL TRADE APPROACH
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When most countries were
following the self-sufficiency
approach two groups of countries
choose the international trade
approach during the mid-20th
century
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The four Asian Tigers
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South Korea, Sinapore, Taiwan, and
Hong Kong (at time still British)
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Characteristics
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The Four Dragons (Tigers)
 Arabian Peninsula
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Singapore and Hong Kong had no natural
resources and large cities surrounded by
rural land
South Korea and Taiwan took lead from
Japan
The four dragons promoted
development by concentrating on
producing a handful of manufactured
goods, especially clothing and
electronics
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Nicknames include “four dragons”, “four
tigers” and the “gang of four”
Developed a comparative advantage
Low labor costs enabled these
countries to sell products
inexpensively in MDCs
INTERNATIONAL TRADE APPROACH
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Petroleum-rich Arabian peninsula
states
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Once among the world’s least
developed countries
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Includes Saudi Arabia, Kuwait,
Oman, and the United Arab
Emirates
Transformed overnight into some of
the wealthiest countries thanks to
escalating petroleum prices in the
1970s
Arabanian peninsula countries
have used petroleum revenues to
finance large-scale projects, such
as housing, highways, airports,
universities, and
telecommunication networks
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Other industries have been aided by
government subsidies
Landscape also changed by
introduction of consumer goods
INTERNATIONAL TRADE APPROACH
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Problems with the International
Trade Approach
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International Trade Success
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Three problems have hindered
countries outside of the “Asian
Dragons” and Arabian Peninsula
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Uneven resource distribution
 In some LDCs dependence on one
product has lead to economic
failure
Increased dependence on MDCs
 Build up of “take-off” industries
might result in less production of
food
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Has to be imported from MDCs
Market decline
 World market for low-cost
manufactured goods has declined
sharply in recent years
In late 20th century, most countries
embraced the international trade
approach
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India switched approaches
Trade has increased more rapidly
than wealth
 Countries “switched” approaches
because of one reasonoverwhelming evidence that
international trade better
promoted development
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World Bank found that between 1990
and 2005 per capita GDP increased
more than 4% annually in countries
oriented toward international trade
Less than 1% for countries oriented
toward self-sufficiency
INTERNATIONAL TRADE APPROACH
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World Trade Organization
(WTO)
To promote the international
trade development model,
countries representing 97% of
world trade established the WTO
 The WTO works to reduce
barriers to international trade in
two principal ways:
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First countries negotiate
reduction of elimination of
international trade restrictions on
manufactured goods and tariffs on
both imports and exports
 Also limitations on movement
of money
Promotes international trade by
enforcing agreements

Critics
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Charge the WTO is anti-democratic
because decisions are made behind
closed doors
Only promotes interests of large
corporations
Compromises the sovereignty of
individual countries
INTERNATIONAL TRADE APPROACH
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Foreign Direct Investment
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Definition:
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Investment made by a foreign
company in the economy of
another country
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FDI grew rapidly during the
1990s from $130 billion to $1.5
trillion in 2000

SEZs
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Does not flow equally throughout
the world
 1/4th from MDCs to LDCs
 1/3rd of went to China
th from MDCs to MDCs
 3/4
Countries wanting to attract
foreign direct investment
establish special economic zones
Regions that offer special tax
breaks, eased environmental
restrictions, and other
incentives to attract foreign
business and investment
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Example: China
Also- export processing zones
Major sources of FDI are
Transnational corporations
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Invest and operate in another
country than the one in which
its headquarters are located
INTERNATIONAL TRADE APPROACH
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Financing Development
LDCs lack money to fund
development
 Finances come from two primary
sources
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Loans
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Two major lenders
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The World Bank
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Split into:
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Direct investment by TNCs
Loans from banks and international
organizations
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IMF (International Monetary Fund)
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IBRD (International Bank for
Reconstruction and Development)
IDA ( International Development
Association)
Provides loans to countries
experiencing balance-of-payment
problems that threaten expansion of
international trade
Does not lend for specific projects
Funding of the IMF based on each
member country’s relative size in the
world economy
Both created post WWII to avoid
disastrous economic policies
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Both part of United Nations
STRUCTURAL ADJUSTMENT PROGRAMS
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Loaning money to LDCs can
perpetuate bad habits.

Led to creation of structural
adjustments
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A structural adjustment includes
economic reforms or “adjustments”
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Typically include:
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Structural adjustments are
requirements attached to a loan
from a lending agency like the
IMF that force the country
receiving the loan to make
economic changes in order to use
the loan
Includes economic goals
 Strategies for achieving objectives
 External financing requirements
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Spend only what it can afford
Direct benefits to the poor, not just
elite
Direct investment from military to
health and education spending
Invest scare resources where they
would have the most impact
Encourage a more productive private
sector
Reform the government
 More efficient civil service
 Most accountable fiscal
management
 More predictable rules and
regulations
 More dissemination of
information to the public
STRUCTURAL ADJUSTMENT PROGRAMS
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Critics charge that poverty
worsens under structural
adjustment programs
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Often structural adjustments force
loan-receiving countries to
increase privatization
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By placing priority on reducing
government spending and
inflation
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Results may include:
 Cuts in health, education, and
social services
 Higher unemployment
 Loss of jobs in state enterprises
and the civil service
 Less support for those most in
need
The selling of publicly-operated
industries to market-driven
corporations
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Can cause hardships for families that
once depended on government owned
or operated resources being sold off
to profit-driven corporations
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Ex. Africa- water systems
Advocates argue that structural
adjustment programs argue that
long-term economic benefits will
outweigh the short-term side
effects of difficult economic
adjustments
NGOS
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
Non-governmental
organizations
Definition
Organizations run by charities
and private organizations,
rather than a government
agency
 provides supplies, resources,
and money to local businesses
and causes that advance
economic and human
development

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Examples:
 Doctors Without Borders,
Save the Children
FAIR TRADE
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Fair Trade has been proposed
as a variation of the
international trade model of
development
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Two sets of standards
distinguish fair trade

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Definition:

Producer standards

Means that products are made
and traded according to
standards that protect workers
and small businesses in LDCs
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Meant to help protect workers
from exploitation that often
occurs from free trade
Advocates work with small
businesses and democratically
run cooperatives
Consumers pay higher prices for
fair trade products
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Able to return a great deal of
money to producers
Leds to higher-quality products
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Usually organic
Worker standards
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Requires employers to pay
workers fair wages, permit
union organizing, and comply
with minimum environmental
and safety standards
GLOBALIZATION

Globalization is the term used
to describe the increasing
sense of interconnectedness
and spatial interaction among
governments, cultures, and
economies

New International Division of
Labor
The NIDOL breaks up the
manufacturing process by
having various pieces of a
product made in various
countries and then assembling
the pieces in another country
 With the rise of Globalization,
the original Fordist assemblyline concept has been split up
 Often many LDCs depend so
heavily on investment by
MDCs that these foreign
corporations hold a large
amount of power over
governmental decisions

NEW INTERNATIONAL DIVISION OF LABOR
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Free trade vs. Fair Trade
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Free trade
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Concept of allowing MDCs to
outsource without any
regulation except for the basic
forces of market capitalism
Globalization
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Controversy
 Some argue that foreign
direct investment is helping
to generate increased
economic development in
LDCs, others contend that
workers (particularly
women) in those countries
are being exploited by profitdriven companies

Fair trade involved oversight
of foreign direct investment
and outsourcing to ensure
that workers throughout the
world are guaranteed a living
wage for their work
ENVIRONMENTAL IMPACTS
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Sustainable development
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
Will the increased rate of
production and development
be maintained while natural
resources are being rapidly
depleted?
Sustainable development

Definition:
 a rate of growth and
resource-consumption that
can maintained from one
generation to another
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Ecotourism
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Improvements in
transportation= more traveling

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Many exotic landscapes being
transformed to attract tourists and
the expense and destruction of
local environments
Ecotourism= tourist operations
that aim to do little harm to
the environment
ENVIRONMENTAL IMPACTS

Greenhouse Effect

Geographers are concerned
with the rising average global
temperature caused in part by
spread of industrialization and
the related increase in
consumption and pollution

Greenhouse effect

Cause by industrial outputs
such as carbon dioxide and
methane in the atmosphere
that create a vapor that
transforms radiation into
heat, leading the Earth’s
temperature to rise

Global Warming

The global warming theory
argues that Earth’s rise in
temperature is causing negative
consequences, such as
premature melting of the polar
ice caps, which could cause a
rise in sea levels and an
interruption of oceanic patterns