Transcript the stages to economic growth

Chapter 9
“Part 2 - Development”
There is a correlation between Development and
Gender Inequality
•Remember GDI and GEM from Part 1 of the Development
slide show.
•GDI is similar to HDI, but for women.
•Eg. Iran and Mexico have a similar HDI (Mexico is a little
higher) and have the same amount of youth in school but
Mexico has a much higher GDI because both boys and
girls have equal access to education.
•Norway has the highest GDI at .941 – Canada is just
below this at .938
•High GDI – Both men and women have achieved a high
level of development
•Low GDI – women have a low level of development
compared to men
•Average income of women is lower than males
everywhere in the world – Economic Indicator
•60 women to every 100 men attend secondary school in
LDCs – Social Indicator
•99 women to every 100 men in MDCs – Social Indicator
•Demographic Indicators are different – Females live longer
than males in MDCs. It is about the same in LDCs
•In both MDCs and LDCs fewer women than men hold
positions of economic and political power – GEM
•Northern Europe is high in women with high incomes and
professional jobs
•North America is high in women in managerial and elected
jobs
•Population Growth is directly related to the status of women
Let’s analyze some slides
Gender Empowerment Measure (GEM)
The GEM combines two measures of economic power and two of political
power by women. (Little data are available for LDCs.)
Gender-Related Development Index (GDI)
The GDI combines four measures of development, reduced by the degree of
disparity between males and females.
Stages of Development
Countries go through economic and
social stages of development. For
example if a country’s economy is
enhanced, the population’s standard of
living is also enhanced, education and
income will also rise and according to
the Demographic Transition (Chapter 2
on Population) their birth rates should
decrease and so on.
The Industrial Revolution created a huge
transformation, but only in countries in Europe
and North America. Their economies moved
towards ‘Industrialization’. Not only did Europe
and North America go through social and
economic change, so did other parts of the
world, the parts that had the resources to fuel
this industrialization. The countries that could
not fuel industrialization were left behind.
From this point on Rich and Poor countries
began to emerge.
When we think of Developed (MDC) we think of:
• Manufacturing of products
• High levels of consumerism – buying goods and
services.
• An advanced infrastructure, that has a strong
transportation and communication network - global.
• Higher education – University and College.
• Ownership of land and capital (money).
• The existence of Multi-National (Transnational)
companies.
• Centers of political power.
•Today there is a large gap between LDCs and
MDCs
•Close this gap by improving the economic,
social and demographic indicators that we
discussed
•1/5 of the world lives in MDCs but consume 4/5
of the resources – Ecological Footprint
•Eg. Europeans spend $11 billion on ice cream
each year. It costs $9 billion to supply 2 billion
people with toilets that they need – make sense?
The poorer countries are designated; Developing
or less developed or LDCs (Less Developed
Countries). These terms suggest that in order to
reach the Developed stage they have to pass
through other stages in order to be like Europe or
North America.
There are a number of theories that try to illustrate
the road to development:
The Modernization Theory (the stages to
economic growth) by W.W. Rostow
Stage 1, the traditional society: This stage is
characterized by rural and agricultural economies.
Little change occurs in this stage with only a very low
level of technology. Bangladesh and Ethiopia today
and Canada before 1850.
Stage 2, preconditions for takeoff: This stage is
apparent when a strong central government
encourages “entrepreneurs” to develop
businesses. Society has a surplus of wealth. In this
stage natural resources become important and are
exploited. Britain was the first in 1750 (Industrial
Revolution). India and Indonesia today and
Canada from 1850 on.
Stage 3, the takeoff: This stage is characterized by
higher rates of capital investment and more and
more entrepreneurs which leads to a manufacturing
industry and technological innovations. The tertiary
sector starts to grow as well as urbanization. People
start to save money which creates a class of future
spenders. Foreign Aid could place a country in this
stage, Brazil and Mexico today and Canada in the
1900s.
Stage 4, the drive to maturity: A strong
manufacturing sector is evident. Technology and
innovations is widespread. Diversified economy.
High levels of saving create wealth. Economic
gain outstrips population growth. Hong Kong,
South Korea today and Canada in the 1950s.
Stage 5, the age of high mass consumption: The
society in this stage is predominately urban. There
is a high use of technology, high levels of
productivity, and a high per capita income. A
surplus of money to be spent on non-essentials.
Japan, the U.S. and Canada after 1950 to the
present.
Countries can skip a stage or even go back a stage
or two – depending on economic conditions.
The above is a theory created by someone from a
rich country, it is a capitalist point of view. The
developing countries found it hard to reach the latter
stages. Brazil and Mexico borrowed lots of money to
create capital but of course they fell into debt. Their
debt led to economic hardship. They became rich in
human resources but the creation of wealth and
entrepreneurs did not happen.
Often the capital for the developing world’s
business remains in the hands of the developed
world. Multinational companies invest in the
businesses of the developing countries, but the
profits go back to the developed countries.
Europe, the US and Japan did it this way so could
other countries.
Globalization could help bring in money and get
things started.
LDCs do have raw materials and now that most are
independent (no longer colonies) they can generate
money with these raw materials
Oil rich countries used money to fund development
but their treatment of women and religious
fundamentalism have held overall development
back.
Time
Levels of Economic Development
Core and Periphery Theory by Immanuel
Wallerstein
Wallerstein stated that the existing world economy
is based on capital that existed since the time
period of 1450 to 1670. He states that countries
centered in Western Europe formed an economic
“Core” around which the development of the rest of
the world – the “Periphery” – took place.
These western countries had strong governments,
and strong armies to support later economic
expansion. Trading developed around the main
urban centers of London, Paris and Madrid. Large
amounts of Capital was available and this financed
the development of later empires.
The “periphery” included Asia, Africa, Eastern Europe,
and Latin America. These countries were essentially
controlled by the core countries. They developed
economies to feed materials back to the core. Much of
the labour and raw materials provided by the periphery
was cheap, and the labour was unskilled.
Side note: Canada calls its’ core the Heartland and the
Periphery is called the Hinterland. The Windsor to Quebec
corridor is Canada’s heartland and the rest of Canada can be
considered the hinterland. Countries and even regions in
countries can have their own core and peripheries. The
meaning of Heartland is even different in the US.
Wallerstein suggests that there are four categories into
which each region of the world may be placed:
Core, Semi-periphery, Periphery, External
• Core:
- initially developed in Europe
- strong central governments with military support
- surplus money from periphery returns to core
- Urbanization and Industrialization
- international trade works in core’s favour
• Semi-Periphery:
- areas bordering the core and Periphery. Outlying core
areas that are in decline or Outlying Periphery areas
that are economically getting stronger.
- access to international banking is either declining
(core) or increasing (periphery)
- manufactured goods – (electrical, computers)
- exploits the periphery countries
- like a transition zone
• Periphery:
- most industry is owned by core
- no central or strong government
- surplus profits go back to core
- raw materials sent back to core for consumer
markets
- inexpensive labour
• External:
- countries are outside the world economy
- not really controlled by any economic or political
powers
- isolated from trading with other countries
- Cuba, North Korea, Iran, Iraq before the war.
-Today the core countries can consist of North
America (Canada and the US.). Interesting but
in the early 1900’s Canada was considered a
Semi-Periphery country.
- The Semi-Periphery countries today are
Eastern Europe including Russia and China
and India and Malaysia.
- The Periphery countries include most of
Africa, except South Africa (Semi-Periphery),
Central Asia (Middle East, Turkey, Pakistan,
Afghanistan, Kazakhstan and South-East Asia
(Burma, Thailand, Cambodia)
Wallerstein has noticed a change. Countries that
are rapidly developing and industrializing
arefour are called:
These
the is
Four
Asian
creating their own cores. A good example
East
Dragons
Asia. The strong economies of South Korea,
Singapore, Taiwan and Hong Kong (now part of
China) have joined Japan to form a core of trade
and centre of banking and investment. Emerging
cores can challenge the traditional cores (Europe
and North America) but usually these cores remain
regional.
The theory suggest that the traditional cores will
continue to dominate the periphery regions of the
world. Latin America will be dominated by North
America and Africa will be dominated by Europe.
Cores may shift in size and even multiply but their
function will remain the same.
Wallerstein sees that the present capitalist world
economy will be detrimental to a large proportion of
the world’s population. He sees the disparities of the
world increasing. The gap between rich and poor
serves the economic needs of the rich. The rich need
to exploit the low wages of the poor. This is the only
way Multi-nationals can make money.
The rich still control the world economy. The
peripheral countries lack the infrastructure to
compete.
According to the UNDP (United Nations
Development Program) the gap between rich and
poor has widened from 30:1 in 1960 to 60:1 in 1990.
Core and Periphery in World Economy
another look
This north polar projection of the world shows that most of the MDCs are in a
core area north of 30° N latitude. The LDCs are mostly on the periphery of this
map.
Develop through Self Sufficiency
•Sometimes called Balanced Growth
•China and India tried this
•Spread investment equally across all sectors and regions
of the country
•Reduce poverty
•Set up barriers to limit imports and competition – taxes,
tariffs, licenses, quotas
•Government would subsidize companies to stay in
business
•Protect your own companies
Problems:
•Inefficiency – little incentive to improve or
change since government controlled
everything
•Large Bureaucracy – abuse and corruption,
many regulations, created a black market
Development Through International Trade
•Most of the world - simple
•Identify unique economic assets and use them to create a
surplus and trade for other needed products
•Rostow and Wallerstein
•Concept of Globalization
Problems:
•Uneven resource distribution – if the price
drops of a resource and your country
specializes in that resource, you may be
unable to make enough money to support your
industry
•Market Stagnation – What if sales flatten out
and demand drops of a product
•Increased dependence on MDCs – the LDCs
depend on the MDCs for a market – what if
MDCs no longer want coffee
•Still International Trade is the way to go!
•Globalization is all about International Trade.
•India and China have both removed trade barriers and
opened up their economies
•WTO – World Trade Organization – part of the UN has
been set up as an international overseer that all countries
trade fairly
•The WTO is all about Globalization – removing trade
barriers
•Globalization Good – promotes peace and trade –
countries that trade will not go to war
Globalization Good – improves standard of living for everyone
Globalization Bad – economy still controlled by the rich and
multi-nationals (trans-nationals)
Globalization Bad – countries loose their identity and
uniqueness. This threatens Religion, language and culture.
A word about – Trans-nationals – “A company that locates and
does business in counties other than the one it has its
headquarters in”
Transnational corporation are aggressive in finding low-cost
labour, especially in LDCs. They can successfully transfer
labour (transfer of Jobs) to another country despite greater
transportation costs. High skilled labour stays with the MDCs.
This selective transfer of labour is known as: the New
international division of labour
•LDCs need money to get started.
•So they borrow money
•Two ways 1. They get loans – World Bank, IMF
(International Monetary Fund)
2. They let Trans-nationals invest in their
country
•Problem: What happens if countries cannot pay the
money back
•Brazil and Mexico have defaulted in payments
•Sometimes the World Bank or the IMF tells these
countries to adopt a “Structural Adjustment Program” –
The countries are told to raise taxes, sell companies or
change economy or start making products that MDCs
want.
Fair Trade
• Products are made and traded according to standards that
protect workers and small businesses in LDCs. Standards
are set by the FLO (FairTrade Labeling Organizations
International).
• Primarily for craft products like textiles, ceramics, jewelry
and home accessories. Food can also be included - coffee,
tea, bananas, chocolate, sugar and juice products.
• Protect workers rights and working conditions
• Fight against child labour
Vocabulary List
Unit VI. Industrialization and Development—Basic Vocabulary and
Concepts
Development
Agricultural labor force
Calorie consumption
Core-periphery model
Cultural convergence
Dependency theory
Development
Energy consumption
Foreign direct investment
Gender
Gross domestic product (GDP)
Gross national product (GNP)
Human Development Index
Levels of development
Measures of development
Neocolonialism
Physical Quality of Life Index
Purchasing power parity
Rostow, W. W.
“Stages of Growth” model
Technology gap
Technology transfer
Third World
World Systems Theory
The End!