Transcript Unit 6: Development

Unit 6: Development
Ch. 9 Development
Development
• Regional separation between division of
wealthy & poor countries
• Development – process of improving the
material conditions of people through
diffusion of knowledge & technology
• MDC vs. LDC
• MDC = more developed, relatively developed,
developed
• LDC = less developed, developing
Key Issue #1: Why Does Development
Vary Among Countries?
• 3 factors in a country’s development level:
① Economic (decent standard of living)
② Social (access to knowledge)
③ Demographic (long & healthy life)
• Human Development Index (HDI)
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UN figure used since 1990
Selects 4 factors (1 economic, 2 social, 1 demographic)
Highest possible score is 1.0 (100%)
Highest in 2013 – Norway (0.944)
Highest regions – Western Europe, U.S. & Canada
Lowest in 2013 – Niger (0.337)
Lowest Regions – Sub-Saharan Africa
U.S. was #5 in 2014; was #10 in 2005 (lower in education due to high
HS drop out rates & lower in life expectancy due to inadequate health
care for low income)
Key Issue #1: Why Does Development Vary
Among Countries?
• Economic Indicators of Development
– Before 2010, Gross Domestic Product (GDP) per capita was used in HDI
– Now, Gross National Income (GNI) is used – value of the output of goods and
services produced in a country in a year including money that enters & leaves a
country (adds economic output of foreign residents minus income of nonresident citizens/businesses); adjusted for Purchasing Power Parity (PPP)
– GDP per capita
• Hard to determine average income
• Average income in MDC ($15 per hour) vs. LDC ($2 per hour)
• GDP – value of the total output of goods & services produced in a country (restricted to
territory of country); does not factor money that leaves or enters country
• Gross National Product (GNP) – value of the total output of goods & services produced
by individuals & businesses of a country (ownership, not location); not viewed as being
as useful of a comparison as GDP
– PPP – used to adjust GDP or GNI or GNP based on exchange rates & inflation;
reflects transaction values for traded goods only (GDP includes non-traded
goods)
– Traded goods – good or service that can be sold in a location different that
where it was produced (non-traded goods: haircuts, massages, prepared food,
construction, etc.)
Key Issue #1: Why Does Development
Vary Among Countries?
• Economic Indicators of Development
– GDP Per Capita
• Total GDP / population = GDP per capita
• Ex. U.S. - $16.8 trillion GDP / 319 million people = approx. $53,000
GDP per capita
• MDC vs. LDC in 2005 - $27,000 vs. $4,000
• Range: over 100,000 in Liechtenstein, Luxembourg, Monaco, &
Norway to 229 in Burundi per UN in 2013
• In 2005, below $1,000 in 15 African countries & 3 Asian countries
• Growth in LDCs avg. GDP per capita 1990-2005 ($800 to $4,400);
increase of 450%; rapid growth in China, modest growth in Africa
• MDCs saw a 55% increase 1990-2005 (grew by $10,000)
• GDP is not a perfect measure – few starving in LDCs, 1/8 of U.S. in
poverty (1/4 of African Americans & 1/5 of Hispanics)
• GDP per capita measures average/mean wealth not its distribution
Key Issue #1: Why Does Development Vary
Among Countries?
• Economic Indicators of Development
– Types of Jobs
• Categories:
① Primary – direct use of raw materials (farming, timber, fishing,
mining)
② Secondary – manufacture of raw materials
③ Tertiary – provision (selling) of goods & services
④ Quaternary – business services (trade, insurance, banking,
advertising); typically involve information processing
⑤ Quinary – usually information & data-driven; health, education,
research, gov’t, tourism, recreation
• Some consider tertiary to include quaternary & quinary
• LDCs – 60% of pop. in primary sector; MDCs – 5% in primary sector
• Most people in LDCs spend effort/time on food for survival; MDCs need
very few farmers to produce enough food for entire pop. (more people
can work in secondary & tertiary+ jobs to increase country’s wealth)
• Decline in primary & secondary jobs in MDCs also because of global
competition for industry (service sector growing in MDCs due to
increasing demand)
Key Issue #1: Why Does Development Vary
Among Countries?
• Economic Indicators of Development
– Productivity
• Productivity = value of a product compared to amount of labor required
(higher in MDCs)
• Value added = gross value of product – cost of raw materials & energy
– $80,000 in U.S. & $70,000 in Japan vs. $1,000 in China & $500 in India
• Less effort in MDCs & more efficient due to machinery, tools, equipment
• LDCs require more human & animal power
– Raw Materials
• U.S. & Russia are very rich in raw materials (amount & variety)
• U.K. became 1st developed country due to coal & iron in late 1700s
(Industrial Rev.)
• Europe began to import raw materials once they ran out locally
(imperialism & colonialism)
• Some LDCs gaining wealth through oil or other energy resources
• Demand for some raw materials has declined (cotton, copper)
• As demand falls, prices fall
• Countries without resources are able to develop through trade (Japan,
Singapore, Switzerland, South Korea)
Key Issue #1: Why Does Development Vary
Among Countries?
• Economic Indicators of Development
– Consumer Goods
• Most important are transportation & communication (motor
vehicles, telephones, computers, Internet etc.)
• Cars, computers, & phones are not as important in LDCs –
workers often live in small, rural areas in low-tech jobs
• MDCs: 500 land-line phones per 1,000 people; 400 motor
vehicles per 1,000; 300 Internet users per 1,000
• LDCs: less than 100 per 1,000 for all 3
– Most familiar with the goods, but cannot afford
– Large gap between haves (gov’t, elite, business owners) & have-nots;
wealthy are usually in cities
– Income gap may lead to social/political unrest
– Goods contribute to increased leisure time & cultural diversity
– Goods also reduce gap to communication between LDCs & MDCs
Key Issue #1: Why Does Development
Vary Among Countries?
• Social Indicators of Development
– MDCs are typically better educated, healthier, & better protected
from hardships; infants more likely to survive; people can be more
economically productive
– Education & Literacy
• UN used literacy rate & average years of schooling until 2010 for the HDI
• Currently, the UN uses average years of schooling & expected years of
schooling for the HDI
• Quantity of education – avg. # of years attending school
• Quality of education – student-teacher ratio & literacy rate
• Years of schooling: 10 years on avg. in MDCs vs. 2 years in LDCs
• 2x higher student-teacher ratio in LDCs
• MDCs have more books, newspapers, & magazines (LDCs often have to
learn from textbooks from MDCs & in a different language)
• Literacy rate – over 98% in most MDCs; less than 60% in most LDCs
• LDCs spend less per pupil but often a higher % of their GDP
Key Issue #1: Why Does Development
Vary Among Countries?
• Social Indicators of Development
– Health & Welfare
• MDCs spend higher % of GDP on healthcare
• Influenced by diet – MDCs consume more calories & proteins per day
than LDCs (MDCs often more than needed, LDCs often less than
needed/malnutrition)
• Health care often free or low cost public service in MDCs (70% paid by
gov’t in Europe)
• Over 50% paid by individual in LDCs (and in U.S.)
• Welfare – income protects those who cannot or do not work (sick,
poor, elderly, orphaned, veterans, widows, unemployed, single
parents); highest in N & W Europe
• Sweden, Norway, & Denmark spend most as % on welfare
• Economic slowdown affects MDCs’ ability to provide high level of
public assistance
• Affordable Care Act (Obamacare) – attempt by U.S. to bring its health
care coverage more in line with other MDCs
Key Issue #1: Why Does Development Vary
Among Countries?
• Demographic Indicators of Development
– Life Expectancy (used by UN for HDI calculation)
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Avg. of 60s in LDCs; Avg. of 70s in MDCs
Gender gap: males 10 years longer in MDCs; females 13 years longer in MDCs
More elderly in MDCs, lower % of under-15 (dependency ratio)
6x more young people in LDCs than old people (practically even in MDCs)
– Infant Mortality Rate (IMR)
• LDCs – 6% on avg. (malnutrition, lack of medicine, dehydration from diarrhea,
poor medical practices during pregnancy & birth, lack of education) vs. MDCs –
0.5% on avg.
– Natural Increase Rate (NIR or RNI)
• Higher in LDCs – strains provision of services (schools, hospitals, jobs, housing,
etc.)
• 15 per 1,000 (1.5%) per year in LDCs vs. 1per 1,000 per year in MDCs (0.1%)
– Crude Birth Rate (CBR)
• Higher in LDCs – 24 per 1,000 vs. 11 per 1,000 in MDCs
• MDCs – economic & social reasons for fewer children; access to birth control
• CDR does not affect development; slightly lower in several LDCs than MDCs
(aging pop.)
Key Issue #1: Why Does Development Vary
Among Countries?
• HDI calculation by UN since 2010:
1) GNI per capita, with PPP adjustment
2) Average years of schooling received by a person 25 years or
older
3) Expected years of schooling that will be received by a child
of age 5
4) Life expectancy from birth
• Inequality-adjusted HDI (IHDI) – used by the UN to
account for economic inequality within a country,
such as where only a few have access to college, good
health care, high income (Examples: regional
inequality, ethnic/racial inequality)
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Exists in all countries, but generally lower in MDCs and
higher in LDCs
Directions: Match each country to its HDI (2014 figures)
HDI
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11)
12)
13)
14)
15)
16)
0.944
0.914
0.891
0.872
0.851
0.822
0.778
0.756
0.719
0.684
0.660
0.617
0.537
0.506
0.473
0.337
Country
A. Chile
B. China
C. Honduras
D. Indonesia
E. Italy
F. Niger
G. Norway
H. Mexico
I. Pakistan
J. Philippines
K. Qatar
L. Russia
M. Rwanda
N. Singapore
O. Sudan
P. U.S.
Answers
HDI
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
13)
14)
15)
16)
0.944 -- G
0.914 -- P
0.891 – N
0.872 -- E
0.851 -- K
0.822 -- A
0.778 -- L
0.756 -- H
0.719 -- B
0.684 -- D
0.660 -- J
0.617 -- C
0.537 -- I
0.506 -- M
0.473 -- O
0.337 -- F
Country
A. Chile
B. China
C. Honduras
D. Indonesia
E. Italy
F. Niger
G. Norway
H. Mexico
I. Pakistan
J. Philippines
K. Qatar
L. Russia
M. Rwanda
N. Singapore
O. Sudan
P. U.S.
List of selected countries (2014 data)
Country
GDP per capita
in U.S. dollars
GDP per capita (PPP adjusted) in
Geary-Khamis dollars or
International dollars
GNI per capita
(PPP adjusted)
Luxembourg
103,187
97,639
59,750
Qatar
78,829
137,162
123,860
U.S.
55,904
54,370
53,960
Singapore
53,224
83,066
76,850
U.K.
44,118
39,826
35,760
Japan
32,481
37,519
37,630
Greece
17,657
25,954
25,630
Argentina
13,428
22,302
N/A
World
10,023
14,982
14,931
China
8,280
13,224
11,850
Algeria
4,345
13,888
12,990
Indonesia
3,412
10,651
9,260
Bangladesh
1,266
3,391
2,810
Key Issue #2: Where Are More & Less
Developed Countries Distributed?
• Almost all MDCs north of 30°N latitude; almost all LDCs south
(north-south split)
• More Developed Regions (Average HDI approx. 0.90)
– Anglo-America (HDI = 0.94)
• U.S. & Canada
• Over 90% speak English and are Christian (excluding “no religion”)
• Some cultural diversity – tension, discrimination; Quebec, indigenous
peoples, history of slavery & segregation, many immigrants
• Major source of manufacturing natural resources & minerals
• Leading consumers of manufactured goods
• Last 30 years – loss of manufacturing jobs to Japan, Western Europe,
China, Latin America, & other LDCs
• Leading producer of financial, management, & high tech services
• Leading producer of entertainment, media, sports, recreation
• Most important exporter of food – few farmers, lots of farmland, heavily
mechanized & efficient agriculture
Key Issue #2: Where Are More & Less
Developed Countries Distributed?
• More Developed Regions
– Western Europe (HDI = 0.93)
• Cultural unity with mostly Indo-European languages & Christianity
• Diversity with wide range of languages, different religious practices,
ethnicities; source of conflict (wars, genocide)
• More unified since end of WWII (EU)
• Diversity increased by migration of Muslims & Hindus from LDCs
• NIR at or below 0; immigration is responsible for pop. Growth
• Highest HDI in core (Germany, NE France, N. Italy, Switzerland, S.
Scandinavia, SE U.K., Belgium, Netherlands, Luxembourg)
• Lower in periphery (S. Italy, Portugal, Spain, Greece)
• Must import food, energy, & minerals (once relied on colonies)
• Provide insurance, banking, luxury cars (BMW, Mercedes, etc.)
• EU – removal of economic barriers, richest market in world
Key Issue #2: Where Are More & Less
Developed Countries Distributed?
• More Developed Regions
– Eastern Europe (HDI = 0.80)
• Only region where HDI has declined since 1990 (legacy of
Communism)
• About equal with Latin America since 2000
• East of 15°E longitude – under USSR influence until early 1990s
• Albania, E. Germany, Hungary, Czechoslovakia, Bulgaria, Poland,
Romania, Yugoslavia, former Soviet republics in Europe
• Rapid development under Communism in 1950s & 60s
• Gosplan (planning commission) – developed 5 year plans in USSR that
focused on:
– heavy industry (steel, iron, weapons, oil) & mining, electric power,
transportation
– dispersal of industry (move to Asian portion to give safety & redistribute
wealth)
– Locate near raw materials not markets (efficient to produce heavy industry
but lack of consumer demand in Siberia)
Key Issue #2: Where Are More & Less
Developed Countries Distributed?
• More Developed Regions
– Eastern Europe (HDI = 0.80)
• Communism ended due to desire for freedom & because
central economic planning proved disastrous
– Annual targets met but long-term investments/upgrades ignored
– Inefficient agriculture (had to import)
– Factories often did not implement orders (long-distance &
unmonitored)
– Some targets unrealistic; others were ignored to ensure job security
– Heavy pollution & little environmental standards
• Neglected consumer products (autos, fridges, clothing) – but
people saw them on TV, movies, radio (better life in West)
• Housing shortages, poor living conditions
Key Issue #2: Where Are More & Less
Developed Countries Distributed?
• More Developed Regions
– Eastern Europe (HDI = 0.80)
• Border countries to Western Europe have grown more
rapidly economically (Czech, Hungary, Poland, Slovakia,
Slovenia)
• Russia’s HDI is lower than Libya & Malaysia (as of 2005);
declining HDI in former Soviet states – high death rates,
lower production, possibly falsified statistics under
Communism
• Closed inefficient businesses; increased unemployment,
price for goods increased with removal of gov’t subsidies
Key Issue #2: Where Are More & Less
Developed Countries Distributed?
• More Developed Regions
– Japan (HDI = 0.94)
• Anglo-America & Western Europe are more alike & viewed together
by much of the world (“the West”; history of global dominance)
• Japan is a 3rd center, with a very different culture
• Very few resources, but a very large population
– High physiological densities & intensively farmed lands
– Consume little meat (other than fish) & little grain (other than rice); must
import most of food
– A leading steel producer; must import all coal & iron ore
– Large # of people willing to work for lower wages
– Sell products at lower prices in foreign markets
– Also produce high quality, high value products (electronics, cameras, autos)
– Concentrated on education & training for skilled labor force
– Spend 2x on what U.S. companies spend on research & development
Key Issue #2: Where Are More & Less
Developed Countries Distributed?
• More Developed Regions
– South Pacific (HDI = 0.87)
• Australia & New Zealand & several small islands/island
groups
• Small population & remote – not as important to global
economy
• Becoming increasingly connected to Japan & other Asian
countries
• Australia & NZ (former British colonies) have high HDIs and
export food to U.K.
• Smaller islands are less developed
Key Issue #2: Where Are More & Less
Developed Countries Distributed?
• Less Developed Regions (average HDI approx. 0.65)
– Latin America (HDI = 0.80)
• Mostly Romance languages (Spanish & Portuguese) & Roman Catholic
• Diversity with indigenous people pop. & history of slaves brought
from Africa
• Very Urbanized compared to other LDCs
• Mexico City, Sao Paulo, Buenos Aires in top 10 largest cities in world
• Concentrated near Atlantic coast – export to Europe during colonial
era, mountains & rain forests limited access to interior
• Higher HDI along coast from Argentina to Brazil & in Mexico (Mexico
very close to U.S.); higher in Chile also (many exports)
• Lower HDI in Caribbean, Central America, & interior South America
• Biggest hindrance to development – inequitable income distribution
(a few wealthy families & many very poor); many tenant farmers (cash
crops such as coffee, tea, fruit – but not for local consumption)
• Encouraged redistribution of land & wealth but do not wish to
alienate wealthy landowners; many poor were given low quality land
Key Issue #2: Where Are More & Less
Developed Countries Distributed?
• Less Developed Regions
– East Asia (HDI = 0.76)
• China – 2nd largest single economy behind U.S.; 1/3 of world’s economic growth;
fastest growing GDP per capita in the world; world’s most populous country
• China’s economy was wealthiest until 1500s; economy has fallen behind by
foreign invasions, imperialism, & civil wars
• 1949 (Communism) – focused on rural areas (2/3 of pop.); gov’t took over land
(communes) & controlled production; food grown for local consumption (not
export); recent changes to allow for land ownership
• Dramatic increase in manufacturing – largest workforce & largest market for
consumer goods
• Lower wages than MDCs (produce for local use & export)
• Partner with major companies like Wal-Mart (prices & wages worldwide kept
low)
• Regional inequality – higher GDP near coasts (Beijing to Shanghai has ¼ of pop. &
½ of GDP & ¾ of foreign investment)
• Problems: weak middle management, low quality control, primitive banking,
inadequate legal protection, pollution, rapid development strains resources
• Largest consumer of copper, steel, cement & 2nd largest of oil behind U.S.
Key Issue #2: Where Are More & Less
Developed Countries Distributed?
• Less Developed Regions
– Middle East (HDI = 0.68)
• Southwest Asia & North Africa; dominated by desert, Arabic, & Islam
• Most products must be imported (particularly food)
• Large % of petroleum reserves – only region that enjoys a trade
surplus (imports < exports); other regions buy oil from Middle East
• Some countries lack significant oil reserves (Egypt, Syria, Jordan,
Israel, Lebanon); most oil is found near Persian Gulf
• Oil has led to conflict: 1990 – Iraq invaded Kuwait (large reserves) &
accused Kuwait of not sharing wealth & not providing good living
conditions for Arab guest workers; Iraq’s largest oil fields also lie
under Kuwait
• Major challenge – to promote development while maintaining Islamic
traditions
– Role of women in business is restricted
– Low literacy rate of women
– Prevent financial/lending practices that are incompatible with Islam
Key Issue #2: Where Are More & Less
Developed Countries Distributed?
• Less Developed Regions
– Middle East (HDI = 0.68)
• AHDI (Alternative Human Development Index)
– UN developed to calculate HDI when adjusted for social inequality
(ethnicities, religious, social class, gender, etc.)
– 3 reasons for low HDI in Middle East:
» Lack of political freedom
» Low education & literacy rates
» Lack of opportunities for women
• Internal conflicts – Iraq, Iraq vs. Iran, Shi’ite vs. Sunni, Syria, Kurds,
Israel, Palestine, Lebanon, Libya, Tunisia, Egypt
• Most Arab & Muslim states refuse to recognize Israel
• Many spend money for war rebuilding & military than economic
development
• Terrorism – most do not hate it, most do not endorse it either
• Most did not support U.S. invasion of Iraq in 2003 & do not support
the “War on Terror”
Key Issue #2: Where Are More & Less
Developed Countries Distributed?
• Less Developed Regions
– Southeast Asia (HDI = 0.58)
• Indonesia – 2/3 of pop. on Java
• Vietnam, Thailand, Philippines
• Internal conflicts, wars, colonialism by
Japan/Netherlands/Portuguese/U.S./U.K./France
• Tropical climate - soil & climate not good for most grains (low nutrients,
excessive water)
• Mountains, volcanoes, rainforests, typhoons, tsunamis all challenge
economic development
• Medicines & tech led to pop. Growth
• Most crops based in manufacturing – palm oil, coconut oil, rubber trees,
kabok (fiber used in insulation), abaca (used for rope fibers)
• Major food & export crop is rice (Indonesia, Malaysia, Thailand, Vietnam)
• Rapid development in Thailand, Singapore, Malaysia, & Philippines
(textiles/clothing – due to low cost labor)
• Economic growth has slowed recently – unwise investing, lack of
watchdog groups, reforms are in process but expensive & time consuming
Key Issue #2: Where Are More & Less
Developed Countries Distributed?
• Less Developed Regions
– South Asia (HDI = 0.58)
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India, Bangladesh, Pakistan, Sri Lanka, Nepal, Bhutan
Region with 2nd highest pop. & 2nd lowest per capita GDP
High NIR, high pop. Density
Climate – monsoon rains May-August (varies year to year)
India – jute (rope, twine, burlap), peanuts, sugarcane, tea, uranium,
bauxite (aluminum), coal, manganese, iron, chromite, rice, wheat,
cotton
India has many minerals but a low mineral to pop. Ratio
Green Revolution (since 1960s) – dramatic increase in agricultural
production with genetically engineered seeds, improved farming
practices, more chemicals & machines
India – 4th largest total GDP behind U.S., China, Japan; but low per
capita
Manufacturing growth but not as fast as China
Service sector growth with help desks – credit card, airline, tech, etc.
Key Issue #2: Where Are More & Less
Developed Countries Distributed?
• Less Developed Regions
– Sub-Saharan Africa (HDI = 0.51)
• Lower pop. density than other LDCs
• Major source of minerals:
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South Africa – chromium, gold, diamonds, manganese, platinum
Botswana & DRC – diamonds
Guinea – bauxite; DRC & Zambia – cobalt
Gabon – manganese; Nigeria – petroleum
Niger – uranium
• Main problem – inability of land to provide food/resources for the
rapidly growing pop. (deserts & tropical climates; highest NIR;
overworked land (desertification))
• Least favorable development prospects:
– Highest % in poverty
– Poor health & education
– Weakening economic conditions (avg. African consumes less than 25 yrs ago)
• Legacy of colonial era – goods produced for export not local use,
border disputes, ethnic conflict, landlocked states
Key Issue #2: Where Are More & Less
Developed Countries Distributed?
• World Systems Theory (Wallerstein)
– Divides the transnational and interregional division of labor into 3
categories:
• Core countries (U.S., much of Europe, Japan, etc.)
• Semi-periphery countries (China, Mexico, Brazil, etc.)
• Periphery countries (most of Africa, parts of Asia, parts of Latin America)
– Core countries focus on high-skill, capital-intensive labor; semiperipheral countries lack the power of the core but diversify their
economies in an effort to join the core; peripheral countries focus
on low-skill, raw material extraction & manufacturing
• Dependency Theory
– Core countries reinforce their dominance by exploiting the
resources and labor of the periphery
– Peripheral countries have limited ability to develop self-sufficiently
and must rely on the core countries
– Mostly ignores semi-periphery
Key Issue #3: Where Does
Development Vary by Gender?
• Using total figures masks gender inequality
• UN states that gender equality exists in every country to some extent
• GDI (Gender-related Development Index) – compares women with
both sexes combined
• GEM (Gender Empowerment Measure) – measure ability of women to
participate in economic & political decision making
• GDI (measures standard of living of women vs. men)
– Similar to HDI (1 economic, 2 social, 1 demographic)
– Penalizes large disparities between men & women (Ex. Iran & Mexico
have even % of kids enrolled in school but GDI is much higher in Mexico
because girls are more likely to be enrolled in school)
– Total equality = 1.0 (no countries)
– Highest in 2005 – Norway (0.96)
– Often higher in Western Europe & North America
– Lowest in Sub-Saharan Africa
– Often low in Middle East
Key Issue #3: Where Does Development Vary by
Gender?
• GDI
– Economic Indicator of Gender Differences (Average Income)
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Average Income – lower in every country for females
U.S. in 2010 - $42,800 (male) vs. 34,700 (female)
Women make 2/3 male income in MDCs (avg. gap of $12,000)
Higher % difference in LDCs
– Social Indicators (Education & Literacy)
• LDCs – women less likely to attend schools (especially high school and
beyond)
• MDCs – 99 girls to 100 boys; LDCs 60 girls to 100 boys
• Very low in Sub-Saharan Africa & Middle East (fewer than 1/3 of girls
attend school)
• Universally required school attendance in MDCs
• Latin America & Asia have equal attendance by gender, but lower overall
attendance
• Literacy – MDCs (near equal & very high); Latin America & Asia (near equal,
but not as high); Sub-Saharan Africa (low for both, but lower for female)
• Low education & literacy limits ability of women to participate
economically & politically in some parts of the world
Key Issue #3: Where Does Development
Vary by Gender?
• GDI
– Demographic Indicator (Life Expectancy)
• MDCs – life expectancy is several years longer for females (6 years in U.S.)
• LDCs – only 1 -2 years longer for females
• Lower in LDCs due to hazards of childbearing (poor medical conditions)
– Overall, the status of women is improving around the world
• Gender Empowerment (GEM)
– Measures ability of women to participate in improving quality of life
– In every country (MDC or LDC), fewer women hold positions of
power
– GEM calculated using income & professional jobs (economic power)
and managerial jobs & elected jobs (political power)
– Complete equality = 1.0 (no countries at perfect GEM)
– Highest in N. America, Northern Europe, & South Pacific
– Lowest in Africa & Asia
– Difficult to determine accurately due to limited data in LDCs
Key Issue #3: Where Does Development Vary by
Gender?
• Gender Empowerment (GEM)
– Economic Indicators (Professional Jobs & Income)
• Cultural barriers restrict empowerment of women in professional &
technical jobs
• ½ or more of professional/tech workers in N. America & Northern Europe
are women
• Less than ½ in LDCs (where data is available)
• Share of income is lower in every country (gender wage gap)
– Political Indicators (Managerial Jobs & Elected Jobs)
• 1/3 of managerial jobs held by women in N. America, Northern Europe, &
South Pacific
• Less than ¼ in LDCs where data available
• Elected positions – no female majority in any country; highest in Northern
Europe (about 1/3)
• About 1 in 5 elected officials are women in other MDCs (15% in U.S. House
& Senate)
• Less than 1 in 10 elected officials are women in LDCs
• Every country has a lower GEM than GDI – women hold a greater share of
resources compared to their power to allocate resources
Key Issue #3: Where Does Development Vary by
Gender?
• Gender Inequality Index (GII)
– New measure that combines elements of GEM with
reproductive health
– 3 Factors:
1)
2)
3)
Empowerment (political power/representation in national
legislature AND education/% completing secondary school)
Employment (female labor force participation rate)
Reproductive health (maternal mortality rate AND adolescent
fertility rate)
– Maternal mortality – number of women who die giving
birth per 100,000 births (16 in MDCs vs. 171 in LDCs)
– Adolescent fertility – number of births per 1,000 women
ages 15-19 (19 in MDCs vs. 53 in LDCs)
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Prospects for LDCs have improved in last 25 years; IMR dropped from 85
to 60; NIR dropped from 2.1 to 1.5; GDP per capita has risen $500 to
$4,500
• MDCs have also improved in last 25 years – the development gap is still
wide (gap in NIR & IMR is even compared to 25 years ago; the gap in
GDP per capita is wider than 25 years ago)
• 1/5 of the world’s pop. (MDCs) consume 5/6 of the world’s goods
• Americans spend more on cosmetics ($8 billion) per year than cost of
educating the 2 billion unschooled children around the world ($6 billion)
• Europeans spend more on ice cream ($11 billion) per year than cost of
providing working toilet to the 2 billion people without one ($9 billion)
• 2 major obstacles for LDCs in encouraging more rapid development:
① Adopting policies to successfully promote development:
② Finding funds to pay for development
• 2 major policies to promote development:
① International trade
② Self-sufficiency
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Development through Self-Sufficiency
– Balanced growth, more popular for most of the 20th century
– Adopted by China, India, most African countries, most Eastern
European countries; popular with Communist countries
– Elements of the Self-Sufficiency Approach
• Spread investment out as equally as possible (all sectors of the
economy & all regions of the country)
• Modest growth pace, but fair system for residents & businesses
• Income in countryside keeps pace with city
• Reducing poverty is more important goal than growing wealth among
the few elite
• Isolates domestic businesses from foreign competition (usually MDCbased transnational corporations)
• Impose barriers to limit import of goods/discourage foreign trade:
① Tariffs – high taxes on imported goods to make them more expensive than
domestic goods
② Quotas – limits to quantity of imported goods
③ Licenses – restrict the number of legal importers (registered with gov’t)
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Development through Self-Sufficiency
– India has used those barriers effectively
• Discouraged Indian businesses from producing exports
• Did not allow exchange of Indian currency (rupee) into other currencies
• Required permission from gov’t to sell new products, modernize
factories, expand production, set prices, hire or fire workers, or change
job classification of existing workers
• Provided subsidies if company could not make a profit from domestic
business (cheap electricity or canceling of debts)
• Government-owned communications, power, transportation,
automakers, & insurance
– Problems with the Self-Sufficiency Approach
• Inefficiency
– Protects inefficient industries (gov’t subsidies, no international competition,
controlled imports)
– Little incentive to improve quality, lower costs, reduce prices, or increase
production
– No pressure to improve technology
– Ex. India’s Maruti-Udyog automobiles – out of date compared to other autos
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Development through Self-Sufficiency
– Problems with the Self-Sufficiency Approach
• Large Bureaucracy
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Complex and large gov’t administration system
Difficult for entrepreneurs to produce goods or services
Stymies business creativity & innovation
More financially rewarding to guide others through the red-tape
process
– Illegal money on black market – selling illegally imported goods at
inflated prices
• Development through International Trade
– Identify most important, unique economic asset
(something in abundance and of value)
– Concentrate on selling scarce resources to fund
development
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Development through International Trade
– Rostow’s Model of Economic Growth (Modernization
Model)
• Proposed by W.W. Rostow (1950)
• 5 stages:
① Traditional Society – not yet begun developing, highly agricultural,
high % of GDP spent on religion & military (non-productive)
② Preconditions for Takeoff – elite & well-educated leaders begin
development process, invest in technology & infrastructure to
increase production
③ Takeoff – rapid growth in some sectors (textiles, food, etc.),
technology advances, other sectors remain traditional
④ Drive to Maturity – technology & investment diffuses to other
sectors leading to rapid growth, workforce becomes more skilled &
specialized
⑤ Age of Mass Consumption – shift from heavy industry focus to
producer consumer goods & services
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Development through International Trade
– Rostow’s Model of Economic Growth
• MDC’s in Stages 4 & 5; LDCs in Stages 1-3
• International trade exposes a country to consumers in other
countries, but also exposes a country to foreign business
competition (must remain competitive in a global market)
• Eastern Europe & Japan had achieved relative equality with
North America & Western Europe through trade by 1950, leading
to Rostow creating his model
• Rostow assumed that other countries could do the same
• Many LDCs have raw materials needed in MDCs for industries
– No more colonialism – MDCs must import/buy through trade
– Exporting should stimulate growth in LDCs
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Development through International Trade
– Comparative Advantage
• A country has a comparative advantage over another
country if they can produce a product at a lower relative
cost prior to trade
• Causes countries to engage in international trade
(exporting products that they have a comparative
advantage for and importing those that they do not)
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Development through International Trade
– Examples of International Trade Approach
• 4 Asian Dragons (Gang of 4, 4 Tigers)
– South Korea, Singapore (British colony until 1965), Taiwan, & Hong
Kong (British colony until 1997)
– South Korea & Taiwan have close trade ties with Japan – modeled
themselves after Japan’s successful development
– All 4 have limited natural resources, but have low labor costs and
focus on clothing & electronics to sell inexpensively in MDCs
– Singapore – very important trade port (one of world’s 5 busiest) on
Strait of Malacca connecting Pacific & Indian Oceans
– Entrepôt – trading post where goods are traded without import &
export duties; often used as middle-man on a long trade route
– Singapore, Hong Kong, Macau, & Dubai all utilize entrepôt trade
– Entrepôts are types of free ports (ports with relaxed jurisdiction of
customs and limited or no import/export duties)
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Development through International Trade
– Examples of International Trade Approach
• Petroleum-Rich Arabian Peninsula States
– Saudi Arabia, Kuwait, Bahrain (island in Persian Gulf), Oman, Qatar,
& UAE
– 1970s – rapid rise in crude oil prices
– Oil revenue has financed large projects (housing, roads, airports,
universities, telecommunications, tourism, skyscrapers)
– Recently built steel, aluminum, & petrochemicals factories
– Diffusion of consumer goods (cars, color TVs, audio, motorcycles,
supermarkets, Western food & products)
– Islamic principles often at odds with Western business practices
» Women’s roles, appearance
» Business halts each time Muslims called to prayer
– Yemen has sizable oil reserves but a very corrupt government that
severely limits development (“kleptocracy”)
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Development through International Trade
– Problems with the International Trade Alternative
• 3 major problems for LDCs outside 4 Asian Dragons & oil-rich Middle
East using the International Trade approach:
① Uneven Resources Distribution – prices did not increase on all products;
some prices declined; not all countries have access to same type & quantity
of resources
② Market Stagnation – world market experiencing a slower growth for many
products than when 4 Dragons began; MDCs have had a limited pop. growth
which limits their purchasing power & market size
③ Increased Dependence on MDCs – many LDCs may have to cut production in
other sectors to focus on a handful of takeoff industries – then must import
from MDCs (ex. Food, clothing, etc.)
• Also, some LDCs often focus on raw materials and unfinished products
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MDCs often import raw materials & produce the final product
Sometimes the finished product is then sold back to consumers in LDCs
Results in a net loss
LDCs lack resources, funding, skilled labor to produce higher-value finished
products
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Development through International Trade
– Problems with the International Trade Alternative
• Neo-colonialism (or Neo-imperialism)
– Indirect economic & cultural imperialism
– Influencing a country without having direct control over its
territory
– Transnational corporations of MDCs often still exploit the former
colonies for resources and labor
– LDCs are often reliant upon trade to MDCs for development
– Related to core-periphery model
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Development through International Trade
– Recent Triumph of the International Trade Approach
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Recently embraced as preferred alternative (since 1990s)
World wealth in GDP has doubled in past 25 years
World trade has tripled in same time
India switched to international trade in 1990s
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Dismantled barriers
Increased product quality
Allowed foreign investment, competition, & imports
Maruti-Udyog autos now a wholly-owned subsidiary of Suzuki
India had a 4% GDP growth annually from 1960-1990
Thailand (7%), Taiwan (8%), South Korea (9%) over same time period
using international trade
Overwhelming evidence that international trade better promoted
development
In 1990s with international trade, India has had 7% annual growth
1980 – ¾ of exports from LDCs were agricultural or mineral products
2000 – 4/5 of exports form LDCs were manufactured goods
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Development through International Trade
– World Trade Organization (WTO)
• Formed in 1995 to help reduce barriers to international trade
– Negotiate reduction or elimination of restrictions (subsidies, tariffs, quotas,
movement of money)
– Enforcing trade agreements & protecting intellectual property (copyrights,
trademarks, patents, etc.)
• Attacked by liberals – accuse promotion of corporations, hurts poor,
hurts small-business
• Attacked by conservatives – compromises power & sovereignty of
countries
– Transnational Corporations (or Multinational Corporations)
• Foreign Direct Investment (FDI) – investment by a foreign company in
the economy of another country
• FDI has grown rapidly since 1970 ($13 billion) to $1.4 trillion in 2004
(declined after 9/11/2001 but has bounced back since)
• Unequal flow & distribution of FDI
– 1/3 from MDC to LDC in 2004, 2/3 from MDC to MDC in 2004
– ½ of all FDI to LDCs went to China in 2004, ¼ to other Asian countries, ¼ to
Latin America; less than 10% to Africa
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Development through International Trade
– Transnational Corporations
• Major source of FDI – transnational corporations (TNCs)
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Headquartered (HQ) in one country (almost all are HQ’d in MDCs)
Invest & operate in multiple countries
¼ of largest TNCs HQ’d in U.S.
2/3 in Western Europe (mostly France, Germany, & U.K.)
Several in Japan as well
• Financing Development
– LDC’s lack money regardless of which alternative chosen
(self-sufficiency or international trade)
– Must rely on loans (banks & international organizations)
or from FDI from transnational corporations
– 2 major lenders of loans (both affiliated with the UN):
• International Monetary Fund (IMF)
• World Bank
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Financing Development
– International Monetary Fund (IMF)
• Loans to countries experiencing difficulty in international trade (help to
rebuild reserves, stabilize currency exchange rates, pay for imports
without heavy restrictions)
• Not for specific projects like the World Bank
• Funding for IMF based on each country’s share of world economy
• Development projects used to lure business & investment (new
infrastructure) – new/higher taxes to pay off loans
– World Bank
• Includes: International Bank for Reconstruction & Development (IBRD)
and International Development Association (IDA)
• IBRD – used to reform public administration institutions, develop &
strengthen financial institutions, and implement transportation/social
service projects
• IDA – used to support poor countries too risky for IBRD loans
• IBRD has provided over $400 billion since 1945, mostly to Europe &
Latin America
• IDA has provided over $150 billion since 1960, mostly to Asia & Africa
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Financing Development
– Problem – many projects are expensive failures
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Not working
Too expensive to maintain
Do not lure businesses
Cannot pay off debt/interest
Loans from MDC companies stop when debt cannot be repaid
Hurts banks in MDCs
World Bank considers ½ of projects approved in Africa to be failures
Very high debt in Africa (debt exceeds income in 18 African countries)
– Structural Adjustment Programs (SAP)
• Fear that if debts are canceled, more loans are granted, and/or
refinancing of existing loans that it will perpetuate bad habits in LDCs
• Before debt relief, LDCs prepare a Policy Framework Paper (PFP)
outlining an SAP
• SAP – describes economic goals, strategies for achieving objectives, &
external financing requirements
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Financing Development
– Structural Adjustment Programs (SAP)
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LDCs can only spend what they can afford
Must provide benefits to the poor (not just the elite)
Must divert military spending to health & education
Must invest in scarce resources
Must encourage a more productive private sector
Must reform gov’t – increased efficiency, fiscal accountability,
predictable rules & regulations, and more open information to
the public
• Critics – say poverty increases under SAP because gov’t makes
cuts to health, education, etc. to reduce spending & inflation;
also argue that unemployment may rise as gov’t cuts workers;
also argue that the poor are punished for gov’t waste &
mismanagement (corruption, high military spending, etc.)
• Supporters – argue poor suffer more when reforms are not
made; SAPs allow for goal of long-term economic growth
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Financing Development
– Dealing with economic downturns like a recession:
• Stimulus strategy – government spends more that they collect in
taxes, typically by building infrastructure to create work and jobs
• Austerity strategy – government reduces taxes so that individuals
and businesses can revive the economy by spending money
saved from tax cuts; also the gov’t cuts spending to prevent debt
from increasing drastically
• Microfinancing
– Small loans provided to individuals and small businesses
who are unable to qualify for regular bank loans
– Example: Grameen Bank in Bangladesh providing microloans to women in South Asia who earn money from
selling handcrafted products (often Fair Trade products)
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Fair Trade (variation of International Trade model)
– Products made & traded to protect workers & businesses in LDCs
(attempts to be more sustainable form of development)
– Standards by FairTrade Labeling Organizations International (FLO)
– TransFair USA – watchdog group that monitors fair trade Primarily
sold as craft products in North America (Ten Thousand Villages)
– Primarily food in Europe (coffee, tea, bananas, chocolate, sugar, etc)
– 2 sets of standards:
① For workers on farms or in factories
② For producers
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Fair Trade Producer Standards
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Advocates work with small businesses or worker-owned cooperatives
(co-ops)
Individuals in LDCs often cannot borrow money so they band together to
form co-ops (directly benefits farmers/artisans not corporate owners)
Fair trade goods are often higher priced (comparable to gourmet prices)
Bypass middle-men; businesses/co-ops earn higher price per unit
Often hand-made crafts or organically-grown food and higher quality
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Fair Trade (variation of International Trade model)
– Fair Trade Worker Standards
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Critics of International Trade Model argue that very little
money reaches workers in LDCs
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Limited technology, requires more workers to produce each good,
earnings are spread thin
Large % of money goes to middle-men (wholesalers, importers, &
retailers)
Critics of International Trade Model also argue that protection
of worker’s rights is not a high priority
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Minimal oversight by gov’t, international lending agencies, etc.
Workers work long hours
Poor working conditions
Unsafe working conditions, injuries
Low wages
Child labor, forced labor
No compensation to injured, ill, or laid-off workers
Key Issue #4: Why Do LDCs Face Obstacles to
Development?
• Fair Trade (variation of International Trade model)
– Fair Trade Worker Standards
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Fair Trade attempts to address these criticisms
Must provide fair wages (at least country’s minimum wage, if
one)
Must allow workers to unionize
Must comply with environmental & safety standards
Must employ women & pay fair wages (60-70% of fair trade
workers are women)
Fair Trade prefers over minimum wage to cover food, shelter,
education, health care, & other basic needs
Co-ops are encouraged to invest back in the community
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Health clinics, child care, training
Better working conditions does not necessarily drive up costs:
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Bypass middle-men to cut costs (return larger % of profit to
producers & workers in LDCs)
Cost is the same, but the distribution of the cost is different