Title: Challenges to Development
1Challenges to Development
2Dependence 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 worlds countries as
existing in a system of interlocking parts - Each countrys actions impact other countries
3Core-Periphery Model
- core-periphery model states that the worlds
countries are divided into three groups - Core
- Consists of industrialized countries with the
highest per-capita incomes and standard of living - Examples U.S., Canada, Australia, New Zealand,
Japan, and Western Europe
- Semi-periphery
- 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
4Wallersteins world systems
- Immanuel Wallersteins 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
- 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
5Development through self-sufficiency
- To promote development, LDCs choose one of two
models - One advocates self-sufficiency
- One emphasizes international trade
6Development through self-sufficiency
- 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
- 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
7Example India
- India employed the self-sufficiency 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 - Indian business required to get government
approval for new products, set prices, etc.
- Exposed two main problems
- Protection of inefficient businesses
- 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
- 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 black-market
8Development through international trade
- 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 markets 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
9Rostows Development Model
- Walt Rostow set out in the 1950s to explain and
predict countries patterns of economic
development - Rostows model consists of five stages through
which all countries move as they improve their
economic development - MDCs exist in stages 4 and 5
- LDCs exist in stages 1 through 3
- According to Rostow, once a country starts
investing in capital, it will begin to develop
10Rostows Development Model
- Rostows Moderization Model assumes that all
countries follow a similar, five-stage process of
development - Stage One- Traditional Society
- 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
- 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
- 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 - Stage Four- Drive to Maturity
- 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
- 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
11Rostows Modernization Model
- Rostows model also considers each country an
independent agent, rather than one piece of an
interlocking system of countries - Stage five assumes that higher economic
productivity leads to high mass consumption of
goods and services - 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
- 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 - Rostows model does not consider structural
issues might limit a countrys ability to
develop, such as post-colonial dependency
12International Trade Approach
- When most countries were following the
self-sufficiency approach two groups of countries
choose the international trade approach during
the mid-20th century - The Four Dragons (Tigers)
- Arabian Peninsula
- The four Asian Tigers
- South Korea, Sinapore, Taiwan, and Hong Kong (at
time still British) - Nicknames include four dragons, four tigers
and the gang of four - Characteristics
- 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 - Developed a comparative advantage
- Low labor costs enabled these countries to sell
products inexpensively in MDCs
13International Trade Approach
- Petroleum-rich Arabian peninsula states
- Includes Saudi Arabia, Kuwait, Oman, and the
United Arab Emirates - Once among the worlds least developed countries
- 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 - Other industries have been aided by government
subsidies - Landscape also changed by introduction of
consumer goods
14International Trade Approach
- Problems with the International Trade Approach
- Three problems have hindered countries outside of
the Asian Dragons and Arabian Peninsula - 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 - Has to be imported from MDCs
- Market decline
- World market for low-cost manufactured goods has
declined sharply in recent years
- International Trade Success
- In late 20th century, most countries embraced the
international trade approach - India switched approaches
- Trade has increased more rapidly than wealth
- Countries switched approaches because of one
reason- overwhelming evidence that international
trade better promoted development - 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
15International Trade Approach
- Critics
- 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
- 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 - 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
16International Trade Approach
- Foreign Direct Investment
- Definition
- Investment made by a foreign company in the
economy of another country - FDI grew rapidly during the 1990s from 130
billion to 1.5 trillion in 2000 - Does not flow equally throughout the world
- 1/4th from MDCs to LDCs
- 1/3rd of went to China
- 3/4th from MDCs to MDCs
- SEZs
- 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 - Example China
- Also- export processing zones
- Major sources of FDI are Transnational
corporations - Invest and operate in another country than the
one in which its headquarters are located
17International Trade Approach
- Financing Development
- LDCs lack money to fund development
- Finances come from two primary sources
- Direct investment by TNCs
- Loans from banks and international organizations
- Loans
- Two major lenders
- The World Bank
- Split into
- IBRD (International Bank for Reconstruction and
Development) - IDA ( International Development Association)
- IMF (International Monetary Fund)
- 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 countrys
relative size in the world economy - Both created post WWII to avoid disastrous
economic policies - Both part of United Nations
18Structural Adjustment Programs
- Loaning money to LDCs can perpetuate bad habits.
- Led to creation of structural adjustments
- 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
- A structural adjustment includes economic reforms
or adjustments - Typically include
- 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
19Structural Adjustment Programs
- Critics charge that poverty worsens under
structural adjustment programs - By placing priority on reducing government
spending and inflation - 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
- Often structural adjustments force loan-receiving
countries to increase privatization - The selling of publicly-operated industries to
market-driven corporations - Can cause hardships for families that once
depended on government owned or operated
resources being sold off to profit-driven
corporations - 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
20NGOs
- 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 - Examples
- Doctors Without Borders, Save the Children
21Fair Trade
- Fair Trade has been proposed as a variation of
the international trade model of development - Definition
- Means that products are made and traded according
to standards that protect workers and small
businesses in LDCs - Meant to help protect workers from exploitation
that often occurs from free trade
- Two sets of standards distinguish fair trade
- Producer standards
- Advocates work with small businesses and
democratically run cooperatives - Consumers pay higher prices for fair trade
products - Able to return a great deal of money to producers
- Leds to higher-quality products
- Usually organic
- Worker standards
- Requires employers to pay workers fair wages,
permit union organizing, and comply with minimum
environmental and safety standards
22Globalization
- 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 assembly-line 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
23New International Division of Labor
- Free trade vs. Fair Trade
- Free trade
- Concept of allowing MDCs to outsource without any
regulation except for the basic forces of market
capitalism - Globalization
- 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 profit-driven 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
24Environmental Impacts
- Sustainable development
- 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
- Ecotourism
- Improvements in transportation more traveling
- 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
25Environmental 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 Earths temperature to rise
- Global Warming
- The global warming theory argues that Earths
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