Approaches to development

We are thinking in general terms here but it is worth remembering key geographical concepts of scale and place.

“Top down” “trickle down” Approach

Proponents of the “trickle down” approach would argue that richer individuals and larger companies are the driving force behind economic growth. The wealth created by the more successful parts of the economy and more successful people will naturally trickle down and benefit everyone.

Therefore the country should focus on ensuring the right environment for the rich and the larger companies to thrive. Low taxation and lack of regulation.

“Top down” approach tends to centralise decision making and is often linked to development through large scale “prestige” projects.

Growth Pole Approach

Development of a core region or growth pole.

Leading to spread effects benefiting the country as a whole.

Growth Pole – Could be planned or unplanned. Development of a specific location through agglomeration. (Special Enterprise Zones in China)

Propulsive Industry – Industries which can stimulate growth. Ship building, Automobile, Hi tech.

“Bottom up” “Grass roots” development

The aim is to lift people out of poverty by helping them directly. Helping them to help themselves.

Local involvement in the decision making process. Identifying their needs and deciding on the most effective solution. Use of appropriate technology. Generally long term aims of sustainability.

Sanitation and water supply, improved farming through use of appropriate technology, education, health care improvements and family planning, development of local industries and businesses through micro loans and the reduction in bureaucracy, improved marketing and access to markets, land and property rights, access to enabling technologies such as the Internet and mobile phones.

Countless examples of this approach throughout the world. Watch the Millennium village documentary on Sauri in Kenya

Fair Trade

An approach which joins consumers in richer countries with producers in poorer countries and creates a fair trading relationship. Started in the late 1980s Max Havelaar.

The basic component is producers are paid a “fair price” for what they produce. But also there is a long term trading agreement and rules relating to worker conditions and environmental impact.

Coffee and cocoa have been the main products with fair trade options available to consumers but now there are a wide variety of fair trade products with increasing market share.

The overall share of fair trade compared to traditional trade is tiny.

Regional development

Focus on developing the peripheral regions of the country. Attempting to reduce the regional disparities which develop from an uneven development of the core and periphery.

Linked to attempting to reduce rural to urban migration, particularly to the primate city of the core.

Often investment in improving infrastructure particularly transport and communications to link the region more with the core.

This approach has been very popular in Europe and is a major part of the EU budget. Particularly in regions which have suffered from industrial decline or countries such as Ireland, Portugal and Greece.

Export led growth

Economic growth through the production and export of products which the country has a comparative advantage at producing.

Approach adopted by many East and South-East Asian countries particularly successful in Taiwan where most of the enterprises were Taiwanese not foreign owned.

There can be significant state involvement in the form of investment, subsidies and protectionist measures.

Potential problem of dependency on key products and problems if export markets drop.

Ivory Coast – Cocoa

China - GDP growth slow down because of USA recession

http://www.guardian.co.uk/business/2009/feb/02/china-unemployment-unrest

Import substitution

Production of products domestically instead of import of products. Subsidies and protection of domestic industries from foreign competition and tariffs and non-tariff barriers reducing imports.

This approach was adopted by many Latin American countries. Also USSR and Warsaw Pact countries had to adopt this approach because of isolation from the Global Economy.

Proponents of free trade argue that by following this approach the benefits of free trade are lost and the country is wasting resources trying to produce what it would be better off importing. The country should focus resources on what it has a comparative advantage at producing.

Foreign Direct Investment

Encourage foreign companies to locate in the country to stimulate economic growth. The foreign companies would provide the investment the economy needs. Policy encouraged by the World Bank.

Particularly significant in extractive industries such as mining and oil where the initial costs are very high. Eg Nigeria oil, Bolivia silver

Some protection of domestic industries needed. Just opening economy to foreign competition will mean even profitable and sustainable industries will be unable to survive in the initial periods.

High levels of FDI in China’s Special Enterprise Zones.

Keynesian economics v neo liberalism

Keynesian Economics – Use government spending on the public sector and infrastructure to boost the economy and provide jobs.

Neo-liberalism – Reduce government spending and public sector of the economy. Increase the role of the private sector and market forces.

Free Market v Interventionist

Free market viewpoint

Spread effects will eventually benefit peripheral regions.

Interventionist

Development in depressed regions needs to be stimulated by government investment.

UN Millennium Development Goals“The Millennium Project was commissioned by the United Nations Secretary-General in 2002 to develop a concrete action plan for the world to achieve the Millennium Development Goals by 2015 and to reverse the grinding poverty, hunger and disease affecting billions of people.” Goal 1: Eradicate Extreme Hunger and Poverty Goal 2: Achieve Universal Primary Education Goal 3: Promote Gender Equality and Empower Women Goal 4: Reduce Child Mortality Goal 5: Improve Maternal Health Goal 6: Combat HIV/AIDS, Malaria and other diseases Goal 7: Ensure Environmental Sustainability Goal 8: Develop a Global Partnership for Development

http://www.unmillenniumproject.org/index.htm