development part 2: “paths to development”paths to development? • international trade model...
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Development Part 2:“Paths to Development”
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What is Development?• Reread/review prior information (Part 1)• Criticisms of the “development” concept:
– One single path/trajectory toward development?• Is “industrialization” always necessary?
– Western bias (values materialism, is industry good?)
– discounts international influence• See Wallerstein’s World System’s Theory
• See p 464 – 465 for alternative discussion– Bhutan measures Gross National Happiness (GNH)
based on psychological well-being, time use, community vitality, culture, health, education, environmental diversity, living standard and governance.
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UN Millennium Development Goals
• To eradicate extreme poverty and hunger• To achieve universal primary education• To promote gender equality and empower women• To reduce child mortality• To improve maternal health• To combat HIV/AIDS, malaria, & other diseases• To ensure environmental sustainability• To develop a global partnership for development
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Paths to Development• self-sufficiency model
– Characteristics:• Barriers are established to protect local businesses
– Three most common barriers = (1) tariffs (tax on imported goods), (2) quotas, and (3) restricting # of importers
– “protectionism”• Distribution/pace of development = even but modest
– Investment spread across economy– Goal is to develop national industries and– reduce poverty over consumerism
• Two major problems with this approach:– Inefficient businesses are protected– A large bureaucracy is needed to regulate/monitor barriers
» costly» could lead to corruption» growth of black market
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Paths to Development?• International Trade Model
– Rostow’s model of development• Five stages
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Paths to Development?• International Trade Model
– Rostow’s model of development• Five stages • Why optimistic?
– Eastern/Southern European growth, Japan– LDCs have tons of resources to exploit
– Examples of international trade approach• The “four Asian dragons”
– Taiwan, Singapore, South Korea, Hong Kong• Petroleum-rich Arabian Peninsula states
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Paths to Development?• International Trade Model
– Problems/criticisms (diff. from text)• single commodity
– depends on world price– could lead to loan default if price collapses– therefore, commodities are often leased/controlled by
outsiders who keep lion’s share of profits • with reliance on cash crops must buy necessities• income inequality
– result of both model and structural reform programs (later)
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Self-sufficiency vs. Int’l trade approach
• International trade approach triumphs– Countries switch because evidence indicates that
international trade is the more effective path toward overall development
– Example: India
– made easier by globalization– “Neo-liberalism”
• Dominant economic/political theory by end of 20th c.• Reduce government intervention in markets
– Multinational corps., Big Business, Wall St. = Republicans– Bill Clinton, Pres. Obama, Rahm Emanuel = Democrats
» NAFTA, TPP (Trans-Pacific Partnership)
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Triumph of International Trade Approach
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Rostow’s “modernization”, “ladder of development” or “int’l trade” approach to
development Winners
• Multinational corporations– Low wages, higher profits,
higher stock prices– Stockholders
• Consumers– Lower prices
• In LDCs– People/regions connected
to int’l trade or the “core”• BIG Q? Will low prices
continue to offset wage stagnation?
Losers• Low skill workers (MDCs)
– Highly paid union workers in manufacturing
• Small businesses/domestic manufacturing
• Prices are undercut
• Downward wage pressure– Will wages decrease or
stagnate for skill workers as well?
• can tertiary jobs be outsourced, globalized?
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International Organizations– World Trade Organization (WTO)
• Helps negotiate reductions in trade barriers = “free trade”• Eliminate restrictions on the movement of capital• Enforces trade agreements
– by allowing non-penalized retaliation or fines.• Criticisms:
– Left = anti-democratic, favors wealthy corporations, ignores the poor– Right = national sovereignty is violated (see TPP)
– Nongovernmental organizations (NGOs)• Independent non-profits (Gates Foundation, Clinton
Foundation, Carter Center)– Some funds can be misappropriated →admin. salaries, travel, etc.
• example of a successful policy = microcredit program– Loans to small entrepreneurs in LDCs (largely women) which are
guaranteed by other’s in village = 98% repayment rate
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Barriers and Costs of Development• Structure and geography of the world economy
(World Systems Theory)• Social conditions
– Demographic trap • high CBR, IMR, dependency ratio leads to a lack of
funds for development which in turns leads to high CBR– Lack of education (overall and gendered)– Trafficking (domestic servants, street vendors, prostitution)
• Disease– weak labor force, orphans
• Political Corruption and Instability– dictatorship, coups, corruption discourage investment
• Financing Development!!!
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Biggest problem =Financing development
• LDCs require money to fund development– FDI = foreign direct investment
• Major source = transnational corps
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Foreign Direct Investment
Figure 9-30
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Financing development• LDCs require money to fund development
– FDI = foreign direct investment• Major source = transnational corps
• Int’l organizations as lenders:– The World Bank
• Loans to make reforms, strengthen financial institutions, infrastructure projects
– IMF (International Monetary Fund)• Provides loans to countries with debt payment issues• Goal = protect international trade
– demand “structural adjustment programs”» realign spending priorities» eliminate govt. bureaucracy» cut jobs, pensions, reduce taxes
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Public Debt by Country
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Costs of Development• est. of Export Processing Zones (EPZs)
– Favorable tax, regulations, etc. for foreign firms• Maquiladoras (Mexico), Special Economic Zones (China)
• Agriculture– Diff. of modern agriculture to produce cash crops
• ↑intensification →↑desertification– Sahel (south of Sahara, shatterbelt) lost 270k sq. miles
• Tourism (mixed impact)– Brings in huge $, now > than oil
• requires infrastructure spending that could be spent on natives• creates jobs but largely low-paying, “dehumanizing”?• profits go to multinational corps.• harsh juxtaposition of tourist wealth and native poverty marks cultural
landscape
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Uneven Development within States• Govt. policies can create or lessen economic
differences between regions– Infrastructure, education, subsidies, taxes and quotas
• Int’l trade benefits more “connected” regions
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Uneven Development within States• Govt. policies can create or lessen economic
differences between regions– Infrastructure, education, subsidies, taxes and quotas
• Int’l trade benefits more “connected” regions• Core-periphery thinking can also apply within states
– reflects weakness of using per capita GNI– Cities/capitals/ports = Islands of Development
• concentrated economic development, foreign inv. $• Forward capitals built to draw investment to interior or
to be a centripetal force.– Brasilia (Brazil), Islamabad (Pakistan), Abuja (Nigeria)
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Fair trade approach• Products are made and traded in a way that
protects workers and small businesses in LDCs• Two sets of standards
– Fair trade producer standards• Must be “small”, democratic, high product quality, use
ecologically friendly growing methods, etc.– Fair trade worker standards
• Collective bargaining, working conditions, minimum wage, etc.
• Producers and workers usually earn more• Consumers usually pay higher prices
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Fair Trade Coffee• Fair trade coffee: Shade-grown coffee produced by
certified fair-trade farmers, who then sell the coffee directly to coffee importers– Often organically grown
• Guarantees a “fair trade price”– At least 40% goes to grower
• Over 500,000 registered farmers– Produced in more than 20 countries– commitment by Starbucks, Dunkin Donuts and other chains
• Demand must come from the consumer!
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