CHALLENGES TO DEVELOPMENT

DEPENDENCE 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 world’s countries as existing in a system of interlocking parts Each country’s actions

impact other countries

CORE-PERIPHERY MODEL core-periphery model

states that the world’s 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

WALLERSTEIN’S WORLD SYSTEMS

Immanuel Wallerstein’s 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

DEVELOPMENT THROUGH SELF-SUFFICIENCY

To promote development, LDCs choose one of two models: One advocates self-

sufficiency One emphasizes

international trade

DEVELOPMENT 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

EXAMPLE: 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

DEVELOPMENT 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 market’s 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

ROSTOW’S DEVELOPMENT MODEL Walt Rostow set out in the

1950s to explain and predict countries’ patterns of economic development

Rostow’s 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

ROSTOW’S DEVELOPMENT MODEL

Rostow’s 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

ROSTOW’S MODERNIZATION MODEL 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

Rostow’s model does not consider structural issues might limit a country’s ability to develop, such as post-colonial dependency

Rostow’s 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

INTERNATIONAL 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

INTERNATIONAL TRADE APPROACH Petroleum-rich Arabian peninsula

states Includes Saudi Arabia, Kuwait,

Oman, and the United Arab Emirates

Once among the world’s 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

INTERNATIONAL 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

INTERNATIONAL TRADE APPROACH

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

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

INTERNATIONAL 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

INTERNATIONAL 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 country’s relative size in the world economy

Both created post WWII to avoid disastrous economic policies

Both part of United Nations

STRUCTURAL 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

STRUCTURAL 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

NGOS 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

FAIR 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

GLOBALIZATION 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

NEW 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

ENVIRONMENTAL 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

ENVIRONMENTAL 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 Earth’s temperature to rise

Global Warming The global warming theory

argues that Earth’s 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