Development and TradeThe Geography of the Global

Economy

Development

• What is development?– The process of improving the material condition of

people through the growth and diffusion of technology and knowledge

• We group countries into more or less “developed”

Measures of Development

• Gross Domestic Product (GDP)– Size of the economy

• GDP per capita using Purchasing Power Parity (PPP)– What can people buy?– Standard of living

• UN Human Development Index

GDP (2012)

PPP (2012)

GDP Density

UN HDI (2014)

Informal Sector

• In many developing countries, much economic activity is not counted– Barter– Black Markets– Illegal Activity

Modernization Model

1) Traditional Society

Limited Technology; Static Society

2) Preconditions for Takeoff

Extractive Export Industries

3) Takeoff

Development of Manufacturing

4) Drive to Maturity

Wider industrial/commercial base

5) High Mass Consumption

Shift to service sector, domestic consumption

Rostow’s Model:

Stairway to Development

Critiques:

Does not account for “roadblocks” and colonial legacies

Structuralism

• In contrast to classical views of development, some critics recognize structural impediments for poorer nations

• Dependency Theory (Wallerstein)– Nations locked in patterns set in colonial past– Core-periphery relationships hard to break

Trade

• Trade is necessary for development– Exports bring wealth into country

• Comparative Advantage– Idea that countries will specialize in certain goods

for trade

Globalization

• Economic globalization– The interconnectedness of the world economy

• Multinational Corporations– Main agents of globalization– Production spread across globe

Foreign Direct Investment

• When foreign corporations open new factories or offices in a country

• Important for development

• But is all FDI the same?– Plantation– Research

NICs

• New Industrialized Countries– States that are succeeding in moving forward in

industrial development

• Asian Tigers (1980s)– Taiwan, South Korea, Hong Kong, Singapore

• BRIC (2000s)– Brazil, Russia, India, China

NAFTA

• North American Free Trade Agreement (1992)– Reduction of tariffs among US, Canada, Mexico– Enabled US corporations to take advantage of

cheap Mexican labor

• Maquiladoras– Export processing zones along Mexican border– Changed economic geography of Mexico

Implications of Globalization

• New International Division of Labor– Economic production is spread across globes– Research/HQ in core– Production in periphery– Are states able to move up chain?

Implications of Globalization

• Race to the bottom?– Are companies playing states off against each

other?

• Are we seeing a drive to:– Lower Wages– More Lax Environmental regulations– Tax Evasion