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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