CHAPTER 9 | KEY ISSUE 4

Development

THURSDAY, DECEMBER 3

OBJECTIVE: Evaluate the self-sufficiency model and the international trade model as approaches to developing your LDC

VOCABULARY: Self-sufficiency modelRostow’s Stages of Economic Growth Model

TWO PATHS TO DEVELOPMENT

SELF-SUFFICIENCY MODELencourages dev. through domestic production of goods and discourages foreign ownership of businesses – gov’t protects businesses from international competition – popular in 20th c.Ex: high taxes, quotas on imports, licenses for importers, invest in all sectors of economy in all regions of country

INTERNATIONAL TRADE MODELcountry uses its unique economic assets to develop (i.e. exports, expanding local industries) – a.k.a. “Rostow’s Stages of Growth Model” – popular in late 20th c.Ex: elite invest in tech diffuse innovation to industry shift from industrial to consumer goods

ROSTOW’S STAGES OF GROWTH MODEL

W.W. ROSTOWU.S. economist in 1950s-1960s – believed economic takeoff must initially be led by a few sectorsEx: theory used in the late 20th century in South Korea, Singapore, Taiwan, Hong Kong and the Arabian peninsula

⑯ ROSTOW’S STAGES OF GROWTH MODELa model of economic development that describes a country’s progression in five stages, transforming them from an LDC to an MDCEx: used by the “Four Asian Dragons” and the petroleum-rich Arabian peninsula states

⑰ TRADITIONAL SOCIETYnot yet started to develop – agricultural and non-productive workers (religion, military)Ex: comparable to Stage 1 of DTM agricultural society

ROSTOW’S STAGES OF GROWTH MODEL

⑱ PRECONDITIONS FOR TAKEOFFelite initiate economic activity and invest in tech and infrastructure to stimulate an increase in productivityEx: infrastructure = water supplies, transportation systems

⑲ TAKEOFF STAGErapid growth in a few economic activities (i.e. “takeoff industries”) – other sectors of the economy are still primary sectorEx: textile factories or food products

⑳ DRIVE TO MATURITYmodern tech diffuses to many industries – those industries then experience rapid growth – workers become more skilled, specializedEx: new electronics industries, etc. and more secondary sector workers

ROSTOW’S STAGES OF GROWTH MODEL

㉑ AGE OF MASS CONSUMPTIONeconomy shifts from production of heavy industry (i.e. steel) to consumer goods (i.e. refrigerators)Ex: shift from: steel and energy industry shift to: cars and refrigerators

CRITICISMS OF ROSTOWuneven resource distribution – prices don’t always increase – leads to increased dependency on MDCs – cut back on goods necessary for own peopleEx: Zambia has a lot of copper, but prices declined globally; 2008 recession hurts demand for products; country buys more exports

㉒ NEOCOLONIALISMeconomic control that MDCs have over LDCs by setting economic policies or using power to put LDCs out of business Ex: MDCs control the IMF, which sets economic policies for LDCs

WHICH PATH TO DEVELOPMENT IS BEST?

Self-Sufficiency Model v. Rostow’s Model

HOMEWORK

Read KI 4 and finish guided reading notesComplete vocabulary as you go

FRIDAY, DECEMBER 4

OBJECTIVE: Determine how to best finance an LDCs path to development.

Newly Industrialized Countries (NICs)

7 NEWLY INDUSTRIALIZED COUNTRY (NIC)3rd world country that made shift from agriculture to manufacturingEx: Mexico, Brazil, Nigeria, Indonesia, China

INFRASTRUCTUREbasic physical structures and facilities needed by NICsEx: buildings, roads, power plants, water systems

RAPID POPULATION GROWTHcharacteristic of NICs - occurs in Stages 2-3 of DTM Ex: Stage 2 (Sub-Saharan Africa), Stage 3 (India, Brazil, China)

RAPID RURAL-TO-URBAN MIGRATIONNICs experience urbanization as their economies industrializeEx: move to cities for factory work

Funding Development

47 WORLD TRADE ORGANIZATION (WTO)promotes int’l trade by reducing barriers to movement of money by banksEx: eliminate trade barriers, negotiate trade agreements

48 WORLD BANKUN financial institution that provides aid to NICsEx: fund infrastructure projects

DEVELOPMENT LOANSgiven to help build major infrastructure projectsEx: World Bank provides loans for infrastructure (i.e. dams, highways)

TECHNOLOGY TRANSFERtechnical knowledge, training and equipment is provided to NICsEx: tablets, laptops, mobile phones

Funding Development

54 MICROLOANS (OR MICROFINANCE)Provision of small loans to individuals and small businesses in LDCsEx: Grameen Bank in Bangladesh, Kiva

55 INTERNATIONAL MONETARY FUND (IMF)work to economically stabilize countries, promote cooperationEx: stabilize currency rates, rebuild int’l reserves, pay for imports

Funding Development

57 STIMULUS STRATEGYgov’ts should spend more than they collect in taxes to pay off debtEx: employ people so they can pay more in taxes (i.e. Bush/Obama, N Europe)

58 AUSTERITY STRATEGYgov’ts should reduce taxes so people can revive economy by spending tax savingsEx: Southern Europe (i.e. Greece, Italy)

59 FOREIGN DIRECT INVESTMENT (FDI)Investment made by a foreign company in the economy of another countryEx: grew rapidly in 1990s; not evenly distributed (China, Brazil, Russia, Singapore); transnational corporations are major source of FDI

Homework

Practice FRQ on Fair Trade (due Monday) Re-read p. 336-337

Develop an LDC Plan (due Tuesday)