Review Developing various typologies or categories of states
(countries) So far Regimes Liberal democracy Communist Fascist
Theocracy Authoritarian Modernizing Semi-authoritarian Fund for
Peace categories Fragile, Sustainable, etc. Strong vs. Weak
Slide 2
Other ways to classify states Political Variables 1.
Institutions Presidential vs. parliamentary Unicameral vs.
bi-cameral legislatures 2. Philosophy Democratic vs. authoritarian
Modernizing authoritarian or semi-authoritarian illiberal
democracy; managed democracy 3. levels of control Unitary vs.
federal
Slide 3
Focus Questions During the period of the Cold War (1945-1989),
what was the most common way to categorize countries? After the
collapse of the Soviet Union, what are the most common ways to
categorize countries? How are NICs different from LDCs?
Slide 4
Other ways to classify states More Typologies 1. Cold War (1945
1989) 1 st world industrialized democracies; high GDP/capita; the
West 2 nd world communist; the East 3 rd world poor; less
democratic; less developed 135 countries basically, everyone else
Grouped into aligned and non-aligned
Slide 5
Other ways to classify states More, more Typologies 2. Post -
Cold War (1989 present) Industrialized democracies Communist and
post-Communist Third world NICs Newly-industrialized countries LDCs
Less developed countries Fourth World Least developed countries
Some typologies include the Islamic countries as a separate
category
Slide 6
NICs and LDCs NIC newly industrialized country Approximately 30
countries SE and East Asia; Caribbean, Latin America Undergoing
rapid political, economic, social, technological change Similar to
19 th century Europe and USA Building stable systems of government
High to medium Freedom House, Economic Freedom and HDI ratings
Growing channels of representation & participation Experiencing
rapid industrialization and export- led economic growth
Slide 7
NICs and LDCs LDC Less developed country 35 mainly African,
Central American, Pacific Island states Potential to build
political, economic, social stability Face short term handicaps
Wide range of governments Political stability is compromised by
corruption, social divisions, poor human rights records, and
intervention by military Low GDP/capita Limited economic base
Poorly developed social services Medium to low Freedom House,
Economic Freedom, & HDI ratings
Slide 8
Other ways to classify states Performance indicators I
Governance Indicators World Bank Freedom House Corruption Index
Protection of Civil Rights & Civil Liberties Political Rights
& Liberties Fair & Free Elections
Slide 9
Other ways to classify states Performance indicators II
Economic Variables GDP & GDP per capita Inequality Gini Index
Purchasing power parity Economic structure Percent of economy
devoted to industry, services & agriculture Economic policies
& philosophy Free market vs. central planning Economic Freedom
Index (Fraser Institute) Heritage Foundation
Slide 10
Other ways to classify states Performance indicators cont.
Social variables Quality of life measurements Life expectancy
Infant mortality Adult literacy Human Development Index (HDI) by
United Nations
Slide 11
Fostering Economic Development Two major forces transforming
political systems and nations Process of economic development
Political democratization Globalization, democratization, and
marketization HDI- Human Development Index Structure of the labor
force Agriculture Urbanization Education levels Increased
productivity requires skilled, healthy labor force and
infrastructure that supports material welfare. Copyright 2012,
2010, 2008 Pearson Education, Inc. All rights reserved.
Slide 12
Slide 13
Economic Growth Increase in real GDP or real GDP per capita
over some time period Percentage rate of growth Growth as a goal
Arithmetic of growth: Rule of 70 25- 13 Approximate number of years
required to double real GDP = 70 annual percentage rate of
growth
Slide 14
Modern Economic Growth Began with the Industrial Revolution in
late 1700s Some Effects Ongoing increases in living standards Time
for leisure Social change Democracy Human lifespan doubled 25-
14
Slide 15
25- 15
Slide 16
Modern Economic Growth Began in Britain Has spread slowly
Starting date main cause of worldwide differences in living
standards Catching up is possible Leader countries invent
technology Follower countries adopt technology Can grow faster 25-
16
Slide 17
Real GDP Per Capita Real GDP Real GDP Average annual per
capita, per capita, growth rate, Country 1960 2004 1960-2004 25- 17
United States12,89236,0982.3 United Kingdom10,32326,7622.2
France8,531 26,1682.5 Ireland 5,294 28,9573.9 Japan 4,509 24,6613.9
Singapore 4,219 29,4044.4 Hong Kong 3,322 29,6425.0 South Korea
1,458 18,4245.8 Figures are in 1996 dollars Source: Penn World
Table
Slide 18
Rostows Stages of Economic Development 1. Traditional society
Subsistence agriculture dominates 2. Preconditions for Takeoff
Agriculture production rises and a surplus is created Trade begins
Requires transportation to take crops to distant markets Investment
in transportation is a key in moving from stage 1 to stage 2 25-
18
Slide 19
Rostows Stages of Economic Development 3. Takeoff Farmers leave
agriculture to take jobs in industry Process of urbanization begins
Small manufacturing sector Many countries adopt Import-Substitution
industrialization policies (ISI) Investment needed to expand
manufacturing sector 4. Drive to Maturity Economic diversification
begins Number and kinds of goods and services expand 25- 19
Slide 20
Rostows Stages of Economic Development 5. High Mass Consumption
Production of consumer goods and services dominate economic
activity Critique of Rostow Development does not always occur in
the way specified by the model Stages are skipped or merged Model
does not identify the causes of movements from one stage to the
next 25- 20
Slide 21
Problems of Economic Development Unequal distribution of
resources and opportunities are among the most serious causes of
political conflict. Large GDP may conceal significant differences
in distribution of these resources. Countrys politics affected by
internal divisions of income, wealth, etc. Economic development
improves the equality of income over time, but first stages of
industrialization may increase income inequality. Copyright 2012,
2010, 2008 Pearson Education, Inc. All rights reserved.
Slide 22
Slide 23
Problems of Economic Development Population growth: Population
increases due to health care improvement, increased living
standards, increased life expectancy Rapid population growth can
pose policy challenges for developing nations. Environmental costs:
Despoiled forests, depleted soils and fisheries, polluted air and
water, nuclear waste, endangered species, and ozone questions.
Shortages of clean water, air, and adequate sanitation. Copyright
2012, 2010, 2008 Pearson Education, Inc. All rights reserved.
Slide 24
Slide 25
Slide 26
Obstacles to Development Lack of natural resources
Overpopulation 9 out of 10 people born in a LDC Reduced standard of
living Less saving and investment Lower productivity Resource
overuse Urban problems Qualifications 39-26
Slide 27
Obstacles to Development Unemployment Underemployment Low labor
productivity Brain drain Capital accumulation is key Domestic
capital formation Savings potential Capital flight 39-27
Slide 28
Obstacles to Development The Problem of Disease Malaria in
Africa Others, especially HIV/AIDS The newest scourge- Ebola
39-28
Slide 29
Obstacles to Development Investment obstacles Lack of
infrastructure Technological advance Borrowed technology
Sociocultural obstacles Institutional obstacles Land reform
39-29
Slide 30
The Vicious Circle of Poverty RAPID POPULATION GROWTH LOW LEVEL
OF DEMAND LOW LEVEL OF SAVING LOW PRODUCTIVITY LOW LEVELS OF
INVESTMENT IN PHYSICAL AND HUMAN CAPITAL LOW PER CAPITA INCOME
39-30
Slide 31
Ingredients of Growth Supply factors Increases in quantity and
quality of natural resources Increases in quality and quantity of
human resources Increases in the supply (or stock) of capital goods
Improvements in technology 25- 31
Slide 32
Ingredients of Growth Demand factor Households, businesses, and
government must purchase the economys expanding output Efficiency
factor Must achieve economic efficiency and full employment 25-
32
Slide 33
Accounting for Growth Factors affecting productivity growth in
the United States Technological advance (40%) Quantity of capital
(30%) Education and training (15%) Economies of scale and resource
allocation (15%)
Slide 34
Modern Economic Growth Growth-promoting institutional
structures Strong property rights Patents and copyrights Efficient
financial institutions Literacy and widespread education Free trade
Competitive market system 25- 34
Slide 35
Role of Government A positive role Law and order Lack of
entrepreneurship Infrastructure Forced saving and investment
Social-institutional problems Public sector problems Corruption
39-35
Slide 36
Policies for Promoting Growth Establishing and implementing the
rule of law Opening economies to international trade Controlling
population growth Encouraging foreign direct investment Building
human capital 39-36
Slide 37
Policies for Promoting Growth Making peace with neighbors
Establishing independent central banks Establishing realistic
exchange-rate policies Privatizing state industries 39-37
Slide 38
U.N. Economic Development Goals 1. Eradicate extreme poverty
and hunger 2. Achieve universal primary education 3. Promote gender
equality and empower women 4. Reduce child mortality 5. Improve
maternal health 6. Combat HIV/AIDS, malaria, & other diseases
7. Ensure environmental sustainability 8. Develop a global
partnership for development 25- 38
Slide 39
Role of Advanced Nations Expanding trade Foreign aid Direct aid
The World Bank group Foreign harm Dependency and incentives
Bureaucracy Corruption and misuse Flows of private capital
39-39
Slide 40
Major Playas in Development World Bank IMF WTO
Slide 41
More about the World Bank (from their website) Founded in 1944
one of the worlds largest sources of development assistance.
bringing a mix of finance and ideas to improve living standards and
eliminate the worst forms of poverty. Owned by more than 184 member
countries helps each developing country onto a path of stable,
sustainable, and equitable growth.
Slide 42
More about the World Bank (from their website) The World Bank
President is by tradition a national of the largest shareholder,
The United States In summary The World Bank borrows money (issues
bonds) and gets contributions. It then loans that $ to countries
for educational, economic, and industrial projects. Works through
the International Bank for Reconstruction and Development (IBRD) It
also provides experts and expert advice to the borrowers.
Slide 43
The Anti-World Bank Argument World Bank policies force
impoverished countries to prioritize debt repayment over human
need, divert resources from health, education, and clean water. the
Bank makes it easier for companies to fire workers and to change
their labor laws to weaken the collective power of workers. The
World Bank raises most of its funds by issuing bonds [sold to]
pension funds, labor unions, churches, municipalities, and
universities Those bond buyers, in rich countries, are the
recipients of profits earned from the poorest countries. (World
Bank Bonds Boycott)
Slide 44
The IMF (International Monetary Fund) an international
organization of 184 member countries. It was established to promote
international monetary cooperation, exchange stability, and orderly
exchange arrangements; to foster economic growth and high levels of
development; and to provide temporary assistance to countries to
ease balance of payments adjustments.
Slide 45
The IMF (International Monetary Fund) the central institution
of the international monetary system the system of international
payments and exchange rates among national currencies It aims to
prevent crises in the system by encouraging countries to adopt
sound economic policies; it is also a fund that can be tapped by
members needing temporary financing to address balance of payments
problems. It is the lender of last resort
Slide 46
The World Trade Organization The WTO is a powerful
international (supranational) organization, responsible for
regulating international trade, settling trade disputes, and
designing trade policies through meetings of its member countries.
Works to lower trade barriers by negotiating multilateral trade
agreements involving Tariffs; trade & environment; anti-dumping
and subsidies; investment; competition policy; trade facilitation;
transparency in government procurement; intellectual
property..
Slide 47
WTO Trade Dispute Resolution Why U.S. Taxpayers Are Paying
Brazilian Cotton Growers.
Slide 48
Why Doesnt Everyone Love the World Bank and the IMF? Common
principles and features Export-led growth Privatization and
liberalization Sell off government-owned industries Reduction of
government subsidies Deregulation Efficiency of the free market
Balanced budgets Cuts in public services Cuts in government
programs Threaten the sovereignty of national economies because an
outside organization is dictating a nations economic policy.
Slide 49
Why Doesnt Everyone Love the World Bank and the IMF? Structural
Adjustment Programs (SAPs) Economic policies which countries must
follow in order to qualify for new World Bank and IMF loans and
help them make debt repayments on older debts owed to commercial
banks, governments, and the World Bank. Conditionality requirement
that countries meet certain conditions to be eligible to receive
international assistance or to join certain international clubs
(like EU or WTO)
Slide 50
Requires countries to end ISI Import-substitution
Industrialization is a policy that stated that a developing country
should protect its new industries by placing restrictions on
international trade, thus allowing its new industries to grow until
they were strong enough to compete on the international market.
Governments took on the role of business owner, creating wholly or
partly government- owned industries that supplied the domestic
market with key goods. (para-statals)
Slide 51
ISI Relatively successful at first. Brazil, Mexico and Turkey
saw very rapid economic growth throughout the 1950s and 60s. But,
Protecting industry from competition in the long run resulted in
inefficient industries that could not compete on the international
market. These industries were hard to change vested interests of
managers and employees caused resistance These industries couldnt
compete with enough exports to balance imports. Countries had to
borrow and often werent able to re-pay debt crises IMF & World
Bank to the rescue at a price.
Slide 52
The Battle of Seattle, 1999
Slide 53
Slide 54
The WTO Protests Protest groups Labor unions,
environmentalists, socialists, anarchists Key issues for the
protestors Labor protection and environmental standards Youtube
37-54