CHAPTER 13International Development

INTERNATIONAL RELATIONS

Seventh Edition

Joshua S. Goldstein

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What is Economic Development? Capital accumulation Rising per capita incomes Increasing skills in a

population New technological styles Related social and economic

changes

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Newly Industrialized Countries (NICs) Despite the poverty in the “South,”

there are some success stories NICs export light manufactured

goods Most successful: Four Tigers Thailand Malaysia Israel

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Per Capita GDP of South Korea, China, and Ghana

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China

After Mao, Deng Xiaoping encouraged “free economic zones”

MNCs shift production to China every year because China’s labor force is vast, low-paid, and disciplined

For more than a decade, China has experienced growth rates of nearly 10 % each year

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Lessons

Export-led growth: NICs used this, but it does not work for everyone

Import substitution: Raising tariffs to protect new industries may work in short term, but countries find it hard to change policy over long term

Concentrating capital for manufacturing

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North-South Business Relations Foreign investment Joint ventures Favorable regulatory environments Labor supply considerations Technology transfer Brain drain The green revolution

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North-South Debt

Borrowing is an alternative to foreign investment

Debt service Default Debt renegotiation Lenders try to extract as much as

they can

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Debt in the Global South, 2004

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Foreign Assistance Most assistance comes from “north” 90% of government assistance comes from

the Development Assistance Committee (DAC)

Required: 0.7% of GNP to be given in foreign aid

Only Norway, Sweden, Denmark, the Netherlands, and Luxembourg meet the target

The United States gives the lowest percentage of GNP of rich countries, but gives most in total economic aid given

Multilateral and bilateral aid

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Who’s Helping?

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Three Different Models The Disaster Relief model The Missionary model The Oxfam model