Why do ldc’s face obstacles to
development?Chapter 9: Development Key Issue 4
The problem:• LDC’s need to develop rapidly
• Trying to increase the per capita income as quickly as possible
• Also reinvesting in social and economic changes
• 2 main problems:• Successful policies for development• Finding $ to pay for policies
Self-sufficiency• Encourage growth of industries
(both rural and urban) within the country• Accomplished by:
• making it difficult to export goods• High import taxes• Quotas on imports• Requiring licensing to sell products
within the country
• Ultimately this controlled GLOBAL competition
• India used self-sufficiency policies for growth• Businesses that struggled may get
subsidies
Self-sufficiency
• Problems with Self-Sufficiency• Encouraged inefficient business practices
• Businesses didn’t have to innovate, adapt, grow, etc.
• Successful no matter how good you did
• Large role of government• Corruption and abuse of power• Illegal importing & black market goods
International
trade• Rostow’s Development model
• Traditional Society• Most people in agriculture• Government $ goes to military (protection) &
religion
• Pre-Takeoff• Educated elites identify innovative economic activity• New activities (infrastructure, new technologies,
etc.) promotes eventual growth
• Takeoff• Rapid growth in limited, identified activities• Leads to technical advances that can be used
elsewhere
• Drive to Maturity• Diffusion of new technologies (i.e. Industrial
Revolution)• Skilled & specialized workforce
• Mass consumption• Consumer goods become the focus of economy• Tertiary jobs take the forefront
Problems with Rostow
• Assumes that economies will naturally pass through these stages• Global politics, war,
colonialism, ethnic conflict, etc.. Go unaccounted for
• Characterizes the final stage by high mass consumption, this makes environmentalists sad.
• Assumes development is economic
• Does not account for deindustrialization
Models of Development
• Dependency Theory is another Structuralist Model
• Political & economic relationships between countries & regions limit the development of the less well off areas
• Colonial dependencies are still in place from long ago.
• Dependency theory sees little hope for economic prosperity in some traditional parts of the world
International trade• Ex. of IT approach
• 4 dragons: S. Korea, Singapore, Taiwan, & Hong Kong• Limited resources but produced clothing &
electronics with cheap labor• Produced for MDC markets not for their own
• Arabian Peninsula• Used oil profits to expand infrastructure and
expand manufacturing abilities
• Problems with International Trade• Uneven resource distribution
• don’t have what people want
• Increased dependence on MDC’s• Can’t get everything needed from revenues
from takeoff industries
• Market decline• Change in demographics = decrease in need
for cheap goods
International Trade Triumphs
• Trade has grown faster than wealth• 1990’s – many self-sufficient countries converted to
international trade• GDP per capita grew faster in IT countries than in SS countries
• World Trade Organization (est. 1995)• Encourage trade by: 1) removing blocks (e.g. removing
subsidies) and 2) enforcing agreements (including copy right laws today)
• Critics say it is too powerful and favors rich corporations
• Foreign Direct Investment – investment made in the economy of another country• FDI is not distributed evenly• Transnational corporations – invest outside the their
headquarter country
Fair trade
• Alternative to International Trade• Goods and services produced and sold according to
standards that protect LDC’s
• Producer Standards• Cooperatives help small business owners by banding
together and having more strength• Producers make more per product than commercial
businesses
• Worker Standards• International trade doesn’t address worker conditions• Fair trade requires minimum working conditions
Financing development• LDC’s get money from MDC’s
• Loans• UN developed World Bank & IMF
following WWII• World Bank:
• International Bank for Reconstruction and Development (IBRD) – loans for improvement from bonds & investors
• International Development Association (IDA) – riskier loans from government contributions
• International Monetary Fund• Loans used to protect currency &
buying power
• Goal of loans is to improve infrastructure and development
Financing development• Structural Adjustment Programs
• LDC’s plan for using a loan:• Economic goals, strategies for achieving those
goals, & external financing requirements• Include several conditions (page 300)
• Critics:• Cuts $ to health care, ed., & social service
programs• Higher unemployment• Less support for those that need it most
Real-World Strategies:• Partnership with
developed countries• Market mechanisms
for environmental regulation
• Resource conservation
• Renewable resources
• Loans to women and very poor (microcredit)
• Women’s and children’s rights
• Appropriate technology
Sustainable Development
1990s
• Global environmental change• Environmental economics• Women and development• Children and development
The Globalization Tapes