Chap 9 Development
Paths to Development and Rostow’s Five Stages of Development
Outline
• Development the mechanism• Rostow’s Five Stages of Development
Development
How it worksand
Hasn’t Worked
Defining Economic Development as a Process
A. Development is --
– investment of a surplus – that results in increasing knowledge and
productivity – That in turn results in or whose long term goal
is sustainable and growing surpluses
How surplus based development should work
Production/Development requires two factors: -- Labor & Capital
They are Combined through Technology
Production/Development Goal is – Surplus beyond current consumption
This Surplus becomes additional future investment
• Increasing Investment leads to
– More Capital – translated into more tools of production
– Better Labor Skills -- through education – Productivity gains through above plus newly
invented technology– Even more surplus in the future
Where does the original Surplus come from???
• Original surplus is the “water that primes the pump”
India Mark Deep Well Hand Pump II /III
Where does the original Surplus come from???
Internal generation theory (or self-sufficiency)– Prof. Morris Morris argued ..."all societies have
roughly equal savings rates"...• Simply all have equal proportions of surplus (say 15%
of output) • However, More technologically advanced societies
have larger Gross Surpluses• Problem the rich get ever richer faster
– 1% of $1billion is $10million– 10% of $1million is only $100,000
Obtaining Surplus
External Procurement theory (trade, FDI, …)– Option 1 traditional 19th century theory: Sell
resources or resource based manufactures• Theory – Sell (Trade) and Invest Profits
Caution: "growth" based on ever increasing extraction of finite resources eventually collapses
Reality of 20th & 21st century: recent terms of trade have worked against most resource sales
– occasionally Oil has not faced this issue
Is Canada still here?
Tar Sands Exporting
Obtaining Surplus
External Procurement theory– Option 2 “Foreign Aid”, Foreign borrowing, FDI…
• theory: Borrow, Invest, Trade, and Repay
Caution: 1. Markets are not necessarily “free” and open2. Competition is stiff under current global demographics3. Bankruptcy has not been an option4. Do the money lenders really want borrowers to
succeed?
China’s Current Approach
Rostow’s 5 Stages of Development
Regardless of how the pump is primed, Rostow believes the long term path is well documented.
Prominent for his role in the shaping of American policy in Southeast Asia during the 1960s, he was a staunch anti-communist, and was noted for a belief in the efficacy of capitalism and free enterprise. He supported American military involvement in the Vietnam War.. He wrote extensively in defense of free enterprise economics, particularly in developing nations. Rostow was famous especially for writing the book The Stages of Economic Growth: A non-communist manifesto (1960) which became a classic text in several fields of social sciences.
http://www.instantcast.com/AllStars/Walt_Whitman_Rostow
Walt Whitman Rostow (also known as Walt Rostow orW.W. Rostow) (October 7 1916 – February 13 2003) was an American economist and political theorist who served as Special Assistant for National Security Affairs to U.S. President Lyndon B. Johnson.
http://www.slideshare.net/geographyalltheway/ib-geography-develpent-rostow-model?src=embed
1. Traditional Society-primary activity, mainly subsistence agriculture-socially captured surplus lost on religious and
military expenditures-indicators**
AFGANISTAN NEPAL-%urban 23% 17%-per capita income $678 $692-infant mortality 117/1000 40/1000** note the values in the next several pages generally come from UN Sources, but can vary based
on exact date and source
2. Preconditions to take-off
-young elite & their role-infrastructure & it’s role-indicators
BANGLADESH GHANA-%urban 25% 44%-per capita income $1,190 $1,646-infant mortality 33/1000 41/1000
3. Take-off
-target sectors -channeling surplus-indicators
MALAYSIA THAILAND-%urban 63% 34%-per capita income $10,432 $5,480-infant mortality 7/1000 11/1000
Malaysia “Vision 2020”
“Hopefully the Malaysian who is born today and in the years to come will be the last generation of our citizens who will be living in a country that is called 'developing'. The ultimate objective that we should aim for is a Malaysia that is a fully developed country by the year 2020.”
PM Seri Dr Mahathir Mohammad
Vision 2020 on hold
Easier Said then DONE• Recent events have questioned such
grandiose goals• The Proton Car is a good example of how
cronyism can make things go bad– Starts as home grown brand to export
internationally– See following NY Times article from Oct 29th, 2009
Proton City : http://www.youtube.com/watch?v=JpXNfT5dvu4
An Example of mixed results based on automotive production in Malaysia
4. Drive to maturity
-broadening and deepening – more products to export-skills of the workforce – more education-size of the surplus & investment grows-indicator countries
S.KOREA TAIWAN -%urban 82% 75%-per capita income $23,892 $48,400-infant mortality 4.1/1000 4.6/1000
5. Age of mass consumption
-consumer based economy-direction of trade flows-countries?
JAPAN USA -%urban 86% 80.7%-per capita income $46,383 $53,101-infant mortality 2.17/1000 5.2/1000
D. Ground truthing Rowstow
1. Oil Rich Middle East -- S.ARABIA KUWAIT
-%urban 85% 98%-per capita income $15,255 $38,374-infant mortality 12/1000 9.2/1000
Export of Resource based development, agriculture/pastoralist has vanished, per capita income way up, infant mortality low, but is this development sustainable??? What happens when the wells go dry??? Rostow doesn’t speak to this.
Indonesia is an oil rich country where oil exports seem to have begun declining.
D. Ground truthing Rowstow
2. East Asia -- other two tigers (dragons) HONG KONG SINGAPORE
-%urban 100% 100%-per capita income $43,800 $36,370-infant mortality 2.9/1000 2.3/1000
All measures say stage 5. These places have become major financial service centers and international corporate headquarters and/or regional front offices. They have ridden the wave of trade to the top, can they continue? Especially in face of a rival like China? Rostow leaves these questions unanswered.
http://www.slideshare.net/geographyalltheway/ib-geography-develpent-rostow-model?src=embed
** Compare maps 9.7.3 & 9.7.4
**
Where is China
1970s – Red Flag Canal -- Moved beyond traditional society– Young elite at work– What was the role of
infrastructure– Stage ???
Where is China
1980s & 90s – Era of Four Modernizations– Targeted export sector– Surplus directed to
booming areas and industries
– Stage ???– 9. Changes on the
Chiang Jiang– http://www.learner.org/resources/series180.html
Where is China2009 – Growing
Automotive Powerhouse– Entrepreneurial Owners can
be “Communists”– Broadening and deepening of
industrial base– Building a highway network
that rivals the USA– Stage ??? Although it varies
acroos the country, they are entering stage 4.
But there are problems with sharing the wealth
http://4.bp.blogspot.com/_FqryYTCchUM/SGFrBG0sWpI/AAAAAAAAA4I/dE60bOzITUo/s1600-h/rostow+model.jpg
Summary of Rostow Model with several historical examples
Blemish on Rostow’s record
"Their casualties are going up at a rate they cannot sustain....I see light at the end of the tunnel."
-Walt Whitman Rostow Dec 12,1967Rostow commenting on the Vietnam War as an
advisor to Pres. Johnson. He showed great faith in capitalism.
Another viewpoint
• "Somehow this madness must cease. We must stop now. I speak as a child of God and brother to the suffering poor of Vietnam. I speak for those whose land is being laid waste, whose homes are being destroyed, whose culture is being subverted. I speak for the poor of America who are paying the double price of smashed hopes at home, and death and corruption in Vietnam. I speak as a citizen of the world, for the world as it stands aghast at the path we have taken. I speak as one who loves America, to the leaders of our own nation: The great initiative in this war is ours; the initiative to stop it must be ours." - Martin Luther King Jr., 1967
My experience is that all societies around the world want development, but too often we ignore inconvenient facts while pushing our own agendas.My experience is that all societies around the world want development, but too often we ignore inconvenient facts while pushing our own agendas.