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