Development Concepts1.pdf

CONCEPTS OF DEVELOPMENT WHY ARE SOME COUNTRIES RICH AND OTHERS POOR?

OBJECTIVES After successful completion of this topic you will be able to: •Identify and explain the factors shaping development. •Describe how development is measured. •Define and analyze the benefits and problems associated with models of selfsufficiency and international trade. •Identify, explain, and evaluate the various models of development. •Identify the major international organizations involved in development, the policies they advocate, and criticisms against them. •Explain fair trade and how it could be an alternative model for development.

• What does it mean to be developed? What types of indicators tell us how developed a country is?

• Normative: “establishment of standards, or norms, to help measure the quality of life and economic prosperity of groups of people” (pg. 263).

WHAT IS DEVELOPMENT? • More Developed Countries (MDCs) – further along the development continuum. • Less Developed Countries (LDCs) – at an earlier stage of the development continuum.

MEASURING DEVELOPMENT

Economic Indicators: •Gross Domestic Product (GDP) – an estimate of the total value of all materials, foodstuffs, goods, and services produced by a country in a year. •Gross National Product – similar to GDP but includes value of income abroad. • Purchasing Power Parity – exchange rate that lets us compare data for countries with different currency systems.

•Weaknesses?

WHERE PEOPLE LIVE BY ECONOMIC STATUS

MEASURING DEVELOPMENT

MEASURING DEVELOPMENT

Sociodemographic Factors: How well off is the population? Selected indicators: • Disease Rates • Education Rates/Literacy • Nutrition • Infant Mortality Rates

DEVELOPMENT INDICATORS

Environmental Indicators: Concerned with sustainability of development – grew out of the 1992 Earth Summit hosted by the UN. • Biodiversity • Pollution • Access to clean water • Frequency of environmental disasters

INDICATORS OF DEVELOPMENT

Old indicators: 1)Economic – GDP (PPP) per capita 2)Social – Adult literacy rate, gross enrollment ratio 3)Demographic – life expectancy

Human Development Index (HDI) • Created in 1990 and used by the United Nations • Indices changed from what is mentioned in the text • 0 to 1 – high scores indicate a country is further along in the development process.

HUMAN DEVELOPMENT INDEX

GENDER AND DEVELOPMENT • Text mentions the Gender Related Development Index (GDI) & Gender Empowerment Measure (GEM) • Replaced by the Gender Inequality Index • % loss to potential human development due to shortfalls in dimensions included. • 0-1 scale - high values indicate higher levels of inequality between males and females.

GENDER INEQUALITY INDEX

1.

Reproductive Health a) b)

2.

Adolescent fertility Maternal mortality

Empowerment a) b)

3.

Educational attainment Parliamentary representation

Labor Market a)

Prostitutes in Mumbai International Labour Organization

Labor force participation

Link to UN Map Tool

Half the Sky Trailer

INCOME INEQUALITY

Measuring Inequality • Income Distribution – the way income is broken up across different groups. • Income Inequality – ratio of earnings of the richest to the earnings of the poorest. • Richest 20% - 74% of income; Poorest 20% - 1.5%

Source: Credit Suisse Research Institute, Global Wealth Report, October 2010

MEASURING AND UNDERSTANDING INEQUALITY • Gini coefficient – a statistic that can be used to measure inequality • Range of 0 to 100, zero meaning complete income equality, high values indicating complete inequality.

UNDERSTANDING INCOME INEQUALITY (LABOR DEMAND OR SUPPLY) • Personal factors – Human Capital (Skills, Knowledge and experiences) Low skilled vs High Skilled • Social factors – Population, Socio-Demographic, Discrimination (less privileged groups) • Policy factors - Tax policy - design is intended to alleviate the gap between the rich and the poor (Everything you buy has tax)

• Historical – Slavery, Colonialism • Does globalization increase or decrease inequality?

DEVELOPMENT THEORIES

• Why are some countries more developed than others? • What should a country do to become more developed?

DEVELOPMENT THEORIES

• Why are some countries more developed than others?

UK had an advantage to development as there’s a lot of coastline so trade was much easier in the past.

If you were in the middle of Africa, trade would be impossible as no ships can get there and airplanes were not invented then, this preventing the development of some countries in Africa.

Bolivia is an example of a land locked country.

THE CLASSICAL MODEL OF DEVELOPMENT • Created by Walt W. Rostow • Development is the result of investment • Need investment to diversify the economy • Five stages would transform the country from a preindustrial society into a modernized service-oriented economy

Stage 5: Age of Mass Consumption Consumer oriented Service sector dominated

Rostow’s Classical Development Model

Stage 4: Drive to Maturity Diversification Less Reliance on Imports Stage 3: Take-Off Industrialization Growth in new technologies

Stage 2: Pre-conditions for Take-off Specialization in key areas Elites start innovation Stage 1: Traditional Society Subsistence/agricultural

The country transitions from a primary to a tertiary sector dominated economy.

If countries have natural resources, and the country has reached stage 2 then industries can be created for oil and coal, like Saudi Arabia, resulting in rapid growth.

• But some countries may exploit countries with raw materials, as they import cheap raw materials and process them into manufactured goods. The countries then need to import these manufactured goods costing them more money than they earn selling raw materials in the first place, leaving them with no profits to develop the country, again holding them back. The picture on the right Showing developing countries percentage of exporting. Valuable proof that they are manipulating these countries for raw materials.

DISCUSSION: ROSTOW’S DEVELOPMENT MODEL Does Rostow’s Development Model work for all countries? Why or Why Not?

? Mr. Rostow

DEPENDENCY THEORY • Forget about stages, development is a result of relational processes. • International trade is the central piece of the relational process. • Some states have more power in international trade and are dominant states. • Other states do not have the resources or power and are dependent states. • Dominant states develop at the expense of dependent states.

WORLD-SYSTEM THEORY • Developed by Immanuel Wallerstein. • The capitalist world economy causes underdevelopment. • Capitalism creates an international division of labor, or a hierarchy of states. • Core, semi-peripheral, and peripheral regions. • System of unequal trade relationships that support the growth of the core at the expense of the peripheral and semi-peripheral states. • States can change their role in the international division of labor.

CORE AND THE PERIPHERY

MAP OF WORLD ACCORDING TO WORLD-SYSTEM THEORY

Fig 9.15b from Greiner

NEOLIBERAL MODEL OF DEVELOPMENT • Based on the liberalist ideas of Rousseau, T. Jefferson, and Adam Smith. • Suggests that capitalism can help countries develop as long as markets were free and open. • Suggested underdevelopment was the result of government policies that prevent economic growth. • So, countries should engage in structural adjustment programs that involve strategies for market reform and deregulation.

UNITED NATIONS DEVELOPMENT PROGRAM The Millennium Development Goals: Eight Goals for 2015 • Eradicate extreme poverty and hunger • Achieve universal primary education • Promote gender equality and empower women • Reduce child mortality • Improve maternal health • Combat HIV/AIDS, malaria and other diseases • Ensure environmental sustainability

United Nations Millennium Declaration A set of goals made by 189 nations in 2000.

• Develop a global partnership for development

Human Development Report Launch 2013

INTERNATIONAL CONNECTIONS WORLD BANK International Bank for Reconstruction and Development – loans for middle income and creditworthy countries International Development Association – for the poorest countries Provide low-interest loans, interest-free credits and grants to developing countries for investments in multi-sector projects.

INTERNATIONAL MONETARY FUND (IMF) Provides loans to countries with payment problems. Help to: 1. Rebuild international reserves 2. Stabilize currency exchange rates 3. Pay for imports Not for specific projects

Both fund development projects to attract foreign direct investment.

INTERNATIONAL CONNECTIONS

World Trade Organization (WTO) • Promotes the free trade model • Works to reduce trade barriers • How? • Criticisms?

INTERNATIONAL CONNECTIONS

Foreign Direct I nvestm company ent: Inv in the ec estment o n by a fore o m y • Invest o f a n ign o ment do ther cou es not fl ntry. ow equa • In lly . 2007, 3/4 s of inve stment f other M rom MD DCs. C com

panies w ent to

Transna tional C orporat countrie ions: inv s other t est and o han one perate in the head • Majo quarters r influe n are in. c e s : In 2002 econom ,o i es, 51 w ere com

-Globalis sues.org

f th e t o p 100 p an i e s a nd 49 w ere stat

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FOREIGN DIRECT INVESTMENT

EXAMPLES OF FAILED DEVELOPMENT PROJECTS • Lesotho Highlands Water Project, $3.5 billion • Project: Sell mountain water to South Africa and divert some for creating electricity. • Problems: • Electricity was too costly for most people. • Environmental and economic problems evolved downstream.

Info from MSNBC

http://www.icpdr.org/icpdr-pages/dw0902_p_10.htm

EXAMPLES OF FAILED PROJECTS

• Lake Turkana Fish Processing Plant in Kenya, $22 million • Purpose: Provide jobs to the Turkana through fishing and fish processing for export. • Problems: • Turkana are nomads with no fishing experience or history of eating fish. • Too expensive to operate freezers and had a high demand for clean water…difficult in a desert environment. Lake Turkana World Heritage Site (Alison M. Jones for www.nowater-nolife.org)

Info from MSNBC

CHALLENGES WITH DEVELOPMENT PROJECTS Development Projects aren’t always successful: 1. Faulty engineering – so project doesn’t function correctly 2. Corruption or loan mismanagement within receiving countries 3. Infrastructure doesn’t attract investment 4. ? 5. ? Many receiving countries are unable to repay loans

DEBT AS % OF GNI

SUSTAINABLE DEVELOPMENT

Fair Trade - Products made and traded according to standards that protect workers and small businesses in LDCs -- Video Microfinancing - Microcredit programs extend small loans to very poor people for selfemployment projects that generate income, allowing them to care for themselves and their families. -started by Muhammad Yunus -address gender-related inequalities

WHY ARE SOME COUNTRIES MORE DEVELOPED THAN OTHERS? GEOGRAPHIC FACTORS • Situational – • Location of territory • Presence of key resources • Dependence on a single resource • Latitude • Shape of Continents • Transport • Markets • Where are the people living? • Agroclimatic • Health / Disease • Prevalence of Disasters

INSTITUTIONAL/HISTORICAL • Colonialism and Imperialism • Technological power • Government Structures Corruption • Discrimination

Geographic Path Dependence – in a location, economic organization in past may shape future.

Initial advantage makes it difficult for other places to catch up. Adapted from Guns, Germs, and Steel by Jared Diamond

THANK YOU..