What strategies and obstacles to countries face as they initiate development?
Financing Development Foreign direct investment: Investment made by a foreign company in the economy of another country. Foreign Aid: Economic or military aid giving to countries from other countries. 2016: US expected to give $37.9 billion in foreign aid. http://beta.foreignassistance.gov/ Loans World Bank -Provides loans to countries to reform public administration and legal institutions, develop and strengthen financial institutions. International Monetary Fund (IMF) -Provides assistance to countries where balance-of-payments threaten expansion of international trade. - The balance of payments (BOP) is an accounting of a country's international transactions for a particular time period. Any transaction that causes money to flow into a country is a credit to its BOP account, and any transaction that causes money to flow out is a debit. Microfinance or Micro-Loans -Small loans and other financial services to individuals and small businesses in developing countries -Example: Grameen Bank
National Development Strategies Self-Sufficiency Approach International Trade Approach
Facts/Positives/Example s Self-Sufficiency Facts/Positives/Example s Problems Spread investment across as many sectors as possible Modest but fair Development more evenly distributed Limits imports (limits competition) High tariffs Quotas on imports Example: India & China Most countries don’t use self-sufficiency any more Protection of inefficient businesses Need for large bureaucracy
International Trade Approach Facts/Positives/Examples Problems Must identify unique economic assets Must produce better quality at lower price than other countries Examples Four Asian Tigers Arabian Peninsula countries Uneven resource distribution Increased dependence on MDCs Market decline
Rostow’s Stages of Development 1960 Attempt to explain the stages that a country goes through as it moves from LDC/periphery to MDC/core 5 stages The traditional society The preconditions for takeoff The takeoff The drive to maturity The age of mass consumption
Stage #1 Traditional Society: Still Subsistence
United States: Pre-independence
Modern Day States: Haiti, Afghanistan
Stage 2: Preconditions for takeoff: Invest in infrastructure
United States: Early to Mid-1800’s
Modern Day: India
Stage 3: Takeoff: Limited Industry
United States: 1880’s Oil and Steel
Modern: Thailand
Stage 4: Drive to Maturity
United States: Late 1800’s
Modern: South Korea
Stage 5: Age of Mass Consumption
United States: Early to Mid-1900’s
Four Asian Tigers Hong Kong Singapore South Korea Taiwan A.k.a. The Four Asian Dragons, The Four Little Tigers, The Gang of Four Pursued export driven economic development in the 1960s, which leveled off in the 1990s International Trade Approach Emerging Tigers? China India Increasing education & export levels are leading to rapid economic development
Kingdom Center, Saudi Arabia Seoul, South Korea Dubai, UAE Hong Kong