Why Do Less developed countries face obstacles to development? KEY ISSUE 4 Why Do Less developed countries face obstacles to development?

Let’s read the Intro to key issue 4 pg. 314

FOUR APPROACHES TO DEVELOPMENT: Self-Sufficiency Model (Balanced Growth) International Trade Model (Economic Growth) Basic Needs Model/Appropriate Technology Model (microloans directly to the people) 4. Revolutionary/Radical Reform Model (Cuba, USSR, communism)

self-sufficiency Most popular through for most of 20th century: Spread investment equally through all sectors of its economy to only rely on domestic goods and resources Income in country keep pace with city, development is even and fair amongst all citizens, share the benefits Not impacted by other countries (MDC’s) Restrict importing goods by imposing high taxes, quotas to limit what can come in, makes domestic goods more attractive Example: India until the 90’s

PROBLEMS WITH self-sufficiency pg. 316 Inefficiency: little incentive to stay competitive with new technology and quality of products Don’t feel pressure to lower costs, reduce prices, or increase production Large Bureaucracy: Need large administrative system to manage, could lead to abuse and corruption, illegally importing goods makes more money, give advice on how to get around government regultions No competition = no innovation. Out of date with other countries Maruti-Udyong Ltd.: car manufacturer in India (poor quality monopoly) eventually bought by Japanese company Suzuki

International trade approach Specialize in what is unique about your country Concentrate scarce resources on its distinctive local industries, import anything else that is needed Rostow’s 5 Stages of Development shows effects of this approach... Examples: FOUR ASIAN DRAGONS AND ARABIAN PENINSULA Four Asian Dragons: South Korea, Singapore, Taiwan, Hong Kong…specialized in producing manufactured goods such as clothing and electronics…low labor costs, sell inexpensively Oil Rich Arabian Peninsula: transformed overnight in extreme wealth by specializing in petroleum exports

Rostow’s development model pg. 316

Problems WITH INTERNATIONAL TRADE pg. 317 Uneven resource distribution: Zambia exports mostly copper, price for copper went down (new technology) Zambia makes less money Market stagnation: selling to MDC does not allow for growth…MDC populations have limited growth…economic profits stay steady but do not increase…must buy competitors in other countries to increase profits Increased dependence on MDC’s: have to import a lot of food, clothing, and other necessities

World trade org. & transnational corporations Promotes trade by enforcing agreements, investigates claims of violations, protects intellectual property, copyright, patents Uneven benefits, WTO regulates trade, but is criticized for often favoring MDC’s/transnational corps rather than the poor. Transnational corporations facilitate the New Int’l Division of Labor (outsourcing)… Foreign Direct Investment: One country gives directly to another country.

Financing development Loans (Microloans, WTO, and the World Bank) Structural adjustment programs: loans for LDC’s BUT… they have to abide by a set of rules. Loans with strings attached. Proponents say it makes LDC’s reform for the better. Critics say it punishes poor people for bad decisions their gov’t has made. Read 1st paragraph on pg. 320

Problems with financing development LDC’s are unable to repay the interest on loans, Latin American countries have very high debts…can’t get further loans. CORRUPTION: Even though a country might have investments or receive aid from other countries, it is not guaranteed to benefit the where it is logically supposed to. Ex: Haiti, no plumbing but new soccer fields https://www.transparency.org/cpi2014/results http://www.cnbc.com/2016/01/27/these-are-most-corrupt-countries-in-the-world.html

Fair trade Products are made and traded with standards that protect the WORKER. Often times a worker in an LDC will get the majority of the profits because there is NO MIDDLEMAN. Fair trade also teaches leadership and organizational skills to workers.

Wallerstein: pg. 322 world systems analysis dependency theory core-periphery It is a circular relationship. The core needs the periphery and the periphery needs the core.

Are Microloans the Key????? Watch “Pennies a Day”