REMINDER!!!!!!! DO NOT READ KEY ISSUE 1 OF CHP. 11 INDUSTRY! SKIP TO READING AND TAKING NOTES ON KEY ISSUE 2! We will cover Key Issue 1 content in class… I REPEAT, DO NOT READ OR TAKE NOTES ON KEY ISSUE 1 INDUSTRY!!!!

Why Do Less developed countries face obstacles to development?

Wallerstein’s theory world systems analysis dependency theory core-periphery Model It is a circular relationship. The core needs the periphery and the periphery needs the core. NEOCOLONIALISM: even though colonial powers have left many nations, there is a continued dependence of new states on their former “masters.”

Obstacles & paths to development: The gap between rich and poor is substantial. Poorer countries lack what rich countries take for granted: electricity, safe drinking water, paved roads Developing countries face two obstacles Adopting policies that successfully promote development Finding funds to pay for development TWO PATHS TO DEVELOPMENT Self-Sufficiency Model International Trade Path Liberia has 66,000 miles of roads, but less than 7 percent are paved. / USAID

self-sufficiency Examples: India until the 90’s China until the 70’s Encourage domestic production of goods Discourage foreign ownership of businesses and resources Protest businesses from international competition Spread investment equally through all sectors of its economy to only rely on domestic goods and resources Income in countryside keeps pace with city, reducing poverty overall is priority Restrict importing goods by: imposing high taxes (tariffs) quotas to limit what can come in, makes domestic goods more attractive Examples: India until the 90’s China until the 70’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 regulations 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 Out of date with other countries Maruti-Udyong Ltd.: car manufacturer in India (poor quality monopoly) eventually bought by Japanese company Suzuki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 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

Advocate of International Trade Approach: W.w. Rostow 1950’s & 60’s proposed five stage model of development Effects of ITA are visible in this 5 stage model DRAW IN YOUR NOTES!

Rostow’s development model pg. 316

Sub-Saharan Africa (LDC’s)

STOP! LET’S WATCH HBO Vice on China’s investment in Africa https://www.youtube.com/watch?v=UBBkjmMlb9U Fast forward to 14:19

Criticisms of INTERNATIONAL TRADE Uneven resource distribution: Zambia exports mostly copper, price for copper went down (new technology) Zambia makes less money Market stagnation (lack of progress): 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

Regulations to help balance obstacles World Trade Org. (Supranational Org!) The only global international organization dealing with the rules of trade between nations 164 member nations Transnational corporations Uses the International Division of Labor (outsourcing)…this brings LDC’s into the global economy…what do they offer? Foreign Direct Investment: One country gives directly to another country.

Fair trade Products are made and traded with standards that protect the WORKER. Ensures they get the majority of the profits because they cut out the MIDDLEMAN in sale/distribution

Financing development Loans (Micro (tiny)loans, WTO, and the World Bank) Austerity measures: government funds are spent only on the MOST necessary things everything else is cut. An enforced/extreme economy. Structural adjustment programs: loans for LDC’s BUT… they have to abide by a set of rules to pay back. Loans with strings attached. Critics say it punishes poor people for bad decisions their gov’t has made. (example: Kenya paying back China)

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

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