What else do you need to know? Development

Development is a continuous process, and every country is located at some point along a continuum of development. Most countries cluster at two ends of this continuum and in two different regions of the world

More and Less Developed Regions Countries of the world can be categorized into 9 major regions according to level of development More developed regions Anglo-America – Western Europe Eastern Europe *(Japan & South Pacific) Less developed regions Latin America – East Asia Southeast Asia – Middle East South Asia – Sub-Saharan Africa

North-South Split 30°N Latitude Brandt line Nearly all MDC’s above this line, & LDC’s below line **some exceptions – Can you think of any?

More and Less Developed Regions Fig. 9-8: The less developed regions include Latin America, Sub-Saharan Africa, Middle East, South Asia, East Asia, and Southeast Asia.

WHY DO LESS DEVELOPED FACE OBSTACLES TO DEVELOPMENT?

The facts…. Annual GDP per capita has increased by $4000 in LDC’s, & $20,000 in MDC’s in past century To reduce disparities between rich & poor countries, LDC’s must develop more rapidly The 1/5 of the people living in MDC’s consume 5/6 of the worlds goods

International Development Countries chose one of two models to promote development Self Sufficiency International Development

Development through: Self-Sufficiency Most popular alternative for most of 20th century Spread investment equally across all sectors of economy & all regions “Balanced Growth” Modest pace, but fair Good for local businesses Set barriers to imports taxes, quotas,& licenses restricts exports

Problems with Self-Sufficiency Inefficiency: Little incentive to improve quality, increase production, lower prices, lower production costs Protected from intl. competition & rapid changes in technology Large Bureaucracy: Complex admin. System corruption

Development through: International Trade Identify economic assets Natural resource? Manufactured product? Concentrate resources on expansion in world markets Rostow’s Development Model many theories grew out of decolonization 1950’s, 5 stage model ladder of development

Examples The Four Asian Dragons Petroleum-Rich Arabian Peninsula States

Problems with International Trade Uneven Resource Distribution Prices of NR (no increase) vs. costs of products needed to buy (ex. Copper in Zambia) Market Stagnation World market expanding slower Capture sales from competitors Increased Dependence on MDCs Focus on selling to people in MDCs vs. necessities for own people

Recent Triumph of International Trade Despite problems, preferred method in most countries 1990s key turning point for many countries World trade has tripled over past 25 years Change in WHAT is being exported in LDCs – 1980 – 75% Agriculture/Minerals 2000 – 80% Manufactured goods WTO established in 1995 to reduce barriers to trade by a) enforcing agreements b) negotiate trade restrictions

Transnational Corporations: Operates in countries other than where its HQ are located (Foreign Direct Investment) Initially primarily US owned, now Japan, Germany, France, UK Foreign investment does not flow equally around the world Only ¼ investment went from MDC to LDC Of that ¼ to LDCs; nearly 50% went to China (less than 10% to African countries)

Financing Development: Loans Borrow $ to build new infrastructure World Bank & IMF lend about $50 billion/year to LDCs Total outstanding loans is approx. 2.1trillion Theory behind loaning $ for infrastructure & problem with it Debt exceeds annual income in 18 countries Structural Adjustment Programs What are they?

Debt as Percent of Income Fig. 9-20: Many developing countries have accumulated large debts relative to their GDPs. Much of their budgets now must be used to finance their debt.

Barriers to Economic Development Low levels of social welfare HDI indicators Foreign Debt Political Instability wealth, corruption, democracies, cut off aid Widespread Disease AIDS, Malaria, Zika virus

Dependency Theory Political & Economic relationships between countries, control and limit the economic development possibilities of poorer areas (Colonialism) Dollarization – poor countries tie their currency into a wealthy countries currency (ex. El Salvador) Some problems with theory: some “dependent” regions have made gains

World Systems Theory Immanuel Wallerstein Three-tier structure (core, periphery, & semi-periphery), helps explain the interconnections between places in the global economy Periphery dependent on the core & vice versa Not possible for entire world to experience same level of wealth (capitalist economy) Applicable across scales (global, national, local)

Core and Periphery in World Economy Fig. 9-22: This north polar projection of the world shows that most of the MDCs are in a core area north of 30° N latitude. The LDCs are mostly on the periphery of this map.