October 29, 2015S. Mathews1 Human Geography By James Rubenstein Chapter 9 Key Issue 4 Why Do Less Developed Countries Face Obstacles to Development?

October 29, 2015S. Mathews2 In recent years, LDCs have made improvements in development, but the gap between LDCs and MDCs have continued to widen. Natural Increase has dropped 20% in LDCs compared to 83% in MDCs. 1/5 th of the world’s people (in MDCs) consume 5/6 ths of the world’s goods.

October 29, 2015S. Mathews3 Progress toward development

October 29, 2015S. Mathews4 To reduce disparities between the rich and poor countries, LDCs must develop more rapidly. They must... adopt policies that successfully promote development (emphasis is on international trade). They must find funds to pay for the development (emphasis is on self-sufficiency).

October 29, 2015S. Mathews5 Elements of Self- Sufficiency Approach 1. Spread investment as equally as possible across all sectors of the economy and regions. 2. Isolate fledgling businesses from international corporations. 3. Set barriers to limit imports.

October 29, 2015S. Mathews6 India: Example of the Self-Sufficiency Approach 1.Limited imports of foreign goods 2.Exports were discouraged. 3.Government approval required for expansion. 4.Businesses subsidized.

October 29, 2015S. Mathews7 Problems with the Self- Sufficiency Alternative 1.Inefficiency - protects inefficient businesses. 2.Large Bureaucracy – the complex administration, needed to manage controls, encouraged abuse and corruption.

October 29, 2015S. Mathews8 Elements of International Trade Approach 1. What resources does a country have in abundance that other countries are willing to buy? 2. What products can the country manufacture and distribute at a higher quality and lower cost to other countries?

October 29, 2015S. Mathews9 *Rostow’s 5 stage Development Model 1.The traditional society. 2.The preconditions for takeoff. 3.The takeoff. 4.The drive to maturity. 5.The age of mass consumption.

October 29, 2015S. Mathews10 The Traditional Society A very high percentage of population engaged in agriculture. A high percentage of national wealth allocated to “nonproductive” activities, such as the military and religion.

October 29, 2015S. Mathews11 The Preconditions for Takeoff Under influence of well educated leaders, the country starts to invest in new technology and infrastructure, such as water supplies and transportation systems.

October 29, 2015S. Mathews12 The Takeoff Rapid growth, technical advances, and high productivity occur in a limited number of economic activities. Other sectors of the economy remain dominated by traditional practices.

October 29, 2015S. Mathews13 The Drive to Maturity Modern technology diffuses from take-off industries to a wide variety of industries. Workers become more skilled and specialized.

October 29, 2015S. Mathews14 The Age of Mass Consumption The economy shifts from production of heavy industry to consumer goods.

October 29, 2015S. Mathews15 MDCs are in stages 4 and 5. As a country concentrates on international trade, it benefits from exposure to consumers in other countries. Rostow’s model suggests that any country can become more developed.

October 29, 2015S. Mathews16 Examples of International Trade Approach Persian Gulf States used petroleum revenues to finance large projects and provide consumers goods. South Korea, Singapore, Taiwan, and Hong Kong used cheap labor to produce and sell products inexpensively.

October 29, 2015S. Mathews17 Problems with the International Trade Alternative.

October 29, 2015S. Mathews18 Problems with the International Trade Alternative 1.Uneven Resource Distribution 2.Market Stagnation 3.Increased Dependence on MDCs

October 29, 2015S. Mathews19 Uneven Resource Distribution LDCs suffer when the resource that they have for sale doesn’t command a large enough price to enable them to purchase products needed for growth.

October 29, 2015S. Mathews20 Market Stagnation The slow growth of MDCs population can and has limited market size of products from LDCs.

October 29, 2015S. Mathews21 Increased Dependence on MDCs Investments in takeoff industries may reduce production of necessities for the population, forcing an LDC to depend on MDCs for those necessities.

October 29, 2015S. Mathews22 Recent Triumph of the International Trade Approach Since India dismantled its barriers to international trade, its per capita GDP has increase from 4% to 6% annually.

October 29, 2015S. Mathews23 World Trade Organization Established in 1995, by countries representing 97% of world trade, to promote, and remove barriers to international trade in all countries.

October 29, 2015S. Mathews24 Critics of the WTO Liberals charge the WTO as antidemocratic. Conservatives charge that the WTO compromises the sovereignty of individual countries.

October 29, 2015S. Mathews25 Financing Development LDCs must generally obtain loans from MDCs. From banks and international organizations, and From direct investment by transnational corporations.

October 29, 2015S. Mathews26 Loans The World Bank and the International Monetary Fund lend about $50 billion annually to LDCs for development. Commercial banks from MDCs have a current outstanding loans to LDCs totaling $2.1 trillion.

October 29, 2015S. Mathews27 Problems with Loans Half of the projects funded in Africa have ended up as failures. Many LDCs have accumulated debt that exceeds annual income. Lending agencies have had to cancel debt and encouraged LDCs to adopt structural adjustment programs.

October 29, 2015S. Mathews28 Debt as a percentage of income

October 29, 2015S. Mathews29 Structural Adjustment Programs Policies that create conditions encouraging international trade, such as raising taxes, reducing government spending, controlling inflation, selling publicly owned utilities to private corporations, and charging citizens more for services.

October 29, 2015S. Mathews30 Transnational Corporations Corporations operating in countries other than the one in which its headquarters are located.

October 29, 2015S. Mathews31 Flow of Investment

October 29, 2015S. Mathews32 Core and Periphery Most MDCs Core and Periphery Most MDCs are located above the 30 o north latitude.

October 29, 2015S. Mathews33 Finis