1. Road to Development

2. Balanced Growth through Self-Sufficiency A country should spread investment as equally as possible across all sectors of its economy and in all regions. –Incomes in rural areas keep pace with urban incomes –Businesses remain independent of foreign corporations –Limit imports through tariffs and quotas –Investment is spread equally throughout country

3. Different Routes to Success

4. India followed this policy –Made imports difficult –Discouraged Indian businesses from exporting –Could not convert Indian money into other currencies –Encouraged production of consumer goods for Indian citizens –Provided subsidies for struggling companies

5. Problems Inefficiency: without true competition, companies have little incentive to improve techniques, technology, products, etc Large Bureaucracy: needed to administer the controls – complex and corrupt

6. Rostow’s Development (Modernization)Model through International trade A country can develop economically by concentrating scarce resources on expansion of its distinctive local resources Developed by W.W. Rostow (1950s)

7. Rostow - Stages of Growth 1.Traditional Society Characterised by –subsistence economy – output not traded or recorded –high levels of agriculture and labor intensive agriculture –Wealth allocated to nonproductive activities (religious, military Village in Lesotho. 86% of the resident workforce in Lesotho is engaged in subsistence agriculture. Copyright: Tracy Wade, http://www.sxc.hu/

8. Rostow - Stages of Growth 2. Pre-conditions: –An elite group initiates development –Investments in technology and infrastructure –Commercialization of agriculture The use of some capital equipment can help increase productivity and generate small surpluses which can be traded. Copyright: Tim & Annette, http://www.sxc.hu

9. Rostow - Stages of Growth 3. Take off: –Increasing industrialization in limited areas (food or textiles) –Foreign investment increases –Infrastructure improvements –Some regional growth –Economy still dominated by traditional practices At this stage, industrial growth may be linked to primary industries. The level of technology required will be low. Copyright: Ramon Venne, http://www.sxc.hu

10. Rostow - Stages of Growth 4. Drive to Maturity: –Develops broad manufacturing and commercial base –Industry more diversified –Increase in levels of technology utilized As the economy matures, technology plays an increasing role in developing high value added products. Copyright: Joao de Freitas, http://www.sxc.hu

11. Rostow - Stages of Growth 5. High mass consumption –High output levels –Mass consumption of consumer durables –High proportion of employment in service sector Service industry dominates the economy – banking, insurance, finance, marketing, entertainment, leisure and so on. Copyright: Elliott Tompkins, http://www.sxc.hu

12. USA Path to Development Stage 5: early 20 th century Stage 4: late 19 th century Stage 3: middle of 19 th century Stage 2: first half of 19 th century Stage 1: prior to independence

14. World-Systems Theory Immanuel Wallerstein Divide world into –Core –Semi-periphery –Periphery

15. Three Tier Structure Core Processes that incorporate higher levels of education, higher salaries, and more technology * Generate more wealth in the world economy Semi-periphery Places where core and periphery processes are both occurring. Places that are exploited by the core but then exploit the periphery. * Serves as a buffer between core and periphery Periphery Processes that incorporate lower levels of education, lower salaries, and less technology * Generate less wealth in the world economy

17. Core Periphery Model Semi Periphery –Regions that exert more power than periphery regions but are –Dominated to some degree by the core

18. Development Indicators Economic: GNP, PPP, per capita energy consumption Noneconomic: HDI, gender equity, calorie intake

19. Four Dragons Aka Four Tigers or Gang of Four S. Korea, Singapore, Taiwan, and Hong Kong Lacked natural resources Strongly influenced by Japan’s success Concentrated on handful of manufactured goods Low labor costs Sell to MDCs