1. © 2011 Pearson Education, Inc. Why Do LDCs Face Obstacles to Development? Development through self-sufficiency –Characteristics: Pace of development = modest Distribution of development = even Barriers are established to protect local business –Three most common barriers = (1) tariffs, (2) quotas, and (3) restricting the number of importers Two major problems with this approach: –Inefficient businesses are protected –A large bureaucracy is developed

2. © 2011 Pearson Education, Inc. Why Do LDCs Face Obstacles to Development? Development through international trade –Rostow’s model of development –Examples of international trade approach The “four Asian dragons” Petroleum-rich Arabian Peninsula states –Three major problems: Uneven resource distribution Increased dependence on MDCs Market decline

3. © 2011 Pearson Education, Inc. Why Do LDCs Face Obstacles to Development? International trade approach triumphs –The path most commonly selected by the end of the twentieth century –Countries convert because evidence indicates that international trade is the more effective path toward development Example: India –World Trade Organization –Foreign direct investment

4. © 2011 Pearson Education, Inc. Triumph of International Trade Approach Figure 9-27 Figure 9-28

5. © 2011 Pearson Education, Inc. Foreign Direct Investment Figure 9-30

6. © 2011 Pearson Education, Inc. Why Do LDCs Face Obstacles to Development? Financing development –LDCs require money to fund development –Two sources of funds: Loans –The World Bank and the IMF –Structural adjustment programs Foreign direct investment from transnational corporations

7. © 2011 Pearson Education, Inc. Debt as a Percentage of Income Figure 9-31

8. © 2011 Pearson Education, Inc. Why Do LDCs Face Obstacles to Development? Fair trade approach –Products are made and traded in a way that protects workers and small businesses in LDCs –Two sets of standards Fair trade producer standards Fair trade worker standards –Producers and workers usually earn more –Consumers usually pay higher prices

9. © 2011 Pearson Education, Inc. Core and Periphery Model Figure 9-32