1. Development
Chapter 9 | Key Issue 4

2. THURSDAY, DECEMBER 3 OBJECTIVE:
Evaluate the self-sufficiency model and the international trade model as approaches to developing your LDC
VOCABULARY:
Self-sufficiency model
Rostow’s Stages of Economic Growth Model

3. TWO PATHS TO DEVELOPMENT
SELF-SUFFICIENCY MODEL
encourages dev. through domestic production of goods and discourages foreign ownership of businesses – gov’t protects businesses from international competition – popular in 20th c.
Ex: high taxes, quotas on imports, licenses for importers, invest in all sectors of economy in all regions of country
INTERNATIONAL TRADE MODEL
country uses its unique economic assets to develop (i.e. exports, expanding local industries) – a.k.a. “Rostow’s Stages of Growth Model” – popular in late 20th c.
Ex: elite invest in tech  diffuse innovation to industry  shift from industrial to consumer goods

4. ROSTOW’S STAGES OF GROWTH MODEL
W.W. ROSTOW
U.S. economist in 1950s-1960s – believed economic takeoff must initially be led by a few sectors
Ex: theory used in the late 20th century in South Korea, Singapore, Taiwan, Hong Kong and the Arabian peninsula
ROSTOW’S STAGES OF GROWTH MODEL
a model of economic development that describes a country’s progression in five stages, transforming them from an LDC to an MDC
Ex: used by the “Four Asian Dragons” and the petroleum-rich Arabian peninsula states
TRADITIONAL SOCIETY
not yet started to develop – agricultural and non-productive workers (religion, military)
Ex: comparable to Stage 1 of DTM  agricultural society

5. ROSTOW’S STAGES OF GROWTH MODEL
PRECONDITIONS FOR TAKEOFF
elite initiate economic activity and invest in tech and infrastructure to stimulate an increase in productivity
Ex: infrastructure = water supplies, transportation systems
TAKEOFF STAGE
rapid growth in a few economic activities (i.e. “takeoff industries”) – other sectors of the economy are still primary sector
Ex: textile factories or food products
DRIVE TO MATURITY
modern tech diffuses to many industries – those industries then experience rapid growth – workers become more skilled, specialized
Ex: new electronics industries, etc. and more secondary sector workers

6. ROSTOW’S STAGES OF GROWTH MODEL
AGE OF MASS CONSUMPTION
economy shifts from production of heavy industry (i.e. steel) to consumer goods (i.e. refrigerators)
Ex: shift from: steel and energy industry  shift to: cars and refrigerators
CRITICISMS OF ROSTOW
uneven resource distribution – prices don’t always increase – leads to increased dependency on MDCs – cut back on goods necessary for own people
Ex: Zambia has a lot of copper, but prices declined globally; 2008 recession hurts demand for products; country buys more exports
NEOCOLONIALISM
economic control that MDCs have over LDCs by setting economic policies or using power to put LDCs out of business
Ex: MDCs control the IMF, which sets economic policies for LDCs

7. WHICH PATH TO DEVELOPMENT IS BEST?
Self-Sufficiency Model v Rostow’s Model

8. HOMEWORK Read KI 4 and finish guided reading notes
Complete vocabulary as you go

9. FRIDAY, DECEMBER 4
OBJECTIVE: Determine how to best finance an LDCs path to development.

10. Newly Industrialized Countries (NICs)
NEWLY INDUSTRIALIZED COUNTRY (NIC)
3rd world country that made shift from agriculture to manufacturing
Ex: Mexico, Brazil, Nigeria, Indonesia, China
INFRASTRUCTURE
basic physical structures and facilities needed by NICs
Ex: buildings, roads, power plants, water systems
RAPID POPULATION GROWTH
characteristic of NICs - occurs in Stages 2-3 of DTM
Ex: Stage 2 (Sub-Saharan Africa), Stage 3 (India, Brazil, China)
RAPID RURAL-TO-URBAN MIGRATION
NICs experience urbanization as their economies industrialize
Ex: move to cities for factory work

11. Funding Development WORLD TRADE ORGANIZATION (WTO) WORLD BANK
promotes int’l trade by reducing barriers to movement of money by banks
Ex: eliminate trade barriers, negotiate trade agreements
WORLD BANK
UN financial institution that provides aid to NICs
Ex: fund infrastructure projects
DEVELOPMENT LOANS
given to help build major infrastructure projects
Ex: World Bank provides loans for infrastructure (i.e. dams, highways)
TECHNOLOGY TRANSFER
technical knowledge, training and equipment is provided to NICs
Ex: tablets, laptops, mobile phones

12. Funding Development MICROLOANS (OR MICROFINANCE)
Provision of small loans to individuals and small businesses in LDCs
Ex: Grameen Bank in Bangladesh, Kiva
INTERNATIONAL MONETARY FUND (IMF)
work to economically stabilize countries, promote cooperation
Ex: stabilize currency rates, rebuild int’l reserves, pay for imports

13. Funding Development STIMULUS STRATEGY AUSTERITY STRATEGY
gov’ts should spend more than they collect in taxes to pay off debt
Ex: employ people so they can pay more in taxes (i.e. Bush/Obama, N Europe)
AUSTERITY STRATEGY
gov’ts should reduce taxes so people can revive economy by spending tax savings
Ex: Southern Europe (i.e. Greece, Italy)
FOREIGN DIRECT INVESTMENT (FDI)
Investment made by a foreign company in the economy of another country
Ex: grew rapidly in 1990s; not evenly distributed (China, Brazil, Russia, Singapore); transnational corporations are major source of FDI

14. Homework Practice FRQ on Fair Trade (due Monday)
Re-read p
Develop an LDC Plan (due Tuesday)