Chapter 1

Chapter 1

Development Part 2: Paths to Development What is Development? Reread/review prior information (Part 1) Criticisms of the development concept (#5) One single path/trajectory toward development? Is industrialization always necessary? Have commodity chains broken the link between industrialization and increasing prosperity?

See article on website Arrested Development Western bias (values materialism, is industry good?) discounts international influence Countries dont operate in a vacuum See Wallersteins World Systems Theory See p 464 465 for alternative discussion Bhutan measures Gross National Happiness (GNH) based on psychological well-being, time use, community vitality, culture, health, education, environmental diversity, living standard and governance.

Dont confuse with criticisms of GDP/GNI Informal economy, inequality, neg. externalities (pollution) Paths to Development? International Trade Model/Rostows model of development Five stages Traditional society

subsistence agriculture govt. funds spent on military/religion Rigid social structure (example: female subservience) technology slow to change Paths to Development? International Trade Model/Rostows model of development

Five stages Traditional society Preconditions to take-off elite, well-educated (usually in West) take lead identify assets to exploit (raw material, cheap labor, etc.) investment in new technology and infrastructure (transportation, clean water systems, etc.) hope to stimulate PRODUCTVITY Paths to Development? International Trade Model/Rostows model of development

Five stages Traditional society Preconditions to take-off Takeoff rapid growth in limited industries Example? Textiles these industries achieve technological advances and become productive Industrial Revolution, growth takes hold, urbanization

increases, tech and mass production breakthroughs Paths to Development? International Trade Model/Rostows model of development Five stages

Traditional society Preconditions to take-off Takeoff Drive to Maturity technology diffuses from initial industries

Workers become more skilled and specialized International trade increases Modernization Population growth slows Paths to Development? International Trade Model/Rostows model of development Five stages

Traditional society Preconditions to take-off Takeoff Drive to Maturity Age of Mass Consumption shift from heavy industry to consumer goods High incomes, wide spread production of consumer goods

Majority of workers enter service sector jobs Paths to Development? International Trade Model/Rostows model of development Five stages Why optimistic? Eastern/Southern European growth, Japan LDCs have tons of resources to exploit Examples of international trade approach The Four Asian Dragons or Four Asian Tigers Taiwan, Singapore, South Korea, Hong Kong

Baby Tigers , Tiger Cubs trying to follow pattern Malaysia, Thailand, Vietnam, Indonesia, Philippines Petroleum-rich Arabian Peninsula states Current example? See Ghana article on website for how the International Trade Model works in real life. Paths to Development? International Trade Model Problems/criticisms (#11 diff. from text)

single commodity depends on world price (cocoa in Ghana, oil in Venezuela) could lead to loan default if price collapses therefore, commodities are often leased/controlled by outsiders (MDC corps) who keep lions share of profits development (technology, skills, etc.) doesnt diffuse to people as a whole but only to those connected to foreign investors with reliance on cash crops must buy food hunger, less money for investment

income inequality result of both this model & structural reform programs (later) Paths to Development self-sufficiency model Characteristics: Barriers are established to protect local businesses Three most common barriers = (1) tariffs (tax on imported goods), (2) quotas, and (3) restricting # of importers

protectionism Tariffs Review impact of tariffs from class notes Paths to Development self-sufficiency model Characteristics: Barriers are established to protect local businesses

Three most common barriers = (1) tariffs (tax on imported goods), (2) quotas, and (3) restricting # of importers protectionism Distribution/pace of development = even but low Investment spread across economy Goal is to develop national industries and reduce poverty over consumerism Two major problems with this approach: Inefficient businesses are protected

A large bureaucracy is needed to regulate/monitor barriers costly could lead to corruption growth of black market Self-sufficiency vs. Intl trade approach International trade approach triumphs Countries switch because evidence indicates that international trade is the more effective path toward overall development Example: India

Self-sufficiency vs. Intl trade approach International trade approach triumphs made easier by globalization Neo-liberalism Dominant economic/political theory by end of 20th c. Reduce government intervention in markets Favored by: Multinational corps., Big Business, Wall St. = Republicans

Bill Clinton, Pres. Obama, Rahm Emanuel = Democrats NAFTA, TPP (Trans-Pacific Partnership) Global economic power shifts from state to corps. WTO (World Trade Org.) = referee on global trade Enforces trade agreements Helps reduce trade barriers = free trade Allows for non-penalized retaliation or fines. Eliminate restrictions on the movement of $

Criticisms: Left = anti-democratic, favors wealthy corps., ignores the poor Right = national sovereignty is violated (see TPP) Rostows modernization, ladder of development or intl trade approach to development Losers Winners Multinational corporations Low wages, higher profits, higher stock prices

Stockholders, investors In LDCs People/regions connected to intl trade or the core Consumers Lower prices BIG Q? Will low prices continue to offset wage

stagnation? Low skill workers (MDCs) Highly paid union workers in manufacturing Unconnected LDC Small businesses/domestic manufacturing Prices are undercut

Downward wage pressure Will wages decr. or stagnate for skilled workers as well? Govt. workers privatized can tertiary jobs be outsourced, automated, globalized? Sustainable Development What is Sustainable Development?

achieving human development goals while at the same time conserving natural systems and Conservation use of resources to meet human needs while maintaining them for use by future generations. Preservation Keep resources in their present condition. Dont touch! (natl parks) meets the needs of the present without compromising the ability of the future generation. But the dilemma

Econ. growth/wealth consumption (depletion) pollution WWF says we are overcapacity in use of resources How would you classify this point of view? Neo-Malthusian Others say, resources can be redefined How would classify this point of view? Environmental possibilism/anti-Malthusian What types of resources do we worry most about depleting?

Energy Consumption Usage is split 50/50 between MDC and LDCs But per capita usage in 3x higher in MDCs MDCs must import supplies from LDCs to meet needs LDCs using more due to development, causing price China is expected to be the worlds biggest energy user by 2015 As LDCs develop , we must find ways to fuel their growth (hopefully clean) Non-renewable Energy

5/6ths of worlds energy supply from 3 main sources: fossil fuels = coal, natural gas, and oil Enhanced extraction = fracking = polluting water, earthquakes Local/personal goal = reduce carbon footprint Renewable Energy (sustainable?) Biomass = wood/ethanol/sugar cane sometimes more energy to grow crops than energy produced deforestation, reduction in soil fertility

Geothermal energy (energy from the Earths interior) most accessible near fault lines, volcanic areas Hydroelectric power 2nd largest source of electricity after coal Three Gorges Dam (China) = environmental disaster Nuclear energy high cost to build, radioactive wastes, accidents are catastrophic! Chernobyl, Fukushima

Solar energy intermittent (not consistent). Storage? Need batteries = expensive recently cost = nonrenewable energy in certain areas = grid parity Incr. efficiency, Chinese manufacturing/government support Wind power noisy, lethal to birds and bats, visual blight Other major depletable resource? Water

Aral Sea (USSR diverts water for irrigation) Sustainability Question? How do we reduce pollution? (to leave a cleaner Earth for future generations) Recycling (pollution control starts at home) Think globally, Act locally Reduce throwaway/non-biodegradable packaging No more styrofoam

cap and trade or emissions trading uses a market concept polluters given allowances to pollute by a govt. agency Markets formed to buy unused allowances from those who dont use them Sold to those who wish to pollute more than their allowance. Industries most able and willing to reduce pollution will do so and profit from their surplus credits Therefore, pollution reduction is incentivized! it rewards companies to pollute less

Increases costs/punishes those who pollute more Paris Agreement (2016) Limit global warming to 2 C (w/eventual goal of 1.5 C) In order to meet 1.5 C, must abandon fossil fuels by midcentury. Who pays to meet goals? Unspecified. Rich countries will have to pay up to $100b to succeed. Incl. China/India???? How often will this be verified? Starting in 2023 every five years. Who will verify? No 3rd party like the UNs IAEA (International

Atomic Energy Agency). Countries agree to a technical expert review. Who pays for damages? US wants to help but w/limits Who is ultimately responsible? Common but differentiated responsibility. Everyone has some but MDCs have the most Trumps withdraws from agreement 2017 Environmental Racism e-waste shipped to LDCs (China)

hazardous materials w/in populated areas in LDCs Union Carbide in Bhopal, India Environmental Racism e-waste shipped to LDCs (China) hazardous materials w/in populated areas in LDCs

Union Carbide in Bhopal, India Water scarcity in the occupied West Bank Environmental Racism e-waste shipped to LDCs (China) hazardous materials w/in

populated areas in LDCs Union Carbide in Bhopal, India Water scarcity in the occupied West Bank City dumps, brownfields, incinerators, etc. Often located in or next to lowincome, minority neighborhoods Well come back next unit

Barriers to Development Structure and geography of the world economy (Wallersteins World Systems Theory) Social conditions Lack of female empowerment Demographic trap (stress this is circular!!!!) high CBR, IMR, dependency ratio leads to a lack of funds for development which in turns leads to high CBR Lack of education (overall and gendered) Trafficking (domestic servants, street vendors, prostitution)

Disease weakens labor force, creates orphans malaria, HIV/AIDs Political Corruption and Instability dictatorship, coups, corruption discourage investment Biggest problem = Financing development LDCs require money to fund development

FDI = foreign direct investment Major source = transnational corps Foreign Direct Investment Figure 9-30 Financing development LDCs require money to fund development FDI = foreign direct investment Major source = transnational corps

Intl organizations as lenders: The World Bank Loans to make reforms, strengthen financial institutions, infrastructure projects IMF (International Monetary Fund) Provides loans to countries with debt payment issues Goal = protect international trade demand structural adjustment programs realign spending priorities, cut non-productive spending

(pensions) eliminate govt. bureaucracy, cut/privatize govt. jobs reduce taxes Nongovernmental organizations (NGOs) Independent non-profits (Gates Foundation, Clinton Foundation, Carter Center) Some funds can be misappropriated admin. salaries, travel, etc.

example of a successful policy = microcredit program Loans to small entrepreneurs in LDCs (largely women) which are guaranteed by others in the village = 98% repayment rate Why is targeting women for development is good strategy? Demographic impact (brings down CBR) Socioeconomic impact (women will use funds to feed children, relegated to domestic sphere) Impacts of Development establishment of Export Processing Zones (EPZs) Favorable tax, regulations, etc. for foreign firms

Maquiladoras (Mexico), Special Economic Zones (China) Can lead to unequal development within states Islands of Development Cities/capitals/ports = Islands of Development concentrated economic development, foreign inv. $ Forward capitals built to draw investment to interior or to be a centripetal force. Brasilia (Brazil),

Islands of Development Cities/capitals/ports = Islands of Development concentrated economic development, foreign inv. $ Forward capitals built to draw investment to interior or to be a centripetal force. Brasilia (Brazil) Islamabad (Pakistan), Abuja (Nigeria) Washington DC Impacts of Development

Agriculture Diff. of modern agriculture to produce export crops intensification desertification Country must import food for people Tourism (mixed impact) Brings in huge $, now > than oil

requires infrastructure spending that could be spent on natives creates jobs but largely low-paying, dehumanizing? profits go to multinational corps. harsh juxtaposition of tourist wealth and native poverty marks cultural landscape Haitian Contrasts Sustainable Tourism? eco-tourism

Visits to fragile, pristine, and relatively undisturbed natural areas Pros low-impact, small scale alternative to mass tourism. helps fund conservation benefit local people Increases environmental awareness

Cons threaten indigenous cultures Relocation ecosystem degradation travel impact on global env. Integrity of ecotourism org. 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 Must be small, democratic, high product quality, use ecologically friendly growing methods, etc. Fair trade worker standards Collective bargaining, working conditions, minimum wage, etc. Producers and workers usually earn more

Consumers (MDCs) usually pay higher prices Fair trade coffee: Shade-grown produced by certified fair-trade farmers, who then sell the coffee directly to importers Guarantees a fair trade price At least 40% goes to grower Over 500,000 registered farmers Produced in more than 20 countries commitment by Starbucks, Dunkin Donuts and other chains Demand must come from the consumer!

Fair Trade

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