Development

1. Development How it worksandHasn’t Worked

2. Defining Economic Development as a Process A. Development is -- • investment of a surplus • that results in increasing knowledge and productivity • that results in growing surpluses available for future investment

3. How surplus based development should work Production requires two factors: Labor & Capital It is Combined through Technology Production Goal is • Surplus beyond current consumption

4. This Surplus becomes additional future investment • Increasing Investment leads to • More Capital – translated into more tools of production • Better Labor Skills -- through education • Productivity gains through above plus newly invented technology • Even more surplus in the future

5. Where does the original Surplus come from??? • Original surplus is the “water that primes the pump” India Mark Deep Well Hand Pump II /III

6. Where does the original Surplus come from??? Internal generation theory • Prof. Morris Morris argued ..."all societies have roughly equal savings rates"... • Simply all have equal proportions of surplus (say 15% of output) • However, More technologically advanced societies have larger Gross Surpluses • Problem the rich get ever richer faster

7. Obtaining Surplus External Procurement theory • Option 1 traditional 19th century theory: Sell resources Caution: "growth" based on ever increasing extraction of finite resources eventually collapses Reality of 20th 21st century: recent terms of trade have worked against most resource sales • occasionally Oil has not faced this issue

8. Obtaining Surplus External Procurement theory • Option 2 “Foreign Aid”, Borrowing, FDI… theory: Borrow, Invest, Trade, and Repay Caution: • Markets are not necessarily “free” and open • Competition is stiff under current global demographics • Bankruptcy has not been an option • Do the money lenders really want borrowers to succeed?

9. Rostow’s Theory • http://images.google.com/imgres?imgurl=http://www.geographyalltheway.com/ib_geography/ib_development/imagesetc/ib_rostow_model.png&imgrefurl=http://www.geographyalltheway.com/ib_geography/ib_development/ib_development_models.htm&usg=__OP24DB0gDJUvjMTWArXVd5eaS_w=&h=486&w=685&sz=42&hl=en&start=2&um=1&tbnid=22Ay1SXld_26rM:&tbnh=99&tbnw=139&prev=/images%3Fq%3Drostow%2Bstages%2Bof%2Bdevelopment%26hl%3Den%26rls%3Dcom.microsoft:en-US%26sa%3DN%26um%3D1 • Geography all the way . com

10. Paul Krugman an introduction • http://www.comedycentral.com/colbertreport/video_search.jhtml?searchterm=paul+krugman • From the Colbert Report

11. Catch-up Vs. Sustainable Growth • Catch-up is copying someone else (Resource Mobilization) • True Long Term Productivity and Knowledge growth equals Sustainable Development (proportionately less raw materials used for more output) • With Catch-up, development is copying someone else’s past success • Knowledge based development is leading the world to new higher, more efficient uses of limited resources Catch-up also called resource mobilization (see Paul Krugman)

12. Catch-up Vs. Sustainable Growth • Buying/Stealing another country’s knowledge is Catch-up • Paul Krugman calls this Resource Mobilization • Creating new technologies is leadership and more sustainable • Krugman calls this Real Growth Paul Krugman at UC Berkley

13. What if it isn’t sustainable??? • Examples of Collapse:Antebellum American South: Cotton production based on "strip mining of land" and lead to Civil War (a resource control war)

14. Southern Cotton Plantation Agriculture was moving West

15. Map of slave/cotton expansion in antebellum south(click here): http://www.uoregon.edu/~atlas/america/maps.html The interactive mapsite shows the migration of the cotton production between 1760 and 1860

16. Post Bellum Production Despite near total collapse of Cotton exports during the Civil War • By 1870 cotton production equals 1860 level • By 1880 it exceeds the earlier level by over 50%, • By 1900 it is nearly 3 times 1860 production.  • Then why was the south so "poor" compared to the north for a century after the Civil War?

17. Foreign Competition • The answer lies in Egypt, India, and other tropical countries that captured the production market during the war • After the war a continuing glut of cotton meant the price of the commodity never recovered • Basically the South had no other economic base until the Post WWII era brought industrial expansion from the North

18. Yet Cotton Production continued its migration Westward Current Production Pattern of Cotton in US Note the importance of California and Arizona in today’s production

19. Another Example • Mayan Collapse:  According to many anthropological studies, Mayan Urban Civilization "strip mined" its surrounding agricultural resources for ever increasing consumer goods until some researchers argue that it collapsed for lack of more virgin land

20. The Soviet Example • Soviet style development required ever increasing resource demand (especially energy) to maintain itself. • Resource waste like this lead to collapse. This and next pictures & text from: Soviet Pollution by Gerd Ludwighttp://zonezero.com/EXPOSICIONES/fotografos/ludwig/lud02.html

21. Pictures of Environmental Destrucation in Azerbaijan. • Layers of oil and chemicals cover water in the oil fields near Baku, Azerbaijan. Streams in the area are considered biologically dead. Runoff from the oil fields is responsible. From: Soviet Pollution by Gerd Ludwighttp://zonezero.com/EXPOSICIONES/fotografos/ludwig/lud02.html

22. Now Impoverished • Once the source of almost half of the world’s oil, Azerbaijan is now desperately poor. Black smoke billows from oil fires burning on the outskirts of Baku. The sight is so common that a shepherd tending his sheep in nearby Bibicheybet takes little notice.

23. Will the future be brighter for Azerbaijan??? Proposed Oil Transport Lines

24. How about China’s Future • Resource Mobilization or Sustainable?