Development Part 2: “Paths to Development”

1. Development Part 2:“Paths to Development”

2. 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 don’t operate in a vacuum • See Wallerstein’s World System’s 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. • Don’t confuse with criticisms of GDP/GNI • Informal economy, inequality, neg. externalities (pollution)

3. Paths to Development? • International Trade Model/Rostow’s 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

4. Paths to Development? • International Trade Model/Rostow’s 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

5. Paths to Development? • International Trade Model/Rostow’s 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

6. Paths to Development? • International Trade Model/Rostow’s 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

7. Paths to Development? • International Trade Model/Rostow’s 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

9. Paths to Development? • International Trade Model/Rostow’s 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.

11. 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 lion’s share of profits • development (technology, skills, etc.) doesn’t 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)

12. 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”

13. Tariffs • Review impact of tariffs from class notes

14. 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

15. Self-sufficiency vs. Int’l trade approach • International trade approach triumphs • Countries switch because evidence indicates that international trade is the more effective path toward overall development • Example: India

16. Self-sufficiency vs. Int’l 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” • 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)

18. Rostow’s “modernization”, “ladder of development” or “int’l trade” approach to development Winners Losers Low skill workers (MDCs) Highly paid union workers in manufacturing Unconnected LDC Small businesses/domestic manufacturing Prices are undercut Downward wage pressure Will wages decrease or stagnate for skilled workers as well? Govt. workers privatized can tertiary jobs be outsourced, globalized? • Multinational corporations • Low wages, higher profits, higher stock prices • Stockholders, investors • Consumers • Lower prices • In LDCs • People/regions connected to int’l trade or the “core” • BIG Q? Will low prices continue to offset wage stagnation?

19. Sustainable Development

21. 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. Don’t touch! (nat’l 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?

22. Energy Consumption • Usage is split 50/50 between MDC and LDCs • But per capita usagein 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 world’s biggest energy user by 2015 • As LDCs develop , we must find ways to fuel their growth (hopefully clean)

23. Non-renewable Energy • 5/6ths of world’s 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

24. 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 Earth’s 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

25. Other major depletable resource? • Water

28. Aral Sea (USSR diverts water for irrigation)

29. 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 don’t 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

31. 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 mid-century. • 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 UN’s 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

32. Pollution Compared to a Country’s Wealth

33. 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 low-income, minority neighborhoods • We’ll come back next unit

36. Barriers to Development • Structure and geography of the world economy (Wallerstein’s 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

37. Biggest problem =Financing development • LDCs require money to fund development • FDI = foreign direct investment • Major source = transnational corps

38. Foreign Direct Investment Figure 9-30

39. Financing development • LDCs require money to fund development • FDI = foreign direct investment • Major source = transnational corps • Int’l 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

40. 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

41. Impacts of Development • est. of Export Processing Zones (EPZs) • Favorable tax, regulations, etc. for foreign firms • Maquiladoras (Mexico), Special Economic Zones (China)

42. Uneven Development within States • Govt. policies can create or lessen economic differences between regions • Infrastructure, education, subsidies, taxes and quotas • Int’l trade benefits more “connected” regions

45. Uneven Development within States • Govt. policies can create or lessen economic differences between regions • Infrastructure, education, subsidies, taxes and quotas • Core-periphery thinking can also apply within states • reflects weakness of using per capita GNI • Cities/capitals/ports = Islands of Development • concentrated economic development, foreign inv. $ • Forward capitalsbuilt to draw investment to interior or to be a centripetal force. • Brasilia (Brazil),

47. Uneven Development within States • Govt. policies can create or lessen economic differences between regions • Infrastructure, education, subsidies, taxes and quotas • Core-periphery thinking can also apply within states • reflects weakness of using per capita GNI • Cities/capitals/ports = Islands of Development • concentrated economic development, foreign inv. $ • Forward capitalsbuilt to draw investment to interior or to be a centripetal force. • Brasilia (Brazil) • Islamabad (Pakistan), Abuja (Nigeria) • Washington DC

48. Impacts of Development • est. of Export Processing Zones (EPZs) • Favorable tax, regulations, etc. for foreign firms • Maquiladoras (Mexico), Special Economic Zones (China) • Agriculture • Diff. of modern agriculture to produce export crops • ↑ intensification → ↑ desertification • Sahel (south of Sahara, shatterbelt) lost 270k sq. miles • 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

49. Haitian Contrasts

50. 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.