Opening O 1 Rostows modernization model is concerned

Opening O 1) Rostow’s modernization model is concerned with which of the following concepts? O A. Dependency O B. Structuralism O C. Core-periphery relations O D. Economic development O E. Neocolonialism

Opening O 1) Rostow’s modernization model is concerned with which of the following concepts? O A. Dependency O B. Structuralism O C. Core-periphery relations O D. Economic development O E. Neocolonialism

Key Issue 4: Why do LDCs face Obstacles to Development?

Two Paths to Development O Self-Sufficiency O International Trade O Encourage O Countries open domestic production of goods O Discourage foreign ownership of businesses and resources themselves to foreign investment and international markets

Self-Sufficiency Path O Use of barriers to promote domestic business… O Tariffs, quotas, licensing. O Spread investment equally across all sectors of the economy O Incomes in rural areas keep pace with those in city O Focus on reducing poverty or wealth of a few

Problems with Self-Sufficiency O Protect inefficient business O Businesses could sell at high prices, giving little incentive to improve quality O Large bureaucracy O Abuse and corruption, lower rewards for entrepreneurs

Walt Rostow Model for International Trade O Five stages of development 1. 2. 3. 4. 5. Traditional society: subsistence farming/primary sector jobs (extraction of resources)…money spent on military or religion Preconditions to take-off: New leadership moves country to greater flexibility, openness, and diversification Take-off: similar to an industrial revolution – innovations in manufacturing, industry, mass production Drive to maturity: Technologies diffuse, industrial specialization occurs, and international trade expands High mass consumption: high incomes, widespread production of many goods and services

Examples of International Trade O Four Asian Dragons (Four Little Tigers, Gang of Four) O S. Korea, Singapore, Taiwan, Hong Kong O Development through production of handful of manufactured goods O Clothing and Electronics O Arabian Peninsula O Kuwait, Bahrain, Oman, UAE, Saudi Arabia O Petroleum revenue for housing, infrastructure, universities, and communication networks

Problems with International Trade O Uneven resource distribution O One commodity limits ability if that price stays low O Increased dependence on MDCs O May cut necessities O Market decline O Limited population of market

International Trade Triumphs O Developing countries with abundance of raw materials benefited from income of developed countries O Competition with outside markets helps improve domestic products O India mid 1990’s O Foreign countries set up factories O Monopolies eliminated O Tariffs lifted O World Bank finds 4% growth in international trade vs. 1% growth in self-sufficiency

World Trade Organization O Founded in 1995 O To promote international trade model O Works to reduce trade barriers by O Eliminating quotas and tariffs O Stopping restrictions on movement of money by banks O Enforces agreements between countries O Protects intellectual property O Critics – WTO is anti-democratic and promotes interests of the rich rather than poor

Foreign Direct Investment How do developing countries get money? O Foreign Direct Investment O Investment by a corporation in another country’s economy, commonly by transnational corporations O Loans given by World Bank and International Monetary Fund O Most loans are not returned or paid back in full

Fair Trade O GOAL: protect the workers and small businesses in LDC’s O Producer Standards: O Producer gets more of a profit O Consumers pay higher price but get the benefits O Worker Standards O Paid fair wages, have unions, and comply with safety standards

Making Progress in Development O Infant Mortality Rate O Gap between MDC and LDC has narrowed O Life Expectancy O Increased by 8 years in LDC and by 7 years in MDC O GNI per capita O Gap in wealth between MDC and LDC has widened since 1980

Millennium Development Goals

Wallerstein World Systems Theory O Relationship between developed and developing countries…the wealth is centered in the CORE O Three overarching groups: O Core – domination of spatial relationships with other nations (neocolonialism) – do not revert to semiperiphery (static understanding) O Periphery – dependent upon core for financial investment and development O Semi-periphery – newly industrialized countries; able to exploit periphery but are also exploited by core

Wallerstein World Systems Theory O Emphasis is on colonialism, imperialism or neocolonialism (economic influence rather than overt colonies) O International trade strengthens developed world and constrains development in periphery O Development is either static, or able to revert into former abilities O Development is uneven

Rostow O “Liberal” approach/capitalist or western approach O International trade helps economies grow O Countries fund development internally – LDC sell resources to MDCs and invest that money O Uneven global development lessened O No reversion into previous stages