CHAPTER 13'1 International Development

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CHAPTER 13.1International Development

• PSC 124
• Spring 2007
• Northrup

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Climate Change and the GS

• NYT article on differential impact of global
  warming/climate change on the global South
  compare to the North

A woman harvesting corn in Malawi, an African
country that is already prone to drought and
faces grim prospects under global warming.
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Overview

• Defining economic development
• Capitalist vs. socialist approaches to
  development
• Development cases
• Lessons
• Import substitution vs. export-led growth
• Concentrating capital
• Authoritarianism vs. democracy
• Corruption

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What is Economic Development?

• Capital accumulation
• Rising per capita incomes
• Increasing skills in a population
• New technologies
• Related social and economic changes
• GDP

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Human Development Index
High .8-1.0
Medium .5-.79
Low .3-.49
World map indicating Human Development Index
(2004).
More detailed map here
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Capitalist vs. Socialist Perspectives Capitalist

• How does the capitalist approach think about
  economic development in the Global South?
• Favors concentration of wealth to spur investment
• Favors tying 3rd world economies to the global
  economy and international trade
• Equity can be deferred development stage
• To attend to equity early would choke growth

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Capitalist vs. Socialist Perspectives Socialist

• The socialist perspective?
• Development should improve the position of the
  whole population and of the poor
• Should happen soon, early in development process,
  and isnt deferrable
• Advocate more equal distribution of wealth
• Greater equity wont impede growth, rather will
  speed up demographic transition
• Build economy from bottom up

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Welfare Capitalism A Mix

• Generally follows capitalist approach
• But distributes wealth enough to meet basic needs
  of almost everyone
• More difficult in a developing country than
  developed since level of wealth is lower, less
  money to divide between investment and welfare

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Cases Web Resources

• Web resource Economy Watch (www.economywatch.com)
  
• Example China (www.economywatch.com/world_economy
  /china)
• World Bank reports on economic development of
  other countries in the world link

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Newly Industrializing Countries (NICs)
Singapore central business district

• Despite poverty in South, some success stories
• NICs some self sustaining capital accumulation
• Semi-periphery states that export light
  manufactured goods
• Most successful Four Tigers or Asian Tigers
• South Korea, Taiwan, Hong Kong and Singapore
• Have developed particular industries that are
  competitive
• Other relatively successful countries
• Thailand, Malaysia, Israel

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Per Capita GDP of South Korea, China, and Ghana
Ghana 1500 China 5200 S. Korea 16K US
(2006) 43.5K
2004 GDP per capita
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China

• After Mao, Deng Xiaoping encouraged free
  economic zones
• MNCs shift production to China every year because
  Chinas labor force is vast, low-paid, and
  disciplined
• For more than a decade, China has experienced
  growth rates of nearly 10 each year
• Economist article on Chinas economic and
  political relationships in its region of the world

A/C plant in China
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China - ShenZhen

• ShenZhen first Special Economic Zone in China
  (web site)
• Video Wal-Mart and economic development in China

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China and Paper Industry - Update

• Bush administration announced reversal of 20
  years of no-tariff policy on Chinese products

NYT article A worker at Luke Paper in Luke, Md.,
labels paper reels.
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Lessons Import Substitution vs. Export-Led
Growth Strategies

• Import substitution Developing local industries
  to produce items previously imported often
  involves protectionism
• Disadvantages Raising tariffs to protect new
  industries may work in short term, but not a good
  long-term policy
• Export-led growth Developing industries to
  complete in specific niches of world economy
• Disadvantages Often invest in one or two, so
  become vulnerable to changes in market can
  squeeze out production of needed agricultural
  products

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Lessons Concentrating Capital

• To deal with problem of limited capital, capital
  is often concentrated on a few industries and at
  expense of social services (e.g. building
  schools)
• This strategy can sharpen disparities in income
  within the country (e.g. Bangalore, India)
• Alternative is to being in foreign investment,
  but then profits leave the country
• Another alternative is microlending (microcredit)

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Yunnus and Bank

• Microlending bank in Bangladesh
• Yunus won Nobel Peace Prize 2006
• Provides very small loans with goal of
  self-sufficiency rather than dependency
• Structured to ensure ability to repay loans
• Almost 97 repay loans according to terms

Prof. Muhammad Yunus with borrowers
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Grameen Bank Principles

• Start with understanding of local problem/issues
• Adopt a progressive attitude
• Serve the poor
• Make it possible for borrower to repay loan
• Establish solidarity groups
• Encourage savings
• Monitor borrowers using standardized procedures
• Train leaders

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Lessons Authoritarianism and Democracy

• Democracy hasnt followed economic development
  predictably
• Fastest growing states have been authoritarian
• Some theorize that authoritarianism is necessary
  and sufficient to early stages of accumulation
  (to prevent nationalist movements, internal
  conflict, etc.)
• Evidence against this theory authoritarian
  states that have not been successful (e.g.
  Zimbabwe and Mugabe with 1400 inflation rate,
  80 unemployment), with political instability
• Appears that there is no consistent relationship
  between form of government and path of economic
  development

Rioting in Zimbabwe
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Lessons Corruption

• A negative factor in development
• Government roles where corruption can occur
• Relationship between country and foreign
  investors
• Taxation
• Government services
• Enforcing worker discipline (strikes, rioting)
• Ownership of public industries
• Corruption in Global South is greater problem
• Less capital to go around
• Decreases trust in government

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Dealing with Corruption - Transparency

• Openness and accountability in government
• NGO Transparency International
• Corruption is the abuse of entrusted power for
  private gain. It hurts everyone whose life,
  livelihood or happiness depends on the integrity
  of people in a position of authority.
• Corruption is both a cause of poverty, and a
  barrier to overcoming it. It is one of the most
  serious obstacles to reducing poverty.

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South Koreas OPEN System

• Seoul Metropolitan government the OPEN System
  link
• Mayor Goh Kun

OPEN System Description