Development

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Development
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What is Development?

• Earths countries can be classified according to
  their level of development
• Development is the process of improving the
  material conditions of people through the
  diffusion of knowledge and technology
• The process of development is continuous
  involving actions to improve the health and
  prosperity of the people
• More developed countries (MDC) also known as
  developed or relatively developed lie further
  along the development continuum than less
  developed countries (LDC) also known as
  developing (implies that further progress is
  expected)

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Challenges

• For MDCs the challenge is to maintain a high
  level of development at a global scale
• For LDCs the challenge is to find connections in
  the global economy by taking advantage of local
  skills and resources

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Why Does Development Vary Among Countries?

• A countrys level of development can be
  determined according to 3 indicators
• Economic
• Social
• Demographic
• The UNs Human Development Index (HDI) recognizes
  that a countrys level of development is a
  function of all 3 indicators
• GDP per capita
• Literacy rate and amount of education
• Life expectancy
• The highest HDI possible is 1.0
• Norway 0.963
• Niger 0.281

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HDI
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Economic Indicators of Development

• UN uses Gross Domestic Product per capita
• 4 other indicators are sometimes used
• Economic structure
• Worker productivity
• Access to raw materials
• Availability of consumer goods
• GDP p.c.
• Value of all final goods and services produced in
  a country in a year divided by the total
  population (i.e. the average)
• MDC gt20,000 p.a.
• LDC 1,000 p.a.
• Average income does not show distribution, not
  informal income
• E.g. not everyone in the US is wealthy 1/8 is
  classified as poor
• However, the higher the GDP, the greater the
  potential for a more comfortable life

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Economic Sectors

• Jobs fall into 3 sectors
• Primary jobs involving the extraction of raw
  materials e.g. farming, mining, fishing,
  forestry and hunting
• Secondary includes processing raw materials and
  manufacturing of products
• Tertiary the provision of services e.g.
  banking, retailing, education, government

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• First priority is to secure food
• A high of agricultural workers indicates people
  involved in food production for themselves
• A low of agricultural workers indicates that a
  handful of farmers can produce all the food
  needed
• Freed from producing food, the majority of
  workers can then contribute through the secondary
  and tertiary sectors to produce wealth

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Productivity Raw Materials

• Productivity is greater in MDCs because of access
  to machinery and energy sources
• Productivity can be measured by the value added
  (gross value of the product minus the cost of raw
  materials and energy)
• Development requires access to raw materials and
  energy
• UK, 1st developed country (C18th) had abundant
  raw materials when they ran short, the imported
  from colonies this sustained development in
  Europe but retarded it in Africa and Asia
• Rise fall in global prices for raw materials
  affects development
• Raw materials determine development potential
  rather than actual development e.g. Japan,
  Singapore, Switzerland (MDCs few natural
  resources) DR Congo (LDC abundant resources,
  unstable government)

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Consumer Goods

• MDC wealth pays for needs (essential for life)
  and wants (luxury goods services)
• 3 consumer goods (11 ratio in MDCs, 1100 in
  LDCs) are good indicators of development
• Telephones
• Motor vehicles
• TVs
• In LDCs these goods are not central to daily life
  why?
• Results in different cultural characteristics

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Social Indicators of Development

• MDCs use their wealth to fund social services
  (schools, hospitals welfare programs)
• Therefore people are better educated, healthier
  and protected form hardships hence they can be
  more productive
• Countries with high levels of development have
  greater quality and quantity of education
  services
• Schooling
• MDC (mean 10 years) LDC (mean 2 years)
• Literacy rates (ability to read and write)
• MDC (gt95) LDC (30)
• Health Welfare
• Ratios of people to doctors, hospitals nurses
  (MDC low LDC high)
• Many MDCs health care is a public service (low or
  no cost)
• Diet influences health (MDCs more proteins
  calories
• MDCs welfare for sick, elderly, orphaned, vets,
  unemployed
• Challenge of MDCs to maintain current levels of
  social services

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Demographic Indicators of Development

• Life expectancy at birth (LEB)
• Others include
• Infant mortality rate (IMR)
• Natural increase rate (NIR)
• Crude Birth Rate (CBR)

Demographic Indicator LDC MDC
LEB Early 40s Mid 70s
IMR 10 1
NIR gt2 lt1
CBR gt40/1000 lt15/1000
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Where are MDCs LDCs?
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MDCs

• Anglo-America (0.94)
• Language religion patterns less diverse
• Wealthy, industrial, consumer, high tech, food
  producing
• Western Europe (0.92)
• More heterogeneous culturally
• industrial, former colonial power, wealthy,
  service-centred, united (EU)
• Eastern Europe (0.78)
• Former Communist bloc, declining HDI, neglected
  modernization of industry, restructuring to
  market economies
• Japan (0.93)
• Imports raw materials, skilled labour force, RD
  for new products manufacturing processes
• South Pacific (0.93)
• Former British colonies exporters of food, low
  populations in relation to resources

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LDCs

• Latin America (0.78)
• Culturally diverse urbanized, developed Atlantic
  coast, past political instability, uneven income
  distribution, landless peasants
• East Asia (0.72)
• China - Centrally planned, agrarian, large
  population, potential economic tiger, some
  reforms
• Southeast Asia (0.71)
• Large population, C20th political instability,
  inhospitable environments, cash crop production,
  corruption
• Middle East (0.66)
• Desert, large petroleum reserves in some states,
  tension between Islam development, low literacy
  among women, cultural disputes, hotbed of
  terrorism
• South Asia (0.58)
• High population densities growth, Monsoon
  climate, Green Revolution, low literacy amongst
  women
• Sub-Saharan Africa (0.47)
• Rich in resources, poorest region on Earth,
  relatively low populations compared to size of
  continent
• In the past, resources used to fuel Europes
  economies landlocked states trade difficulties,
  low world prices for resources, political
  instability, climatic restrictions on food
  supply, high NIR, corruption, tribal culture
  mentality

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Gender Inequality

• In every country, gender inequalities exist to a
  greater or lesser extent
• Gender-Related Development Index (GDI)
• Compares level of development of women with that
  of both genders
• Complete gender equality GDI1.0
• Average incomes of women are less than men
• Women have lower levels of literacy than men in
  LDCs
• LEB women higher than men (7 in MDCs 1 in LDCs)
• Gender Empowerment Measure (GEM)
• Compares the ability of women and men to
  participate in economic and political decision
  making
• In MDCs and LDCs fewer women hold positions of
  political economic power
• Fewer women in professional and technical
  positions

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Literacy Rates
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Obstacles to Development in LDCs

• The gap between LDCs and MDCs continues to widen
• 20 worlds population living in MDCs consumer
  5/6 of worlds goods 14 of worlds population
  in Africa consume 1 of worlds goods
• 2 major obstacles to development
• Adopting policies that successfully promote
  development
• Finding funds to pay for development
• 2 models
• International trade model
• Self-sufficiency model

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Development Through Self-Sufficiency

• Balanced growth, spreading investment equally
  among sectors regions
• Through trade barriers (duties, quotas, red tape)
• Case Study India
• Trade barriers protected domestic industries
• However Indias production was also for the
  domestic market only no generation of foreign
  currency
• Subsidies and govt run industries
• Inefficient and outdated industries
• Large bureaucracy prone to corruption black
  market

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Development Through International Trade

• Use of absolute and comparative advantage to
  generate wealth and foreign currency
• Rostows Development Model
• Traditional society
• Agrarian society, religious and military
• Preconditions for take-off
• Elite group initiates innovative activities
  investment in new technology infrastructure
• The take-off
• Rapid growth in limited activities where
  technology grows rapidly other sectors remain
  traditional
• The drive to maturity
• Modern technology diffuses to all sectors
  specialization of workers
• The age of mass consumption
• Production shifts from heavy industry to consumer
  goods

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International Trade Model

• According to the model
• Each country is in 1 of the 5 stages
• LDCs (1,2,3) MDCs (4,5)
• LDCs will achieve development by moving up
  through the stages
• Country engaged in international trade benefits
  from a wider marketplace
• Must keep abreast of changes in the market
• Model based on the fact that
• certain countries (e.g. Japan) had joined W.
  Europe Anglo-America surely others could too
• many LDCs contain abundant raw materials

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Examples of ITM

• Petroleum-rich Persian Gulf States
• Saudi Arabia, Kuwait, Bahrain, Oman, UAE
• Used to be LDCs until 1970s oil boom
• Petroleum revenues have financed large scale
  development housing, airports, universities,
  telecom networks
• Diffusion of consumer goods has altered the
  landscape e.g. cars, TV, imported foods
• Sometimes conflicts with Islamic religious
  principles sometimes adaptation occurs

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Persian Gulf States
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Examples of ITM (cont.)

• The Four Asian Dragons
• S. Korea, Singapore, Taiwan Hong Kong
• Singapore HK have no natural resources
• Taiwan S. Korea limited resources
• Therefore they developed by concentrating on
• Producing a handful of goods including electronic
  good and clothing
• Lower labour costs enabling goods to be sold
  cheaply

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Limitations of the ITM

• 3 problems hinder countries from developing
  through the ITM approach
• Uneven resource distribution e.g. Zambia has
  abundant copper reserves declining copper
  prices have hindered development
• Market stagnation world market demand has slowed
  down (MDCs have limited pop growth)
• Increased dependence on MDCs LDCs production for
  world markets may compromise production of
  necessities for the domestic market
• Nevertheless the ITM has been the preferred
  alternative for LDCs
• E.g. India has removed trade barriers
  monopolies dismantled quality of goods has
  improved attracted trans-national corporations
  (TNC) GDP has increased dramatically

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World Trade Organization (WTO)

• To promote the ITM, countries dominating world
  trade formed the WTO
• Idea is to promote international trade
• By reducing or eliminating barriers to trade
• By enforcing WTO agreements protection of
  intellectual property rights
• Critique of WTO
• WTO is anti-democratic
• Protects large corporations
• Compromises sovereignty of states

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Financing Development

• LDCs lack money for development
• Funds come from MDCs
• Loans from banks and international organizations
• Direct investment from transnational corp.
• Loans
• IMF and World Bank loans to finance
  infrastructure projects to attract business
  investment and development. Problems
• Project failure
• Inability of LDCs to repay loans
• TNC (HQ in MDCs branches in LDCs). Problems
• Profits return to MDCs
• Employment opportunities extended to fortunate
  few
• Negative impact on local culture

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Core-Periphery Model
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Core-Periphery Model (cont.)

• Core MDCs
• W. Europe, Anglo-America, Australia New Zealand
• Periphery LDCs
• outer rings around the core
• Africa, Asia, S. America, E. Europe
• Semi-periphery Newly Industrialized Countries
  (NIC)
• e.g. Taiwan, Mexico, Brazil, India, S. Korea

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The Role of NGOs IDAs in Development

• Non-governmental organizations (NGOs)
• Case Studies
• World Vision
• The Grameen Bank
• Social Entrepreneurs
• International Development Agencies (IDAs)
• Case Studies
• Canadian International Development Agency (CIDA)
• Norwegian Aid