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Chapter 13: Development: The Glue that holds together the Global Economy

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Title: Chapter 13: Development: The Glue that holds together the Global Economy


1
Chapter 13 Development The Glue that holds
together the Global Economy
  • Where are we going, what, how, why, spatially
    where, and for whom

2
Link between Resource Curse Development
http//www.npr.org/2011/02/25/134048260/Libyas-Eco
nomy
3
7 points on Development
  • 1. Definining Developing Countries
  • Moral High Ground
  • 2. Goals of Development
  • Greed isn't enough
  • 3. Characteristics of Less Developed Countries
  • What baggage they bring to the table
  • 4. LDCs debt crisis
  • 5. Measuring Economic Development
  • Divining the future
  • 6. Defining Economic Development
  • 7. Core--Periphery Concepts vs. Growth Pole

4
But first reality check
  • Development for who???
  • Remember the Four major questions of the World
    Economy (chapter one)
  • What to produce given limited resources
  • How to produce it labor, capital, technology
  • Where to produce it why might it be in a give
    place
  • Who benefits and how rich, poor, both
  • The most important promise held out by the Global
    Economy is that all countries will develop as a
    result

5
1. What's in the Word Developing
6
1. What's in the Word Developing
  • Why are words important? Words as
    social/political indicators, words as
    powerExample
  • Mailman
  • Mailwoman
  • Mail carrier
  • Letter Carrier
  • Mailer
  • Letterer???
  •  
  • Soldier
  • Soldierette???

7
A. Neoclassical school's current favorite
Definitions
  • LDCs Less Developed Countries
  • early step on inevitable path
  • "there but for the grace of God go I"
  • Old terms underdeveloped, developing, primitive,
    traditional

8
A. Neoclassical school's current favorite
Definitions
  • IACs Industrially Advanced Countries  
  • further step on path based on industrial age
  • allows for future post-industrial acronym
  • Old terms developed, more-developed, modern,
    advanced

9
A. Neoclassical school's current favorite
Definitions
  • IACs and LDCs
  • NOTE Both terms are apologetic and yet hopeful
  • Some are better off
  • But you too can "own your own modern economy
    someday

10
B. Marxist School View of the Situation
  • Underdevelopement
  • An active state that results from outside
    exploitation and impoverishment

11
B. Marxist School View of the Situation
  • Capitalist (Hegemonic Imperial)
  • Countries
  • parasitical exploiters
  • economic colonial powers

12
B. Marxist School View of the Situation
  • Socialist Countries -- supposedly the solution
  • appear to have disappeared (if they ever existed)

13
B. Marxist School View of the Situation
  • New rich are party's new role models By
    Antoaneta Bezlova  May 8, 2002atimes.comBEIJING
    - Newly rich entrepreneurs, despised as
    exploiters for much of China's communist era,
    have become the new role models for the Communist
    Party, which once defined itself as the
    "political party of the proletariat". Marking
    Labor Day on May 1, China canonized private
    entrepreneurs as "model workers" - an honor that
    in the past was deserved solely by state-sector
    workers. On that day, the All China Federation of
    Trade Unions awarded Labor Medals to four private
    businessmen, and declared another 17
    entrepreneurs in the northwestern province of
    Shaanxi "model workers".

14
B. Marxist School View of the Situation
  • implied fraternal nations neither exploiter nor
    exploited
  • Is this possible???

15
Conclusion
  • How an Issue is Framed in Words Reflects Much
    about the agenda underlying the Solution

www.olive.kiev.ua/pro/americandream.jpg
http//www.affordableamericandream.us/images/house
withfamily.gif
16
2. Goals of Development
  • What is the Agenda???
  • "More!" Samuel Gompers, President
    AFL
  • "Love!" Timothy Leary,
    PhD, LSD

17
2. Goals of Development
18
2. Goals of Development
  • What exactly is the good life and the just
    society and the proper stance towards nature?
  • Very different answers will be given by people
    with different belief systems, or philosophies of
    life, or cultural explanations of the meaning of
    life and death. (Does this sound like
    Hoefstede???)

19
http//www.ted.com/talks/tim_jackson_s_economic_re
ality_check.html
20
2. Goals of Development Denis Goulets Approach
  • A New Ethics Of Development
  • Denis Goulet examines alternatives to one-eyed
    views of the good life, the just society, and our
    relationship with nature in his interview with
    Mike Gismondi of Aurora Online Magazine.A
    pioneer in the study of development ethics, Denis
    Goulet began exploring this new
    inter-disciplinary realm in 1956. For ten years
    he served apprenticeships in France, Spain,
    Algeria, Lebanon, and Brazil to become familiar
    with the sociology and anthropology of
    underdevelopment. He has lived among nomadic
    tribesmen in the Sahara worked as a factory hand
    and laborer in the United States, France, and
    Spain served on development planning teams for
    national governments and studied social change
    planning at universities and research institutes.
    He presently holds concurrent appointments in the
    Kellogg Institute for International Studies, the
    Department of Economics, and the Institute for
    International Peace Studies at the University of
    Notre Dame.
  • http//www.gateway.hr/index.php?folder119article
    24

21
2. Goals of Development
  • Goulet's Three
  • 1) Life Sustenance -- Guarantee basic needs
  • (See textbook s 1,2,3,7,8)
  • 2) Esteem -- Individual Worth
  • (See textbook s 5,9 note that doesn't perfectly
    fit)
  • 3) Freedom -- Pursuit of one's own dream to the
    level of one's own potential
  • (See textbook s 4,6)

22
Conclusion 
  • Development has both economic and humanistic
    goals, but at times they are in a dynamic
    tension.
  • More care for the human side can result in less
    current term economic gain
  • More emphasis on the economic side can lead to
    greater inequality and unsustainable gains
  • How might either of these effect the environment
    or the future??? NO EASY ANSWER, MORE BELIEF
    SYSTEM

23
3. Characteristics of LDCs
24
3. Characteristics of LDCs
  • 1) Rapid Population Growth -- result of declining
    death rate not yet accompanied by declining birth
    rate
  • Or in the case of China -- Demographic Momentum
    still results in crushing large additions to the
    Population
  • 2) Unemployment/underemployment
  • 3) Low labor productivity
  • 4) Adverse climate and/or lack of natural
    resources
  • 5) Lack of capital and Investment
  • 6) Lack of technology
  • 7) Local Cultural Factors can impede capitalist
    growth
  • 8) Political Factors can also impede capitalist
    growth
  • 9) Vicious Cycle of Poverty (see model next slide)

25
Model of the Vicious Cycle of Poverty
  • Fig 13.16a  Basically the argument here is that
    low incomes are both caused by and cause rapid
    population growth. Why? You explain.

26
Escaping the Vicious Cycle of Poverty
  • To escape different groups offer different
    solutions
  • Direct investment perhaps FDI (capitalist
    resource mobilization approach)
  • Crash program in literacy (more
    socialist/humanist human capital theory)
  • Redistribution of existing capital
    (socialist/communist end exploitation)

27
Model of escape
  • Example of the Human Capital Approach
  • Fig. 13.16b Basically High Education and Good
    Health are mutually reinforcing and lead to
    greater productivity and hence maintain our
    Environment.
  • Question remains how do we START? 
  • Who pays for the investment in
  • Education
  • Health Services
  • Resource Management
  • Enhanced Earning Capacity -- like new labor
    intensive industries for Export market
  •  

28
Model of Escape
  • Each school would answer with its own bias
  • Capitalist foreign investment
  • Humanist local sources would be martialled and
    humanitarians and foreign aid would help
  • Marxists redistibution of existing capital

29
Conclusions
  • Many pitfalls face LDCs where, by some
    accounts, "The rich get richer and the poor have
    babies
  • Some LDCs pitfalls a result of their
    ownproblems others not
  • Export lead growth can cause wealth
    production,but for whom? Four major questions of
    the World Economy
  • Cont.

www.rivertowns.net/rustad/xru015.gif
30
Conclusions
  • Many pitfalls face LDCs where by some
    accounts "The rich get richer and the poor have
    babies
  • Others argue Sharing helps all
  • For others nothing short of revolutionwill
    work   

www.rivertowns.net/rustad/xru015.gif
31
Move to Lecture 14
  • Mechanisms to start the development process

32
4. LDCs debt crisis
33
4. LDCs debt crisis
  • Basically over-extended selves in 70s and
    couldn't repay in high price 80s of low oil year
    90s
  • Included oil rich and oil poor alike

34
4. LDCs debt crisis
  • The Issue -- the crisis is like the person with
    so much credit card debt that they can't even
    make the minimum payment -- and even if they did
    they are still enslaved to debt

35
4. LDCs debt crisis
  • Result of the past by mid 80s more capital flow
    from LDCs to AICs than reverse
  • IMF sets conditions for bail-out
  • Goal Restore LDC growth
  • Reduce LDC Govt. involvement (more free mrkt)
  • Expand exports
  • Reduce imports (seen as luxury)

36
G-8 Agrees to some debt relief
  • Aid to Africa and debt cancellation
  • The traditional meeting of G8 finance ministers
    before the summit took place in London on 10 and
    11 June 2005, hosted by Chancellor Gordon Brown.
    On 11 June, agreement was reached to write off
    the entire US40 billion debt owed by 18 Highly
    Indebted Poor Countries to the World Bank, the
    International Monetary Fund and the African
    Development Fund. The annual saving in debt
    payments amounts to just over US1 billion. War
    on Want estimates that US45.7 billion would be
    required for 62 countries to meet the Millennium
    Development Goals. The ministers stated that
    twenty more countries, with an additional US15
    billion in debt, would be eligible for debt
    relief if they met targets on fighting corruption
    and continue to fulfill structural adjustment
    conditionalities that eliminate impediments to
    private investment. The agreement, which required
    weeks of intense negotiations led by Brown, must
    be approved by the lending institutions to take
    effect.
  • http//en.wikipedia.org/wiki/31st_G8_summitAid_to
    _Africa_and_debt_cancellation
  • Some argue this doesnt go far enough

37
Conclusion
  • Success or failure still open question,

Arguments against debt relief Opponents of debt
relief argue that it is a blank cheque to
governments, and fear savings will not reach the
poor in countries plagued by corruption. Others
argue that countries will go out and contract
further debts, under the belief that these debts
will also be forgiven in some future date. They
use the money to enhance the wealth and spending
ability of the rich http//en.wikipedia.org/wiki/
Debt_relief
38
Wild card what happens when the Western World
Economy is Threatened?
CHINA A NEW SOURCE OF LOANS AND GRANTS????
39
5. MEASURES OF ECONOMIC DEVELOPMENT or how do we
tell who is developed 
40
5. MEASURES OF ECONOMIC DEVELOPMENT
  • A. PER CAPITA INCOME (GDP/Capita)
  • 1. An easy to determine measure. How do you
    calculate this???

http//upload.wikimedia.org/wikipedia/en/e/ea/GDP_
nominal_per_capita_world_map_IMF_figures_for_year_
2005.png
41
Criticism per capita income
  • Five criticisms
  • 1) distribution not included
  • 2) exchange rate problems
  • 3) value of goods not always comparable across
    nations
  • 4) goods and bads both included (what does this
    mean?)
  • 5) growth may not be sustainable -- measures
    current consumption patterns not level of
    investment in the future 

42
B. Consumer Purchasing power -- an alternate
measure addressed criticism 3 from above
slide.
  • Referred to as PPP per capitaPurchasing Power
    Parity
  • What is the difference of purchasing power and
    "per capita income"?

43
Geographic Comparison
Per capita Income
  • Note the subtle differences in PPP
  • Europe more complex
  • Africa more uniform,
  • S.America splits in two
  • US Canada same

PPP per capita
44
GDP PPP table top 16
Rank Country GDP () Rank Country GDP (PPP)
Rank Country per capita Rank Country per capita
1 Luxembourg 80,288 1 Luxembourg 69,800
2 Norway 64,193 2 Norway 42,364
3 Iceland 52,764 3 United States 41,399
4 Switzerland 50,532 4 Ireland 40,610
5 Ireland 48,604 5 Iceland 35,115
6 Denmark 47,984 6 Denmark 34,740
7 Qatar 43,110 7 Canada 34,273
8 United States 42,000 8 Hong Kong 33,479
9 Sweden 39,694 9 Austria 33,432
10 Netherlands 38,618 10 Switzerland 32,571
11 Finland 37,504 11 Qatar 31,397
12 Austria 37,117 12 Belgium 31,244
13 United Kingdom 37,023 13 Finland 31,208
14 Japan 35,757 14 Australia 30,897
15 Belgium 35,712 15 Netherlands 30,862
16 Canada 35,133 16 Japan 30,615

The table below includes data for the year 2005 for all 16 members of the International Monetary Fund. Data are in United States dollars. The table below includes data for the year 2005 for all 16 members of the International Monetary Fund. Data are in United States dollars. The table below includes data for the year 2005 for all 16 members of the International Monetary Fund. Data are in United States dollars. The table below includes data for the year 2005 for all 16 members of the International Monetary Fund. Data are in United States dollars. The table below includes data for the year 2005 for all 16 members of the International Monetary Fund. Data are in United States dollars. The table below includes data for the year 2005 for all 16 members of the International Monetary Fund. Data are in United States dollars.
http//en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita http//en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita http//en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita http//en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita http//en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita http//en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)_per_capita
45
Bottom dozen or so quite similar
Rank Country GDP () Rank Country GDP (PPP)
Rank Country per capita Rank Country per capita
170 Afghanistan 300 170 Zambia 931
171 Madagascar 282 171 Madagascar 908
172 Niger 274 172 Sierra Leone 903
173 Rwanda 242 173 Niger 872
174 Sierra Leone 223 174 Eritrea 858
175 Myanmar 219 175 Ethiopia 823
176 Eritrea 209 176 Democratic Republic of the Congo 774 2
177 Guinea-Bissau 190 177 Yemen 751
178 Liberia 161 178 Burundi 739
179 Malawi 161 179 Guinea-Bissau 736
180 Ethiopia 153 180 Tanzania 723
181 Democratic Republic of the Congo 119 3 181 Malawi 596
182 Burundi 107
46
C. ECONOMIC STRUCTURE
  • 1. What kinds of jobs that appear under each of
    the four categories listed below?
  • PRIMARY EMPLOYMENT
  • SECONDARY
  • TERTIARY
  • QUATERNARY
  • Which types of employment predominates in
    developed countries?
  • Which in less developed?
  • What type of job will most of the students in
    class hope to obtain?  

47
D. PRODUCTIVITY or more with less
  • What is productivity? Output/input
  • Why is it so important? Squeeze more from limited
    resources
  • How does this relate to the effectiveness of the
    workforce?
  • Are AICs always more productive?
  • Consider energy use in Russia
  • Or in China vs India
  •  

48
E. RAW MATERIALS -- country's inheritance
Development Or Windfall Wealth
  • E. RAW MATERIALS -- country's inheritance
  • Does this guarantee development? Explain.

49
E. RAW MATERIALS -- country's inheritance
  • 1. Does this guarantee development? Petro State
    trap or Dutch disease.
  • Consider Nigeria, Venezuela, or Native Americans
  • Can be resource rich, income poor
  • 2. Development vs Sustainable Development
  • 3. Two approaches
  • a. Sell it off
  • b. Combine it with technology to increase
    national wealth
  • Example countries
  • Canada, Australia, S. Arabia  
  • What happens when the Aussies sell their last
    load of iron ore to the Chinese?

50
F. HUMAN DEVELOPMENT INDEX
  • -- This basically the same process as is done in
    the United States to rank best cities or
    universities (or for you sports fans, the same
    college football teams, only the variables are
    changed but the technique is the same) 
  • What variables are used to create the Human
    Development Index (HDI). What does it describe.
  • What continent generally has the lowest HDI
    measures? What two continents have the highest
    level? Compare HDI to per capita income
  • Leave these for you to read about

51
UNDP Human Development Index
52
G.  Other measures
  • There is basically a "cottage industry" in
    creating additional measures of development. 
    Here is one for Happiness.  Compare Mexico and US
    for Happiness. (next slide)

53
A Plateau of Happiness
54
Conclusions
  • There is no single measure that fully describes
    development. A combination of measures provides
    a more complete picture

55
7. Core--Periphery Concepts vs. Growth Pole
56
Expanding Pattern of Core
57
7. Core--Periphery Concepts vs. Growth Pole
  • I. The two camps
  • A. Negative -- Marxian Approach
  • B. Positive -- Perroux and Growth Poles (not
    dealt with in text)

58
Core--Periphery
  • Negative -- Marxian Type Approach
  • 1. World contains few small wealthy Cores
    surrounded and supplied by large poor Periphery
    (see Figures 14.1,18, 20, 25, 26 for
    international national spatial examples)
  • 2. Core acts as parasitical appendage on the
    landscape
  • 3. Cores occur at various international,
    national, local levels

59
7. Core--Periphery Concepts vs. Growth Pole
  • B. Positive -- Perroux and Growth Poles (not
    dealt with in text) -- more NeoClassical Approach
  • Growth does not appear everywhere at the same
    time it becomes manifest at points or poles of
    growth, with variable intensity it spreads
    through different channels with variable terminal
    effects on the whole economy. Francois Perroux

60
Growth Poles
  • Agrees that
  • 1.World contains few small wealthy Cores
    surrounded and supplied by large less developed
    Periphery
  • 2. Core acts and draws upon periphery for
    resources, labor, and capital
  • 3. Cores occur at various scales

61
Growth Poles
  • Difference
  • 1. This theory assumes Growth Poles are a natural
    evolution of world economies
  • 2. Assumes that they are episodic and temporary
    not permanent or predatory
  • 3. Stresses the benefits to the Global Economy of
    such spatial constructs

62
Growth Poles -- Background
  • François Perroux, 1903-1987
  •  François Perroux belongs to that small, strange
    group of unique Frenchmen who, in spite of the
    Anglophone dominance of economics, still manage
    to occasionally infect the imagination of the
    economics world with their novel ideas.
  • At Collège de France, Perroux studied under
    Etienne Antonelli, the last lingering shadow of
    the Lausanne School. In many ways, Perroux
    inherited the mantle of Leon Walras and carried
    it to perhaps where the failed engineering
    student would have liked to have taken it. Like
    Walras, he was a Cartesian in method, a socialist
    in sentiment and an evolutionist in vision. His
    early acquaintance and interaction with other
    independent thinkers, such as Pantaleoni,
    Aftalion, Schumpeter, Morgenstern and Allais,
    added even more streams of flavor into his unique
    blend of thinking. After setting up the Institut
    de Sciences Economiques Appliqueées (ISEA) in
    1944, he had a chance to encounter and absorb the
    ideas of the younger economists which converged
    upon it.

63
Growth Poles -- Background
  • Regional growth has been the subject of research
    going back to Francois Perroux' work on growth
    poles in the 1950s. In the US such research
    currently goes on under the label of "clusters"
    Michael Porter of the Harvard Business School
    talks of the 'Diamond of Competitive Advantage'.
    The early literature on growth poles was
    concerned with the transport of physical goods
    and, for this reason, stressed the importance of
    physical proximity to the eventual success of a
    given growth pole. Work on clusters also stresses
    the importance of physical proximity, but with a
    much greater stress on face-to-face knowledge
    flows than on the flow of physical goods.
    (Growth-Nodes in a Knowledge-based Europe
    (G-NIKE), Researchers Dr. Bertram Konert, Dirk
    Hermanns,
  • http//www.eim.org/DigWorld/Projects/ViewDigworld.
    php3?ID35 )

64
Growth Poles Their Impacts
  • 1. Centers of Technology Innovation suddenly
    appear on the landscape (ex. Silicon Valley)
  • 2. Surrounding region benefits in a distance
    decay function (further away less benefit)
  • 3. As original technology ages, Growth Pole faces
    crises
  • Can decline (Detroit, Cleveland,... Seattle in
    the future???)
  • Can create new technology rebirth (Boston
    textiles to computers)

65
The continuing Debate
  • Marxian critique of Growth Poles Continued
    existence of Pole indicates unequal, parasitical
    nature of Core
  • Perrouxian response Can not "engineer or create"
    Poles, therefore impossible to maintain them
    through inefficient, non-competitive
    relationships
  • Simply the rich arent always going to be rich

66
Another View from the Left
  • II. Wallerstein... World Systems Monopolies
    are the name of the game
  • "All monopolies great and small will fall... but
    not too far"
  • 1. International Core(s) in a Dynamic system,
    alternates between
  • Single Hegemonic Power with few colonies
  • Many smaller Hegemonic Powers with many colonies

67
World Systems
  • 2. Neither state is stable
  •  
  • Single Super Power becomes over-extended, as it
    polices the world then secondary powers save
    policing costs and bide their time
  • Many smaller Powers results in rising tensions
    and emergence of new great power through conflict

68
World Systems
  • 3. Periphery
  • During period of one Super Power All countries
    are informally tied to Hegemonic Single Power --
    few colonies
  • During period of many Powers -- smaller countries
    are formally tied to many Small Powers -- many
    colonies

69
World Systems
  • 4. World Today (parting questions)
  • Is there a single Hegemonic Super Power?
  • b. Are there many Smaller Powers waiting in the
    wings?
  • c. Are Colonial spheres being mapped out?

70
Another View from the Right
  • III. Myrdal Hirschman and the Local Regional
    Core--Periphery Mechanism a way to explain the
    birth, growth and death of cores (growth poles)
  • 1. "In the Beginning... (birth) there are two
    regions A and B each with ample factors
  • Labor
  • Capital
  • Resources

71
Local Regional Core--Periphery Mechanism
  • 2. "After the Fall..." Region A emerges as a Core
    (growth)
  • jumps ahead technologically
  • causing it to fully, efficiently use its factors
    of production
  • gets "rich"

72
Local Regional Core--Periphery Mechanism
  • 3. "Meanwhile back at the ranch..." (other region
    fails to grow)
  • Region B workers and capitalists start moving to
    Region A to get "rich"
  • Resources soon follow higher demands in Region A

73
Local Regional Core--Periphery Mechanism
  • 4. "As the rich get richer..." (final stage of
    growth)
  • More and more flows to Region A
  • All new technology created in Region A
  • "Circular and cumulative causation" sets in
  • Few benefits "trickle down" to Region B
  • Region B despairs and fails to create new
    technology

74
Local Regional Core--Periphery Mechanism
  • 5. "The Second Coming... (death and rebirth)
  •  
  • Government brings technology and capital to
    Region B
  • Region B with lower labor and resource costs
    catches-up

75
EXAMPLES
  • 6. Case 1 Appalachia
  • New Government Interstates were built to lure
    industry into the mountains
  • Instead enabled labor to leave more easily
  • So does Government intervention work?  If not why
    do we subsidize Boeing so much???  What about
    Bonneville Power???

76
Examples
  • Case 2 Asian Tigers China
  • Government "Developmental State" policies adopted
  • Technology imported
  • Walls of trade barriers created
  • Cheap labor exploited
  • Mobilization of resources has proven highly
    effective
  • Creation of new technologies is still illusive
    (but for how long???)
  • Does China trade fairly???

77
Future???
78
Closing shot
  • As you read the textbook and review the study
    notes be sure that you look at the following
    issues discussed about Development Theory
  • Dependency
  • Modernization
  • World Systems

79
Conclusions
  • Development is not evenly spread across the
    landscape.
  • There are core and periphery regions
  • The cause of core regions is open to debate
  • At time in history there are single super powers
    and at others many powers, this difference effect
    the status of the core and periphery
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