Development

1. Development Why Are Some Countries Rich and Others Poor?

2. Objectives After successful completion of this unit you will be able to: • Identify and explain the factors shaping development. • Describe how development is measured. • Define and analyze the benefits and problems associated with models of self-sufficiency and international trade. • Identify, explain, and evaluate the various models of development. • Identify the major international organizations involved in development, the policies they advocate, and criticisms against them. • Explain fair trade and how it could be an alternative model for development.

3. What does it mean to be developed? What types of indicators tell us how developed a country is? • Normative: “establishment of standards, or norms, to help measure the quality of life and economic prosperity of groups of people” (pg. 263).

4. What Is Development? • More Developed Countries (MDCs) – further along the development continuum. • Less Developed Countries (LDCs) – at an earlier stage of the development continuum.

5. Measuring Development Economic Indicators: • Gross Domestic Product (GDP) – an estimate of the total value of all materials, foodstuffs, goods, and services produced by a country in a year. • Gross National Product – similar to GDP but includes value of income abroad. • Purchasing Power Parity – exchange rate that lets us compare data for countries with different currency systems. • Weaknesses?

6. Where People Live by Economic Status

7. Measuring Development

9. Measuring Development Sociodemographic Factors: How well off is the population? Selected indicators: • Disease Rates • Education Rates/Literacy • Nutrition • Infant Mortality Rates

10. Development Indicators Environmental Indicators: Concerned with sustainability of development – grew out of the 1992 Earth Summit hosted by the UN. • Biodiversity • Pollution • Access to clean water • Frequency of environmental disasters

11. Indicators of Development Human Development Index (HDI) • Created in 1990 and used by the United Nations • Indices changed from what is mentioned in the text • 0 to 1 – high scores indicate a country is further along in the development process. Old indicators: • Economic – GDP (PPP) per capita • Social – Adult literacy rate, gross enrollment ratio • Demographic – life expectancy

13. Human Development Index

14. Gender and Development • Text mentions the Gender Related Development Index (GDI) & Gender Empowerment Measure (GEM) • Replaced by the Gender Inequality Index • % loss to potential human development due to shortfalls in dimensions included. • 0-1 scale - high values indicate higher levels of inequality between males and females.

16. Gender Inequality Index • Reproductive Health • Adolescent fertility • Maternal mortality • Empowerment • Educational attainment • Parliamentary representation • Labor Market • Labor force participation Prostitutes in Mumbai International Labour Organization Link to UN Map Tool Half the Sky Trailer

17. Income Inequality Measuring Inequality • Income Distribution – the way income is broken up across different groups. • Income Inequality – ratio of earnings of the richest to the earnings of the poorest. • Richest 20% - 74% of income; Poorest 20% - 1.5%

18. Source: Credit Suisse Research Institute, Global Wealth Report, October 2010

21. Measuring and Understanding Inequality • Gini coefficient – a statistic that can be used to measure inequality • Range of 0 to 100, zero meaning complete income equality, high values indicating complete inequality.

22. Understanding Income Inequality • Personal factors • Social factors • Policy factors • Historical • Does globalization increase or decrease inequality?

23. Development Theories • Why are some countries more developed than others? • What should a country do to become more developed?

24. The Classical Model of Development • Created by Walt W. Rostow • Development is the result of investment • Need investment to diversify the economy • Five stages would transform the country from a preindustrial society into a modernized service-oriented economy

25. Stage 5: Age of Mass Consumption Consumer oriented Service sector dominated Rostow’s Classical Development Model Stage 4: Drive to Maturity Diversification Less Reliance on Imports Stage 3: Take-Off Industrialization Growth in new technologies Stage 2: Pre-conditions for Take-off Specialization in key areas Elites start innovation The country transitions from a primary to a tertiary sector dominated economy. Stage 1: Traditional Society Subsistence/agricultural

26. Discussion: Rostow’s Development Model Does Rostow’s Development Model work for all countries? Why or Why Not? ? Mr. Rostow

27. Dependency Theory • Forget about stages, development is a result of relational processes. • International trade is the central piece of the relational process. • Some states have more power in international trade and are dominant states. • Other states do not have the resources or power and are dependent states. • Dominant states develop at the expense of dependent states.

28. World-System Theory • Developed by Immanuel Wallerstein. • The capitalist world economy causes underdevelopment. • Capitalism creates an international division of labor, or a hierarchy of states. • Core, semi-peripheral, and peripheral regions. • System of unequal trade relationships that support the growth of the core at the expense of the peripheral and semi-peripheral states. • States can change their role in the international division of labor.

29. Core and the Periphery

30. Map of World According to World-System Theory Fig 9.15b from Greiner

31. Neoliberal Model of Development • Based on the liberalist ideas of Rousseau, T. Jefferson, and Adam Smith. • Suggests that capitalism can help countries develop as long as markets were free and open. • Suggested underdevelopment was the result of government policies that prevent economic growth. • So, countries should engage in structural adjustment programs that involve strategies for market reform and deregulation.

32. United Nations Development Program The Millennium Development Goals: Eight Goals for 2015 • Eradicate extreme poverty and hunger • Achieve universal primary education • Promote gender equality and empower women • Reduce child mortality • Improve maternal health • Combat HIV/AIDS, malaria and other diseases • Ensure environmental sustainability • Develop a global partnership for development United Nations Millennium Declaration A set of goals made by 189 nations in 2000. Human Development Report Launch 2013

33. Structural Adjustment Programs Provide debt relief, but must commit to a structural adjustment program. How? Criticisms?

34. International Connections World Bank International Monetary Fund (IMF) Provides loans to countries with payment problems. Help to: Rebuild international reserves Stabilize currency exchange rates Pay for imports Not for specific projects International Bank for Reconstruction and Development – loans for middle income and creditworthy countries International Development Association – for the poorest countries Provide low-interest loans, interest-free credits and grants to developing countries for investments in multi-sector projects. Both fund development projects to attract foreign direct investment.

35. International Connections World Trade Organization (WTO) • Promotes the free trade model • Works to reduce trade barriers • How? • Criticisms?

36. International Connections Foreign Direct Investment: Investment by a foreign company in the economy of another country. • Investment does not flow equally. • In 2007, 3/4s of investment from MDC companies went to other MDCs. Transnational Corporations: invest and operate in countries other than one the headquarters are in. • Major influences: In 2002, of the top 100 economies, 51 were companies and 49 were states. -Globalissues.org

37. Foreign Direct Investment

38. Examples of Failed Development Projects • Lesotho Highlands Water Project, $3.5 billion • Project: Sell mountain water to South Africa and divert some for creating electricity. • Problems: • Electricity was too costly for most people. • Environmental and economic problems evolved downstream. Info from MSNBC http://www.icpdr.org/icpdr-pages/dw0902_p_10.htm

39. Examples of Failed Projects • Lake Turkana Fish Processing Plant in Kenya, $22 million • Purpose: Provide jobs to the Turkana through fishing and fish processing for export. • Problems: • Turkana are nomads with no fishing experience or history of eating fish. • Too expensive to operate freezers and had a high demand for clean water…difficult in a desert environment. Info from MSNBC Lake Turkana World Heritage Site (Alison M. Jones for www.nowater-nolife.org)

40. Challenges with Development Projects Development Projects aren’t always successful: • Faulty engineering – so project doesn’t function correctly • Corruption or loan mismanagement within receiving countries • Infrastructure doesn’t attract investment • ? • ? Many receiving countries are unable to repay loans

41. Debt as % of GNI

42. Sustainable Development Fair Trade - Products made and traded according to standards that protect workers and small businesses in LDCs -- Video Microfinancing - Microcredit programs extend small loans to very poor people for self-employment projects that generate income, allowing them to care for themselves and their families. -started by Muhammad Yunus -address gender-related inequalities

43. Why are Some Countries More Developed Than Others? Geographic Factors Institutional/Historical Colonialism and Imperialism Technological power Government StructuresCorruption Discrimination • Situational – • Location of territory • Presence of key resources • Dependence on a single resource • Latitude • Shape of Continents • Transport • Markets • Where are the people living? • Agroclimatic • Health / Disease • Prevalence of Disasters Geographic Path Dependence – in a location, economic organization in past may shape future. Initial advantage makes it difficult for other places to catch up. Adapted from Guns, Germs, and Steel by Jared Diamond

44. Review! • Be able to provide examples (and define where appropriate) of economic, sociodemographic indicators, environmental indicators. • Understand the difference between indicators and indices. What is the HDI? And the gender related indices? Know how these have changed. • What types of factors influence development? Be able to identify and describe them. • What does global inequality look like? • Be able to identify and explain the different development theories. • What are structural adjustment programs, what organizations have they been associated with and what are some criticisms? • Terms: development, normative, dependency, GNI, GDP, neoliberalism, poverty line