Newly Industrializing and Less Developed Countries

majority of the world’s countries have neither advanced democratic or communist regimes third-world countries  “less developed countries (LDCs) and “newly industrializing countries” (NICs) compressed modernity : rapid economic and political which transforms a country into –a stable nation with democratizing political institutions, –a growing economy, and –an expanding group of nongovernmental institutions

Economic Development Economic liberalization: –privatization (expanding private ownership of property) and –marketization (allowing free-market principles to govern the economy) Gross National Product: the total market value of all goods and services produced in the country –per capita GNP Purchasing Power Parity: estimates buying power by using U.S. prices as benchmark –relative cost of living

Comparative PPP CountryPPP (in U.S.$) United Kingdom$36,600 Russia$15,800 China$6,000 Mexico$14,200 Iran$12,800 Nigeria$2,300

economic sectors primary sector : –uses raw materials –agriculture, farm animals, fishing, forestry, mining –largest sector in low-income, pre-industrial countries secondary sector: –transforms raw materials –petroleum refining, machine making –sector that grows most quickly as country industrializes, causes population shift tertiary sector: –services: construction, trade, finance, real estate, government, private services, transportation –dominates post-industrial societies

theories of economic development what explains lack of economic development in LDCs? neocolonialism: –an unequal relationship in which new indirect forms of imperialism are at play Westernization Model : – all economic development is tied to economic practices exemplified by Great Britain after the Industrial Revolution: –combination of prosperity, trade connection, inventions and successful exploitation of natural resources Dependency Theory: –industrialized nations exploit other countries and block their economic development

economic policies in the less-developed world policies designed to jump-start the economies of LDCs: import substitution: –governments in poorer countries need to create more positive conditions for development of local industry : restrict imports, stimulate domestic businesses export-oriented industrialization: –directly integrate the country’s economy into the global community, focus on production that can compete immediately in international markets structural adjustment: –open domestic economy to imports and investments, reduce government spending and debt, sell off state-owned enterprises

political development democratization: –the process of developing a political system in which power is exercised directly or indirectly by the people procedural democracy: regular competitive elections Substantive democracy: civil liberties, rule of law, open civil society, rule of law, independent judiciary, civilian control of the military consolidated democracy -> political liberalizaton –most countries with high PPP and developed tertiary sectors are also liberal democracies –chicken or egg? are post-industrial societies necessarily democratic? failed state: state structures weaken, collapse, anarchy and violence ensue

International financial institutions International Monetary Fund (IMF), World Bank, World Trade Organization (WTO) –critical forces in shift toward structural adjustment –controversial: accused of destroying the environment, reinforcing poverty and exploitation World Bank: –makes loans, issues direct grants to developing countries –funded by member countries and private financial market IMF: –originally designed to stabilize international monetary flow –now lender of last resort for troubled economies –Insists on conditionality: acceptance of structural adjustment and other policy-related conditions WTO: –Advance free trade, resolve commercial disputes among members

foreign aid several types: –direct loans and grants to 3 rd world governments –international agencies provide loans for long-term investment and to escape the debt trap –multinational corporations invest, creating jobs and other indirect economic benefits –Nonprofit NGOs microcredit: –small-scale financial institutions that enable the 3 rd world to determine and implement their own development policies –mobilize local people to control their own resources and then help finance others –poverty as a structural problem: lack of capital