1. The Developing World

2. Why are some countries Rich and some countries Poor?
Natural Environmental Endowments of Raw Materials etc. DO NOT explain National Wealth
The Theory of Environmental Determinism has problems with this
‘Adding Value’ to raw material is key to Wealth
‘Downstream Activities’ are key to wealth creation because they are nearer the source of money.
Processing, Manufacturing, Transporting, Advertising, Insuring, Marketing, and Financing the flow of goods is more profitable than extracting the raw materials they are derived from.

4. Characteristics of the
Developing World

5. I. Poverty is widespread.
People are malnourished and have little energy and little resistance to disease.
Unsanitary conditions, polluted water little health care.
Many unemployed or underemployed: long hours, manual labor, little pay ($1 a day) – no jobs available to improve their lives.

6. II. Agriculture
In developing countries, 50-80% farmers. In the U.S., only 2% are farmers.
Simple methods, handmade tools, animate energy (people or animals), poor, overused soil
SUBSISTENCE FARMERS: just enough to survive, not for profit

7. III. Rapid Population Growth
¾ of the world’s pop. Live in developing or transitional.
Many children to help on the farm and to take care of parents. Free time is spent with family.
Poor health care means more infant deaths. BUT, improving health care means people live longer, leads to
OVERPOPULATION: Too many people for the available resources.

11. Population Density, 2006

15. World Population Cartogram, 2008
"Out of every 100 persons added to the population in the coming decade, 97 will live in developing countries." Hania Zlotnik, 2005

16. Total Births, 2008
More children are born each year in Africa than are born in the Americas, all of Europe and Japan put together. Worldwide, more than a third of a million new people will be born on your birthday this year.

17. Illiterate Women
The biggest gaps between male and female literacy are in Southern Asia, Northern Africa and Southeastern Africa. In Pakistan, when the number of illiterate boys is subtracted from illiterate girls, the result is 2.6 million ‘extra’ girls who cannot read or write; that is 24% of women aged there.

18. IV. Capital is scarce Capital is anything that produces wealth.
machines, factories, roads, harbors, communications = INFRASTRUCTURE
C. Imports are limited – great need but no $.

19. Factors of Industrialization
A. Industrialization is needed for development. It provides jobs and exports.
B. To succeed, countries need land, labor, capital, infrastructure, and a STABLE GOVERNMENT.
Paraguay

20. Latin America: a case study
Benefits to industrialization:
New jobs
Growing middle class
Development of manufacturing centers
National pride

21. Challenges of development:
Pollution
Urban squalor – increase in crime
Foreign debt – money borrowed to start businesses plus interest
Neglect of agricultural exports
Unemployment of rural workers

22. What do countries need to develop?
SHEFIE!
S – Stable government
H – Health care
E – Economic F – Freedom
I – Infrastructure
E - Education

28. Improvement in PINGs
To promote development, PINGs seek to improve the indicators…economic, social, and demographic
PINGs are improving, but the gap is growing
Example: PINGs have improved income by $4,000, but PEDs have improved by $20,000

29. 2 fundamental obstacles to PINGs trying to develop
Adopting policies that successfully promote development
Finding funds to pay for development

30. Core-Periphery Model
In the context of spatial systems a sharp contrast exists between economic heartlands and subordinate zones in terms of wealth, economic advancement, and growth

31. Core-Periphery Model
Core regions are those that have achieved high levels of socioeconomic prosperity
Periphery regions are poor and dependent in significant ways on the core, and do not have much control over their own affairs
Semi-periphery regions exert more power than peripheral regions, but are dominated to some degree by core regions

32. Core-Periphery Model
Model assumes that growth and prosperity of the core comes at the cost of the periphery
High Tech Concentration vs. Rust Belt
Urban Cores vs. Rural Peripheries

33. Core-Periphery Model Assumes a linkage of interaction between regions
A high tech process occurs in the core becomes attractive to investors
This pulls investment away from the periphery

34. Core-Periphery Model Theories Similar to Core-Periphery
Circular and Cumulative Causation
Dependency Theory
World Systems Analysis (Theory)

35. Development Strategies
Development through self-sufficiency
Elements of self-sufficiency approach
Problems with self-sufficiency
Development through international trade
Rostow’s development model
Examples of international trade approach
Problems with international trade
Financing development

37. Rostow - Stages of Growth
The work of American Walt W. Rostow
Rostow is an economic historian
This is a liberal model
Suggests that all countries follow a similar path to development
Countries can be placed in one of five categories in terms of its stage of growth:
A child in Sierra Leone making breakfast. Which stage would a country like Sierra Leone fit in?
Copyright: Dave Dyett,

38. Rostow - Stages of Growth
Traditional Society: a country that has not started development; large amounts of people in agriculture and “nonproductive” activities (religion and military)
Characterised by
subsistence economy – output not traded or recorded
existence of barter
high levels of agriculture and labour intensive agriculture
dominant activity is subsistence farming
Rigid social structure, resistance to change
Village in Lesotho. 86% of the resident workforce in Lesotho is engaged in subsistence agriculture.
Copyright: Tracy Wade,

39. Rostow - Stages of Growth
2. Pre-conditions (of takeoff): the process of development begins when an elite group begins to invest in technology and infrastructure
Development of mining industries
Increase in capital use in agriculture
Necessity of external funding
Some growth in savings and investment
progressive leadership moves the country toward openness and diversification
The use of some capital equipment can help increase productivity and generate small surpluses which can be traded.
Copyright: Tim & Annette,

40. Rostow - Stages of Growth
3. Take off: rapid growth is promoted in a few number of activities (i.e. textiles, food products)
Increasing industrialisation
Further growth in savings and investment
Some regional growth
Number employed in agriculture declines
Industrial Revolution, Urbanization, Mass-Production
At this stage, industrial growth may be linked to primary industries. The level of technology required will be low.
Copyright: Ramon Venne,

41. Rostow - Stages of Growth
4. Drive to Maturity: modern technology diffuses to more industries which experience rapid growth and workers become more skilled
Growth becomes self-sustaining – wealth generation enables further investment in value adding industry and development
Industry more diversified
Increase in levels of technology utilised
Tech. Diffusion, industrial specialization, international trade, modernization of core, population decline
As the economy matures, technology plays an increasing role in developing high value added products.
Copyright: Joao de Freitas,

42. Rostow - Stages of Growth
5. High mass consumption: the economy shifts from heavy industry to consumer goods
High output levels
Mass consumption of consumer durables
High proportion of employment in service sector
high income, widespread production of G&S, Service Sector
Service industry dominates the economy – banking, insurance, finance, marketing, entertainment, leisure and so on.
Copyright: Elliott Tompkins,

43. Criticisms: Too simplistic
Necessity of a financial infrastructure to channel any savings that are made into investment
Will such investment yield growth? Not necessarily
Need for other infrastructure – human resources (education), roads, rail, communications networks
Efficiency of use of investment – in palaces or productive activities?
Rostow argued economies would learn from one another and reduce the time taken to develop – has this happened?

44. Rostow’s ‘Stages of Growth’
The ‘natural’ evolution of peoples are to ‘evolve’ from ‘Hunter-Gatherer’ to ‘Agriculture’ to ‘Industrial’ to whatever.
Is this Social Darwinism?
Is it reasonable?

45. Selected countries up to 1960
Walt Rostow’s Modernization Model
Selected countries up to 1960

47. Models of Development
Liberal: 1) Assume all countries are capable of developing economically in the same way, and 2) disparities b/w countries & regions are the result of short-term inefficiencies in local or regional markets
Structuralist: Economic disparities are the result of historically derived power relations w/in the global economic system; cannot be changed easily (misleading to assume all areas will go through the same process of development)

48. Development through self-sufficiency
For most of the 20th century, self-sufficiency was the more popular of the development alternatives
Key elements:
Investment is spread across all economic sectors
Focus is on promoting wealth across income levels, not just the rich
Barriers are set on imports (tariffs, taxes, quotas, requiring licenses)

49. Example of Self-Sufficiency: India
India made efficient use of barriers to trade
Indian businesses were discouraged from producing goods for export
Businesses produce for India
If private companies were unable to make a profit by selling only to India, then the government would provide a subsidy

50. Problems with self-sufficiency
Inefficiency: self-sufficiency protects inefficient industries
Business has little incentive to improve quality, lower production costs, reduce prices, or increase production
Large Bureaucracy: self-sufficiency requires large bureaucracy to administer the controls
A complex administrative system encouraged abuse and corruption

51. International Dependence

52. Dependency Theory (“structuralist”)
Political & economic relationships b/w countries & regions control & limit the developmental possibilities of less well-off areas (e.g. imperialism caused colonies to be dependent – this helps sustain the prosperity of dominant areas & poverty of other regions)
Only at later stages of development does the core have a positive impact on the periphery (grants, loans, special economic zones,…)

53. International Dependence
International division of labour – rich in high value activity, poor in low value, can be traced back to colonial and imperial dominance
Dominance of political decision making in the hands of a few wealthy and powerful groups who aim to maintain the status quo
Such interest groups also exercise power over international institutions and initiatives such as the World Trade Organisation, International Monetary Fund, Kyoto talks, etc.

54. International Dependence
Advice given to poorer nations has been poor – e.g. lending to less developed countries, investment advice, etc.
Inability to solve the debt crisis and protectionism continues to prevent development of poorest countries
The International Dependence model can perhaps be exemplified by the lack of progress on reducing emissions to restrict climate change and freeing up international trade.
Copyright: Nikita Golovanov,

55. Criticism: Offers causes but no solutions
Talks to free up trade have been going on for many years; progress is slow.
We know that protectionism is disadvantageous to developing countries but how do we go about putting in place solutions to help solve the problem?
Copyright: Doug Wray,

56. Development through international trade
A country identifies its distinctive/unique assets
What product can the country manufacture and distribute at a higher quality and a lower cost than other countries?

57. Examples of the International Trade Approach
The Four Asian Tigers (Dragons): South Korea, Singapore, Taiwan, and Hong Kong
Influenced by Japan
Concentrated on clothing and electronics
Petroleum Rich Arabian Peninsula States:
The increase in petroleum prices in the 1970s greatly enriched these countries

58. Problems with the International Trade Alternative
Uneven resource distribution
Market stagnation
Increased dependence on PEDs

59. Recent Triumph of International Trade Approach
This approach has been adopted by most in recent years
India switched to an international trade approach
India’s GDP grew 7% per year in the 1990s
Manufactured goods accounted for more than 4/5 of exports from PINGs in 2000

60. World Trade Organization
Established in 1995 by countries representing 97% of world trade
Reduces barriers to trade:
Countries negotiate reduction or elimination of international trade restrictions
The WTO enforces agreements

61. Financing Development
PINGs lack money!
Loans – mainly for infrastructure
The World Bank
International Monetary Fund
Structural Adjustment Programs – in exchange for repaying debt, lending agencies require PINGs to create conditions favorable for international trade

62. Fair Trade
Fair trade – products are made and traded according to standards that protect workers and small businesses in PINGs
Producer Standards
Worker Standards

63. Income and Demographic Change, 1980–2004
Per capita GDP has increased more in MDCs than in LDCs during this period, while population growth and infant mortality have declined more rapidly in MDCs than in LDCs.

64. Foreign Investment Flows
Three-quarters of foreign investment flows from one MDC to another. Only one-quarter goes from an MDC to an LDC.

65. Core and Periphery in World Economy
This north polar projection of the world shows that most of the MDCs are in a core area north of 30° N latitude. The LDCs are mostly on the periphery of this map.

66. A Tricky Move?
… in 1991 the GNP was turned into the GDP - a quiet change that had very large implications. Under the old measure, the Gross National Product, the earnings of a multinational firm were attributed to the country where the firm was owned and where the profits would eventually return. Under the Gross Domestic Product, however, the profits are attributed to the country where the factory or mine is located, even though they won't stay there.