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  • 1. February 6, 2012
  • 2. North-South Economic Relations: The Main Issues
    • The origins of inequality
    • The role of international regimes in preserving or increasing that inequality
    • The role of commodity and raw materials trade in preserving or increasing inequality
    • Import substitution vs. export-led growth as strategies for industrial growth in the Third World
  • 3. Consequences of Poverty
    • Lack of access to food, shelter, and education
    • Feelings of helplessness and insecurity
    • Low self-esteem
    Garbage dump harvesting in Phnom Penh, Cambodia
  • 4. Gross National Income per Capita, Purchasing Power Parity Method, 1980-2006, in Dollars, in High-, Middle-, and Low-Income Countries Source: World Bank, World Development Indicators 2008 , online data.
  • 5. Hobson’s Theory of Economic Imperialism Unequal Distribution of Income Capitalism Surplus production Overseas outlets imperialism war John Hobson
  • 6. Lenin’s Theory of Imperialism Unequal Distribution of Income Capitalism Surplus capital Overseas outlets imperialism war Revolution - Vladimir I. Lenin
  • 7. Declining Terms of Trade Theory
    • Developing countries (LDCs) depend upon exports of raw materials and agricultural commodities
    • Prices of LDC exports decline over time relative to price of their imports (mostly manufactured goods)
    • Until LDCs diversify their economies, they will remain poor
    Raul Prebisch
  • 8. Prices of Exports Prices of Imports
    • Why do they decline?
    • Competition among LDCs for export markets
    • High population growth rates in LDCs
    • Low bargaining power of LDC unions
    • Oligopolistic markets for IC goods
  • 9. Sir Arthur Lewis
  • 10. Policies Recommended by Raul Prebisch
    • Industrialization through Import Substitution
    • Regional Integration
    • Increased South-South Trade and Investment Flows
    • Population Control
  • 11. Import Substitution
    • High tariff barriers on imports of manufactured goods to encourage domestic manufacturing (“infant industries”)
    • Tariff barriers are supposed to be reduced when domestic manufacturers become internationally competitive
    • Regional integration (helps to deal with limits imposed by small internal markets)
  • 12. Examples
    • Dairy Farming in Jamaica
    • Corporacion Venezolana de Guayana in Venezuela
    • Posco (steel manufacturing) in Korea
    • Bohemia (beer) in Mexico
    • Early automobile industry in Japan
    1936 Toyota Model AA Sedan
  • 13. Why Import Substitution Bogs Down
    • Inward FDI displaces domestic manufacturers
    • Country develops trade deficit because exports are not competitive while both domestic and MNC firms import expensive inputs for assembly plants and light manufacturing
    • Government often turns to subsidies and state enterprises to encourage deepening of manufacturing
    This is called the “deepening of import substitution”
  • 14. Examples of Crises of Import Substitution
    • Mexico
    • India
    • Brazil
    • Korea
    • Taiwan
    See chapters 4-7 of Episode 2 in The Commanding Heights documentary.
  • 15. Export-Led Growth
    • Initial period of import substitution
    • Reduce tariffs on inputs for manufacturing
    • Adopt new incentives for exports:
      • export processing zones
      • new trade-oriented infrastructure
      • subsidies for exporting firms
      • export performance requirements for MNCs
  • 16. Examples
    • Japan
    • Korea
    • Taiwan
    • Hong Kong
    • Singapore
    • Chile
    • China
    • India
  • 17. Per Capita Income in the Four Asian Tigers, 1975-2006 Sources: World Development Indicators 2008 ; and (for Taiwan only) Taiwan Economic Statistics 6 (May 2008). The data for Taiwan are GNP per capita; for the others GDP per capita at purchasing power parity.
  • 18. Per Capita Income in China and India, 1980-2006 Source: World Development Indicators 2008.
  • 19. The Millennium Development Goals
    • 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
    Source: /
  • 20. Ending Extreme Poverty Videos
    • Global Poverty Project video
    • Hans Rosling at the State Department video
    • Hans Rosling washing machine video