• Enormous gaps between Global Economics the rich and poor countries of the world• Some states are still subsistence based while others have moved beyond manufacturing to tertiary economies.• Even within the wealthy or First World nations there are often areas of economic disparity within regions
Measuring DevelopmentGross National Product (GNP) Measure of the total value of theofficially recorded goods and services produced by the citizens andcorporations of a country in a given year. Includes things producedinside and outside a country’s territory.Gross Domestic Product (GDP) Measure of the total value of theofficially recorded goods and services produced by the citizens andcorporations of a country in a given year.Gross National Income (GNI) Measure of the monetary worth ofwhat is produced within a country plus income received frominvestments outside the country. ** Most common measurement usedtoday.
Concepts & Approaches• Gross National Product-all goods & services produced by the economy per year both inside & outside the nation• Gross Domestic Product-all goods & services produced by the economy per year with in the nation• GNP or GDP does not reflect regional variations-it also doesn’t count the informal economy-black market, illegal drug trade & underground economy• Developed Countries-(DCs) have high levels of industrialization, urbanization & standard of living• Underdeveloped (UDCs) or Developing Countries are moving toward developed status-not as highly industrialized or urbanized with a lower standard of living
Measures of Development• National Product per person-the total income divided by total population- Core (developed) about $25,000 while Periphery (developing) as low as $100.• Occupational Structure of the Labor Force-% of workers in each section- high number in agriculture signals low development• Consumption of Energy per Person- the greater the use of electricity-the higher the development• Productivity per Worker-production of all goods divided by the total labor force
Measures of Development• Transportation & Communication per person-railroad, road miles and airline connections per person as well as telephone, radio, television or computers per person.• Consumption of Manufactured Metal per Person-the greater the amount of steel, iron, copper, aluminum etc. used per person• Other Rates- – Literacy – Caloric intake – % of income spent on food – Amount of savings per person
Issues with Measuring Economic Development• All measurements count the: – Formal Economy – the legal economy that governments tax and monitor.• All measurements do not count the: – Informal Economy – the illegal or uncounted economy that governments do not tax or keep track of.
Core-Periphery Model• Immanuel Wallerstein proposed the World Systems Theory with promoted the Core-Periphery concept.• Unlike the term-developed and developing, the Core- Periphery Model does not imply that change will occur.• Core-Periphery regionalism got its start during the period of colonialism was re-enforced by the Industrial Rev. and continues in the age of globalization.
Core-Periphery Model• New approach to developed or underdeveloped idea• Core-Periphery also used in a political context• Core-the nations with a high level of prosperity with dominant economies globally• Periphery-poor nations that are dependent on the core as markets for raw materials and sources of technology• Semi-Periphery-better off than periphery, but still dominated by the core to some degree
Global Economic Disparities• Much of the disparity existed as Colonialism was established by European nations.• The Industrial Revolution increased the need for raw materials and markets for finished goods.• Neo-colonialism refers to the economic dominance of the core over the former colonial nations-economic rather than political control
Conditions in the Periphery• High birth rates, moderate death rates and low life expectancy• High infant mortality rates-large population under age 15 yrs.• Poor health care & shortage of doctors-disease is common• Poor sanitation and lack of fresh, clean water• Poor nutrition and protein deficiency• Low per capita income with many women & children doing hard manual labor• High illiteracy rate with low levels of education• Great disparity between rich & poor, small middle class• Urban areas overcrowded, lack of services, rapid urban migration• Subsistence farming on small landholdings
Conditions That Hamper Development• Political instability and corruption• Exploitation of natural resources and workers regardless of consequences• Dependence of agricultural products or primary products such as mineral resources• Misuse of foreign assistance• Misguided priorities• Cultural resistance to modernization
Costs of Economic Development• Industrialization – Export Processing Zones (EPZs), maquiladoras, and special economic zones (SEZs).• Agriculture – Subsistence and agricultural conglomerates – Desertification-especially in Africa – Soil erosion• Tourism-may have serious negative consequences – Use of scarce commodities – Foreign investors make the profit
Tourism: Boom or Bust• Tourism contributes little to a nation’s development & may have serious negative effects on the culture• Hotels & other facilities are often owned by transnational corporations which take the profits out of the country• Tourism jobs can be demeaning & dehumanizing or even insulting• Tourism jobs pay minimal wages for menial tasks
Tourism: Boom or Bust• Profits are reinvested in airports, cruise ship ports & other infrastructure to serve tourists• Tourists use up valuable resources such as food & fresh water• Tourism can debase or change a local culture• An invasion by wealthy foreigners can breed hostility and resentment• Harsh contrast between gleaming modern tourist hotels and poor workers housing
Levels of Industrialization• Some countries like the Soviet Union industrialized quickly with central planning-Stalin’s Five Year Plans• All decisions were made in Moscow-no local control• Focus on heavy industry- steel, electrical, chemical, military hardware• Little emphasis on consumer goods• Little concern for worker safety or environmental problems
Models of Development• There are two broad models of economic development; – Liberal Models based on the assumption that all countries pass through the same stages of economic development and disparity is the result of short term inefficiencies – The Liberal Model assumes that all nations are capable of the same level of economic
Development ModelsModernization ModelWalt Rostow’s model assumes all countries follow a similar path to development or modernization, advancing through five stages of development, climbing a ladder of development. - traditional - preconditions of takeoff - takeoff - drive to maturity - high mass consumption
Models of DevelopmentWalt Rostow created this liberal model of development in the 1960s1. First Stage-Traditional 1. Subsistence farms-limited technology 2. Rigid social structure 3. Resistance to change-transition triggered by external influence2. Second Stage-Preconditions for Take-Off 1. Progressive Leadership-commercial exploitation of agriculture & extractive industries 2. Greater flexibility-installation of infrastructure-roads, railways, etc. 3. Greater openness to new technology 4. Greater Diversity of products produced
Models of Development3. Third Stage-Take Off 1. Experiences industrial growth 2. Urbanization 3. Industrialization, technology & mass production3. Drive to Maturity 1. Diffusion of technology 2. Industrial specialization 3. International trade 4. Modernization at the core 5. Population growth is reduced3. Fifth Stage-Final Stage 1. Mass consumption-widespread production of goods & services 2. High incomes 3. Majority of workforce in service sector
Rostow’s Ladder of Development
Models of Development• Structuralist Model this is the alternate to the Liberal Model that states disparities are inevitable due to structural features of the global economy.• These disparities can not be easily changed-it is misleading to assume that all areas will go through the same economic process of development
Models of Development• Dependency Theory is another Structuralist Model• Political & economic relationships between nations & regions limit the development of the less well off areas• Colonial dependencies are still in place from long ago.• Dependency theory sees little hope for economic prosperity in some traditional parts of the world
Dependency TheoryThe political and economic relationships betweencountries and regions of the world control and limitthe economic development possibilities of poorerareas. -- Economic structures make poorer countries dependent on wealthier countries. -- Little hope for economic prosperity in poorer countries.
Dependency Ratio by Country, 2005A measure of the number of people under the age of 15 andover the age of 65 that depends on each working-age adult.
A Changing World• Until 1980s there were 3 Blocs – First World-The Capitalist West-the most advanced nations-democratic & capitalist – Second World-The Communist East of the Soviet Union & its Eastern European Satellites, Red China, N. Korea & Vietnam – Third World-non aligned nations with mixed economies and state control- now an obsolete term
Three Tier StructureCore PeripheryProcesses that incorporate higher Processes that incorporate lower levels of education, higher levels of education, lower salaries, and more technology salaries, and less technology* Generate more wealth in the * Generate less wealth in the world economy world economy Semi-periphery Places where core and periphery processes are both occurring. Places that are exploited by the core but then exploit the periphery. * Serves as a buffer between core and periphery
Differences inCommunications ConnectivityAround the World
Dollarization –Abandoning the local currency of a country and adopting the dollar as the local currency. El Salvador went through dollarization in 2001
Commodity ChainSeries of linksconnecting themany places ofproduction anddistribution andresulting in acommodity thatis thenexchanged onthe worldmarket. Dolomite stone from Jerusalem covers a fireplace in Beacon Hill, Boston, Massachusetts.
Barriers to Economic Development• Low Levels of Social Welfare – Trafficking-bullied into poor working conditions – High birth rates, Low life expectancy, large number of dependents – Lack of proper health care – Poor water supply & sanitation – Widespread Disease vectored diseases-spread by a host – Malaria-kills 150,000 children each month• Political Instability-military dictatorships, corruption, revolution• Foreign Debt – World Bank or International Monetary Fund – Structural adjustment loans-economic reform required
Foreign Debt ObligationsTotal interest payments compared to the export of goods and services.
Foreign Debt ObligationsForeign Debt and Economic Collapse in Buenos Aires, Argentina, 2001
Widespread Disease • Malaria kills 150,000 children in the global periphery each month.Tamolo, IndiaThis baby sleepsunder a mosquitonet distributed tovillagers byUNICEF workers.
Global Distribution ofMalaria Transmission Risk
Areas Threatened by Desertification
How Government Policies Affect Development• Governments – get involved in world markets – price commodities – affect whether core processes produce wealth – shape laws to affect production – enter international organizations that affect trade – focus foreign investment in certain places – support large-scale projects
Export Processing Zones
Governments &Corporationscan createIslands ofDevelopmentPlaces within aregion orcountry whereforeigninvestment,jobs, andinfrastructureareconcentrated.
Africa Map• Be able to locate major countries: such as-South Africa, Nigeria, Sudan, Kenya, Ethiopia, Rwanda, Somalia and so forth
Government-created Island of DevelopmentMalaysian government built a new, ultramodern capital at Putrjaya to symbolize the country’s rapid economic growth.
Corporate-created Island of DevelopmentThe global oil industry has created the entire city of Port Gentile, Gabon to extract Gabon’s oil resources.
Nongovernmental Organizations (NGOs) entities that operate independent of state and localgovernments, typically, NGOs are non-profit organizations. Each NGO has its own focus/set of goals. Microcredit program: loans given to poor people, particularly women, to encourage development of small businesses.