Unit 7-Part 2: Development and Trade
Chapter 19 (Topics 7.5-7.6)
7.5 Theories of Development
Objective and Essential Learning 7.5
Explain different theories of economic and social development.
Different theories such as Rostow’s Stages of Economic Growth, Wallerstein’s World System Theory, dependency theory, and commodity dependence help explain spatial variations in development.
How Can We Explain Spatial Variations in Development?
Rostow’s Stages of Economic Growth (aka Modernization Model)
Wallerstein’s World Systems Theory (aka Core-Periphery Model)
Dependency Theory
Brandt Line (aka North-South Divide)
Rostow’s Stages of Economic Growth
Walt W. Rostow (1960)
Also known as: Modernization model: focuses on the shift from traditional to modern forms of society.
Often referred to as the Stages of Economic Growth Model:
Assumes all countries aspire to modernize.
Progress is often linear (Stage 1, 2, etc.).
Final stage culminates in high mass consumption.
Generalization primarily based on the experiences of the US and Europe.
Distinction made from the Demographic Transition Model (DTM).
Requires different inputs and levels of investment to transition between stages.
Stages of Economic Growth (Detailed Description)
Traditional Society
Not yet initiated development; predominantly agrarian (high % of agriculture).
Utilizes rudimentary technology.
Engages in local or regional trading.
Limited socio-economic mobility.
Examples: English colonies in N. America (17th century), Medieval Europe.
Preconditions for Take-Off
Investments in infrastructure (roads, electricity, water systems) lead to increased productivity.
Adoption of improved farming techniques and transition towards commercial agriculture.
Begins to engage in international trade by exporting agricultural and raw materials.
Ushering in individual socio-economic mobility.
Examples: United States early 19th century, Nigeria, Afghanistan.
Take-Off
Major technological innovations are embraced.
Starts significant industrialization; primary sector (agriculture) shows shrinkage.
Entrepreneurship begins to flourish; urbanization initiates.
Marks the beginning of self-sustaining economic growth.
Examples: United States mid-19th century, Japan late 18th century, Bangladesh today.
Drive to Maturity
Development of new industries continues alongside the enhancement of existing ones.
Improvements in energy, transportation, and communication systems ensue.
Economic growth outpaces population growth.
Substantial investments are made in social infrastructure (e.g., schools, hospitals).
Examples: United States late 19th century, Germany early 20th century, Brazil today.
Age of Mass Consumption
Society shifts from heavy industry to consumer goods.
Demand for non-essential goods escalates; purchases of higher-order goods become commonplace.
A desire for egalitarianism emerges, alongside a robust tertiary sector.
Examples: United States early 1920s to present, Japan mid-1950s to present.
Criticisms of Rostow’s Model
Limited Examples: Based primarily on US and European contexts, which makes it less applicable to non-Western cultures or non-capitalist economies.
Role of Exploitation: The model may perpetuate a state of dependency for poorer countries reliant on wealthier nations.
Bias Towards Progress: Implies a linear trajectory of economic development, not accounting for potential regression in some nations.
Lack of Variation: Overlooks significant country-specific variables such as physical size, population, resources, political systems, and climate.
Lack of Sustainability: Posts that all societies can eventually achieve high mass consumption without addressing issues related to sustainable development or carrying capacity.
Need for Poorer Countries: Does not acknowledge that developed economies often exploit lesser-developed ones to meet their consumption needs.
Narrow Focus: Centers on domestic economies, largely ignoring international relationships and globalization influences.
How Can We Explain Spatial Variations in Development? (Repeated Theme)
Rostow’s Stages of Economic Growth (aka Modernization Model)
Wallerstein’s World Systems Theory (aka Core-Periphery Model)
Dependency Theory
Brandt Line (aka North-South Divide)
Wallerstein’s World System Theory
Developed by Immanuel Wallerstein (1970s) as an alternative to Rostow’s model.
Commonly referred to as World Systems Theory or Core-Periphery Model.
Wallerstein’s World System Theory (Detailed Description)
Sharp spatial distinctions exist in social and economic development between core (heartlands) and peripheral (awarding subordinate) areas.
It functions as a dependency model, positing that countries are interdependent and do not exist in isolation.
Considers both political and economic dimensions, sometimes classified as a political theory and sometimes as an economic theory.
Three Types of Countries:
Core
Economically advantaged; nearness to business and financial centers; hosts most large multinational corporations.
Focuses on high-skill, capital-intensive production.
Promotes capital accumulation and dominates peripheral and semi-peripheral countries through economic and political means.
Examples: United States, United Kingdom, Japan, Australia, Germany.
Semi-Periphery
Comprises middle-income countries sometimes viewed as emerging economies.
Supplies the core with manufactured goods and services it previously self-sustained.
Examples: India, Mexico, South Africa, Brazil, China.
Periphery
Encompasses least-developed nations reliant on low-skill, labor-intensive production and extraction of raw materials.
Supplies core and semi-periphery with inexpensive raw materials and labour.
Examples: Afghanistan, Zimbabwe, Peru, Kenya.
Dependency Theory
Suggests that countries in the periphery send cheap labor and resources to semi-periphery and core countries.
The economic flow includes:
Core countries purchase raw materials, pay for cheap labor, and sell consumer goods at high prices.
Peripheral countries consequently buy these consumer goods at high prices, depleting their dollar supply and investment opportunities.
Criticisms of World Systems Theory
Little Emphasis on Culture: Fails to analyze the impact of cultural influences such as media and entertainment alongside economic factors.
Emphasis on Industry: Primarily based on industrial production without addressing postindustrial economies centered on services.
Lack of Explanation: Provides limited guidance on how countries can change their global position within this framework.
Limited Roles: Overemphasizes the actions of countries and corporations while neglecting the impact of organizations like the UN or charitable NGOs.
Commodity Dependence
Core countries maintain diverse export economies whereas peripheral and many semi-peripheral countries often rely heavily on exporting commodities.
Commodity: A raw material or primary agricultural product available for sale (e.g., copper, coffee).
Commodity Dependence: A condition where nations rely significantly on exporting primary commodities.
Example: If more than 60% of Kenya’s GDP is derived from coffee exports, it is deemed commodity dependent.
How Can We Explain Spatial Variations in Development? (Repeated Theme)
Rostow’s Stages of Economic Growth (aka Modernization Model)
Wallerstein’s World Systems Theory (aka Core-Periphery Model)
Dependency Theory
Brandt Line (aka North-South Divide)
Brandt Line (aka the North-South Divide)
A spatial analysis of development indicating that:
Most More Developed Countries (MDCs) are situated in the Northern Hemisphere, while Less Developed Countries (LDCs) are primarily in the Southern Hemisphere.
Its relevance has diminished as numerous Newly Industrialized Countries (NICs) have emerged in the southern hemisphere.
7.6 Trade and the World Economy
Objective and Essential Learning 7.6
Explain causes and geographic consequences of recent economic changes such as the increase in international trade, deindustrialization, and growing interdependence in the world economy.
International Trade
Trade: A process where one party seeks goods/services from another willing to exchange, typically involving money or credit although bartering is also valid.
Barter: An exchange system bypassing the use of money.
Parties trade goods or services where each holds a comparative advantage.
Example: Florida's climate is better suited for oranges than Maine's.
Example: Maine's climate is better for potatoes than Florida's.
Complementarity in Trade: Ideals are maximized when both trading parties possess goods/services desired by the other. However, complementarity may not always exist.
If it does not, trade can skew heavily in one direction.
Example: The US imports more from China than it exports back, resulting in a trade deficit.
Trends in International Trade
International trade rose dramatically from 5% of the total economy in 1960 to 28% in 2018.
Influential factors for this increase include:
Advancements in technology (larger, faster ships, containerization).
Developing major canals and port facilities.
Enhancements in air cargo services making goods transportation cheaper.
Internet efficiencies for trade logistics and information systems (e.g., online sales).
Government & Trade
Over the last century, governments increasingly intervened to influence trade patterns.
Free Trade Agreements: Collaborative pacts between two or more nations aimed at minimizing trade barriers like tariffs and quotas.
Neoliberal Policies: Economic policies encouraging minimal government involvement, espousing the belief that free markets govern both economic organization and broader societal dynamics.
Government Efforts to Promote Economic Growth
Incentives for Businesses
Type of Incentive | What Businesses Receive |
|---|---|
Tax Breaks | Temporary exemptions from certain taxes; tax breaks for investment in R&D. |
Loans | Forgivable loans or money at below-normal interest rates; access to land/buildings free of charge. |
Direct Assistance | Infrastructure (e.g., roads, sewers) funded by the government; subsidies for job creation. |
Changes in Regulations | Legislation that diminishes union power; environmental rule reductions. |
Government & Trade (continued)
Neoliberal policies and free trade agreements have facilitated new organizations, relationships, and trade networks.
Trading Blocs: Groups of nations agreeing to shared trade rules.
European Union (EU): Economic and political alliance of 28 countries operating as one economy.
World Trade Organization (WTO): Governs international trade regulations among its 164 member states.
Mercosur: A regional bloc in South America.
OPEC: Organization of Petroleum Exporting Countries controlling oil production levels among member nations like Saudi Arabia, Iran, Iraq, and Venezuela.
Trade & Interdependence
Manufacturing in semi-periphery countries has surged due to:
Globalization driving industrial relocations from developed to developing nations.
Enhanced global communication among decision-makers via internet and telecommunications, easing management tasks.
Simplified transportation enabling swift goods shipment from manufacturers to markets globally.
Impacts of Economic Interdependence
Increased interdependence links countries economically; growth in one can stimulate growth in others.
Example: Increased wealth in China leads to heightened imports from US farmers.
Conversely, an economic downturn in one area may create challenges elsewhere.
Example: The price drop in oil in mid-2014 benefitted consumers with lower gas prices but harmed economies in oil-producing regions.
Responses to Global Financial Crises
International Financial Institutions (IFIs) provide financial assistance and development consultations:
International Monetary Fund (IMF): Founded in 1945 to support countries in financial distress through stabilization loans.
World Bank: Focuses on providing funds to developing countries primarily for infrastructural development.
Responses to Global Financial Crises (continued)
The IMF, World Bank, and More Developed Countries (MDCs) express concerns over granting or forgiving debts without conditions, which may encourage unsustainable fiscal practices in Less Developed Countries (LDCs).
Structural Adjustment Programs (SAPs): Set of reforms mandated for borrowing countries including:
Spending restraint relative to available resources.
Direct benefits for the impoverished, not just elite individuals.
Shifting investment priorities from military to health and education.
Strategic resource allocation to areas of highest impact.
Promoting an efficient private sector.
Government reforms to improve administration.
Free Trade vs. Fair Trade
Assignment: Organize into groups to research, compare, and contrast Free Trade and Fair Trade using various sources.
Deliverables: Create a visually engaging and informative poster incorporating illustrations; be prepared to present findings.