CONCEPTS OF

DEVELOPMENT
WHY ARE SOME COUNTRIES RICH AND OTHERS POOR?
 OBJECTIVES

After successful completion of this topic you will be able to:

•Identify and explain the factors shaping development.
•Describe how development is measured.
•Define and analyze the benefits and problems associated with models of self-
sufficiency and international trade.
•Identify, explain, and evaluate the various models of development.
•Identify the major international organizations involved in development, the
policies they advocate, and criticisms against them.
•Explain fair trade and how it could be an alternative model for development.
• What does it mean to be developed? What types of
indicators tell us how developed a country is?

• Normative: “establishment of standards, or norms, to

help measure the quality of life and economic prosperity
of groups of people” (pg. 263).
 WHAT IS DEVELOPMENT?

• More Developed Countries (MDCs) – further along the development

continuum.
• Less Developed Countries (LDCs) – at an earlier stage of the
development continuum.
 MEASURING DEVELOPMENT

Economic Indicators:
•Gross Domestic Product (GDP) – an estimate of the total value of all
materials, foodstuffs, goods, and services produced by a country in a year.
•Gross National Product – similar to GDP but includes value of income
abroad.

• Purchasing Power Parity – exchange rate that lets us compare data for countries
with different currency systems.

•Weaknesses?
WHERE PEOPLE LIVE BY
ECONOMIC STATUS
MEASURING DEVELOPMENT
 MEASURING DEVELOPMENT

Sociodemographic Factors:
How well off is the population?
Selected indicators:
• Disease Rates
• Education Rates/Literacy
• Nutrition
• Infant Mortality Rates
 DEVELOPMENT INDICATORS

Environmental Indicators:
Concerned with sustainability of
development – grew out of the
1992 Earth Summit hosted by the
UN.
• Biodiversity
• Pollution
• Access to clean water
• Frequency of environmental
disasters
 INDICATORS OF DEVELOPMENT

Old indicators: Human

1)Economic – GDP (PPP)
per capita
Development Index
2)Social – Adult literacy (HDI)
rate, gross enrollment • Created in 1990 and used by the
United Nations
ratio • Indices changed from what is
mentioned in the text
3)Demographic – life • 0 to 1 – high scores indicate a
country is further along in the
expectancy development process.
HUMAN DEVELOPMENT INDEX
GENDER AND DEVELOPMENT

• Text mentions the Gender Related Development Index

(GDI) & Gender Empowerment Measure (GEM)
• Replaced by the Gender Inequality Index
• % loss to potential human development due to shortfalls in
dimensions included.
• 0-1 scale - high values indicate higher levels of inequality between
males and females.
GENDER INEQUALITY INDEX

1. Reproductive Health
a) Adolescent fertility
b) Maternal mortality

2. Empowerment
a) Educational attainment
b) Parliamentary representation
Prostitutes in Mumbai
International Labour Organization
3. Labor Market
a) Labor force participation

Link to UN Map Tool Half the Sky Trailer

 INCOME INEQUALITY

Measuring Inequality
• Income Distribution – the
way income is broken up
across different groups.
• Income Inequality – ratio of
earnings of the richest to the
earnings of the poorest.
• Richest 20% - 74% of income;
Poorest 20% - 1.5%
Source: Credit Suisse Research Institute, Global Wealth Report, October 2010
 MEASURING AND
UNDERSTANDING INEQUALITY

• Gini coefficient – a
statistic that can be
used to measure
inequality
• Range of 0 to 100, zero
meaning complete
income equality, high
values indicating
complete inequality.
 UNDERSTANDING INCOME
INEQUALITY (LABOR DEMAND OR
SUPPLY)
• Personal factors – Human Capital (Skills, Knowledge
and experiences) Low skilled vs High Skilled
• Social factors – Population, Socio-Demographic,
Discrimination (less privileged groups)
• Policy factors - Tax policy - design is intended to alleviate the gap
between the rich and the poor (Everything you buy has tax)

• Historical – Slavery, Colonialism

• Does globalization increase or decrease inequality?

 DEVELOPMENT THEORIES

• Why are some countries more developed than others?

• What should a country do to become more developed?
 DEVELOPMENT THEORIES

• Why are some countries more developed than others?

UK had an advantage to development

as there’s a lot of coastline so trade
was much easier in the past.

If you were in the middle of Africa,

trade would be impossible as no ships
can get there and airplanes were not
invented then, this preventing the
development of some countries in
Africa.

Bolivia is an example of a land locked country.

 THE CLASSICAL MODEL OF
DEVELOPMENT
• Created by Walt W. Rostow
• Development is the result of investment
• Need investment to diversify the economy
• Five stages would transform the country from a
preindustrial society into a modernized service-oriented
economy
 Stage 5: Age of Mass Consumption
Consumer oriented
Rostow’s Classical Service sector dominated
Development Stage 4: Drive to Maturity
Model Diversification
Less Reliance on Imports

Stage 3: Take-Off
Industrialization
Growth in new
technologies

Stage 2: Pre-conditions for

Take-off The country transitions
Specialization in key areas from a primary to a
Elites start innovation
tertiary sector
dominated economy.
Stage 1: Traditional Society
Subsistence/agricultural
If countries have
natural resources, and the
country has reached stage 2
then industries can be created
for oil and coal, like Saudi
Arabia, resulting in rapid growth.

• But some countries may exploit countries with raw materials, as they import cheap raw
materials and process them into manufactured goods. The countries then need to import
these manufactured goods costing them more money than they earn selling raw
materials in the first place, leaving them with no profits to develop the country, again
holding them back.

The picture on the right

Showing developing countries
percentage of exporting. Valuable
proof that they are manipulating
these countries for raw materials.
 DISCUSSION: ROSTOW’S
DEVELOPMENT MODEL

Does Rostow’s Development Model work for all

countries? Why or Why Not?

?
Mr. Rostow
 DEPENDENCY THEORY

• Forget about stages, development is a result of relational

processes.
• International trade is the central piece of the relational process.
• Some states have more power in international trade and are
dominant states.
• Other states do not have the resources or power and are
dependent states.
• Dominant states develop at the expense of dependent states.
 WORLD-SYSTEM THEORY

• Developed by Immanuel Wallerstein.

• The capitalist world economy causes underdevelopment.
• Capitalism creates an international division of labor, or a
hierarchy of states.
• Core, semi-peripheral, and peripheral regions.
• System of unequal trade relationships that support the
growth of the core at the expense of the peripheral and
semi-peripheral states.
• States can change their role in the international division of
labor.
CORE AND THE
PERIPHERY
 MAP OF WORLD ACCORDING
TO WORLD-SYSTEM THEORY

Fig 9.15b from Greiner

 NEOLIBERAL MODEL OF
DEVELOPMENT

• Based on the liberalist ideas of Rousseau, T. Jefferson, and Adam Smith.

• Suggests that capitalism can help countries develop as long as markets
were free and open.
• Suggested underdevelopment was the result of government policies that
prevent economic growth.
• So, countries should engage in structural adjustment programs that
involve strategies for market reform and deregulation.
 UNITED NATIONS DEVELOPMENT
PROGRAM

The Millennium Development Goals: Eight Goals for 2015

• Eradicate extreme poverty and hunger
United Nations
• Achieve universal primary education
Millennium
• Promote gender equality and empower women
Declaration
• Reduce child mortality
• Improve maternal health
A set of goals made
by 189 nations in
• Combat HIV/AIDS, malaria and other diseases
2000.
• Ensure environmental sustainability
• Develop a global partnership for development
Human Development
Report Launch 2013
 INTERNATIONAL CONNECTIONS
WORLD BANK
International Bank for
Reconstruction and
Development – loans for middle
income and creditworthy
countries
International Development
Association – for the poorest
countries
Provide low-interest loans,
interest-free credits and grants
to developing countries for
investments in multi-sector
projects.
Both fund development projects to attract foreign direct investment.
INTERNATIONAL
MONETARY FUND (IMF)
Provides loans to countries with
payment problems.
Help to:
1. Rebuild international reserves
2. Stabilize currency exchange
rates
3. Pay for imports
Not for specific projects
 INTERNATIONAL
CONNECTIONS

World Trade Organization (WTO)

• Promotes the free trade model
• Works to reduce trade barriers
• How?

• Criticisms?
 INTERNATIONAL
CONNECTIONS

Foreign
Direct I
company nvestm
in the ec ent: Inv
on estment
• Invest o my of a by a fore
ment do n other cou ign
es not fl
ow equa ntry.
• In 2007, 3/4 lly .
s of inve
other M stment f
DCs. rom MD
C com panies w
ent to
Transna
tional C
countrie orporat
s other t ions: inv
han one est and o
• Majo the head perate in
r influe quarters
econom n c e s : In 2002 are in.
i es, 51 w ,o
f th e t o
ere com p 100
-Globalis
sues.org p an i e s a
nd 49 w
ere stat
es.
FOREIGN DIRECT INVESTMENT
 EXAMPLES OF FAILED
DEVELOPMENT PROJECTS
• Lesotho Highlands Water Project, $3.5 billion
• Project: Sell mountain water to South Africa and divert
some for creating electricity.
• Problems:
• Electricity was too costly for most people.
• Environmental and economic problems evolved downstream.

Info from MSNBC

http://www.icpdr.org/icpdr-pages/dw0902_p_10.htm
 EXAMPLES OF FAILED PROJECTS

• Lake Turkana Fish Processing Plant in Kenya,

$22 million
• Purpose: Provide jobs to the Turkana through
fishing and fish processing for export.
• Problems:
• Turkana are nomads with no fishing experience
or history of eating fish.
• Too expensive to operate freezers and had a
high demand for clean water…difficult in a
desert environment.
Lake Turkana World Heritage Site (Alison Info from MSNBC
M. Jones for www.nowater-nolife.org)
 CHALLENGES WITH
DEVELOPMENT PROJECTS

Development Projects aren’t always successful:

1. Faulty engineering – so project doesn’t function correctly
2. Corruption or loan mismanagement within receiving countries
3. Infrastructure doesn’t attract investment
4. ?
5. ?
Many receiving countries are unable to repay loans
DEBT AS % OF GNI
SUSTAINABLE DEVELOPMENT

Fair Trade - Products made and traded

according to standards that protect workers
and small businesses in LDCs -- Video

Microfinancing - Microcredit programs extend

small loans to very poor people for self-
employment projects that generate income,
allowing them to care for themselves and
their families.
-started by Muhammad Yunus
-address gender-related inequalities
 WHY ARE SOME COUNTRIES
MORE DEVELOPED THAN
OTHERS?
GEOGRAPHIC FACTORS INSTITUTIONAL/HISTORICAL
• Situational –
• Location of territory • Colonialism and Imperialism
• Presence of key resources
• Dependence on a single
resource • Technological power
• Latitude
• Shape of Continents • Government Structures
• Transport Corruption
• Markets
• Where are the people living? • Discrimination
• Agroclimatic Geographic Path Dependence – in a
• Health / Disease location, economic organization in
• Prevalence of Disasters past may shape future.

Initial advantage makes it difficult for

other places to catch up.
Adapted from Guns, Germs, and Steel by Jared Diamond
THANK YOU..