chapter 10: by zharen. how do you define & measure development? commodity chain formal/informal...

Chapter 10:

By Zharen

How do you define & measure

development?• Commodity chain• Formal/informal economy• Development models

– Rostow’s Modernization Model

Commodity Chain

• Series of links connecting places of production & distribution in order to make a commodity for the world market.– Gaining wealth depends

on which link in the chain the production is.

– More links=more value

FormalEconomy

• Legal• Gov’t taxes &

monitors• Included in Per

Capita GNI• Ex. Things with sales

taxes, etc.

• Illegal or unauthorized

• Unaccounted for• Ex. Babysitting,

trafficking, etc.

InformalEconomy

Rostow’s Modernization Model

• Aka the ladder of development

• By Rostow• Grew from

decolonization movements of the 60’s

• Answers how the countries moved forward

• Controversy: not all movement is the same

Stage 1: Traditional Society (subsistence farming, static/rigid society, doesn’t like change)

Stage 2: Preconditions for Takeoff (commercial exploitation, progressive leadership)

Stage 3: Takeoff (manufacturing sector, urbanization, industrialization, technology)

Stage 4: Drive to Maturity (industrial & commercial base, technology diffuses, specialization, int’l trade, modernization, population growth slows)

Stage 5: High Mass Consumption (high incomes, widespread production, most workers in service)

How does geography affect

development?• Dependency theory

– Dollarization

• Structuralist theory• World systems theory

Dependency Theory

• Political & economic relationships between countries & regions have created arrangements that control & limit the development possibilities

• Ex. Colonialism- Colonies became dependent on the colonial powers because of the political & economic structures forced on them

• Furthers the gap between dominant and subordinate countries

Dollarization

poorer country ties its currency value to a wealthier country’s currency

orpoorer country changes its currency to the richer one Ex. El Salvador changed from the colon to the American dollar

because Salvadorians in the USA were sending remittances home

Structuralist Theory• People built, organized, and structured

the world economy in such a way that it can’t be changed easily

• Economic disparities are result of history in the global economy placing wealth and power in some areas over others

• Explains how neo-colonialism came about– Note: neo-colonialism is how major world

powers control the economies of poorer countries, even if politically independent.

World Systems Theory• Wallerstein’s• Countries are linked interdependently by

political & economic competition• Started with European explorationplaces

became more connected (others not)social change

• 3-tier structure developed: world divided into…– Core: process generates wealth, high socioeconomic

prosperity, high contribution to world– Periphery: process requires little education,

technology, and wages– Semiperiphery: buffer between core & periphery

What are the barriers to and

costs of economic development?

• Barriers:– Low social welfare– Foreign debt– Political instability– Disease

• Costs:– Industrialization– Agriculture

Barriers to Economic Development• Low levels of social welfare

– Poor social conditions mostly in periphery– High birth & death rates, low life expectancy, malnourishment,

lack education (gendered), trafficking

• Foreign debt– In history: after decolonization wave, IMF & World Bank gave

structural adjustment loans for reforms in economy/government, but problems in repaying loans (Ex. Argentina)

– When repaying loans, can’t simply use country’s budget because that money is needed for development

• Political instability– Gap between rich and poor, competition for control of

government, corruption, mostly in periphery and semiperiphery,

• Widespread disease– Vectored disease (spread by intermediate host/vector usually in

moist/warm climates to enhance biological activity), Malaria (“silent tsunami”; infectious disease spread by the parasites in mosquitoes’ saliva, seen in tropical places)

– Solutions: pesticides(success in Sri Lanka), new nonvirulent ones, nets

Costs of Economic Development• Industrialization

– Pollution– Export Processing Zones- special manufacturing export

zones made by the government to attract industries• Offer good tax, regulatory, & trade agreements• Ex. Maquiladoras, Special Economic Zones

– NAFTA=North American Free Trade Agreement- US, MX, CA, helps further industrialization by creating manufacturing plants

• Agriculture– Large-scale modernized agriculture in periphery

produces for foreign markets while helping the native land very little

– Lower yields, can’t afford tools, little education, unfavorable land

– Desertification- humans destroy vegetation & erode soils because of overuse for farm purposes

Why do countries experience uneven development within

the state?• Economic disparity- Poverty not just in

periphery, but also in regions of the core• Governments get involved make islands

of development (concentrations of economic development in a city)

• NGOs!

Nongovernmental Organizations

• Independent organization• Usually nonprofitable• Have specific goals to improve

development• Microcredit program- program of an NGO

for South Asia and South America.– Gives loans to poor (particularly women) to

encourage small business development– Alters gender balance