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Review Developing various typologies or categories of states (countries) So far Regimes Liberal democracy Communist Fascist Theocracy Authoritarian Modernizing Semi-authoritarian Fund for Peace categories Fragile, Sustainable, etc. Strong vs. Weak

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Other ways to classify states Political Variables 1. Institutions Presidential vs. parliamentary Unicameral vs. bi-cameral legislatures 2. Philosophy Democratic vs. authoritarian Modernizing authoritarian or semi-authoritarian illiberal democracy; managed democracy 3. levels of control Unitary vs. federal

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Focus Questions During the period of the Cold War (1945-1989), what was the most common way to categorize countries? After the collapse of the Soviet Union, what are the most common ways to categorize countries? How are NICs different from LDCs?

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Other ways to classify states More Typologies 1. Cold War (1945 1989) 1 st world industrialized democracies; high GDP/capita; the West 2 nd world communist; the East 3 rd world poor; less democratic; less developed 135 countries basically, everyone else Grouped into aligned and non-aligned

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Other ways to classify states More, more Typologies 2. Post - Cold War (1989 present) Industrialized democracies Communist and post-Communist Third world NICs Newly-industrialized countries LDCs Less developed countries Fourth World Least developed countries Some typologies include the Islamic countries as a separate category

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NICs and LDCs NIC newly industrialized country Approximately 30 countries SE and East Asia; Caribbean, Latin America Undergoing rapid political, economic, social, technological change Similar to 19 th century Europe and USA Building stable systems of government High to medium Freedom House, Economic Freedom and HDI ratings Growing channels of representation & participation Experiencing rapid industrialization and export- led economic growth

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NICs and LDCs LDC Less developed country 35 mainly African, Central American, Pacific Island states Potential to build political, economic, social stability Face short term handicaps Wide range of governments Political stability is compromised by corruption, social divisions, poor human rights records, and intervention by military Low GDP/capita Limited economic base Poorly developed social services Medium to low Freedom House, Economic Freedom, & HDI ratings

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Other ways to classify states Performance indicators I Governance Indicators World Bank Freedom House Corruption Index Protection of Civil Rights & Civil Liberties Political Rights & Liberties Fair & Free Elections

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Other ways to classify states Performance indicators II Economic Variables GDP & GDP per capita Inequality Gini Index Purchasing power parity Economic structure Percent of economy devoted to industry, services & agriculture Economic policies & philosophy Free market vs. central planning Economic Freedom Index (Fraser Institute) Heritage Foundation

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Other ways to classify states Performance indicators cont. Social variables Quality of life measurements Life expectancy Infant mortality Adult literacy Human Development Index (HDI) by United Nations

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Fostering Economic Development Two major forces transforming political systems and nations Process of economic development Political democratization Globalization, democratization, and marketization HDI- Human Development Index Structure of the labor force Agriculture Urbanization Education levels Increased productivity requires skilled, healthy labor force and infrastructure that supports material welfare. Copyright 2012, 2010, 2008 Pearson Education, Inc. All rights reserved.

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Economic Growth Increase in real GDP or real GDP per capita over some time period Percentage rate of growth Growth as a goal Arithmetic of growth: Rule of 70 25- 13 Approximate number of years required to double real GDP = 70 annual percentage rate of growth

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Modern Economic Growth Began with the Industrial Revolution in late 1700s Some Effects Ongoing increases in living standards Time for leisure Social change Democracy Human lifespan doubled 25- 14

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Modern Economic Growth Began in Britain Has spread slowly Starting date main cause of worldwide differences in living standards Catching up is possible Leader countries invent technology Follower countries adopt technology Can grow faster 25- 16

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Real GDP Per Capita Real GDP Real GDP Average annual per capita, per capita, growth rate, Country 1960 2004 1960-2004 25- 17 United States12,89236,0982.3 United Kingdom10,32326,7622.2 France8,531 26,1682.5 Ireland 5,294 28,9573.9 Japan 4,509 24,6613.9 Singapore 4,219 29,4044.4 Hong Kong 3,322 29,6425.0 South Korea 1,458 18,4245.8 Figures are in 1996 dollars Source: Penn World Table

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Rostows Stages of Economic Development 1. Traditional society Subsistence agriculture dominates 2. Preconditions for Takeoff Agriculture production rises and a surplus is created Trade begins Requires transportation to take crops to distant markets Investment in transportation is a key in moving from stage 1 to stage 2 25- 18

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Rostows Stages of Economic Development 3. Takeoff Farmers leave agriculture to take jobs in industry Process of urbanization begins Small manufacturing sector Many countries adopt Import-Substitution industrialization policies (ISI) Investment needed to expand manufacturing sector 4. Drive to Maturity Economic diversification begins Number and kinds of goods and services expand 25- 19

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Rostows Stages of Economic Development 5. High Mass Consumption Production of consumer goods and services dominate economic activity Critique of Rostow Development does not always occur in the way specified by the model Stages are skipped or merged Model does not identify the causes of movements from one stage to the next 25- 20

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Problems of Economic Development Unequal distribution of resources and opportunities are among the most serious causes of political conflict. Large GDP may conceal significant differences in distribution of these resources. Countrys politics affected by internal divisions of income, wealth, etc. Economic development improves the equality of income over time, but first stages of industrialization may increase income inequality. Copyright 2012, 2010, 2008 Pearson Education, Inc. All rights reserved.

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Problems of Economic Development Population growth: Population increases due to health care improvement, increased living standards, increased life expectancy Rapid population growth can pose policy challenges for developing nations. Environmental costs: Despoiled forests, depleted soils and fisheries, polluted air and water, nuclear waste, endangered species, and ozone questions. Shortages of clean water, air, and adequate sanitation. Copyright 2012, 2010, 2008 Pearson Education, Inc. All rights reserved.

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Obstacles to Development Lack of natural resources Overpopulation 9 out of 10 people born in a LDC Reduced standard of living Less saving and investment Lower productivity Resource overuse Urban problems Qualifications 39-26

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Obstacles to Development Unemployment Underemployment Low labor productivity Brain drain Capital accumulation is key Domestic capital formation Savings potential Capital flight 39-27

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Obstacles to Development The Problem of Disease Malaria in Africa Others, especially HIV/AIDS The newest scourge- Ebola 39-28

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Obstacles to Development Investment obstacles Lack of infrastructure Technological advance Borrowed technology Sociocultural obstacles Institutional obstacles Land reform 39-29

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The Vicious Circle of Poverty RAPID POPULATION GROWTH LOW LEVEL OF DEMAND LOW LEVEL OF SAVING LOW PRODUCTIVITY LOW LEVELS OF INVESTMENT IN PHYSICAL AND HUMAN CAPITAL LOW PER CAPITA INCOME 39-30

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Ingredients of Growth Supply factors Increases in quantity and quality of natural resources Increases in quality and quantity of human resources Increases in the supply (or stock) of capital goods Improvements in technology 25- 31

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Ingredients of Growth Demand factor Households, businesses, and government must purchase the economys expanding output Efficiency factor Must achieve economic efficiency and full employment 25- 32

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Accounting for Growth Factors affecting productivity growth in the United States Technological advance (40%) Quantity of capital (30%) Education and training (15%) Economies of scale and resource allocation (15%)

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Modern Economic Growth Growth-promoting institutional structures Strong property rights Patents and copyrights Efficient financial institutions Literacy and widespread education Free trade Competitive market system 25- 34

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Role of Government A positive role Law and order Lack of entrepreneurship Infrastructure Forced saving and investment Social-institutional problems Public sector problems Corruption 39-35

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Policies for Promoting Growth Establishing and implementing the rule of law Opening economies to international trade Controlling population growth Encouraging foreign direct investment Building human capital 39-36

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Policies for Promoting Growth Making peace with neighbors Establishing independent central banks Establishing realistic exchange-rate policies Privatizing state industries 39-37

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U.N. Economic Development Goals 1. Eradicate extreme poverty and hunger 2. Achieve universal primary education 3. Promote gender equality and empower women 4. Reduce child mortality 5. Improve maternal health 6. Combat HIV/AIDS, malaria, & other diseases 7. Ensure environmental sustainability 8. Develop a global partnership for development 25- 38

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Role of Advanced Nations Expanding trade Foreign aid Direct aid The World Bank group Foreign harm Dependency and incentives Bureaucracy Corruption and misuse Flows of private capital 39-39

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Major Playas in Development World Bank IMF WTO

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More about the World Bank (from their website) Founded in 1944 one of the worlds largest sources of development assistance. bringing a mix of finance and ideas to improve living standards and eliminate the worst forms of poverty. Owned by more than 184 member countries helps each developing country onto a path of stable, sustainable, and equitable growth.

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More about the World Bank (from their website) The World Bank President is by tradition a national of the largest shareholder, The United States In summary The World Bank borrows money (issues bonds) and gets contributions. It then loans that $ to countries for educational, economic, and industrial projects. Works through the International Bank for Reconstruction and Development (IBRD) It also provides experts and expert advice to the borrowers.

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The Anti-World Bank Argument World Bank policies force impoverished countries to prioritize debt repayment over human need, divert resources from health, education, and clean water. the Bank makes it easier for companies to fire workers and to change their labor laws to weaken the collective power of workers. The World Bank raises most of its funds by issuing bonds [sold to] pension funds, labor unions, churches, municipalities, and universities Those bond buyers, in rich countries, are the recipients of profits earned from the poorest countries. (World Bank Bonds Boycott)

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The IMF (International Monetary Fund) an international organization of 184 member countries. It was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of development; and to provide temporary assistance to countries to ease balance of payments adjustments.

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The IMF (International Monetary Fund) the central institution of the international monetary system the system of international payments and exchange rates among national currencies It aims to prevent crises in the system by encouraging countries to adopt sound economic policies; it is also a fund that can be tapped by members needing temporary financing to address balance of payments problems. It is the lender of last resort

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The World Trade Organization The WTO is a powerful international (supranational) organization, responsible for regulating international trade, settling trade disputes, and designing trade policies through meetings of its member countries. Works to lower trade barriers by negotiating multilateral trade agreements involving Tariffs; trade & environment; anti-dumping and subsidies; investment; competition policy; trade facilitation; transparency in government procurement; intellectual property..

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WTO Trade Dispute Resolution Why U.S. Taxpayers Are Paying Brazilian Cotton Growers.

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Why Doesnt Everyone Love the World Bank and the IMF? Common principles and features Export-led growth Privatization and liberalization Sell off government-owned industries Reduction of government subsidies Deregulation Efficiency of the free market Balanced budgets Cuts in public services Cuts in government programs Threaten the sovereignty of national economies because an outside organization is dictating a nations economic policy.

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Why Doesnt Everyone Love the World Bank and the IMF? Structural Adjustment Programs (SAPs) Economic policies which countries must follow in order to qualify for new World Bank and IMF loans and help them make debt repayments on older debts owed to commercial banks, governments, and the World Bank. Conditionality requirement that countries meet certain conditions to be eligible to receive international assistance or to join certain international clubs (like EU or WTO)

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Requires countries to end ISI Import-substitution Industrialization is a policy that stated that a developing country should protect its new industries by placing restrictions on international trade, thus allowing its new industries to grow until they were strong enough to compete on the international market. Governments took on the role of business owner, creating wholly or partly government- owned industries that supplied the domestic market with key goods. (para-statals)

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ISI Relatively successful at first. Brazil, Mexico and Turkey saw very rapid economic growth throughout the 1950s and 60s. But, Protecting industry from competition in the long run resulted in inefficient industries that could not compete on the international market. These industries were hard to change vested interests of managers and employees caused resistance These industries couldnt compete with enough exports to balance imports. Countries had to borrow and often werent able to re-pay debt crises IMF & World Bank to the rescue at a price.

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The Battle of Seattle, 1999

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The WTO Protests Protest groups Labor unions, environmentalists, socialists, anarchists Key issues for the protestors Labor protection and environmental standards Youtube 37-54