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Terms in this set (24)

To reduce disparities between rich and poor countries, developing countries must develop more rapidly
o Increasing per capital GNI more rapidly-> make more rapid improvements in social and economic conditions
SOLUTION= Finance comes from two primary sources:
o Direct investment
• Foreign direct investment- Investment made by a foreign company in the economy of another country
FDI does not flow equally around the world
Not evenly distributed among developing countries
Major sources of FDI are transnational corporations that invest and operate in countries other than one in which the company headquarters are located
o Loans
• Two major lenders to developing countries are the...
World Bank
o Includes the International Bank for reconstruction and Development (IRBD) and the International Development Association (IDA)
o IRBD= provides loans to countries to reform public administration and legal institutions, develop and strengthen financial institutions, and implement transportation and social service projects
Primarily loan to Europe and Latin America
o IDA= provides support to poor countries considered too risky to qualify for IBRD loans
Primarily loan to Asia and Africa
International Monetary Fund (IMF)
o Provides loans to countries experiencing balance-of-payments problems that threaten expansion of international trade
o Designed to help a country rebuild international reserves, stable currency exchange rates, and pay for imports without the imposition of harsh trade restrictions or capital controls that could hamper the growth of world trade
o Does not lend for specific projects
o Finding is based on each member country's relative size in the world economy
Relationship between developed countries and developing countries is often descrbied as a north-south split
o Most of developed countries are north of the equator, whereas many developing countries are south
Wallerstein's world-systems analysis
o Increasingly unified world economy, developed countries form an inner core area, whereas developing countries occupy peripheral locations
• Result= Uneven development- global development patterns with countries at the core benefitting at the expense of countries on the periphery
o Developing countries in the periphery have less access o the world centers of consumption, communications, wealth, and power, which are clustered in the core
o Developed countries play at the core of the world economy
GDI impacts a nation by allowing new resource and funds distribution
Development is financed through a foreign direct investment by corporations and loans by governments and international organizations
The different levels of Rostow's theory were:
Traditional Society
o Not started process of development
o High percentage of people engaged in agriculture
o High percentage of wealth allocated to military and religion NONPRODUCTIVE ACTIVITIES
Preconditions for take off
o Elite group initiates innovative economic activities
o Country starts to invent in technology and infrastructure-water supports, transportation
Stimulate increase in productivity
Take off
o Rapid growth is generated in a limited number of economic activities
o Industries achieve technical advances, whereas other sectors of economy remain dominated by tradition practices
Drive to Maturity
o Modern technology diffuse to wide variety of industries-> rapid growth comparable to take of industries
o Workers become skilled and specialized
Age of Mass Consumption
o Economy shifts from heavy industry STEAL, ENERGY to consumer goods MOTOR VEHICLES, REFRIGERATORS