Terms in this set (111)
What are some examples of things that poor countries often lack that richer countries take for granted?
Access to electricity, safe drinking water, and paved roads
What must happen to reduce disparities between rich and poor countries?
Developing countries must develop more rapidly
How can developing countries develop more rapidly?
Increasing per capita GNI more rapidly and using the additional funds to make more rapid improvements in social and economic conditions
What are the two fundamental obstacles that developing countries face in trying to encourage more rapid development?
Adopting policies that successfully promote development and finding funds to pay for development
What are the two models that developing countries choose from to promote development?
Self-sufficiency and International trade
What does the self-sufficiency model involve?
Countries encourage domestic production of goods and discourage foreign ownership of businesses and resources, and protect their businesses from international competition
What does international trade involve?
Countries open themselves to foreign investment and international markets
Which model was the more popular of the development alternatives?
When did the international trade development model become more popular?
The late twentieth century
What has caused some countries to question the international trade approach?
The global economic slowdown of 2008
What do barriers limit in the self-sufficiency path?
The import of goods from other places
What are three widely used barriers used in self-sufficiency models?
Setting high taxes (tariffs) on imported goods so that they are more expensive than domestic goods, fixing quotas to limit the quantity of imported goods, and requiring licenses in order to restrict the number of legal importers
What encourages a country's fragile businesses to achieve independence in a self-sufficiency model?
Isolating them from competition
How is investment spread across all sectors of a country's economy in a self-sufficient model?
As equally as possible
What do incomes in the country side of a country using a self-sufficient model keep pace with?
Incomes in the city
What takes precedence over encouraging a few people to become wealthy consumers in a country using self-sufficient model?
What was India a leading example of after it gained its independence from Great Britain in 1947?
The self-sufficiency strategy
Why was securing a license for foreign companies to import goods into India a long and cumbersome task?
Several dozen government agencies had to approve the request
What did India make effective use of in the self-sufficiency model?
Barriers to trade
Could Indian money be converted to other currencies?
Why were businesses supposed to produce goods for consumption inside India?
India was effectively cut off from the world economy
What did businesses in India need government permission for?
To sell a new product, modernize a factory, expand production, set prices, hire or fire workers, and change job classification of existing workers
What did the government do in India if private companies were unable to make a profit selling goods only inside India?
They provided subsidies such as cheap electricity or they wiped out debts
What did India achieve by following the self-sufficiency path?
Only modest development
What must a country identify if it is following the international trade path?
Its unique or distinctive economic assets
What can a country do to develop according to the international trade approach?
Concentrating scarce resources on expansion of its local industries
W. W. Rostow was a pioneering advocate of which approach?
What are the five stages of Rostow's model of development?
Traditional Society, Preconditions for takeoff, Takeoff, Drive to maturity, and Age of mass consumption
What makes up the Traditional Society stage of Rostow's model?
They have not started the development process yet, many people engaged in agriculture and a high percentage of national wealth is allocated to "nonproductive" activities such as military or religion
What makes up the Preconditions for Takeoff stage of Rostow's model?
An elite group initiates innovative economic activities, the country starts to invest in new technology and infrastructure such as water supplies and transportations systems, stimulates an increase in productivity
What makes up the Takeoff stage of Rostow's model?
Rapid growth is generated in a limited number of economic activities such as textiles or food products, other sectors of the economy remain dominated by traditional practices
What makes up the Drive to Maturity stage of Rostow's model?
Modern technology diffuses to a wide variety of industries which then experience rapid growth, workers become more skilled and specialized
What makes up the Age of Mass Consumption stage of Rostow's model?
The economy shifts from production of heavy industry, such as steel and energy, to consumer goods, such as motor vehicles and refrigerators
Which two groups of countries chose the international trade approach while most developing countries were following the self-sufficiency path?
The Four Asian Dragons and Petroleum-Rich Arabian Peninsula States
Which countries make up the Four Asian Dragons?
South Korea, Singapore, Taiwan, and Hong Kong
How did the four dragons promote development since they were large cities surrounded by very small amounts of rural land and had virtually no natural resources?
They concentrated on producing a handful of manufactured goods, especially clothing and electronics. Low labor costs enabled these countries to sell products inexpensively in developed countries
What countries are in the Arab Peninsula?
Saudi Arabia, Kuwait, Bahrain, Oman, and the United Arab Emirates
How did the countries in the Arab Peninsula become some of the world's wealthiest countries?
Escalating petroleum prices starting in 1970s
What are the two major difficulties with the self-sufficient path?
Protecting inefficient businesses and a need for large bureaucracy
Why don't businesses in countries following the self-sufficiency path have to improve quality, lower production costs, reduce prices, or increase production?
They are protected from competition
What are the three difficulties with the international trade path?
Uneven resource distribution, increased dependence on developed countries, and market decline
Why has Zambia not been able to use their copper reserves to promote development?
The world prices for copper is declining
What was a measure of the growing importance of the international trade approach?
During the late twentieth century and early twenty first, trade increased more rapidly than wealth
When did India dismantle its formidable collection of barriers to international trade?
Why did countries like India convert from self-sufficiency to international trade during the 1990s?
Because of overwhelming evidence at the time that international trade better promoted development
Why was the World Trade Organization established?
To promote the international trade development model
When was the WTO established?
How does the WTO work to reduce barriers to international trade?
Through the WTO, countries negotiate reduction or elimination of international trade restrictions and restrictions on the international movement of money by banks, corporations, and wealthy individuals
How does the WTO promote international trade?
By enforcing agreements
Which two ways do developed countries financially support developing countries?
Direct investments by transnational corporations and loans from banks and international organizations
What is foreign direct investment?
Investment made by a foreign company in the economy of another country
When did foreign direct investment rapidly grow?
During the 1990s ($130 billion in 1990 to $1.5 trillion in 2000 and 2010)
Where do 3/5 of foreign direct investments go?
From one developed country to another
Where did nearly 40% of all FDI destined for developing countries go in 2010?
Which developed countries besides China received large percentages of FDIs in 2010?
Brazil, Russia, and Singapore
What are the major sources of FDI?
Transnational corporations that invest and operate in foreign countries
Who are the two major lenders to developing countries?
The World Bank and the International Monetary Fund
What is the International Bank for Reconstruction and Development?
It provides loans to countries to reform public administration and legal institutions, develop and strengthen financial institutions, and implement transportation and social service projects
What is the International Development Association?
It provides support to poor countries considered too risky to qualify for IBRD loans
What is the International Monetary Fund?
It provides loans to countries experiencing balance-of-payments problems that threaten expansion of international trade
When and where were the World Bank and IMF conceived?
1944 at a United Nations Monetary and Financial Conference in Bretton Woods, New Hampshire
What is the theory about new infrastructure?
That it will make conditions more favorable for domestic and foreign businesses to open or expand
What happens when developing countries can't repay their loans?
Financial institutions in developed countries refuse to make further loans so construction of needed infrastructure stops, it also damages financial stability of banks in developed countries
What did the 2008 recession reveal about developed countries?
That many developed countries also have extremely high debts
Which European countries have extremely high debts?
Ireland, Italy, Greece, Portugal, and Spain
What is a developing country required to fill out to apply for debt relief?
A Policy Framework Paper (PFP), which outlines a structural adjustment program
What does a structural adjustment program include?
Economic goals, strategies for achieving the objectives, and external financing requirements
What do critics charge about structural adjustment programs?
That poverty worsens under it
What might structural adjustment programs result in by placing priority on reducing government spending and inflation?
Cuts in health, education, and social services that benefit the poor, higher unemployment, loss of jobs, and less support of those most in need
What do the World Bank and IMF now encourage in response to criticisms?
Innovative programs to reduce poverty and corruption and consult more with average citizens
What did citizens and political leaders in many developed countries question with the economic downturn in 2008?
The benefits of orienting a country's economy to facilitate international trade, especially in Europe
How was inequality reduced during the twentieth century in many developed countries?
The countries used some of their wealth to extend health care and education to more people, and to provide some financial assistance to poorer people
What has happened with inequality in developed countries since 1980?
It has increased and the severe recession exacerbated an inequality trend that had begun a quarter-century earlier
What did many Americans think was unfair about the banks as inequality increased?
They thought that it was unfair for very large banks to be rescued by the government and to quickly resume making substantial profits at a time when the income of most Americans was stagnant or declining
What have political leaders and independent analysts been sharply divided on?
The optimal strategy for fighting the severe economic downturn
What does the stimulus strategy for fighting the severe economic downturn include?
That governments should spend more money than they collect in taxes and once the economy recovers people and businesses will be in a position to pay more taxes to pay off the debt
What does the austerity strategy for fighting the severe economic downturn include?
That governments should sharply reduce taxes so that people and businesses can revive the economy by spending their tax savings
Which strategy was initially employed in the United States by Presidents Bush and Obama?
The stimulus strategy
When was more attention payed to the austerity strategy in the United States?
After the success of Tea Party candidates in 2010
What may possibly result in the demise of the euro currency in?
The disagreement between European countries on the stimulus and austerity strategies
Which region has faced an especially difficult challenge in responding to the sharp economic slowdown of the early twenty-first century?
What do economic difficulties in Europe call into question?
The regions'a ability to continue supporting the international trade development path
What did the severe recession in 2008 prove for Europe?
That having each country saddled with the same currency was a burden for the countries in Europe with weaker economies
What type of strategy (stimulus or austerity) do Northern European countries believe that Southern European countries need to adopt?
What was the heart of the global economic crisis?
The poor condition of many banks and other financial institutions in developed countries
What is a housing bubble?
A rapid increase in the value of houses followed by a sharp decline in their value
What is fair trade?
Commerce in which products are made and traded according to standards that protect workers and small businesses in developing countries, it is a variation of the international trade model
What is the largest fair trade organization in North America and what does it specialize in?
Ten Thousand Villages, handicrafts
What are most fair trade products in North America?
Primarily craft products
What are most fair trade products in Europe?
What does the Fair-trade Labelling Organizations International do?
Set standards for fair trade
What does TransFair USA do?
Certify the products sold in the US that are fair trade
Which two sets of standards distinguish fair trade?
One set applies to workers on farms and in factories and the other set applies to producers
What do critics of international trade charge?
Only a tiny percentage of the price a consumer pays for a good reaches the individual in the developing country who is responsible for making or growing it
How much of the price does fair trade return to the producer in the developing country? Where does the rest go?
1/3, the rest goes to the wholesaler who imports the item and for the retailer's rent, wages, and other expenses
How does fair trade help small scale farmers and artisans in developing countries?
They can't borrow money from banks that they need to invest in their businesses and they also learn leadership and organized skills
How are fair trade organizations able to return a greater percentage of the retail price to the producers?
They bypass distributors and work directly with producers so they can cut costs
Why are fair trade products sometimes higher quality?
Because the fair traders factor in the environmental cost of production
Why are working conditions so poor for workers in developing countries following the international trade model?
Because protection of worker's rights is not a high priority and there is minimal oversight by governments and international lending agencies
Who are approximately 2/3s of the artisans providing fair trade hand crafted products?
Women who are often mothers and the sole wage earners in the home
What are cooperatives for fair trade encouraged to do?
Reinvest profits back into the community
What is microfinance?
Provision of small loans and other financial services to individuals and small businesses in developing countries that are unable to obtain loans from commercial banks
What is the Grameen Bank?
An example of microfinance, it was established in 1977 and specializes in making loans to women
Why was Muhammad Yunus awarded the Nobel Peace Prize in 2006?
He founded Grameen Bank
Where is the Grameen Bank located?
Bangladesh and it also gives loans to women in neighboring South Asian countries
What are the three most prominent variables for reducing the gap in the level of development between developing and developed countries?
Infant mortality rate, life expectancy, and GNI per capita
What has happened with the gap in wealth between developed and developing countries since 1980?
It has widened
Why were the Millennium Development Goals made?
To reduce disparities between developed countries and developing countries
What type of country forms the "core" of the world economy?
What type of country forms the "periphery" of the world economy?
What is uneven development?
Core countries benefit at the expense of periphery countries