APHG Chapter 9 Key Issue 4
Vocab flashcards for Rubenstein's Chapter 9 (development) Key Issue 4.
Terms in this set (42)
paths to development
self-sufficiency or international trade
spread industry equally throughout all sectors of the economy; isolate countries from the global economy so industry can develop without interference; income in the countryside equals that in the city; popular in the 1900s, China/India/Africa/Eastern Europe once followed this
a barrier on international trade: setting high taxes on imported goods
limits on how many foreign products can be imported, a barrier to international trade
required to import foreign products, a barrier to international trade
India's former self-sufficiency
India severely limited both imports and exports to and from India. Businesses were expected to make changes and modernize within the country. The government provided subsidies, like free electricity, to businesses that couldn't sell within India alone.
A problem with self-sufficiency, the lack of international trade lowers the quality of goods. (Ex: Indian cars sold a lot within India but were low in quality)
A problem with self-sufficiency, to regulate the economy a large government must be formed. The size of the government encouraged corruption, and entrepreneurs found that giving advice about how to navigate the government was more profitable than selling goods.
A second pathway to development, a country seeks to produce more of a natural resource and sell it to the international community for less.
W W Rostow
Supported the international trade method, proposed a 5-stage model of development in the 1950s. The demographic transition model for the economy!
1. The traditional society
A country that has not yet developed, most people involved in agriculture and most wealth going to military and religion without actually helping people.
2. The preconditions for takeoff
The elite group begins innovative economic activities, such as investing in better water and transportation systems
3. The takeoff
rapid growth occurs in a limited number of economic activites, such as textiles or food production. These few industries rapidly develop and become productive
4. The drive to maturity
Modern technology diffuses to a wide variety of industries instead of just the original few. Workers become more skilled and specialized.
5. The age of mass consumption
The economy shifts from "heavy" industry (steel/energy) to consumer goods, such as cars and refrigerators.
MDC/LDC in economic transition
LDCs are in the first 3 stages, MDCs like the US are in the last 2
Benefits of international trade
exposes countries to consumers in other countries so they can produce more goods that people will buy
reasons for Rostow's model
Japan and South Asia had modernized, so why couldn't other LDCs?
LDCs had many natural resources that they could use to their advantage
followed the international trade model. South Korea, Singapore, Taiwan, and Hong Kong (the four tigers/gang of four/the four asian dragons) rapidly developed by producing a few high-quality goods like clothing and electronics with low-cost labor. Followed Japan's success.
The Arabian Peninsula
Export of petroleum is the main economic activity, with more recent steel and aluminum industries. Islamic religious principles conflict with development
uneven distribution of resources
some countries have a lot of a valuable resource, others have a lot of a non-valuable resource, problem of international trade
the world market is growing more slowly than it used to because of decreasing NIRs in MDCs, problem of international trade
increased dependence on MDCs
Only focusing on making products for MDCs could lead to a lack of resources for the LDCs themselves, problem of international trade
which pathway to development?
International trade is proven to be the better option and has "converted" many countries, such as India, from self-sufficiency. GDP has increased more than 4% in international trade countries, and less than 1% in self-sufficiency countries
manufactured goods are now being traded more than crops/minerals
World Trade Organization, founded to reduce barriers to international trade. Est. 1995. WTO reduces trade restrictions like tariffs and enforces economic agreements
considered to be "undemocratic" because decisions are made by a select few. The WTO mostly benefits corporations rather than the poor
Foreign direct investment: a foreign country invests in the economy of another. FDI grew rapidly in the late 1900s, declined after 9/11, but has increased steadily again
directions of FDIs
Most economic investment is between MDCs, only 1/3 was from and MDC to an LDC. Out of LDC investments, 1/2 went to CHina, 1/4 to other Asian countrie, 1/4 to Latin America, and less than 10% to Africa
abbreviated TNCs, a TNC operates in a country(ies) other than the one where it has headquarters
1/4 based in the US, 2/3 in Western Europe(led by France, UK, Germany)
LDCs can get loans from the International Monetary Fund (IMF) and the World Bank, both created in 1944
includes International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA)
IMF funding is based off a country's relative size in the world economy. It provides money to help rebuild a country's reserves, stabilize currency exchange rates, and pay for imports
Many LDCs can't repay their loans or the interest. Also, some projects the money is spent on turn out to be expensive failures
structural adjustment program
an application for debt relief, it outlines a country's economic goals, strategies and financing requirements
structural adjustment criticism
Poverty worsens under programs because money goes toward reducing international debt instead of health and education. Criticism has inspired IMF/World Bank to talk to average people about the economy and include an economic safety net
products are being traded in a way that protects workers and small businesses in the LDCs that made the product
Ten Thousand Villages
the largest fair trade organization in the US
fair trade products
in the US: mostly handicrafts/ceramics/jewelry. in Europe: mostly food like chocolate/tea/bananas
organizations of fair trade product producers in LDCs, cooperatives reduce costs, help the environment, and encourage leadership and democratic thinking
fair trade workers
fair trade product producers recieve 1/3 of the total price. Fair trade bypasses the middle men--the sellers work directly with the producers. workers are paid at least the country's minimum wage