APHG Chapter 9 - Key Issue 4

2 fundamental obstacles that developing countries face in trying to encourage more rapid development.

1. Adopting policies that successfully promote development. 2. Finding funds to pay for development.

What are the 8 Millennium Development Goals that the UN agreed to achieve by 2015?

1. Eradicate extreme poverty & hunger. 2. Achieve universal primary education. 3. Promote gender equality & 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

What are the two sets of standards that distinguish fair trade?

1. For workers. 2. For producers.

Describe the self-sufficiency model of economic development.

1. Imposing barriers (tariffs, quotas, licenses) to limit import of goods from other countries. 2. Fledging businesses are nursed to success by being isolated from competition with large internationally corporations. 3. Investment is spread equally throughout country. 4. Income spread out among people, cities and country.

Who has criticized the WTO and why?

1. Progressives: WTO antidemocratic; promotes interests of big companies instead of poor people. 2. Conservatives: WTO takes power/sovereignty away from countries because it can order changes in taxes & laws related to trade.

What are some problems and criticisms of the self-sufficiency model of economic development?

1. Protection of inefficient businesses (lack of incentive, protected from competition). 2. Need for large bureaucracy fostering inefficiency, abuse and corruption.

2 models of paths to development that a developing country can take.

1. Self-sufficiency 2. International trade

What are the Four Asian Dragons and what are they an example of?

1. South Korea 2. Singapore 3. Taiwan 4. Hong Kong Examples of international trade. Promoted development by concentrating on producing a handful of manufactured goods, esp clothing & electronics.

Examples of requirements placed on LDCs by structural adjustment programs.

1. Spend only what can afford. 2. Direct benefits to poor, not just elite. 3. Direct spending to health & education, not military. 4. Investing scarce resources where they will have most impact. 5. Encourage more productive private sector. 6. Reforming government.

What are some strategies for fighting severe economic downtown?

1. Stimulus. More government spending to create jobs and improve infrastructure. Can increase taxes later to recover this debt. 2. Austerity. Reduces taxes so that people/businesses can spend more and revive economy. Cut government spending to keep debt lower.

In the self-sufficiency model of economic development, what are 3 widely used barriers to limit import of goods from other countries?

1. Tariffs (high taxes on imported goods). 2. Quotas on quantity of imported goods. 3. Requiring licenses in order to restrict the number of legal importers.

In what two principal ways does the WTO reduce barriers to international trade?

1. Through the WTO, countries negotiate trade restrictions, quotas, tariffs. 2. WTO enforces agreements, settles disputes between countries.

What are the Rostow five stages on the pathway towards development via international trade?

1. Traditional society. 2. Preconditions for takeoff. 3. Takeoff 4. Drive to maturity 5. Age of mass consumption.

What are some problems and criticisms of the international trade model of economic development?

1. Uneven resource distribution. 2. Increased dependence on developed countries 3. Market decline

Who are the two major lenders to developing countries?

1. World Bank. Provides loans to countries for reform and development. 2. IMF (international monetary fund). Provides loans to countries to help stabilize debt and expand their trade.

Describe the international trade approach to economic development.

A country can develop economically by concentrating scarce resources on expansion of its distinctive local industry; the sale of these products in the world market brings funds into the country that can be used to finance other development.

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?

An alternative to international trade that emphasizes small businesses and work-owned and democratically run cooperatives and requires employers to pay workers fair wages, permit union organization and comply with minimum environmental and safety standards. It protects workers and small businesses in developing countries.

Why did the gap between rick and poor narrow in developed countries in the 20th Century? What has happened since 1980?

Because developed countries used some of their wealth to extend health care and education to more people and to provide some financial assistance to poorer people. Since 1980 -gap has widened. Recession triggered more inequality.

Why has Europe had an especially difficult challenge in responding to the economic slowdown of the 21st century?

Because of common currency of the Euro. Takes away country's power to regulate its own currency.

What is the theory behind using loans for infrastructure projects in LDCs?

By improving infrastructure (roads, water supplies, electric lines...), conditions will be more favorable for businesses to open or expand.

What is a transnational corporation?

Corporations that invest and operate in countries other than the one in which its headquarters are located; most have headquarters in developed countries.

What are structural adjustment programs?

Economic policies and goals imposed on LDCs by international agencies to create conditions encouraging international trade. These may include restrictions on where the money goes, reforming the government, etc.

Common reasons for failure when loans are made to developing countries.

Faulty engineering, project plans. Aid squandered or stolen, or spent on weapons. New infrastructure does not attract businesses.

How is the housing bubble related to global economic crisis.

Houses lost value so people lost money and then couldn't pay back their loans. Banks then lost money.

How have the infant mortality rate, life expectancy and GNI per capita changed in developed and developing countries since 1980?

IMC - decreased in both but more in LDCs = gap narrowing LE - increased in both = gap same GNI/capita - increased in MDC > LDC = gap increased

Which of the two models for development has shown more success? Explain.

International trade better promoted development. India has even switched over. Worldwide, GNI increased >4% annually with international trade compared to <1% for countries oriented toward self-sufficiency.

Define foreign direct investment.

Investment made by a foreign company (usually transnational corporations) in the economy of another country.

What are the IBBD and IDA?

Parts of the World Bank. IBRD = International Bank for Reconstruction & Development. IDA - International Development Association. Especially for poor countries too risky for IBRD.

Define microfinance.

Provision of small loans & other financial services to individuals and small businesses in developing countries that are unable to obtain loans from commercial banks.

Explain some of the worker standards for fair trade.

Requires fair wages, unions and minimum environmental and safety standards.

Explain some of the producer standards for fair trade.

Returns higher percentage of price (approx 1/3) to the producer in the developing country. Producers form cooperatives which are democratically managed.

What are the Arabian Peninsula states and what are they an example of?

Saudi Arabia, Kuwait, Bahrain, Oman and United Arab Emirates. Example of international trade due to petroleum.

What is the WTO?

World Trade Organization. Formed to reduce barriers to international trade.

What are some dangers of the structural adjustment program directives on reducing government spending and inflation?

may result in cuts in health, education, social services, jobs and support for needy (poor, children, pregnant women, elderly...)

India is an example of which path to economic development? How so?

self sufficiency. India made effective use of many barriers to trade (licensing, quotas, taxes), Indian money could not be converted to other currencies. Indian businesses were discouraged from exporting. Many businesses owned or tightly regulated by government.