4.3.3c - Other development strategies Flashcards
Assumptions made by the lewis model
- The Lewis model assumed that developing countries had dual economies with a
traditional agricultural sector, which had low wages, low productivity,
underemployment and low savings, and a modern industrial sector, with high levels
of investment and urbanisation
State the other development strategies
o industrialisation: the Lewis model
o development of tourism
o development of primary industries
o Fairtrade schemes
o aid
o debt relief
Describe the lewis model
- It suggested that the modern industrial sector would attract workers from rural
areas by offering higher wages. - Lewis believed that labour productivity was so low in agricultural areas that people leaving the area would have no impact on output and would in fact mean there was a surplus of food, since the same amount was being shared amongst less people.
- Those who moved to the urban areas would have higher incomes and thus more savings for investment.
- He believed savings and investment were the key to growth and thus growth
could be achieved through rural-to-urban migration
Evaluate lewis model
● However, although labour productivity is low for some parts of the year, during
planting and harvesting vast amounts of labour is needed. Also, it is not necessarily
true that those with higher wages will save and invest their money.
● Recently, migration has led to urban poverty replacing rural poverty as the industrial sector is unable to provide jobs for all those who have moved. Improvements in technology will lead to a reduced demand for labour.
- lewis model suggests industrialisation is a cause of development: India went from agriculture to services as this is where they
had a comparative advantage. This shows that not all countries will develop in the
same way.
-Evidence suggests that surplus labour is as likely in the urban sector as in the agricultural sector. Migrating workers may possess insufficient information about job vacancies, pay and working conditions. This results in high unemployment levels in towns and cities.
- Towns and cities may also be fixed in size and unable to accommodate large numbers of immigrants. This gives rise to slums and shanty towns, which are often illegal, built on flood planes or areas vulnerable to landslides and without sanitation or clean water. Cape Town provides a good example. Globally 1bn people live in slum
Describe industralisatoin in relation to development
● It can be argued that industrialisation is a result of development , rather than a
cause.
● It is possible for the government to build factories and plants to encourage the
transition to industrialisation. This has been successful in countries such as South
Korea, but in many countries the industry fails and so there is just a waste of scarce
resources
Describe the cons of development of tourism as a development strategy
● However, the industry is seasonal and involves low skilled, low paid jobs which
means the effect of the multiplier is limited (especially during recession). Tourism destinations can go in and
out of fashion , meaning some areas will see a loss of employment and that
investment may only receive a short-term return.
● A large amount of wealth created will be withdrawn as TNCs repatriate their profits ,
causing problems involving capital flight.
● On top of this, the country can suffer from a large number of externalities, including pollution, waste, environmental damage and impact on culture.
pros of development of tourism to aid development
● Tourists bring foreign currency, which will fill the currency gap. so countries will be able to fund their imports EVAL: However,
holidaymakers’ demands for products from their home countries mean that the
tourism industry is associated with an increase in imports and so may not help the foreign currency gap at all?
● Countries are likely to attract investment from transnational hotel companies, who
will also bring knowledge with them. It can help to fund improvements in
infrastructure, as tourism requires reliable electricity, airports, clean water etc. and
so the government have an incentive to provide this. This investment will have a
multiplier effect through the economy.
● Jobs are created locally since the tourism industry relies on low skilled workers who
know the local area, rather than to high skilled workers which may be sourced from
abroad. HELPS LOCAL COMMUNITY
● The government will see higher tax revenues due to higher income and higher
profits. It can provide funds to allow countries to diversify. tourism has positive YED which prevents deterioration of TOT
Advantages of development of primary industries as a development strategy
● Some countries, such as Saudi Arabia, Norway and Australia, were able to develop
because of an abundance in natural resources. The development of a primary
industry provides funds to allow a country to diversify as well as allowing
infrastructure development and better education. - diamonds and oil are income elastic
● However, primary products are volatile and primary product dependency causes
many issues. Primary industries also suffer from corruption.
● The government can address the Dutch Disease , for example in Norway the
government uses some of its oil revenues to invest overseas and this increases
supply of their currency, depreciating it and helping other industries to compete
overseas - Norway has developed the world’s largest sovereign wealth fund based on its oil revenues.
define fair trade
“Fairtrade is about better prices, decent working conditions, local sustainability, and fair terms of trade for farmers and workers in the developing world.
How does the fairtrade scheme occur
A fair price typically means that agreements are made to buy a guaranteed amount of produce over a period of time at a price which is above the market price when the agreement was made. This gives producers stability and raises their income. The system means that child labour is not used and that production is sustainable
and does not take place at the expense of environmental degradation. SUSTAINABLE DEVELOPMENT becoming more importnat
How may fiar trade negatively impact other producer
It is argued that the system has an insignificant impact on the developing world. It benefits the Fairtrade producers but can leave others worse off since non-Fairtrade producers see a fall in demand. In the long term, the higher price for Fairtrade goods will increase supply and thus this could bring price back down, but this will depend on the price elasticity of supply.
Another con of fair trade
- higher incomes reduces the incentive to diversify and keeps farmers engaged in low profit activities.
- On the other hand, it can be argued that it allows parents to send their children to school (whether because it provides the
funds necessary or means children are no longer expected to stay at home to work
the land) and this will allow them to gain skills which in the future will allow them to
move away from agriculture. - costs of meeting fair trade standard e.g organic certification might reduce famr incomes bc lower prod yields
- limited impact: fair trade only covers a small proportion of world trade - 202 sales were 19.2bn euros, just 0.02% of global trade
four types of aid
o tied aid is aid with conditions attached, such as economic or political reforms
or a commitment to buy goods from the donor country
o bilateral aid is directly from one country to another
o multilateral aid is when countries give aid to an international organisation who
distributes it to other countries.
o concessional loans are loans given on lower, or no, interest rates
Disadvantages of aid
● However, some argue it results in a dependency culture where countries are
unconcerned by their finances as they know they can receive aid from another
country.
● Corruption means that money does not always go to where it is meant to. In the long term, tied aid and concessional loans may mean that the country loses out. Since
concessional loans still have to be repaid, this may limit where the money is spent;
countries may only spend money on things they know will see a return in the short
term
- It is difficult to know the best way to develop a country and therefore it is difficult to
know the best place to spend the aid.
-* Conditions attached to aid may have negative
consequences, e.g. not clear that the loans
offered in Extract D are concessionary, or
interest rates may still have a high
opportunity cost
* Aid may be more effective if used in
conjunction with supply side measures
* The concessionary loans need to be paid back,
Extract E. These can increase a country’s
indebtedness and exposure to risk, and could
affect government finance, where tax
collection is inefficient and tax base (10%) is
small.
explain debt relief as a development strategy
● Many countries suffer greatly from the high interest repayments to loans they have taken out. It limits the growth of some of the poorest countries, whilst being relatively small for the countries and agencies that are owed the money. Therefore, it seems reasonable for the debt of developing countries to be written off
.
● It will ease government finances and allow more money to be spent on provision
of services and infrastructure to aid development.
- alleviate extreme povertyin LIC by freeing up funds for gov elsewhere like sanitation, health ,ed
- source of humanitarain relief if country kjust experience natural disasters or civil conflicts
