Causes of DG: Theories of development Flashcards
Poverty cycle
This theory focuses on underdevelopment, using poverty and social deprivation to explain the inequality between countries. Less developed countries are trapped in a continuing cycle of poverty because they lack capital.
Rostow
His model of economic development argued that a country passes from underdevelopment to development through a series of stages of economic growth. In the late 1960s Rostow believed that capital should be transferred from developed to developing countries to assist development.
Criticism of the Poverty cycle
The theory does not account for the rapid economic emergence of countries like China, India and South Korea. It also assumes that development takes place in isolation from other countries and is free from global interactions. Furthermore it does not take into account foreign aid or loans.
Politics
These models examine the impact of different philosophies on equality and development. For example, Karl Marx believed that the capitalist free market economy caused exploitation and social inequality while communism, in which the economy and other areas were state controlled, made the effects of development more equitable.
Dependency
Gundar Frank’s dependency theory of development suggested that developed countries such as the USA, control and exploit less developed ‘satellite’ areas of the world. This produces a relationship of dominance and dependency possibly leading to poverty and underdevelopment, one example is colonialism.
Core-periphery
Friedmann argued that beneficial effects can spread from developed core regions or countries to less developed, peripheral regions.
Myrdal’s core-periphery model
It is similar, except that spread effects are outweighed by backwash effects which favour the core region. This widens the development gap. Many governments attempts to neutralise backwash effects with international aid or trade agreements.
Globalisation
Countries are becoming more connected and interdependent at a global scale, in complex ways that are cheaper, faster and more efficient than previously. The main types of global flow that connect places around the involve the movement of people, capital, technology, ideas and information.
Debt
In the last 50 years, many countries have accepted loans from rich countries. Interest payments on the loans affect development as they put pressure on the already stretched financial situation of a country. Loans have to be repaid, plus interest and sometimes they have strings attached.
The debt crisis and the developing world
Problems are particularly bad in Africa, the debt crisis was produced by a series of events:
1) The Arab-Israeli was of 1973-4 led to sharp increase in oil prices.
2) People in the oil in the producing countries invested in so called petro-dollars from rich banks.
3) These banks offered loans at low interest rates to recycle their large reserves of petro-dollars. Poor countries were encouraged to borrow to invest in development.
4) In the 80s western countries experienced recession an tried to combat inflation by increasing interest rates. But demand for goods in developing countries fell due to crop surpluses.
Why does the debt crisis continue?
1) High interest rates charged by some banks.
2) Corruption within developing countries’ governments and companied which diverts loan monies from their intended targets.
3) Political instability leading to loss of confidence that some countries can repay their loans.
4) New IMF and World Bank loans to help pay back the old ones which have conditions attached.
5) Trade barriers imposed by developed countries that make it hard for poorer countries to export.
