Globalisation and Developments Flashcards
Anachronistic Definition of Development
Economic progress, usually measured by GDP rises. UK grows by 0.2% pa, China has been running at above 10%, now down around 8%. Was the USA moving backward in terms of development when in 2009 its GDP shrunk by 3%.
Evolution of the Definition of Development
(1) : Using available resources to bring about an increase in the standard of living in the country. The HDI, measuring literacy rates, GNI and life expectancy does this.
(2) : Creating an environment in which people can develop to their full potential and lead productive and creative lives according to their needs and interests. This brings quality of life into the dimension necessitating more qualitative (strictly semi-quantitative) indices like the Happy Planet Index into the mix.
Rostow’s Model vs the Development Continuum
The biggest discord here is the case of the resource rich countries (housing 60% of the world’s proven oil resources). They ‘leapfrog’ the NIC/RIC stage and their cities appear to be R5 (high mass consumption) areas but rural areas still are R1 (traditional society). Spatial differences are important in the development continuum but scupper Rostow’s model.
Historic Development Categorisation
Traditionally rich countries = 1st World USSR and associated centrally planned economies = 2nd World. Poor countries (LEDC's) = 3rd World This plays in to the ideas of the North-South divide (Brandt Line) put forward, in addition to a plea to developed countries to help less developed nations to access free market economic systems, in the Brandt Report of 1982
HDI
On a 0-1 scale. Measures GNI/capita; literacy rates; school enrolment, and life expectancy. Norway world’s highest at 0.944, Niger the lowest at 0.345.
GEM
Gender Empowerment Measure.
Measures women in parliament, salary disparities and the % of women who are economic decision makers.
Happy Planet Index
Measures sustainability of a particular country as well as the fulfilment of its people.
Modern Classification of Countries
- Affluent - Traditional MEDC’s such as the UK and USA.
- Emerging (with GDP growth rates >3.5% pa)
- Resource Rich (contain 60% of proven oil resources).
- Poor and Lagging (home to 1bn of the world’s poorest people). These can also be called LLEDC’s.
Sudan - Context
Gained independence from Britain in 1956 (1st Jan). Arbitrary British borders prevented there being a clear national identity as there was a divide between Dinka people (Black Christians) in the South and Arab (Muslims) in the North. There is an instantaneous power struggle which the Arab faction win. Blue and White Niles meet in Khartoum leading to the formation of what was - at the time - the world’s largest single irrigated area: the Gezira.
Sudan’s Drive to Development
Borrowed extensively from the WB to mechanise production. Within c.8 years it was self sufficient in terms of food as it no longer undertook cotton monoculture. This was despite a coup before the parliament first met in 1958.
Crisis in Sudan
In 1973, following the Yom Kippur War, the world entered economic crises following OPEC sanctions. Oil prices increased by 4x (hitting Sudanese mechanised farmers) and loans recalled. Debt spiralled. By 2003 sudan had $15bn of debt, $45bn (80% of GDP) by 2013. It was subject to a SAP that forced it to return to growing cotton. Suspended in 1990 from the IMF due to corruption. 3 major periods of civil war in its history. In 2011, 97% of the S voted for independence. Population grew at 3% pa so famine hit. Now, 2 million are displaced and the same number dependant on food aid, 1.3 million people are dead. Tenant farmers displaced from best land, replaced by the elites who would ravage it for 3 years and then leave.
International Debt Burden
LEDC debt stands at $3.7tn. Was $598bn in 1980. This can be attributed to predictable pattern of inappropriate borrowing. Corruption a significant problem: until Pres. Soharto was removed in Indonesia in 1998 he stole £31bn. AIDS epidemic in areas like SA (where 40% of the population are infected in some parts) can push a country back down the development continuum.
Mercantilism/Neo-Colonialism
This is where a rich country buys low price goods off a low income country and sells expensive ones back. Can also include an aspect of dumping of subsidised produce. Mali receives $37m from the US in aid per year but loses $43m in cotton sale profit to subsidised US cotton (which can be sold for 25% less than the production price) which lowers the prices on the international market.
Debt Relief Initiatives
For every $1 given in aid per year, $3 is used to service debt. This is despite a 66% rise (2000–>2015) in aid donations and 2013 aid standing at $135bn. Countries realised that for aid to be sustainable it needed to relieve debt.
MDRI
Millennium Debt Relief Initiative.
In 2005, conditional on meeting transparency criteria and having a economic plan in place countries could have debts written off. 16 countries, all in Sub Saharan Africa benefitted from this with debts having fallen, in two years from 2005–> 2007 from $55bn to $26bn.
Jubilee 2000
This scheme was designed to get countries to invest more in their public services. If a country wanted debt written off they would have to approach a debt relief agency with a proposal as to how they would use the same amount to invest in a public service project. If the debt relief agency were convinced the plan was sustainable they would authorise funding.
Taiwan: An Economic Miracle
In 1960, it was as poor as Kenya. Following land redistribution in the 1950’s, giving land to Tenant farmers (paid for by US investment) it went through an economic miracle from 1960-1970 with poverty rates halving and real wages now being 10x higher. It is now 20x as rich as Kenya.
Taiwan’s Path to Development
Land reform gave people ownership over a bit of land and an imperative to develop it. The government, under the ‘benign’ dictatorship of Chiang Kai Shek, encouraged people to open businesses. 1/6th of Taiwanese people did so. Its first ‘step’ was buying cheap machinery to make cheap plastic toys such as Barbie dolls. Here, cheap labour was a significant factor in giving Taiwan a comparative advantage. It invested in high quality education, of which parents were very supportive. Labour costs grew, Taiwan responded to this with innovation, beginning a market breakthrough that started with obsolete parts at low prices.
Acer Company
Purchased the patent to an obsolete calculator in 1981, using this to train 3000 engineers. 2 years later they exported their first competitive computer, with all the functionality a business user could want at much lower prices than US and Japanese manufacturers. It benefitted from acquired skills from when its citizens worked as contractors for Japanese TNC’s. It became the world’s 4th biggest computer company because of market deregulation. It is now democratic with a socially mobile middle class.
Facilitators of Taiwan’s economic miracle.
- A focus on state investment in good quality education through government input.
- Parents sacrificed their own quality of life, working in sweatshops doing 3D jobs to send their children to school.
- Benign dictatorship gave one individual the power to lay the foundations for development which, ironically, led to democracy.
Factors constraining economic growth in Kenya.
Neo-colonial relationships (Mange Tout farming for Tesco, fresh cut flower cultivation). Highly regulated economies. Tenant farmers have no rights. You need a licence to start a business. To get this takes 68 days and costs 50% of the average annual salary.
NIC Development: South Korea. Stage (1)
Jobs initially 3D (dirty, difficult and dangerous) and low skilled. People are low paid and that is what attracts companies to contract to them as it makes labour intensive jobs (like boat breaking in the Bay of Bengal) cheap. They are often enticed in by low wages and tax incentives in SEZ’s. This kick starts the wage economy in the country and creates a domestic market ( a multiplier effect as people spend their wages). This creates the preconditions for stage 2.
NIC Development: South Korea. Stage (2)
Using industrial skills developed in stage 1, the country develops heavy industries with an export focus. These cheap exports (e.g. Ships; using Australian iron ore South Korea became the world’s second largest shipbuilder). They can use their own natural resources or import cheaply from other suppliers. Earnings invested in infrastructure. This convinces TNC’s to invest in production plants. e.g. Japanese technology manufacturers invested in S Korea. Simple electronics made for TNC’s but give S Korean people a lot of transferable skills.
NIC Development: South Korea. Stage (3)
These transferable skills and considerable government backing allows the country to develop its own high tech industries. The government often favours a small number of large companies (the Chaebols) who produce ‘everything’ and do everything for their employees. Exports are more valuable in this area but the countries are still able to undercut competitors on price. They also market aggressively with tactics such as Kia’s 7 year warranty on new cars. World domination in these sectors is the key. Samsung is the world’s biggest producer of mobile phones; in 1996 South Korea became the world’s biggest producer of computer chips, and Hyundai is today the world’s 4th largest car manufacturer by sales.
NIC Development: South Korea. Stage (4)
These large companies in NIC’s become TNC’s as the cost of production in NIC’s becomes too large. For example, LG opened a plant in Newport, Wales in 1996. It cost £1.7bn and was supported by funding from the Welsh Development fund. 6100 jobs were promised, perhaps rising to 15,000. It failed, however, with only 315 jobs remaining when it closed in 2006.
Assets of South Korea that helped it to industrialise.
The average working week in South Korea is 72 hours. In 1989, wages were 4.5x less than Japan. The government pushed exports and they rose from $40 million in 1963 to $65bn in 1990. Are a member of the APEC trade bloc giving them free trade around the Asia-Pacific region, including with the USA, Japan and Russia.
Negatives of Rapid Development in S Korea
Deforestation is at 2.6% pa with 20% of land classed as seriously degraded. The Nakdong River Incident: 31 tonnes of toxic phenol dumped into the river from chip production in Kumi city. 75% of low skilled workers are female. There is a real gender divide. In the 1960’s child labour was widespread. Until 1987, dissent was quashed brutally by the government. Chaebols so big that when they do collapse, as happened with Daewoo in 2000, massive numbers of jobs (c. 14000 in S Korea alone) can be lost.
Focus on the environment increasing as countries develop.
In South Korea today there is work being done on a Garden Bridge, as proposed in London. The Cheonggyecheon expressway project in Seoul was demolished over a 2 year period, costing £200 million, The subsequent green corridor has lowered the urban heat island effect by 0.3 degrees C.
China’s Development as a Superpower
Started in 1978. Under Mao’s successor Xiaoping the country moved away from central economic planning to a more integrated approach. He encouraged FDI and relaxed controls on industry. More autonomy given to plant directors.
Increasing Productivity
The government realised that urban populations and production were important. They therefore worked in the 1980’s to increase rural production (agricultural production increased 100%) through mechanisation, freeing people up to work in the cities.
SEZ’s
There were six SEZ’s, with the largest being the North China Energy Zone, and 14 coastal open cities (such as Beijing and Shanghai). FDI drove growth rates in GDP of over 10%. Between 2000 and 2006, FDI increased by $13bn a year. This is the largest figure for any developing country.
WTO Membership for China
Gained, after significant negotiation, in December 2001. Between 2001 and 2006 imports rose by 256%.
Foreign Policy: Africa
In 3 years from 2005 to 2008, following the Chinese charm offensive in Africa, China-Africa trade grew to 1017% its 2000 level. China is keen to have an influence in the area. Sold Zimbabwe K8 fighter jets in 2006. Offered $795 million to construct a dam in Cameroon after the British contractor pulled out. When 150 demonstrators were killed in Guineau western government pulled out in protest, China stepped in to sign a $7bn mining contract. This supplies the raw materials to a country whose industrial output is growing by 6% a year. Chinese troops are on a peacekeeping mission in the DRC where there is $27tn of untapped mineral resources.
Issues in a developing China
Western China left behind. Arable land deteriorating and air quality across the country falling. The economy is prone to global recession, it has seen a marked slowdown since 2008, with growth rates expected to fall to 5.8% by 2021. This has the negative multiplier effect of discouraging investors and making the problem worse.
Three Gorges Dam
An example of how the government is investing in resources for growth. Produces 22,500MW of energy. 1.2 million people have been displaced to poor quality land around 700m ASL. Delta sediment has dropped by 50%, damaging downstream habitats and risking the dam silting up in 30 years.
Labour Costs
Labour is 95% cheaper than in the USA. As a result American TNC’s (like Apple) contract Chinese contractors (like Foxconn) to build products for them in Chinese factories. All despite wages increasing 3x in the past 10 years. Produces 70% of all mobile phones and 50% of all shoes.
