Week 9 Notes
Week 9 Notes INR3003
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This 4 page Class Notes was uploaded by Beatriz Arteaga on Monday October 26, 2015. The Class Notes belongs to INR3003 at Florida State University taught by Whitney Bendeck in Summer 2015. Since its upload, it has received 46 views. For similar materials see Intro to International Affairs in International Studies at Florida State University.
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Date Created: 10/26/15
Strategies for Development I Import Substitution Industrialization ISI A Latin America Associate ISI with Latin America Ideas developed there and was implemented notoriously Were not in GATT 1 How It Worked In Practice State led Protectionist approach Provided protection for economies allowed economies to grow Goal was to develop their own domestic industry infant industries and protect them Had to cut off foreign imports in order for domestic market to grow WILL SUBSTITUTE IMPORTS WITH FRUITS FROM THEIR OWN DOMESTIC INDUSTRY High trade barriers were placed specifically on imports prohibition Increased the value of the currency gives them higher spending value on imports they NEEDED Worked well with authoritarian governments state led State insures that food prices remain very low consumers could afford them Countries with very best ISI were the larger ones Mexico Brazil etc more self sufficientlarger population 2 Problems It Encountered Highly vulnerable to international market shifts due to dependency Great Depression hit Latin America HARD due to borrowed loans other countries called in their loans Profits were exiting the country that39s why foreign businesses were still affiliated in Latin America Owned and subsidized by the state itself Agricultural sector suffers due to industrialization rising food prices low farmers aren39t making money Short term gains but over the long term it became counterproductive 3 The Lost Decade 19731987 1973 OPEC oil crisis Smaller countries the majority were at a disadvantage smaller populationless resources Were not developing strong export economies Weren39t offsetting imports two ways to offset is increase export gains andor invest Oil prices skyrocketed was one of the needed imports caused major debt in Latin America Each country began to default on their debt First was Mexico 1982 Inflation some say was over 100 Things that were promoted to help economies deregulation free market economy privatization B Infant vs Mature Industries II ExportLed Growth Built up diverse industry State led A Comparative Advantage Each country will specialize in something they can produce very easily and cheap Used S initially but then got rid of it to export goods on international market Start with little cheap trinkets textiles Turn profit into more sophisticated exports such as steel production and electronics B Asia 1 How It Worked Kept their currency low to keep exporting goods cheaper and competitive Buy what they have to buy but main focus is to make profit off of exports unlike S Government guided investment determined which industries the country should produce and then provided the resources 2 Its Problems Export economies are at the mercy of demand Many producing similar goods Overreliance on the US most wealthy consumers Wanted to be part of WTO neoliberal but weren39t fond of protectionist economies a Crony Capitalism State led state picks quotfriendsquot political support Loansmoney flowing very freely not competitive A lot of the time the loans go bad and encourage irresponsible behavior Smaller countries are more vulnerable than the others b Asian Financial Crisis 19971998 Thailand Baht Noncompetitive practices Bad real estate investments which later went bad quotAsian Contagionquot Thailand pegged it39s currency to the US dollar 1996 pulled the Baht off the peg Baht began to lose value at a VERY rapid rate Plummeted their stock market which caused the same for neighboring countries Countries hit the hardest were Thailand S Korea Malaysia Indonesia Philippines and Singapore US was also hit I Was one strategy better than the other Export Led Growth worked better than the ISI Asian countries were once colonized by very strong industrial power houses Great Britain France Japan Latin American countries were colonized by Spain and Portugal not as strong Globalization and Poverty I Pros and Cons of Economic Globalization Industrialized North 90 percent of industry is produced there 45 of the world s income comes from there and only a fourth of the population lives there Today more than 1 billion people live in abject poverty Vast majority live in Africa and South Asia Abject not able to feed themselves lack of clothing and lack of shelter Not just poor People who face death because they do not have the resources in order to guarantee health Every 6 seconds a child dies of malnutrition According to recent studies there is progress being made but the amount of poverty still present in the world is unacceptably high II NorthSouth Gap Between 1990 and 2013 the GDP has risen from 3000 to 6450 Sitting at 63 percent GDP growth However the population of the south is also growing rapidly at 13 percent Compare this to global North GDP 1990 20000 to GDP 2013 38470 Gap still exists however the growth for the south is impressive more rapid growth than in the north In the global north GDP growth is only 15 percent compared to 63 percent in the South Population growth in the north only 1 percent compared to 13 percent in the south III Are the poor catching up There certainly is economic progress in the South However 3 countries in the global south skewing data China India and Brazil Looking at a chart developing Asia leading the way in growing economies due to China and India as rising economies How do we measure development Typically we look at GDP however people suggest that we should look at more than just numbers Only within a free society is there opportunity for those people at the bottom to benefit from economic growth key component of development What is GDP GDP private consumption gross investment government spending exports imports GDP gives us an annual figure that gives us a sense as to the strength of a country s economy Average world GDP per capita 12000 Things not included in calculation of GDP accumulated wealth More accumulated wealth in the North Doesn t tell us what money is being spent on Gives us no sense of the distribution of wealth in a country Doesn t count illegal activity ie drug trade IV Distributional Issues One has to do with poverty those not benefitting from a country s wealth Dollar a day standard Now 125 adjusted for inflation used to measure poverty as distinguished from extreme of abject poverty Under a dollar a day is in the worst shape These people are living in the worst situations possible While there has been improvement many people have only moved up into the gap between the dollar and 2 dollar a day standards still not in good shape Not in abject poverty but still impoverished Inequality Large issue contributing to poverty GINI Coefficient looks at income equality If a country receives perfect 0 that d be perfect Would mean that income is equal No country is perfect countries like Denmark and Japan are the best around 2 Countries in the worst shape are poor countries like Namibia and Botswana which are closer to one Human Development Index First in equation is GDP how much people should have Next are adult literacy rates life expectancy and the number of children enrolled in school gross enrollment ratio Higher HDI rating means standards of living are higher As expected HDI is higher in the global north when compared to the global south Those in the worst shape are overwhelmingly present in Africa and South Asia What s disturbing is when we have a country with a high GDP and a low HDI means the country has money but isn t spending it on the people Little distribution of wealth Foreign Aid Talking here about quotofficial aid government to government Comes in the form of either humanitarian or development aid Humanitarian short term comes in times of crisis ie earthquake or tsunami Development Long term aid helping countries build up their infrastructures Foreign Aid can be controversial benefits and drawbacks Benefits in times of crisis aid can be very helpful and very welcome It can be very important toward seeing progress made in development projects Might see situations in these countries be better off thanks to aid Good in terms of demonstrating good will flowing from developed to developing countries In modern times providing aid helps to strengthen global security radical groups stem from impoverished regions Drawbacks A lot of these countries that need aid the most don t have democratic governments mainly authoritarian How do we know the money we provide is going to help the people Millennium Challenge Corporation Point is to try and address this problem assesses the level of corruption in a given country in order determine whether or not aid should be given V Different Approach OXFAM does not establish a donorrecipient relationship Establishes partnerships Goes into countries and helps the people get started teaches them skills with which they can learn to selfsustain
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