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Economic Development and Culture

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Economic Development and Culture. Team 7 Chapter 8 Ben Kerstens , Kyle Hassan, Wade English, Devon Purcell, Greg Lappo , James Mounts, Kelsie Lynn, Michael Barker, Chris Gist, Jacque Daly. Background. Economic Development and Globalization - PowerPoint PPT Presentation
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Economic Development and Culture Team 7 Chapter 8 Ben Kerstens, Kyle Hassan, Wade English, Devon Purcell, Greg Lappo, James Mounts, Kelsie Lynn, Michael Barker, Chris Gist, Jacque Daly
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Page 1: Economic  Development and Culture

Economic Development and Culture

Team 7Chapter 8

Ben Kerstens, Kyle Hassan, Wade English, Devon Purcell, Greg Lappo, James Mounts, Kelsie Lynn, Michael Barker, Chris Gist, Jacque Daly

Page 2: Economic  Development and Culture

Economic Development and Globalization◦ What happens in one nation affects another

nation.

Paradoxes of economic development◦ Trade, Democracy, and Open and Free markets◦ Culture and change

Background

Page 3: Economic  Development and Culture

Background, Cont. Emerging theories on international trade

and development◦ Mercantilism:

strict regulation, favorable balance of trade◦ David Ricardo:

Economic development comes from three things: land, labor and capital.

Each nation must examine and use its competitive advantage.

◦ Post – Ricardo: Identifying specific factors leading to economic

growth

Page 4: Economic  Development and Culture

Post-Ricardo, Cont.◦ Free-market capitalism assumes a level playing

field China and India require a disproportionate amount of

natural resources. The huge boom in China and India’s economy affects

other, more developed nations, like the U.S.◦ Immiseration:

An economy can suffer even while growing rapidly Over producing and exporting will lower global

demand, effecting price.

Background, Cont.

Page 5: Economic  Development and Culture

Problems with global economic development◦ Previous government policies gave some

countries late starts in economic development. Chinese policy of targeting development areas Indian policy of waiting for paperwork before starting

a company.◦ Funding

UN and World Bank have provided over 1 trillion dollars, with little success.

Squandered by the nations who receive it

Background, Cont.

Page 6: Economic  Development and Culture

Ranking Nations◦ http://www.heritage.org/index/ranking

Nations in Class:◦ Germany: 71.8 (23rd)◦ Norway: 70.3 (30th)◦ Switzerland: 81.9 (5th)◦ Spain: 70.2 (31st)◦ Sweden: 71.9 (22nd)◦ China: 52.0 (135th)◦ Japan: 72.8 (20th)◦ Italy: 60.3 (82nd)

Background, Cont.

Page 7: Economic  Development and Culture

Amy Chua links democracy and markets. Fall of the Berlin Wall and the move from

communism to capitalism, and the belief that democracy and free and open markets would transform the world into a peaceful global community

Rise of militant Islam, ethnic wars, two genocides, and increasing threat of nuclear war

Paradox 8.1Are democracy and free markets antithetical to each other?

Page 8: Economic  Development and Culture

Majority tend to be ethnically related and poor

Elect popular leaders who have little if any understanding of business and economics

Leaders become dependent on educated and skilled members of the minority that control a disproportionate share of the national wealth

Indonesian Riots of 1998

Developing Nations

Page 9: Economic  Development and Culture

Happens when developing nations introduce democratic elections at the early stages of economic development.

When governments become dependent on the minority group, bribery and corruption usually occur, and demagogues appear who incite envy and hatred of the minority group

Destructive Cycle

Page 10: Economic  Development and Culture

Developing nations open up markets dramatically to international trade by lowering tariffs.

Not free because both market-dominant majority and Knowledgeable, networked minority engage in bribery and related activities to satisfy the other group and benefit themselves

Inequalities persist and usually increase, sometimes significantly

Destructive Cycle cont.

Page 11: Economic  Development and Culture

Democracy and free markets, which exist simultaneously in developed economies, are opposed to one another in many developing nations

There are no policy suggestions, but this allows us to understand more clearly the process of ethnic antagonisms and violence

Conclusion of paradox 8.1

Page 12: Economic  Development and Culture

Paradox 8.2

Does trust increase trade among nations?

Does increased trade lead to conflict and war among nations?

Page 13: Economic  Development and Culture

Trust and Trade Culture

Geography

Alan Rugman on Globalization

http://www.geographicguide.net/europe/maps-europe/political.htm

Page 14: Economic  Development and Culture

Trust and Trade Continued Democracy and peace

Study on trust and trade

http://www.americancitizenstogether.org/ACT/Web/Cartoons_2.html

Page 15: Economic  Development and Culture

War and Trade Does trade lead to peace?

History is mixed

How can increased trade lead to war?

WTO and International Court of Justice

Page 16: Economic  Development and Culture

Conclusion No steadfast conclusion

http://www.costpernews.com/archives/will-affiliate-marketing-make-it/

Page 17: Economic  Development and Culture

Institutions- Courts of Law, Police Systems, and Government systems

Trustworthy as perceived by Citizens

Circumvent the Legal System◦ Gangs◦ Italian Mafia

Paradox 8.3Are institutions more important than culture for explaining economic development?

Page 18: Economic  Development and Culture

Douglas North (Nobel Prize Economics)◦ Need trustworthy Institutions

Mancur Olsen (1982)◦ Increase in Interest Groups=Decrease in

Prosperity◦ When institutions impede progress

Institutions Critical for Economic Development

Page 19: Economic  Development and Culture

Hernando de Soto (2000)◦ West has more capital

◦ Essentials-Capital cannot be created without initial capital.

◦“Dead Capital” ⇨ “Genuine/Active Capital” Shantytowns

Why Capitalism Triumphs/Fails

Page 20: Economic  Development and Culture

Particular Issue in China and Russia◦ 60% of population resides in countryside◦ Livelihood is farming◦ Stricken of lifestyle when Government enforce

ownership Argentinean Barrio- Buenos Aires

◦ 829 settlers in total◦ 419 received title and 410 did not◦ Improved quality of life

“Dead” to “Active” Capital

Page 21: Economic  Development and Culture

Tan (1999) and Peng (2002) Study of China’s Development◦ Native Chinese working in China under Communist

governmental rule and institutions

◦ Chinese Americans

◦ White Anglo-Saxon Americans

Concluded institutions are more important than culture

China’s Development

Page 22: Economic  Development and Culture

North (2005) pointed out about China’s development◦ 1. While the institutions China employed are different

from developed nations, the incentive implications were similar.

◦ 2. China has been confronting new problems and realistically attempting new solutions

North’s analysis of China’s development suggests culture is more relevant than institutions

China’s Development

Page 23: Economic  Development and Culture

Turkey changed from a theocratic Muslim nation to a secular nation in a few years (even though the population was 99% Muslim)

Major changes included:◦ Shift from Islamic to European code of laws◦ Closing of religious schools and lodges◦ Use of the Roman alphabet ◦ Recognition of the Western calendar rather than a religious one

Turkey’s development indicates institutions are more important than culture

Turkey’s Development

Page 24: Economic  Development and Culture

Paradox 8.3Are institutions more important than culture for explaining economic development?

There may be no solution to the paradox about the relative importance of culture and institutions. They are both important, they are very closely related but separate concepts.

Page 25: Economic  Development and Culture

Individualism - Individualism stresses the primacy of the individual, who sees themselves independent from the group an makes decisions accordingly.

Collectivism - The opposite of individualism, the individual makes decisions in terms of group values rather than personal preferences.

Question - When nations become more economically developed to they tend to become more individualistic.

Paradox 8.4Does economic development and globalization lead to individualism?

Page 26: Economic  Development and Culture

Replication of original Hofstede survey; focused on 22 nations on all five continents.

Original four dimensions could not be statistically related to economic development.

Three of four dimensions were found in all the countries, uncertainty avoidance was not.

Survey discovered a new dimension called Confusion dynamism

Hofstede and Bond (1988)

Page 27: Economic  Development and Culture

Confusion dynamism- emphasizes persistence, ordering relationships by status, behaving in accordance with this order, stressing thrift, and having a sense of shame.

Confusion dynamism is extremely prevalent in the east Asian countries.

Confucius created the ideal person who contributes to society

This dimension can be statistically correlated with economic growth.

Confusion Dynamism

Page 28: Economic  Development and Culture

Individualism and collectivism can exist together within a culture

Key: Delay present gratification for future rewards

Increased GNP or wealth generates individualism

Increased individualism accompanies economic growth

Greater affluence allows individuals to make broader choices and satisfy a larger number of needs and desires.

Results

Page 29: Economic  Development and Culture

German

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ain

Switz

erlan

d

Swed

en Italy

Japan

Norway

China

United

State

s0

20406080

100Hofstedes' individualistic score

Hofstedes' individ-ualistic score

Examples

Page 30: Economic  Development and Culture

Developed and developing countries can regress economically

◦Russia◦Japan◦Germany

Paradox 8.5Why do citizens vote for and accept stationary bandits as political leaders?

Page 31: Economic  Development and Culture

How and why regression occurs

◦ Mancur Olson – Roving and Stationary Bandits Genghis Khan – Roving Bandit Joseph Stalin – Stationary Bandit Adolph Hitler – Stationary Bandit

Page 32: Economic  Development and Culture

Thank YouDanke Schön

Page 33: Economic  Development and Culture

DEBATTEDEBATE

Page 34: Economic  Development and Culture

Why does providing aid to developing countries usually fail?

What are the problems between helping nations develop (with global funding) and the self interest of multinational companies?

Background

Page 35: Economic  Development and Culture

Paradox 8.1

Page 36: Economic  Development and Culture

How do you think your country would trust the other groups countries?

Would this lead to greater peace and/or trade?

Paradox 8.2

Page 37: Economic  Development and Culture

Are there some instances where institutions aren’t the answer and a more cultural approach is necessary?

Paradox 8.3

Page 38: Economic  Development and Culture

Paradox 8.4

Page 39: Economic  Development and Culture

Stationary Bandits◦ Do you think the protests and revolt against

Muammar Gaddafi in Libya is happening because he is a stationary bandit?

Paradox 8.5

Page 40: Economic  Development and Culture

Danke für Eure teilnahme

Prost!


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