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7 Rags and Riches: The Dimensions of Development INTRODUCTION Huge differences in human welfare and standards of living now separate the coun- tries of the world. For instance, Italy has 1 physician for every 181 people; Chad has 1 for every 50 ,000. The United States has 1.5 persons per telephone; Bangladesh has .508 persons per phone. In Norway, 100 percent of the rural population has access to clean drinking water in their homes or nearby; only 5 to 6 percent have it in Turkmenistan and Paraguay. Indeed , many indicators of development show that the gap between the rich and the poor is increasing over time. In 1900, the ratio between the average income of the typical rich country and typical poor country was 4 to 1. In 2000 that ratio was 16 to I! More careful analysis of national differences in well-being requires that we define more precisely what we mean by rich and poor. Generally, countries are seen as falling along a continuum of development. Development , which implies modernization and progress, was once defined in strictly economic terms, but human progress can- not be measured in monetary terms alone. The usual indicators of development (see the Ar ea and Denwgraphic Data online or on your CD) include variables such as gross domestic product (GDP) per capita (Figure 7.1 ), percent of the workforce in nonagricultural activities (Figure 7.2), infant mortality rate (deaths of children less than 1 year of age) (Figure 7.3), and female literacy rate (Figure 7.4). To geog- raphers and others, development has come to mean the extent to which a society is making effective use of its resources, both human and natural. This definition rec- ognizes that different regions have different resources with which to work and, indeed, different societies may aspire to different goals. Although the income gap betv.reen the very richest and very poorest countries has widened, the middle has become more muddled . In much of the hventieth cen- tury, the distinction between more-developed countries (MDCs) and less-developed countries (LDCs) was relatively clear. The MDCs consisted of the northern tier of countries (U nited States, Canada, Europe, the Soviet Union, and Japan ) plus Australia and New Zealand. All other countJies and regions were classified as LDCs. Although this classification sys tem always had snags (Israel and South Africa, for example, are more developed than other countries in their regions ), it was a useful starting point in discussions of world patterns of development. © 2006 John Wiley & Sons, Inc. 177
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Page 1: Rags and Riches: The Dimensions of Developmentlantztastic.weebly.com/uploads/3/8/4/8/38484567/kuby_ch...184 Chapter 7. Rags and Riches: The Dimensions of Development Figure 7.6 The

7 Rags and Riches: The Dimensions of Development

INTRODUCTION

Huge differences in human welfare and standards of living now separate the coun­tries of the world. For instance, Italy has 1 physician for every 181 people; Chad has 1 for every 50,000. The United States has 1.5 persons per telephone; Bangladesh has .508 persons per phone. In Norway, 100 percent of the rural population has access to clean drinking water in their homes or nearby; only 5 to 6 percent have it in Turkmenistan and Paraguay. Indeed, many indicators of development show that the gap between the rich and the poor is increasing over time. In 1900, the ratio between the average income of the typical rich country and typical poor country was 4 to 1. In 2000 that ratio was 16 to I!

More careful analysis of national differences in well-being requires that we define more precisely what we mean by rich and poor. Generally, countries are seen as falling along a continuum of development. Development, which implies modernization and progress, was once defined in strictly economic terms, but human progress can­not be measured in monetary terms alone. The usual indicators of development (see the Area and Denwgraphic Data online or on your CD) include variables such as gross domestic product (GDP) per capita (Figure 7.1), percent of the workforce in nonagricultural activities (Figure 7.2), infant mortality rate (deaths of children less than 1 year of age ) (Figure 7.3), and female literacy rate (Figure 7.4). To geog­raphers and others, development has come to mean the extent to which a society is making effective use of its resources, both human and natural. This definition rec­ognizes that different regions have different resources with which to work and, indeed, different societies may aspire to different goals.

Although the income gap betv.reen the very richest and very poorest countries has widened, the middle has become more muddled . In much of the hventieth cen­tury, the distinction between more-developed countries (MDCs) and less-developed countries (LDCs) was relatively clear. The MDCs consisted of the northern tier of countries (U nited States, Canada, Europe, the Soviet Union, and Japan) plus Australia and New Zealand. All other countJies and regions were classified as LDCs. Although this classification system always had snags (Israel and South Africa, for example, are more developed than other countries in their regions ), it was a useful starting point in discussions of world patterns of development.

© 2006 John Wiley & Sons, Inc. 177

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Page 4: Rags and Riches: The Dimensions of Developmentlantztastic.weebly.com/uploads/3/8/4/8/38484567/kuby_ch...184 Chapter 7. Rags and Riches: The Dimensions of Development Figure 7.6 The

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Page 5: Rags and Riches: The Dimensions of Developmentlantztastic.weebly.com/uploads/3/8/4/8/38484567/kuby_ch...184 Chapter 7. Rags and Riches: The Dimensions of Development Figure 7.6 The

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182 Chapter 7. Rags and Riches: The Dimensions of Development

Economic collapse of the former Soviet Union and its allies; dynamic growth among the newly industrializing countries of Taiwan, South Korea, and Singapore (the so-called Asian Tigers); and rapid income growth among the oil-rich countries of the Middle East have blurred the distinction between more-developed and less­developed. South Korea, traditionally a less-developed country, today has a per capita income of more than $16,900 per year, an overall life expectancy of 76.8 years, and an infant mortality rate of 6.3 infant deaths per 1,000 live births, a profile more sim­ilar to the southern European countries of Spain, Portugal, and Greece than to LDCs such as India or Peru. Russia, traditionally a more-developed countly ,"vith the capa­bility of putting a space station into permanent orbit, now has a per capita income of $8,080, an overall life expectancy of 67.1, and an infant mortality rate of 15.9, a profile more like Mexi.co or Brazil than Europe or North America. United Arab Emirates, with a per capita income of $24,030, is creating as much wealth per per­son as are many European countries but has not made similar progress in women's rights or education; one-third of all women there are unable to read and write. Meanwhile, Chile, Argentina, and Mexico are follOwing in the Asian Tigers ' foot­steps, and China quadrupled the size of its economy from 1980 to 2000. Clearly, many of the old stereotypes no longer apply.

During the last half of the twentieth centmy, the way social scientists think about development evolved, and so did the real-world strategies to combat poverty (Table 7.1). Development of poor countries first became a major international issue after World \;\/ar II as they began to declare their independence from their colo­nial rulers, starting with India and Pakistan in 1947. The modernization school of thought dominated the postwar era. The predominant idea was that the former colonies should follow the path taken by Western Europe and North America dur­ing the Industrial Revolution. According to economists, the MDCs progressed through structural change in the makeup of their economies. The MDCs passed through a series of stages from a traditional, subsistence economy dominated by agriculture to a modern, commercial economy dominated first by industry and later by the service sector. The modernization of the MDCs was made possible by build­ing (1) the physical infrastructure of transport, energy, and water systems and (2) the social institutions needed for capitalism, such as currency, private property, taxes, banks, insurance, and a legal system. The keys to creating wealth were seen as mass production, specialization, and substitution of capital and inanimate energy for human labor (Figures 7.5 and 7.6). The World Bank, the International Monetary Fund, the U.S. Agency for International Development (USAID), and other agencies were cre­ated to facilitate investment and technology transfer from rich to poor countries. Many of the first development projects were huge, Western-style power plants, factories , roads, and port facilities. These projects were expected to jump-start an industrial economy, the benefits of which would evenrually trickle down to the masses.

After several decades of modernization poliCies in which few LDCs progressed linearly from stage to stage as had been expected, a new school of thought began to take root (Table 7.1). The dependency school of the 1970s argued that the dynamic between the developed and developing worlds kept the latter poor and economically "dependent." Central to this thinking is the core-periphery model, a spatial frame­work for how economies develop over time and space. The model says that the prein­dustrial order is characterized by small inequalities in wealth and development with regions that function in relative isolation from each other (Figure 7.7a). The begin­nings of industrialization bring the concentration of investment into a Single strong center, or core. Growth in the modern, dynamiC core is distinguished by secondary,

© 2006 John Wiley & Sons, Inc.

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Introduction ~ 183

TABLE 7.1 A Brief History of Ideas and Strategies in Development

School of Thought Time Period Main Ideas Real-World Strategies

Modernization 1940s-1960s • Progressive stages of • Investment economic growth • Technology transfer

• Economic structural • Large-scale industrialization change projects

• Tlickle-down economics

Dependency 1970s • Human welfare • Small-scale and rural • Core-periphery model enterprises • Circular and cumulative • Import substitution

causation • Nationalization • Neocolonialism • Bottom-up economics

Neoliberal 1980s • Free-market economics • Privatization Coun terrevolution • Transition economies • Foreign direct investment

• Reduced role of the state

• Free trade • Currency devaluation

Sustainable Development 1990s • Global environmental • Partnership with developed change countries

• Environmental • Market mechanisms for economics environmental regulation

• ·Women and development • Resource conservation • Children and development • Renewable resources

• Loans to women and very poor (microcredit )

• Women 's and children's rights

• Appropriate technology

Figure 7.5 In less-developed countries, where labor is cheap and capital expensive, goods are produced in some of the most labor-intensive ways imaginable. Here, unskilled workers (mostly women, children, and the elderly) in Trivandrum, India, are manufacturing gravel by chipping away at rocks with hammers. In more-developed countries, one worker operating a large piece of heavy machinery could conceivably do the work of a thousand workers with hammers-and maybe more.

© 2006 John Wiley & Sons, Inc.

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184 Chapter 7. Rags and Riches: The Dimensions of Development

Figure 7.6 The expense of getting around aboard the Train aGrand Vitesse (TG\~ or high-speed train) can be justified only in a very high-income country such as France. These trains represent a massive substitution of capital and energy for labor compared with walking. The office buildings in the background represent the service economy.

temary, and quaternary activity, and it occurs at the expense of a more traditional periphery dominated by primary economic activities (see Chapter 6 for definitions of primary, secondary, tertiary, and quaternary activities). The periphery supplies raw materials at cheap prices to the urban-industrial core, and the core supplies expen­sive manufactured goods back to the periphery (Figure 7.7b). Regional inequalities in development are greatest in this stage. Later, the simple core-periphery structure is transformed into a multinuclear structure ,vith strong subcenters emerging in the periphery (Figure 7.7c). Ultimately, according to the model, a mature and functionally interconnected national economy should arise in which the periphery has been absorbed into nearby metropolitan economies (Figure 7.7d). Regional inequalities in wealth are again small at this stage of development.

The growth and then decline of inequalities between rich and poor regions are driven by processes of concentration and deconcentration. The forces of concen­tration are called polarization effects. Polarization effects reinforce growth in the core at the expense of the periphery. One way this works is through circular and cumulative causation in which forces set into motion a sequence of other forces that create a self-sustaining "sno\vballing" effect. There are four pathways to this: capital, labor, innovation, and services. First, capital investment is attracted to the core, retarding growth in the periphery. Second, young, educated workers migrate to the core, leaving an older, less-dynamic labor force behind. Third, more innova­tion in the core leads to the creation of new or enlarged industries, which in turn breed more innovation, and so on. Fourth, faster growth in the core is multiplied into a more service-rich support environment, thus making it more attractive for future economic activity.

Forces of deconcentration are called spread effects. Eventually, growth in the core stimulates demand for goods and services from the periphery, and regional sub­centers emerge to lead the peripheral areas. High density, congestion, high labor costs , and environmental decay in the core and the diffusion of technology to the periphery also encourage the outward dispersion of growth.

The core-periphery model has been used to e>.-plain both national and interna­tional differences in economic development. At the national scale, stage 1 corresponded

© 2006 John Wiley & Sons, Inc.

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Introduction 185

88 •

• pe riphery

manufa

a. Stage One: The preindustrial structure of b. Stage Two: Early industrialization brings independent local centers with small market concentration of investment, wealth, and areas and little interaction . power into a single, strong core. The

periphery provides raw materials and labor to the core , and the core provides manufactured goods to the periphery. The net result is a draining of wealth from the periphery to the core .

periphery

c. Stage Three: As industry develops, the core remains the dominant center, but regional subcenters begin to emerge. The core and regional subcenters exchange manufactured goods and services while continuing to receive

d. Stage Four: Ultimately a mature and functionally interconnected space economy emerges in which the periphery has been absorbed into nearby metropolitan economies.

raw materials and labor from the periphery. Figure 7.7 The core-peripherv model shows changi ng spat ial inequalities tha t OCC lI r during the process or ind ustlializati on. Many coun tries remain in stage 2 or 3. seemingl), stall ed in the global pe riphe ry and lacking a strong inte rn al econOl11y

to the American colon ial peliod of relatively isolated port towns from Virginia to Massachusetts. In stage 2, the E ast Coast ports evolved in to industrial cities, and all areas wes t of the Appalachians and much of the South were an agricultural periph­e ly. In stage 3, peripheral cities such as Chicago, Dallas , and Atl anta developed into regional subcenters, but surrou nding areas still lagged far behind. Finally, by stage 4, most of the United States and Canada had achieved high levels of econom ic: devel­opment. Many LDCs are still in stage 2 or 3, vvith capitalJpOlt cities (for example,

© 2006 John Wiley & Sons, Inc.

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186 Chapter 7. Rags and Riches: The Dimensions of Development

Bangkok, Thailand, and Lagos, Nigeria) that are often far more advanced than their interior regions.

The same process can be seen internationally. More-developed core regions are in North America and Western Europe, and less-developed peripheries are in Asia, Africa, and Latin America. At this scale, polarization forces continue to concentrate growth and development in the core, and inequalities bet\veen rich and poor coun­tries grow. We can also see some trickle-down effects, however, as labor-intensive industries such as foohvear, clothing, toys, and electronic assembly disperse ouhvard from the high-wage core to the 100N-wage periphery.

The dependency school of thought invokes the existence of core-periphery rela­tionships at the global scale to explain the persistent lack of development in the periphery. Most of today's LDCs were colonized during the nineteenth century to supply cheap and/or exotic raw materials to European factories in the core and to serve as peripheral markets for the output of these factories . Education lagged, lit­tle industrial base was developed, and e>-''P0rt-oriented transport systems were con­structed with the sole purpose of funneling the products of forests , farms, and mines to coastal ports (Figure 7.8). Taxes frequently were imposed to force subsistence farmers to produce crops that could be sold for cash, which could then be used to pay the colonial ta;·(, When most Third World countries became independent, their economies depended heavily on the former colonial rulers to purchase the raw mate­rials they produced, they lacked economic and political leadership, and their trans­port networks were woefully inadequate for independent economic development. Their initial dependence on colonial mother countries set into motion a type of economic development that continues to render them economically dependent, a process called neocolonialism. Production and trade are now controlled by multi­national cOlporations rather than by colonial governments, but former colonies

Legend: f-+--l Railroads

Burundi

Democratic Republic of The Congo

(Zaire)

Zambia

Figure 7.B Railroads in Tanzania, 1965. Patterns show that the transportation system left by the British colonial government was designed to funnel raw materials to the ports for export rather than to foster a stong local economy by connecting the Tanzanian urban centers together.

© 2006 John Wiley & Sons, Inc.

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Introduction 187

remain locked into an overdependence on exporting unprocessed raw mateIials at cheap prices to rich countJies. Countries that re ly on single-commodity primmy mate­rial exports include Sao Tome and PrIncipe (93 pe rcent from cocoa, or cacao ), Iran (85 percent from oil) , Chad (76 percent from cotton), Zambia (50 percent from copper), and Martinique (40 percent from bananas).

To rectity this dependency, one popular development policy duting the 1970s was import substitution. Countries were encouraged to produce internally what they previously had relied on from the mother country, especially basic, low-tech con­sumer goods. Often, high import tariffs were imposed on foreign goods to protect infant home-grown industries, a pohcy caUed protectionism. Another widespread prac­tice in the postcolonial period was nationalization of foreign-owned assets, such as the Mexican oil industry. Some LOCs adopted socialist economic philosophies, in light of what they saw as a histOlic pattern of exploitation by the West.

Apart from the purely economic developme nt strategies of the depe ndency school, a central concern was also to improve human welfare by prOViding the basic phySical and social needs of citizens. The goal was to improve the overall quality of life for the masses. Unlike the top-down, structural change model of the postwar era, the approach to development of the 1970s argued for a bottom-up strategy. More resources were directed toward traditionally poor sectors of society, such as day labor­ers and agricultural peasants, to meet their education, health, food, water, and shel­ter needs. Emphasis on human welfare concerns represented a deliberate effort to redistribute capital more evenly, in order to generate a strong middle class that would have the buying power to purchase the nationally produced goods that import sub­stitution encouraged. Many governments in the developing "vorld, dissatisfied "vith persistent poverty, took an active role in trying to rillse standards of living. The choice to focus on human welfare needs rather than strictly economic development directly affects the human welfare indicators used to measure development, as you will see in this chapter's activities.

The next stage in development thinking was the neoliberal counterrevolu­tion (Table 7.1), which dovetillied with the free-market approaches of the 1980s and the end of the Cold War. These policies were championed by Ronald Reagan in the United States and Margaret Thatcher in the United Kingdom. They advo­cated that protectionism and state-owned industries perpetuated dependency rather than cured it. Protected state-owned industries were not forced by the market to be competitive in price and quality. International agencies like the World Bank and International Monetary Fund (IMF) imposed economic reforms such as selling of government-O\'VTled industries to the private sector and free trade as conditions for getting economic assistance. Instead of protectionism to keep out foreign compe­tition, the neoliberal approach advocates that countries allow their own currencies to devalue relative to other currencies in order to make their exports more attrac­tive. With the 1980s and 1990s came the creation of the C('neral Agreement on Tariffs and Trade (GATT), the World Trade Organization (WfO), and the North American Free Trade Agreement (NAFTA). Developing countries competed to attract for­eign direct investment: China, for exa mple, attracted investment from Boe ing, and Vietnam from Nike. Neolibe ral reforms are not only economic phenomena but also social ones. Social welfare programs from health care to education have been opened up to market competition by cost-cutting governments.

The People's Republic of China has undergone a dramatic makeover under neoliberalism. The change began in 1976 after the death of Mao Zedong, who led

© 2006 John Wiley & Sons, Inc.

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188 Chapter 7. Rags and Riches: The Dimensions of Development

the Communist Revolution in 1949 and later organized hundreds of millions of Chinese peasants into aglicultural communes and state-owned factories with little contact .vith the outside world. The ideological Mao was succeeded by the prag­matic Deng Xiaoping, who declared that "to get rich is glorious" and "it doesn't mat­ter if the cat is black or white, as long as it catches mice." Deng initiated a series of step-by-step and place-by-place reforms. Individual farmers were granted long-term allotments of land and permitted to sell their excess produce to anyone for any price they could get. China established four special economic zones in coastal cities near Taiwan and Hong Kong where foreign investors could CO-O\\lJ1 factories with Chinese companies, using cheap local labor and foreign technology and management. Graduall)" economic reforms were wi.dened to other places and deepened to other sectors. Competition was permitted in a variety of industries, and subsidized prices were scaled back. State-owned factories were given smaller subsidies and more free­dom to make decisions; the factOlies also were forced to compete based on price, quality, and timeliness. Banks have more freedom in making and turning dO\\lJ1loans instead of just giving money to projects approved by the government. Many young people now leave the secUlity of the "Iron Rice Bowl" of government employment to "jump into the sea" and work for foreign companies or as entrepreneurs. The result of two decades of reform is offiCially known as "Socialism with Chinese Characteristics" and unofficiall), as "Market Leninism." The effect of China's neolib­eral reforms has been nothing short of spectacular: China's GDP per capita has reached $5,600, and its total GDP now ranks second in the world after the United States and ahead of Japan and Germany.

Countries converting from socialist to capitalist economies are kno\\lJ1 as tran­sition economies . Regardless of whether the transition is step-by-step as in China or overnight "shock therapy" as in Russia, the transition is guaranteed to be both painful and exciting and to create wi.nners and losers. With the improving business conditions and the lure of the world 's largest consumer market, China in 1995 attracted 38 percent of the foreign investment for the entire developing world, yet the transition has also created huge dispcuities of wealth between the rich coastal provinces and the poor interior. rur pollution and traffic congestion plague most cities, political reforms have failed to match the economic reforms, drugs and crime are increasing, and many Chinese complain of the loss of the old Confucian and Communist value systems.

The latest thinking among development specialists focuses on the idea of sus­tainable development- that progress should not come at the expense of future generations by warming the climate, reducing biodiversity, depleting forests, increas­ing pollution, and reducing the resource base (Table 7.1). Most LDCs would like to protect their environments, but not at the cost of reducing their standard of liv­ing. Sustainability proponents argue that development and environmental protec­tion are not necessarily conflicting goals: efficient energy and water use, renewable resources, pollution reduction, and protection of forests and wetlands actuall), make long-term economic sense. The sustainable development movement aims to help the LDCs skip the inefficient dependency on fossil fuels that the MDCs e:-:perienced and vault light to efficient, renewable technologies. Popular sustainable poliCies include ecotoUlism , paltnerships with developed countries to introduce clean tech­nolOgies , and \i\Tes tern pharmaceutical companies paying royalties on drugs devel­oped from rain forest species. New kinds ofstatistical indicators include air and water quality, percentage of land in nature preserves, deforestation rate , energy effiCiency, and number of threatened species.

© 2006 John Wiley & Sons, Inc.

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Introduction 189

Coincident with sustainable development, the idea of appropriate technol­ogy has regained favor. Instead of the large-scale technology suited to the capital­rich, labor-scarce industlial world, what are needed are technologies appropriate to the capital-poor, labor-abundant, predominantly aglicultural developing world­production by the masses rather than mass production. These ideas have been debated and practiced since the 1970s, when E. F. Schumacher, the economist who coined the phrase appropriate technology, said that the LDCs needed small-scale industIies for "Two Million Villages." Appropriate technology goes hand in hand with the renewed emphaSis that sustainable development places on ecologically and cul­turally sensitive development strategies. Appropliate technology is not a return to the primitive technology of the past but involves tools that are inexpensive and sim­ple enough to be widely adopted and maintained by peasants, do not degrade the environment or human dignity, and are in keeping \-vith the local culture. Examples of appropliate technology include looms for weaving, efficient cooking stoves, simple clay-pot water filters, electric irrigation pumps, composting systems, village pay phones, bicycle rickshaws, easy-to-read paper strips for testing for diseases and preg­nancy, and technology for extracting usable fibers from pineapple leaves (Figures 7.9 and 7.10). TechnolOgies that have been criticized as inappropriate are oil-fired power plants, automated factories , infant formula replacement for breast milk, combine harvesters, and chain saws.

The concept of sustainability has been broadened to include sustainability in a social sense. DUling the 19905 the focus on the roles ofwomen and children in devel­opment increased (Figure 7.11). For example , the widespread use of child labor in the oriental carpet industry in Asia is not considered sustainable, because these chil­dren have had their educations cut short. As they get older, their fingers are not as nimble as they once were; but without an education, they could be unable to get a decent job. Gender issues also have moved to the forefront of the development debate. Gender diffe rences exist throughout the world, but they tend to be more pronounced in LDCs. Inequalities exist not only in political and social freedoms but also in the allocation of resources such as education, health care, food, and bank credit. The pattern of inequality begins at an early age, with female infanticide in countries such as India and China that favor male children and the practice of hav­ing boys stay in school longer and visit doctors more frequently than girls. In South

Figure 7.9 Women all over the developing world can be seen carrying heavy loads on their heads, as these women ill New Delhi , India, are doing.

© 2006 John Wiley & Sons, Inc.

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190 Chapter 7. Rags and Riches: The Dimensions of Development

Figure 7.10 A bicycle rickshaw is a classic appropliate technology This man , also in New Delhi, can do the work of 10 people carrying loads on their heads as in Figure 7.9. The capital investment is affordable with a slHall loan , repairs are cheap and simple, and the health benefits are many

Figure 7.11 Health c1illics are a successful strategy for delive ling basic health care to children, women, the elde rly, and the infirm in rural areas . Here a health care worker prepares a tetanus syringe jn a clinic jn Mauritania.

Asia, female literacy rates are 24 percentage points below male rates, \vhich trans­lates into fewer employment oppOltunities for females outside the home. Overall, in MDCs there are about 8 women for every 10 men in the labor force, but there are only 4 women for every 10 men in the Middle East and North Africa labor mar­kets. African women perform about 90 percent of the work of processing food crops, providing household water and fuelwood, hoeing, and weeding. Women who do get jobs usually must continue to bear the brunt of household chores (Figure 7.12).

The Grameen (or "Village") Bank in Bangladesh is a successful and widely imi­tated program to integrate women into the development process. Founded in 1976 by a professor of rur~l economics at the University of Chittagong, Grameen Bank offers "microcredit" loans averaging $160 (but as low as $1) to people with no col­lateral (e .g., assets that banks seize if debtors fail to repay their loans). The bank has 2 . .3 million borrowers, of which 94 percent are women. An astonishing 9.5 per­cent repay their loans . More than 22.3 similar banks have been opened in .58 coun­tlies. The sustainability paradigm holds that until women have equal access to

© 2006 John Wiley & Sons, Inc.

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Introduction .. 191

16

10

14 +-----

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• Women 8

. Men

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Figure 7.12 Daily productive hours (home and work) for men and wo men in selected AfJican countries.

Source: Gender. Grou;!" . and Pocerty RedllctiolJ: Special Program of Assistance for Africa: 1998 Status Report on Pouerty in Sllb­Saharan Africa (English Edition). Washington. DC: World Bank. Copylight 1999 by World Bank. Reproduced with permission of World Bank in the format textbook via Copyright Clearance Center.

resources and assets, have equal say in household and governmental decisions , and their unpaid household work is valued as highly as men's paid labor, society ,,\fill not be making full productive use of its human resources.

In Mexico, the social sustainability advocates have raised gender issues regard­ing the free-trade poliCies of the neoliberal school. To promote industrialization, Mexico established export assembly plants called maquiladoras that rely on cheap labor to assemble imported components that are then reexported as finished goods. Initially restricted to the border region with the United States, today these plants are located throughout Mexico. The labor used in such plants is ovenvhelmingly female. Corporate rationale is that women are more dexterous and better suited to perform detailed work in such fields as garment production and electical compo­nent assembly. Critics believe the emphasis on hiring women exists because employ­ers know they can pay women lower wages and believe that they are more "moldable" to rigid work schedules and policies and less likely to join militant unions than men are. These assembly plants provide desperately needed jobs, but often the wages are well below what is needed to support a family. Additionally, women in Mexico are usually still required to perform the traditional roles of cooking, housework, and child care in addition to their newly found jobs in manufacturing. The result places great stress on traditional gender roles for both men and women in a soci­ety known for machismo (male emphasis on masculine traits ). Compounding these changes is the reduction in social services such as day care and health care provided by the state as the Mexican government evolves from a protectionist institution to a neoliberal one.

In the latter half of the twentieth century, many LDCs accumulated Crippling amounts of debt on money they borrowed from banks and governments in the MDCs to finance development. The total debt owed by LDCs has increased 25 times from around US$100 billion in 1970 to more than US$2500 billion in 2000. Since 1984,

© 2006 John Wiley & Sons, Inc.

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192 Chapter 7. Rags and Riches: The Dimensions of Development

the interest payments on loans plus the schpc1uled repayments of the principal have exceeded new loans, resulting in a net transfer of moneyfrom the LDCs to the MDCs. Many LDCs owe more than their entire CDP, and their annual interest payments alone can exceed one-quarter of their total eamings of foreign currency from exports. Advocates in both LDCs and MDCs consider the debt situation unsustainable and are calling for banks and other lenders to forgive interest payments .

Because neoliberal development policies tear down global protection barriers, advocates ofsustainable development (and many others ) question the gro.ving global inequalities. Street protests ellJpted against the World Trade Organization, the World Bank, and the International Monetary Fund in Seattle in 1999, Prague and \iVashington in 2000, and Quebec and Geneva in 2001 (Figure 7.13 ). Protesters agi­tate against policies that seem to benefit corporations at the expense of citizens and t-,IIDCs at the expense of LDCs. Central to the complaints about neoliberal global­ization (see Chapter 8) are the undemocratic policies of these international trade organizations. Countries that enter into neoliberal trade agreements often find national or local interests at odds .vith "fair" trade practices that interfere mth corporate profit making. For instance, Californians voted to ban a carcinogenic gasoline additive, causing a Canadian corporation that manufactures the product to sue the United States for violating the free-trade accords. Mexican fishermen com­plain that U.S. dolphin-safe restlictions on tuna nets inhibit their ability to sell tuna in the United States. The European Union is suing the United States for allomng corporations to avoid taxes by locating headquarters "offshore" on Cmibbean islands (thereby gaining an unfair competitive advantage) . A U.S. company that wanted to open a toxic dump next to an impoverished neighborhood in nOlthern Mexico was even awarded $16 million compensation after local citizens stopped the landfill! Should a country agree to international trade agreements, it could be forced to overrule local rules put in place by the democratic process. In a further affront to

Figure 7.13 Protests (· rupted again st the ,",\lorld Trade Organization, th e \\lorld Bank, and the Inte rnational .'v1one tar) Fund.

© 2006 John Wiley & Sons, Inc.

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Introduction < 193

democratic decision making, NAFTA-related lawsuits are heard by a closed-door tribunal without input from or responsibility to citizens. Protestors see this as favor­ing the right of global corporations to make money over the right of local citizens to decide what's good for their own country or community. Who should have the final say about local environmental, labor, or financial rules?

Sustainability and globalization are not always at odds, however, because the global economy can bring better-paying, badly needed jobs to an LDC. Better jobs reduce child labor and increase literacy when parents make enough money to send their children to school, not work. Jobs attributed to the global economy may also be the only source of employment for women, thereby increasing their economic inde­pendence and social status.

As development theory has evolved, many of the problems, solutions , policies, and institutions from older schools of thought remain important. Development is a highly complex phenomenon with no easy explanations. In the activities in this chapter, you will e"'Plore that complexity by prodUCing different measures and rank­ings of development.

© 2006 John Wiley & Sons, Inc.

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194 .. Chapter 7. Rags and Riches: The Dimensions of Development

RAGS AND RICHES

GOAL

To introduce the different ways of defining and measUling the multifaceted phenomenon of development. You will recog­nize that certain countries perform better on human welfare than on economic dimensions.

LEARNING OUTCOMES

After completing the exercise, you will be able to:

• Define development in economic and human welfare terms.

• Identify countries where economic and human welfare measures yield different ran kings of development.

• Interpret the reasons for these different ran kings.

• Consult UN documents and Web sites to identify other development indicators .

SPECIAL MATERIALS NEEDED

• Calcu lator

BACKGROUND

"Ve are all aware that some countries are better off than others. Because no measures ofdevelopment ,u'e universally accepted, development can mean different things to different people, depending upon how much weight they place on particular dimensions of progress and well-being. Just as individuals can be rich in money but poor in health , family ties, or sense of

community, so also can countries rank high in economic terms but Jow in human welfare terms.

Economic indicators of development measure a country's development by assessing its economic base, comparing such variables as gross domestic product (GDP) per capita with percentage of the labor force engaged in agricultural activities. Human welfare indicators define development by how well a country is able to provide necessary resources for its citizens and measure development with variables such as life expectancy, female literacy, and infant mortality rates.

Countlies that score high on the economic dimension do not always score well on human welfare indicators. Some coun­tries experience rapid economic growth with little improvement in human welfare. Similarly, other countries expelience rela­tively high levels of human welfare without high economic devel­opment by pUlposely allocating resources to meet the basic needs of their citizens. In this exercise, rather than collapsing these differences into a single composite ranking, you will exam­ine development as a multidimensional phenomenon.

You will also be asked to develop your own measures and to justify them. Remember that there are no universally agreed upon indicators of development. What you put in determines what you get ou t.

The 20 countries (Figure 7.14) examined in these activities allow you to see different stages of development as measured by human welfare and economic variables. They have been selected to provide a broad coverage of political systems, continents, cul­tures, and, more generally, development strategies (Table 7.2).

© 2006 John Wiley & Sons, Inc.

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196 Chapter 7. Rags and Riches: The Dimensions of Development

.,

TABLE 7.2 Description of the Selected 20 Countries

200.5 Name Population Government Description

Afghanistan

Argentina

Cambodia ( formerly Kampuchea)

Canada

Cuba

Democratic Republic of Congo (formerly Zaire)

29,928,987

39,537,943

13,607,069

32,805,041

11,346,670

60,085,804

Transitional

Democracy

Democracy, transition economy

Confederation, parIiamentalY democracy

Communist state

Dictatorship

Extremely poor, landlocked, arid and mountainous country. Highly dependent on farming and livestock raising. After end of Soviet occupation in 1989, Islamic law imposed by Taliban, which U.S. military action overthrew in 2002 for supporting the al-Qaeda terrorist network, resulting in a new interim govern­ment and constitution. Is currently occupied by U.S. and allied troops. New president elected in 2004, but the government's sustainability without Allied occupation is unclear. Afghanis are overwhelmingly Muslim (99%).

Temperate climate varying physically from rich plains to the high Andes Mountains. Was a very prosperous country last century; still maintains high levels of education and middle-class values. Although better off than other Latin American countries, has an ineqUitable distribution of wealth. Economy characterized by years of mismanagement and a current major financial crisis associated vvith neoliberal reforms.

Tropical and rainy ,vith a monsoon season. Much rice fanning along the Mekong River, and gemstone mining elsewhere. Suffered mass genocide during the Khmer Rouge reign in the mid-to-late 1970s. Destroyed by decades of war; later occupied by Vietnam; elections in 1998 brought new political stability. Economic growth hindered by undeveloped infrastmcture.

Large land area with a climate varying from arctic to temperate. An affluent, high-tech, postindustrial society with great natural resources and a skilled labor force. However, there is potential for its dissolution along French/English linguistic lines.

Tropical island ,vith a centrally planned economy. Suffered from the withdrawal of foreign aid upon Soviet Union collapse. AggreSSively seeks new foreign investors and tourism while the United States maintains a trade embargo on Cuba. Relies on agricultural products but has a strong medical tradition. Is raCially mixed, "vith 51 % mulatto, 37% white, and 11 % black.

Tropical, humid, or wet-dry. An ethnically diverse country composed of numerous indigenous groups. Has a vast potential for natural resource wealth but a history of rebellion and corruption that has resulted in little foreign investment. Long-running civil war and foreign occupation plagued the country from 1997 to 2002. Exports of minerals and tropical plantation agriculture.

© 2006 John Wiley & Sons, Inc.

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Case Study 197

. ,

TABLE 7.2 Description of the Selected 20 Countries

2005 Name Population Government Description

Iceland 296,737 Constitutional Despite its northerly location, has a largely temperate climate republic and quite homogeneous population, with important historical,

cultural , and linguistic ties with the remillnder of Scandinavia. Has a Scandinavian-type capitalist economy characterized by an extensive welfare system, low unemployment, and an even income distribution. Economy hecwily dependent on fishing but is beginning to diversify with manufaeturing and tourism. Planning to become the first country in the world to get 100% of its energy from renewable sources.

Mexico 106,202,903 Federal Great diversity of climate and physical features from tropical republic rain forest to desert and high mountains. Possesses a great

wealth of natural resources, including oil. Changed economy to open-market policies after decades of government protectionism and management resulting in severe recession in 1994 that caused hardships for the transition. Like most of Latin America, has an ineqUitable distribution of wealth, is 89% Catholic, and has a sizable Amerindian population (30%).

Moldova 4,455,421 Republic, A former Soviet Republic and a landlocked country with a transition steppe climate. Culturally and linguistically similar to Romania. economy Has an agriculturally based economy with the need to import

almost all of its electriCity and fossil fuels. Poorest country in Europe; elected a communist preSident in 2001.

Morocco 32,745,827 Constitutional Mediterranean climate, more alid in the interior. Predominantly monarchy Muslim country suffeJing from foreign debt and unemployment

causing many of its citizens to work temporarily in Europe, but has key resources-fishing, phosphates, and tourism-to develop.

Poland 38,635,144 Democracy, Temperate climate with cold winters and industrial pollution. transition HistOrically a conflict zone on the plains between Europe and economy Russia. Conversion to democracy replaCing the communist state

in 1990. Underwent an economic shock when convelied to capi­talism. Large strides made toward privatization, but much of the economy still government controlled. Is 95% Catholic. Joined the European Union in 2004.

Saudi Arabia 26,417,599 Monarchy Harsh, dry desert with great extremes of temperature. Mostly uninhabited sandy desert. Has a well-to-do, oil-based economy with strong government controls over economic activity but a highly ineqUitable distribution of wealth. Almost all export earn­ings and 75% of revenues from the petroleum sector. Has the world's largest petroleum reserves and exports the most. Is 90% Arab and 100% Muslim. Government has seen increasing threats from domestic terrorism.

(continued)

© 2006 John Wiley & Sons, Inc.

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198 .. Chapter 7. Rags and Riches: The Dimensions of Development

, TABLE 7.2 Description of the Selected 20 Countries

2005 Name Population Government Description

Senegal 11,126,8,32 Republic

Singapore 4,425,720 Democracy

South Africa 44,344,136 Democracy

Sri Lanka 20,064,776 Democracy

Taiwan 22,894,384 Democracy

Turkey 69,660,559 Parliamentary democracy

Tropical, wet-dry climate with multiethnic population of numerous indigenous groups, many of whom are Muslim. Recently made modest economic gains including a steady growth of its GDP and an increase in information technology, but still suffers from serious unemployment and drug abuse in the urban centers.

A tropical hot and humid island country at the tip of the Malay Peninsula whose location is a focal point for Southeast Asian sea routes that led to excellent international trading links. A prosper­ous country with an open and entrepreneurial economy whose people are 77% Chinese, 14% Malay, and 8% Indian.

Mostly semiarid to subtropical on the east coast with a high plateau immediately inland from most of the coasts. Rich in mineral resources. Population of 75% black, 14% white, 8% colored (mixed), and 3% Indian. Officially discriminated against blacks who lacked basic rights of citizenship under the system of apartheid, which ended in 1994. Still racially divided with most whites living on a par with the affluent West but most blacks living in poverty and Third World status. Many hardships created by change to an export-based economy.

A tropical island at the tip of India with monsoonal rains and ethnicity of 74% Sinhalese, 18% Tamil, and 7% Moor. Has been in near civil ,var between the Sinhalese and Tamils since the mid-1980s, but with cease-fire signed in 2002. Some terrorism as the groups struggle for power. Economy relies on apparel industry exports and agriculture. Still in transition from state-run economy to export orientation. Religiously, 70% Buddhists and 15% Hindu.

An island with tropical monsoon climate. Formerly a province of China that split from it in 1949 and whose status remains con­tested. Has a sparse natural resource base but a vibrant economy. Known as one of the Asian Tigers. A newly industrialized countl)' (NIC) with rapid industrialization over the past half century.

Mountains and high plateaus with hot summers. Straddles Europe and Asia and controls the strategic straits between the Black Sea and the Mediterranean Sea. Internal tensions between the tradition of Western government and more fundamentalist Muslims. Kurdish minority (20% of the population) want politi­cal autonomy. Economy hurt by fiscal deficits and inflation but economic and judicial reforms and a thriving private sector likely to increase prosperity. Has long exported workers to Europe; currently seeking membership in the European Union.

© 2006 John Wiley & Sons, Inc.

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Case Study 199

. ,

TABLE 7.2 Description of the Selected 20 Countries

Name 2005

Population Government Description

United Arab Emirates

2.563,212 Federation A flat, desert nation that is largely Muslim with a mixed population of Arabs, Iranians, and South Asians. Has one of the world's highest per capita incomes, the result of its oil and natural gas production and its low population. Imports labor from Asia to work in oil and other sectors.

United States 295,734,134 Federal republic

Diverse physical environments \:vith population of 77% white, 12.3% African-American. and 12.5% Hispanic. Most powerful, diverse, and technologically advanced economy in the world. Market-oriented and open. Predominantly Christian (84%), \:vith many minority groups \:vith diverse religiOUS beliefs.

Source: Central Intelligence Agency. The World Factbook 2005. www.cia.gov/ciaJpublications/factbook!

© 2006 John Wiley & Sons, Inc.

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---------------------------- ---------------------------------

Activity 1: Economic Model of Development 201

Name: Instructor:

Rags and Riches: The Dimensions of Development

ACTIVITY 1: ECONOMIC MODEL OF DEVELOPMENT

In this section, you will use two indicators to assess a country's level of economic development. These indicators are CDP per capita and percentage of the labor force engaged in nonagricultural labor. CDP per capita, the most typical indicator of eco­nomic development, measures the total goods and services produced by a country divided by its population. Percentage of the population involved in nonagricultural activities is another commonly used indicator of development. Because a subsistence economy is extremely labor intensive, a count!)' with an economy based primarily on subsistence agriculture has few resources to invest in industry and services. As a country develops its technological capabilities, a smaller and smaller percentage of the labor force is needed to produce enough food for the entire population, and a larger and larger percentage of workers are diverted into manufacturing, trade , and services.

You will find values for each of these indicators listed by count!)' in Columns B and D of Table 7.3 and will calculate a composite economic development ranking for each country based on these two indicators. This index \vill appear in Column F.

A. Column B lists CDP per capita for each country; Column C lists the rank of countries from highest per capita CDP to lowest per capita CDP. Column D lists the percentage of the labor force in nonagricultural activi­ties for each country. Column E ranks the countries by values given for Column D. Cenerally, as a country develops, its percentage of workers engaged in nonagricultural activities increases . Therefore, the country with the highest value in Column D should be ranked 20 (highest ), and the country with the lowest value in Column D should be ranked 1 (lowest). In the event of a tie, both countries should receive the same highest ranking. For example, if hvo countries share the highest value for CDP per capita, both would be ranked 20. The country in third place would receive a ranking of 18. Remember to skip a ranking number after assigning two identical rankings for a tie.

B. Column F is a composite economic development ranking for each coun­try based on rankings for CDP per capita and the percentage of the labor force involved in nonagricultural activities. To complete Column F, calcu­late the average of values in Columns C and E. Example: A country \vith a CDP ranking of 4 (Column C) and a nonagricultural ranking of 3 (Column E ) would have an economic development ranking (Column F) of 3.5. To confirm that you are calculating the values correctly, calculate the composite ranking for the United States; the answer should be 19.5.

© 2006 John Wiley & Sons, Inc.

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- -- -

L

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TABLE 7.3 Composite Rankings l';) 0 0 ~

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B C EA 0 F G II I KJ

GOP GOP Non- NOIl- IntiUlt lnfilllt Hllman Wclfam Ft'malc Per Per Agricultuml Agricultural Ecollomic Mortality MOItality Ft'male HumanLiteracy Ratlking-

Capita· Capita· D('w\opnu-'nt Ratl- WelfureEmploYllwnt Employmen l.i tt-rc1L'Y EconomicRatt' Hat<' . (%) ($US) R(wkinJ! I pt-r_l .000Cmllltrv Rankin/! RUlikine nah~ lUlllkilltl ntmkilloRankin/! Raukille

United States 36,200 20 98% 6.69 97

Singapore 26,500 19 100% 3.6 90

Canada 24,800 97%18 4.95 97

Iceland 24,800 95% 3.5318 100

United Arab Emirates 22,800 93% 16.1216 80

Taiwan 17,400 15 92% 6.8 79

Argentina 12,900 14 88% 17.2 96

Saudi Arabia 88%10,500 13 49 ..59 70

Mexico 9,100 80% 24.5212 87

Poland 8,500 73%11 9.17 98

South Africa 8,500 70%11 61.78 85

Turkey 6,800 9 60% 45.77 77

Morocco 3,500 50%8 46.49 31

Sli Lanka 3,250 7 62% 15.65 87

Moldova 2,500 6 60% 42.16 94

Cuba 76%1,700 5 7.27 95

Senegal 30%1,600 55.41 29

Cambodia

4

20%1,300 64 22

Oem. Rep. of the

3

1,100 35%2 98.05 68 Congo (Zaire)

Afghanistan 20% 21

Note that these figures are the most recent available; some may supersede those found in the Country Facts on your CD. "Based on purchasing power parity. Source: Central Intelligence Agency. 2002. CIA Factbook: wwwcia.govlcialpublications/factbooklindex.html

800 1 144.76


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