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Development Through Self-Sufficiency

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Lillian Ford

on 1 February 2014

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Transcript of Development Through Self-Sufficiency

Key Issue 4
by: Aggela P. Chloe H. Lillian F. Kathleen R. Yara #swag M.

Development Through Self-Sufficiency
Development Through International Trade
Fair Trade
Financing Development
Elements of Self-Sufficiency Approach
Problems with the Self-Sufficiency Alternative
Rostow's Development Model
Examples of the International Trade Approach
Problems with the International Trade Alternative
International Trade
Approach Triumphs
World Trade Organization
Foreign Direct Investment
Loans
Structural Adjustment Programs
Fair Trade Producer Standards
Fair Trade Worker Standards
LDC’s lack money to fund development so they turn to MDC’s for support.

There are two main sources for funds: loans from banks and international organizations, and direct investment by international businesses
-
Two major lenders to LDC’s are World Bank and the International monetary Fund (IMF)

-Both organizations were created at a 1944 United Nations Monetary and Financial Conference, promoting economic stability and development after WWII

-World Bank includes the IBRD and IDA, the IBRD provides loans to countries to reform public administrations and legal institutions, while the IDA provides fro poorer countries considered to risky for a IBRD loan

-IMF provides loans to countries experiencing balance-of-payment problems that threaten expansion of international trade

-Many LDC’s are unable to pay for the interest on their loans, debt exceeds annual income in a dozen countries, and when these countries are unable to repay, MDC’s refuse to make further loans.


-The organizations loaning money often fear that loaning money without proper structure will lead to bad habits in LDC’s

-Therefore all LDC’s must prepare a Policy Framework Paper (PFP) outlining a structural adjustment program, which includes goals and strategies for achieving success

-Requirements can include:
1. Spend only what it can afford
2. Direct benefits to the poor, not just the elite
3. Invest scarce resources where they would have the biggest impact

-Critics, on the other hand, state that the programs may result in:
1. Higher unemployment
2. Loss of jobs
3. Cuts in health, education, and social services that benefit the poor
because LDC’s place priorities on reducing government spending and inflation. In short programs like these punish the poor for actions they did not commit.


Fair trade: products are made and traded according to standards that protect workers and small businesses in LDCs.
Standards for fair trade are set by Fairtrade Labeling Organizations International (FLO)
In North American, fair trade products are typically craft products such as jewelry, textiles, and ceramics.
One set of fair trade standards applies to workers on farms and factories, the other set of standards applies to producers.
Trade has increased more rapidly than wealth.

Countries that were once
self-sufficient converted to international trade during the 1990s.

International trade promotes development better than self-sufficient countries.
LDCS choose one of two models to emphasize international trade.
In the twentieth century, self-sufficiency was a popular way of development.
China and India adopted these strategies.
Small scale farmers and artisans in LDC's band together to reduce material costs and maintain fairer prices. These cooperatives benefit the members rather than corporate owners.
Farmers and artisans can learn leadership and organizational skills through these co-ops.
Because fair trade organizations bypass exploitative corporations, they are able to cut costs and return a greater percentage of profits to the producers.
To promote international trade development, countries representing 97% of world trade established the World Trade Organization (WTO) in 1995.

-Reduces barriers in two main ways
>countries negotiate reduction or elimination of international trade restrictions on manufactured goods
>reduced or eliminated are restrictions on the international movement of money by banks, corporations, and wealthy individuals

-the WTO has been attacked by critics that say the WTO is antidemocratic because decisions promote interests of large corporation rather than the poor.

a self-sufficient country should spread investment across all sectors of its economy and regions.
Incomes in the countryside should keep pace with the comes in the city.
Countries promote self-sufficiency by setting barriers that it the import of goods from other places. these include tariffs, quotas to limit the quantity of imported goods.
India used many barriers for trade.
To import goods, foreign companies had to secure a license
There are restricts on quantity that company could sell
Heavy taxes were imposed heavy taxes on imported goods( that doubled or tripled the price).
India discouraged Indian companies from exporting goods, Indian curreny could not be converted to any other currency.
Investment made by a foreign company in the economy of another country is foreign direct investment.
>grew rapidly during the 1990s from $130 billion in 1990 to $1.5 trillion in 2000

FDI does not flow equally around the world.

Major sources of FDI are transnational corporations.
> invests and operates in countries other than the one in which its headquarters are located
Two Major Problems with Self-Sufficiency
Protection of Inefficient businesses
Businesses could sell all they made, at high government-controlled prices
Companies protected from international competition were not pressured to keep ahead of rapid technological changes.
Need for large bureaucracy
The complex administrative system needed to administer the cntrols encouraged abuse and corruption.
Potential entrepreneurs found that struggling to produce goods or offer services was less rewarding financially than advising others how to get around the complex government regulations.
Calls for a country to identify its unique economic asserts
Things such as: what animal, vegetable, or mineral resources does the country have in high quantity and a lower cost than other countries?
selling these products in the world market brings money into the country that can be used to finance other development
five-stage model about the development of countries
1. Traditional Society- high percentage of people who work in agriculture, and wealth is with "nonproductive" activities, like the military and religion.
2. Preconditions for takeoff- a group initiates economic activities, country invests in new tech., such as water supplies and transportation.
3. Takeoff- rapid growth in textiles and food products, this few industries have taken off while the rest of the economy remains dominated by traditional practices.
4. Drive to Maturity- transforms from a few takeoff industries to a wide variety with rapid growth, workers are skilled and specialized.
5. Age of mass consumption- industries switch from heavy industry (steel and energy) to consumer goods such as refrigerators and motor vehicles

Four Asian Dragons- first to adopt the international trade alternative were South Korea, Singapore, Taiwan, and Hong-Kong (british colony at the time)

These countries took the lead after Japan, they lacked any natural resources, but created goods such as clothing and electronics.
Petroleum Rich Arabian Peninsula states

*Saudi Arabia, Kuwait, Bahrain, Oman, United Arab Emirates.
Sold oil and were able to create highways and high means of housing, airports, universities.
Were transformed over night by the escalating petroleum prices in the 1970's
Uneven resource distribution- Zambia- has high amounts of copper but the price of copper is decreasing within the market
increased dependence on MDC's- they sell a handful of goods to MDC's but the money they earn, they buy goods from the MDC's that work within their LDC factories
Market Decline- products that could once be sold for good amounts of money, have now declined in price
Workers in LDC's allegedly work long hours in poor conditions for low pay.
In contrast, fair trade requires workers to be paid fair wages, permits union organizing, and complies with environmental and safety standards.
Because fair trade organizations bypass exploitative middlemen, they are able to cut costs and return more money to the workers.
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