Transcript Slide 1
International Trade Model
W. W. Rostow, 1950s
Identify distinctive or unique economic assets
◦ Animal, vegetable or mineral resources in abundance
and marketable
◦ Any marketable product to manufacture and distribute
competitively
Concentrate scarce resources on distinctive local
industries
Marketing of that industry will fund other
development
By this model, all countries are in one of the 5
stages
Current MDCs passed through the other stages
This progression worked to develop Japan
and Eastern and Southern Europe
Much of Earth’s raw materials are in LDCs
and are a source of funds to promote
development
No modern development established
High percentage of people engaged in agriculture
High percentage of national wealth active in
“nonproductive” activities (i.e. military & religion)
By western standard, life is primitive with basic
needs low
LDCs
USA: pre-independence -1800
International trade model
Well-educated elite group initiates innovative
economic activity
Invest in new technology and infrastructure
i.e. water supply and transportation systems
New investments stimulate increased
productivity
LDCs
USA: 1800 -1850
Rapid growth is concentrated in a limited number
of economic activities (i.e. textiles or food
products)
Takeoff industries perfect methods, innovate and
attain productivity
Other economic activities still using traditional
practices
Preparation for diffusion of processes to other
industries
LDCs
USA: 1850 – 1870
Perfected methods and technology diffuses to
wide variety of industries
Rapid growth (even faster than takeoff industries)
Workers (labor) become more skilled
Specialization occurs
Must maintain competitive focus via
◦
◦
◦
◦
Evaluate change in market and consumer preferences
Marketing strategies
Production engineering
Design technologies
MDCs
USA: 1870 – 1920
Shift from production of export heavy
industry to consumer goods
Increase in standard of living makes market
for consumer goods
MDCs
USA: 1920 – to present
Saudi Arabia – oil
Four Asian Dragons - manufacturing
◦
◦
◦
◦
South Korea
Singapore
Taiwan
Hong Kong
Per capita GDPs up by >4 percent per year
avg
World Trade Organization (WTO)
◦ Works to reduce barriers to international trade
Reduce/eliminate trade restrictions: subsides, quotas,
tariffs and finance/banking
Enforce established agreements, patents, copyrights
Uneven Resource Distribution
◦ A country’s marketable commodity does not
produce sufficient revenue
◦ Yet, cost of need items increase
◦ Zambia - copper
Market Stagnation
◦ Market saturated – demand growth slows
Increased Dependence on MDCs
◦ Focus on exports deprives the peoples of LDC of
necessities
Balanced growth
◦ investment across all sectors of economy and
regions of the country
◦ Modest pace of development
Protective of home grown fledgling business
◦ Isolation from MDC corporate competition
◦ International trade barriers
Tariffs on imports, quotas, importer licensing
With trade barriers: the country’s businesses have
limited ability to export
Inefficiency
◦ Government protects inefficient and/or unprofitable
industry
◦ Little incentive without real competition to innovate
and modernize
Large Bureaucracy
◦ Complex administrative systems lead to abuse and
corruption
◦ Discourages entrepreneurialism
◦ Encourages underground sales of foreign goods
LDCs borrow to facilitate growth
◦ Funded by the more developed countries
World Bank
International Monetary Fund
◦ In 1996, debt balance of LDCs $2.1 trillion