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