Development How it works and Hasn’t Worked
Jan 11, 2016
Development
How it worksand
Hasn’t Worked
Defining Economic Development as a Process
A. Development is --
– investment of a surplus – that results in increasing knowledge and
productivity – that results in growing surpluses available
for future investment
How surplus based development should work
Production requires two factors: Labor & Capital
It is Combined through Technology
Production Goal is – Surplus beyond current consumption
This Surplus becomes additional future investment
Increasing Investment leads to
– More Capital – translated into more tools of production
– Better Labor Skills -- through education – Productivity gains through above plus newly
invented technology– Even more surplus in the future
Where does the original Surplus come from???
Original surplus is the “water that primes the pump”
India Mark Deep Well Hand Pump II /III
Where does the original Surplus come from???
Internal generation theory– Prof. Morris Morris argued ..."all societies
have roughly equal savings rates"...• Simply all have equal proportions of surplus (say
15% of output)
• However, More technologically advanced societies have larger Gross Surpluses
• Problem the rich get ever richer faster
Obtaining Surplus
External Procurement theory– Option 1 traditional 19th century theory: Sell
resources
Caution: "growth" based on ever increasing extraction of finite resources eventually collapses
Reality of 20th 21st century: recent terms of trade have worked against most resource sales
– occasionally Oil has not faced this issue
Obtaining Surplus
External Procurement theory– Option 2 “Foreign Aid”, Borrowing, FDI…
theory: Borrow, Invest, Trade, and Repay
Caution: 1. Markets are not necessarily “free” and open
2. Competition is stiff under current global demographics
3. Bankruptcy has not been an option
4. Do the money lenders really want borrowers to succeed?
Rostow’s Theory http://images.google.com/imgres?imgurl=http://www.geographyalltheway.com/ib_geography/ib_development/imagesetc/ib_rostow_model.png&imgrefurl=http://www.geographyalltheway.com/ib_geography/ib_development/ib_development_models.htm&usg=__OP24DB0gDJUvjMTWArXVd5eaS_w=&h=486&w=685&sz=42&hl=en&start=2&um=1&tbnid=22Ay1SXld_26rM:&tbnh=99&tbnw=139&prev=/images%3Fq%3Drostow%2Bstages%2Bof%2Bdevelopment%26hl%3Den%26rls%3Dcom.microsoft:en-US%26sa%3DN%26um%3D1
Geography all the way . com
Paul Krugman an introductionhttp://www.comedycentral.com/colbertreport/video_search.jhtml?searchterm=paul+krugman
From the Colbert Report
Catch-up Vs. Sustainable Growth
Catch-up is copying someone else (Resource Mobilization)
True Long Term Productivity and Knowledge growth equals Sustainable Development (proportionately less raw materials used for more output) – With Catch-up, development is copying someone else’s
past success
– Knowledge based development is leading the world to new higher, more efficient uses of limited resources
Catch-up also called resource mobilization (see Paul Krugman)
Catch-up Vs. Sustainable Growth
Buying/Stealing another country’s knowledge is Catch-up– Paul Krugman calls this
Resource Mobilization
Creating new technologies is leadership and more sustainable– Krugman calls this Real
Growth
Paul Krugman at UC Berkley
What if it isn’t sustainable???
Examples of Collapse: Antebellum American South: Cotton production based on "strip mining of land" and lead to Civil War (a resource control war)
Southern Cotton Plantation Agriculture was moving West
Map of slave/cotton expansion in antebellum
south(click here): http://www.uoregon.edu/~atlas/america/maps.html
The interactive mapsite shows the migration of the cotton production between 1760 and 1860
Post Bellum Production
Despite near total collapse of Cotton exports during the Civil War
By 1870 cotton production equals 1860 level
By 1880 it exceeds the earlier level by over 50%,
By 1900 it is nearly 3 times 1860 production.
Then why was the south so "poor" compared to the north for a century after the Civil War?
Foreign Competition
The answer lies in Egypt, India, and other tropical countries that captured the production market during the war
After the war a continuing glut of cotton meant the price of the commodity never recovered
Basically the South had no other economic base until the Post WWII era brought industrial expansion from the North
Yet Cotton Production continued its migration Westward
Current Production Pattern of Cotton in US
Note the importance of California and Arizona in today’s production
Another Example
Mayan Collapse: According to many anthropological studies, Mayan Urban Civilization "strip mined" its surrounding agricultural resources for ever increasing consumer goods until some researchers argue that it collapsed for lack of more virgin land
The Soviet Example
Soviet style development required ever increasing resource demand (especially energy) to maintain itself.
Resource waste like this lead to collapse.
This and next pictures & text from: Soviet Pollution by Gerd Ludwig http://zonezero.com/EXPOSICIONES/fotografos/ludwig/lud02.html
Pictures of Environmental Destrucation in Azerbaijan.
Layers of oil and chemicals cover water in the oil fields near Baku, Azerbaijan. Streams in the area are considered biologically dead. Runoff from the oil fields is responsible.
From: Soviet Pollution by Gerd Ludwig http://zonezero.com/EXPOSICIONES/fotografos/ludwig/lud02.html
Now Impoverished
Once the source of almost half of the world’s oil, Azerbaijan is now desperately poor.
Black smoke billows from oil fires burning on the outskirts of Baku. The sight is so common that a shepherd tending his sheep in nearby Bibicheybet takes little notice.
Will the future be brighter for Azerbaijan???
Proposed Oil Transport Lines
How about China’s FutureResource Mobilization or Sustainable?