Newly Industrializing and Less Developed Countries

majority of the worlds countries have neither advanced democratic or communist regimes

third-world countries less developed countries (LDCs) and newly industrializing countries (NICs)
compressed modernity : rapid economic and political which transforms a country into a stable nation with democratizing political institutions, a growing economy, and an expanding group of nongovernmental institutions

Economic Development
Economic liberalization:
privatization (expanding private ownership of property) and marketization (allowing free-market principles to govern the economy)

Gross National Product: the total market value of all goods and services produced in the country
per capita GNP

Purchasing Power Parity: estimates buying power by using U.S. prices as benchmark
relative cost of living

Comparative PPP
Country United Kingdom Russia China PPP (in U.S.$) $36,600 $15,800 $6,000

Mexico
Iran Nigeria

$14,200
$12,800 $2,300

economic sectors
primary sector:
uses raw materials agriculture, farm animals, fishing, forestry, mining largest sector in low-income, pre-industrial countries

secondary sector:
transforms raw materials petroleum refining, machine making sector that grows most quickly as country industrializes, causes population shift

tertiary sector:
services: construction, trade, finance, real estate, government, private services, transportation dominates post-industrial societies

theories of economic development

what explains lack of economic development in LDCs?

neocolonialism:
an unequal relationship in which new indirect forms of imperialism are at play

Westernization Model :
all economic development is tied to economic practices exemplified by Great Britain after the Industrial Revolution:

combination of prosperity, trade connection, inventions and successful exploitation of natural resources

Dependency Theory:
industrialized nations exploit other countries and block their economic development

economic policies in the less-developed world

policies designed to jump-start the economies of LDCs:

import substitution:
governments in poorer countries need to create more positive conditions for development of local industry : restrict imports, stimulate domestic businesses

export-oriented industrialization:
directly integrate the countrys economy into the global community, focus on production that can compete immediately in international markets

structural adjustment:
open domestic economy to imports and investments, reduce government spending and debt, sell off state-owned enterprises

political development
democratization:
the process of developing a political system in which power is exercised directly or indirectly by the people
procedural democracy: regular competitive elections Substantive democracy: civil liberties, rule of law, open civil society, rule of law, independent judiciary, civilian control of the military consolidated democracy -> political liberalizaton

most countries with high PPP and developed tertiary sectors are also liberal democracies chicken or egg? are post-industrial societies necessarily democratic?

failed state:
state structures weaken, collapse, anarchy and violence ensue

International financial institutions

International Monetary Fund (IMF), World Bank, World Trade Organization (WTO)
critical forces in shift toward structural adjustment controversial: accused of destroying the environment, reinforcing poverty and exploitation

World Bank:
makes loans, issues direct grants to developing countries funded by member countries and private financial market

IMF:
originally designed to stabilize international monetary flow now lender of last resort for troubled economies Insists on conditionality: acceptance of structural adjustment and other policy-related conditions

WTO:
Advance free trade, resolve commercial disputes among members

foreign aid
several types:
direct loans and grants to 3rd world governments international agencies provide loans for long-term investment and to escape the debt trap multinational corporations invest, creating jobs and other indirect economic benefits Nonprofit NGOs

microcredit:
small-scale financial institutions that enable the 3rd world to determine and implement their own development policies mobilize local people to control their own resources and then help finance others poverty as a structural problem: lack of capital