Economic Issues Test review

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Ch. 11 Economic Issues

Rostow's Stages of Economic Development

1. Traditional Society- agriculture is the most important industry and production is labour intensive

2. Transitional Stage- surpluses for trading emerge. supported by an emerging transportation infrastructure. Savings and investment grow, entrepreneurs emerge.

3. Take Off- industrialization increases, new political and social institutions evolve to support it.

4. Drive to Maturity- growth is now divers and standard of living rises. a greater % of nation's wealth goes into economic development.

5. High Mass Consumption- social programs increase, incomes higher than needed, greater demand for consumer products and services.

Development requires substantial investment in capital equipment so the economy would have to have reached stage 2, therefore Rostow's theory only applies to Western Countries.

Free market economy- price of all goods is determined by supply and demand

Command economy- supply and price of all goods are determined by government

Economic Systems

Economic Liberalism- Adam Smith, belief in strong free market policy

Keynesian economics- John Keynes, gov't needed to ensure that employment was high in order to achieve economic growth; projects like building dams, highways, railways.

Progressive government- based upon Keynesian but added tax distribution to help the poor through pension plans, health care, employment insurance etc.

Neo-Liberal economics- based on model by Adam Smith, large debts created by successive gov'ts spending more than they collected in taxes. gov't subsides and replaced with free market (privatization of companies), led to less money spent on social services. Liberal became widely accepted, even by progressive gov'ts. Closing of factories that move to other countries, availability to goods from around the world.

Ch. 12 Growth of Economic Globalization

In favor of globalization

- wider range of products and services to people

-increase in world economic growth

-stimulates economic development in developing nations

-breakthrough in teach are more easily shared

Against globalization

-loses of cultural identity

-corporation make more then the country, no gov't control

-greater benefits to the developed world rather the developing

-forces poor countries to compete as rich companies "shop around" looking for weaker labour and environmental laws

Ch.13 Economic Disparity in the World

Causes:

Impact of Colonialism- all money and resources made in the colony goes to the motherland, change standard of living for the colonies in the future.

Lack of Investment- most countries in the far periphery can't fund that "take-off" necessary to start economic growth

Population Growth- good standard of living must be sacrificed so that money gets distributed evenly to the people, movements toward pop control.

Disease- Canada's healthcare makes up 10% of GDP but for countries like Africa it just adds to the poverty.

Foreign Debt- rich countries give loans, poor country sometimes able to pay back but then nothing left to invest for economic growth.

War- constant civil unrest makes gov't use all its money on protection to prevent being overthrown.

Leadership Issues- leader is not interested in improvement, maybe create odious debt.

Trade Inequalities- raise taxes on developing nations' products.

Lack of Local control- citizens argue that the decisions about their own affairs, are made by outsiders, like UN.

Ch.14 International Debt Crisis

How Did the Debt Crisis Happen?

Loans-- U.S decided to switch from grants to loans so that the country can pay it back when they generate wealth, other countries followed leas.

Skyrocketing Oil Prices-- "oil shocks" were sudden rises in price over a short period of time. They were a problem for Canada so it was devastating to a Far Periphery country.

A Glut of the Petrodollar-- OPEC nations put deposits in banks, banks make money off customer loans, target poor countries as they are desperate after oil shocks, more debt.

High Inflation-- things would've worked out if it weren't for inflation rates rising from 5% to 15%, totally unaffordable.

Falling Commodity Prices-- highly indebted poor countries (HIPC) pay off debts with exports but now their export values decline so they get less money.

Declining Exchange Rates-- value of their currency decline compared to US and euro, more of the poor nation's money to equal the same amount in US dollars.

Debt Relief IMF vs Jubilee

World Bank/IMF:

they aim to reduce debt enough so that they regain the ability to pay it back, only 41 poorest countries

pre-decision point- a country is determined to be eligible

decision point- with anyone the country'd civil society organization, they create a poverty reduction strategy paper (PRSP) that details the aid that will be given

completion point- after discussion the plan get put into action, the money counts ad foreign aid but the money goes straight to the banks not the country

Jubilee:

debt relief to 50 countries, occurs so that poor countries can use their limited wealth ti fund social and economic growth

jubilee wants to see a program that focuses on the need of the debtors not the creditors

debtors paid more than enough from 1980-1992 but the debt has increased, these debts have been forced on them

not faIr to have countries repay debts from decades ago that were due to bad dictators so it should be forgiven and written off

Ch.27 Human Rights Issues

Child Labour

-Kids are more desirable due to physical capabilities (small fingers for weaving), can pay less, and don't complain as much.

-its a necessary evil, families needs them to work to survive and they contribute to the economy

-factors determining appropriateness for child to work include age, working conditions, and whether it hinders or enhance ability to get education,

-child labour is fought legally (not always is there will to enforce it), consumptionally (boycott certain brands), or through projects that help educate them such as the children village in Brazil where homeless kids learn woodworking and sell the crafts to pay for the program.

Slavery in the 21st Century

-in India the higher caste can own the lower caste, even released slaves may still have ties due to the caste system.

-forced labour enforced by gov't or militant power, using violence to threaten people into being slaves (In China prisoners become slaves, selling products on international markets they made in camps).

-bonded labour is debt bondage where you work to pay off the owed money

-trafficking people happens when people borrow money to travel, told they can pay back with money they earn in the country they arrive in but end up not being able to make enough.

-In 2002 5.7 million out of 27 million children were bonded labourers.

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