Developing countries Content: A.DC in general B.Political development C.Economic development D.Milestones E.Ways to overcome underdevelopment DC in general A. DC in general •majority formed after WWII – main characteristic underdevelopment •DC in LR: lagging behind developed countries (according to GDP p.c.) • BUT big differences among countries • + according to HDI: catching-up since 1950s • development with problems •DC blame western countries •western countries emphasis internal problems of DC Terms •1960s developed x underdeveloped •1970s third world countries = outside of blocks ð first world + CPE •1980s developed x less developed •nowadays newly industrialized + emerging markets DC - definition •different concepts •narrow = original – all colonies, semi-colonies and dependent countries which gained independence -> DC •wide – according to GDP p.c. but differences illogical è characteristics Comparison of narrow and wide concepts – examples DC – main characteristics •low GDP p.c •high population growth •high % of poverty •unequal distribution of incomes •structure of economy (large share of agriculture) •small share of trade on GDP •high unemployment •serious market failures and rigidities •lack of human capital (quality of LF) •lack of physical capital + backward technologies + low labour productivity DC – characteristics • • • • •https://www.youtube.com/watch?v=MauZwxPEF88 Selected demographic indicators in 1992 Economic growth and changes in GDP p.c. in India (1986–1996) Population growth in India and its share below poverty line Average growth rate of GDP in India (1950–2002) Structure of Indian economy Development of India´s government deficit India´s labour productivity in selected sectors (USA=100) India vs. China Difference between econ. growth and econ. development }income distribution and poverty }life expectancy }production of steel and iron p.c. }production of energy p.c. }number of primary and secondary schools }number of hospitals per 1000 inhabitants }number of cars per 1000 inhabitants }quality of environment }involvement of inhabitants in the governance Political development - common strategy of DC B. Political development of DC • until the end of 19th century – countries divided among colonial powers •certain countries formally independent (China, Persia) + dependent countries or semi-colonies (Australia, New Zeland) •reasons … • relations with colonies •trade in similar way as in GB´s empire •emigrants •capital Colonies and colonial powers in 1945 Political map of Africa in 1914 Independence •certain countries after WWI • •but the majority after WWII •disputable outcomes •24 the worst countries according to HDI in Africa – during last 10 wars or coups in ½ of them •in1991 first president in AFR who voluntarily resigned after lost elections (Benin) • •nowadays – Caribbean area •no attempt to gain independence Cold War •DC x Western •not many with centrally planning •only strategically important states forced to join either sidet •making use of bipolarity • • Common strategy of DC • conference in Bandung • 29 countries in 1955 • resolution x war, zionism, colonialism, • + right to self-determination • + demands of help from advanced economies •OSN • 1960 - Declaration on the Granting of Independence to Colonial Countries and Peoples • 1960 - Declaration on the abolition of colonialism • 1974 - New International Economic Order •Number of claims (e.g. 1% GDP to support DC) Non-Aligned Movement • 1961 in Belgrade • 21 states • goals: • more active participation of Non-Aligned states • ban on nuclear testing • final and total decolonization • initiative to the establishment of the UN Conference on Trade and Development( UNCTAD) • stability of natural resources prices •I. slogan „trade not aid“ • in 1970s X Western (Cuba – chair) • in 1980s mass character •influence in OSN • end of the Cold War ò importance Group of 77 •1964 in Geneva •77 underdeveloped countries •goals: • X „inequity“ of the world economic system = particularly X ò natural resources prices • coordination of DC´s actions • dissension in 1970s - OPEC • in 1990s > than 120 members, but insignificant influence Economic development C. Economic development • economic and cultural backwardness ð need of econ.ñ • + ñ had to be > than ñ population ð X population explosion • ! Difference in economic strength and growth • different initial position + different development ð huge differences among countries and regions •Asian Tigers X Sub-Saharan Africa Convergence? Average growth of GDP, 1971-2000 (in prices of 1995 and %) Asian Tigers •South Korea, Taiwan, Hong-Kong, Singapore •belong to newly industrialized countries (NIC) •up to 1960s standard DC •since 1960s very rapid econ. growth •South Korea strongly influenced by the monetary crisis in 1997 •nowadays GDP p.c. more than 20 000 $ = more than in Czech Republic } reasons: }ññ EX }cheap and productive labour force }foreign capital }development of industry – textile, clothing, metallurgical, metal-working ð electronics, chemistry, auto industry }reasonable EP } }BUT different strategies: }Singapore a Hong-Kong - liberal }X South Korea and Taiwan – state interventions } } 2nd wave: Malaisia, Thailand, Indonesia } 3th wave: Laos, Vietnam } China } } X Sub-Saharian Africa – lagging behind } ðð possibility of convergence BUT need of good EP Taxes levied on cell phones Migration of qualified labor force Remittances Milestones - Green Revolution, Debt, Poverty, Foreign aid D1. Green Revolution •population growth + food shortage ð starvation and malnutrition ð effort toñ efficiency in agriculture •changes at end of 1960s and beggining of 1970s = Green Revolution •tools: •biological •seeds- „miracle seeds“ •more intensive use of agricultural land •irrigation + organical fertilizers •mechanical •tractors, mechanization •important role of governments - fertilizers, irrigation and seeds • outcomes •prevention of starvations •at the beginning - ñ production •BUT problems with chemical fertilizers - ñ usage + ñ acidity of land • • Africa not affected by the first round •in he mid-1980s program „Sasakawa 2000“ •similar problems as those in Asia • • end of 1980s new Green Revolution •ecological = more traditional wit less chemicals •emphasis on grading up D2. Debt •indebtedness - important problem since constitution •in 1970s ñ indebtedness •ñ oil price • beginning of 1980s •Inflationary pressures ð shift in the US monetary policy •ð ñ interest rates (LIBOR) • ð appreciation of $ •econ. ò in Western countries + other problems huge ñ indebtedness Current account balance in USD billion 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 Rice producers 6.7 68.3 35.4 40.3 29.4 -1.3 56.8 102.4 45.8 -17.8 Other developing countries -11.3 -37 -46.3 -32.6 -29.6 -33.2 -49.7 -74.4 -95 -73.2 Industrial countries 20.3 -10.8 19.8 0.5 -2.4 14.6 -25.6 -61.8 -18.9 -22.2 • Mexico + other 60 countries serious problems with repayments • ð IMF + IBRD + Paris Club: •prolonging the repayment schedule •lowering of interest rates •granting further debts • BUT strict conditions •ñdebt also after the end of the crisis •reduction in 1990s External debt (% of GDP) in respective developing regions Nowadays }huge differences among countries }IMF a IBRD lend to DC under the condition of a meaningful program }discussion about so-called Washington Consensus = macro stability, trade liberalization and privatization }agreement of IMF, WB, and the US Treasury Department BUT never an official doctrine }conditions often not respected ð serious problems+ promises ð loans ð… ð for certain countries strict conditions •+ somewhere e.g. Kenya opposition X loan from IMF b/c corruption in government •debt relief for the poorest couries – HIPC (Heavily Indepted Poor Country) •initiative sice 1996 •38 countries included – mainly in Africa •individual states in most cases already forgiven bilateral debts •problem with international ogranizations IMF + WB •no money for projects •+ conditioned by meaningful EP + from saved money program with NGO x poverty D3. Poverty •persistent problem • Number of people with a daily income less than one dollar (billion) Millennium Development Goals • • Poverty around the world D4. Foreign aid •permanent aid, BUT •sufficient? •efficiency of using the aid (army + dictators + …) •often „conditioned“ = western countries provide s recipients to buy goods or services ð inefficiency… • • reasons for the aid: •support stability •relations with former colonies •Cold War •„compensation“ for DC • form: •loans •donations •scientific and technical support •loans in the case of BofP problems •food aid •private INV • •development: •long-term permanent ñ absolute size BUT • nowadays: •in 1990sò aid •mainly problematic treatment with aid •recently again ñ •certain countries tens % of GDP •meeting of MMF and WB in Prague, 2000 - CR started the so- called graduation = financing development programs •CR´s aid very small • the best form of aid = liberalization (open markets) •Protectionism mainly in AGR. + labour-intensive commodities (textile) •OSN – trade losses for DCs 700 bil. $ per year – significantly > tan the total amount of aid Official net amount of funds to developing economies according to countries (USD billion) and percent of GNI in 1990 and 2004 Development of aid in % of GDP given by Lithuania, Poland, Hungary, Slovakia, Czech Republic and the USA Lithuania Poland Hungary Slovakia Czech Republic USA Ways to overcome underdevelopment E. Ways to overcome underdevelopment through foreign trade • two main strategies: •1. import substitution industrialization •2. export-led growth •shift towards 2., but sometimes combination of the strategies E1. Import substitution •Industrialization via import substitution = •Import Substitution Industrialization •protection of domestic markets -> industrialization •strategy of „infant industry“ •theoretically: •seemingly efficient •application only on condition that the consumers’ loss is < the producers’ profit •Other problems: • corruption •monopolization •bureaucracy (bureaucracy – industry - army) •problematic elimination high costs + world trade liberalization è difficult implementation E2. Export-led growth •growth strategy based on export = •export-led growth • ñ export ð ñ GDP Relationship of export and growth •Problems: •commodity concentration •concentration on certain markets •geographic concentration • long-term ò terms of trade • main problem – EX structure = concentration on EX of natural resources •ð plans to stabilize commodity prices Major commodities’ share in export and GDP in selected countries (%) Dependency on textile exports Real commodity prices in 1990-2000 (index 1900=100) …even semiconductors Protectionism Thanks for your attention!