notes 11-05-07 - Notes Overview 1 Poverty 2...

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Notes 11-05-07 Overview 1. Poverty 2. Underdevelopment trap 3. Origins of underdevelopment trap 4. WTO case study 5. Solutions 6. Announcements 1. Poverty The world is poor 99% of people in the world do not have a college degree 2. Underdevlopment trap a vicious cycle countries in the South, the developing world (countries with low GDP) In the U.S., the average GDP per capita is $43,600 per year In Japan, there is about $33,000 per year. In Tanzania, there is only $752 per capita per year. The GDP gap between rich and poor countries have grown overtime. For example, in 1977, poor states produced about $170 per person and rich states about $7000 per person. By 1995, poor states were earning $440 per person, but rich states were producing $25,000. In 1960, Africa was a net exporter for food, but by 2007 Africa is importing 1/3 of it's grain. Four parts of the underdevelopment trap A dual economy – on the one hand, 70% of a poor country is totally destitute with no money with a tiny middle class and a very tiny band of rich people and elites. There is no middle class with the purchasing power to create much of a market. Low productivity – productivity is the output of goods and services per work hour. Very little output = low surplus = low savings = no money available for investments to produce more wealth. Insufficient capital – Roads, telephone wires, airports, bridges .... things that are necessary to make an economy function. This means that there is not enough money for investments for the tools of productivity. Human capital – the absence of educated and talented people to run the society and the economy. 3. Origins of underdevelopment trap A big piece of the explanation of why some countries are poor has to do with imperialist legacies. Western capitalists, until the 1960s were in charge of the developing world. As they pulled back, they left behind them patterns of dependency which are impossible to escape. They have invested money in former colonies to earn big profits, they redirected money from Africa and Asia to the West.
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