Midterm Exam Firobind 260929844.docx - Take Home Midterm...

This preview shows page 1 - 4 out of 8 pages.

Take Home Midterm Exam Work given As part of the course Winter 2021 - POLI-227-001 - Developing Areas/Introduction By Paul Firobind (260929844) For 21/02/2021
Answer any 4 out of the following 6 questions (worth 25% each): 1) What factors have shaped developing countries’ economies, and what pitfalls have they faced as a result? The economies of developing countries are the result of several factors that have shaped them depending on the path they have taken. Indeed, after the decolonization of the world in the post-World War II era, by gaining their independence many states kept a legacy of colonialism in their economies. Indeed, independent states followed the same intensive resource extraction methods after their independence. However, great inequalities residing between countries of the North and the South, these inequalities can be understood through the Dependency Theory that appeared between 1960-1970. This theory, in response to that of modernization, asserts that world economic policy follows a core-peripheral dynamic. The core is thus the industrialized countries that consume the raw materials supplied by the peripheral countries, which in turn export these materials to be transformed by the industries of the core countries. This theory explains the North-South economic gap and theorizes the notions of “underdevelopment” and “development” that reflect a dialectical relationship (Rodney 1972). Thus, developing countries have relied solely on raw materials for their economic development, leading them into a vicious circle of the necessity of overproduction to increase their income. However, raw materials are subject to strong fluctuations, such as oil or coffee, which can wipe out entire economies when prices fall, as was the case in Zambia, which, based on its comparative advantage in copper (being the country with the most reserves), found itself in economic crisis after a drastic drop in its price in 1980, and then in a boom in the 2000s due to abundant demand from China (which is now slowing down, thus slowing down the Zambian economy as well). Thus, to overcome the comparative advantage of industrialized countries, developing countries turned to Import Substitution Industrialization (ISIs) and International Financial Institutions (IFIs) in the 1960s and 1970s. ISIs are notably used in Latin America and Asia to develop indigenous industries. However, this has encouraged corruption and lack of competition in these same countries. As a result, jobs created were asphyxiated under the weight of buying and maintaining machinery which forced these developing countries to borrow money using foreign reserves of funds to buy Western products
making ISIs unprofitable in no time at all. However, some countries such as the Asian Tigers escaped this through public spending policies, labor control, and investment in human capital, which allowed Japan, for example, through this interventionist and subsistence approach to certain industries, to develop its economy (Ahearne, p65) also with the help and protection provided by the US. Thus, the massive demand

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture