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dependencies. However, the established powers left their old colonies poorly prepared to compete in
an increasingly globalized economy. In the intervening decades billions of dollars were invested on “development” projects (e.g.,
roads, airports, hydroelectric power facilities, schools, hospitals)… …but the gap between the developed and developing countries has not narrowed
—in fact by some measures it has actually increased. Gross Domestic Product, 1972-1999 (US$ 1995) International lending institutions have provided the bulk of the money for these
development projects—principally the World Bank and the International Monetary
Fund. 2. Export Substitution
To initiate this process international institutions encouraged developing countries to shift labor
and financial resources from the production of subsistence goods that satisfied local needs… …to goods that could be sold as export products to consumers in Europe and North
America (e.g., coffee, tea, bananas, sugar, tobacco, beef). The establishment of export agriculture however requires investments in fertilizers, pesticides,
hybrid seeds, tractors, and computers. 3. Demand for Foreign Exchange To acquire these inputs developing countries must have access to foreign exchange (i.e.,
US dollars). 4. Foreign Borrowing To obtain the necessary foreign exch...
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This document was uploaded on 03/01/2014.
- Spring '14