A modern term used to

describe the changes in

societies and the world
economy that result from
dramatically increased
international trade and cultural
“Countries engage in international trade for two
basic reasons, each of which contributes to their
gain from trade. First, countries trade because
they are different from each other. Nations, like
individuals, can benefit from their differences by
reaching an arrangement in which each does the
things it does relatively well. Second, countries
trade to achieve economies of scale in production.
That is, if each country produces only a limited
range of goods, it can produce each of these
goods at a larger scale and hence more efficiently
than if it tried to produce everything. In the real
world, patterns of international trade reflect the
interaction of both these motives.”
~Paul Krugman, International Economics
 Definition~ Preventing a foreign
product from freely entering into a
nation’s territory.
1. Import Quota
2. Voluntary Export Restraint
3. Tariff
4. Informal Barriers
• Government Licensing Restrictions
• Government Health and Safety
Requirements
The overall impact of trade barriers is
that they limit supply. This results in
two common consequences:
1. Increased price of foreign goods
2. Trade wars
 Development- Process by
which a nation improves Indicators of
the economic, political and Development
social well being of its 1. Per capita GDP
people. 2. Energy
 Developed-High level of Consumption
material well being (US) 3. Labor Force
 Less Developed- Low level 4. Literacy
of material well being 5. Infant Mortality
(Ethiopia) 6. Life Expectancy
 Newly Industrializing- 7. Consumer Goods
Better performing LDC’s
(Mexico)
1. Rapid population growth
2. Resource distribution
3. Lack of physical capital
4. Lack of human capital
• Health/Nutrition
• Education/Training
• “Brain Drain”
5. Political Factors
• Colonial Dependency to Independent Planning
• Government Corruption
• Political Instability (civil wars, social unrest, lack of
government infrastructure)
6. Debt
Why are there more babies being born?
1. Children may be needed to help earn money
2. Lack of contraceptive devices may lead to
unwanted pregnancies and babies.
3. The local or national culture or government
may encourage large families
4. Parents may be fearful of infant mortality
(children dying very young)
5. Better medical facilities could be increasing the
lives of mothers and therefore increasing their
chances of having larger families
Why are there fewer deaths now?
1. Better birthing facilities
2. More widely available medicines and medical
expertise
3. A general improvement in diet and nutrition in
many countries
In parts of Africa, Asia, and Latin
America, physical geography
makes development more
difficult.
Only about 10 percent of the
world’s land is arable, or
suitable for producing crops.
The lack of economic activity
typical of LDCs is due in part
to a lack of physical capital.

Subsistence agriculture
provides little opportunity for
individuals or families to save.
Health and Nutrition
Proper food and nutrition are necessary for physical
and mental growth and development. Inadequate
nutrition is called malnutrition.
Education and Training
To be able to use technology and move beyond
mere subsistence, a nation must have an educated
work force.
Brain Drain
The scientists, engineers, teachers, and
entrepreneurs of LDCs are often enticed to the
benefits of living in a developed nation. The loss of
educated citizens to the developed world is called
“brain drain.”
1. shifting from colonial
dependency Find out more...
2. political instability Find out more...
3. Corruption Find out more...
4. Debt Find out more...
 Many nations, specifically on the African continent,
were under colonial domination until recent times.
 This domination created an economic structure
that was “export” heavy and “import” light. This
unequal balance of trade made nations dependent
on the colonial power for manufactured products.
 In addition to hyper-dependency for manufactured
goods, colonies often lacked infrastructure and
internal leadership.

But independence is a good thing…

RIGHT?!!?!?
Political instability plagues
less developed nations
with civil wars and social
unrest acting to prevent
the necessary social
stability required for
sustained development.
“Corruption is a major cause of poverty as well as
a barrier to overcoming it. The two scourges
feed off each other, locking their populations in a
cycle of misery. Corruption must be vigorously
addressed if aid is to make a real difference in
freeing people from poverty.” ~ Peter Eigen

“Corruption isn’t a natural disaster: it is the cold,

calculated theft of opportunity from the men,
women and children who are least able to protect
themselves. Leaders must go beyond lip service
and make good on their promises to provide the
commitment and resources to improve
governance, transparency and accountability.”
“Debt is an efficient tool. It ensures access to other
peoples' raw materials and infrastructure on
the cheapest possible terms. Dozens of countries
must compete for shrinking export markets and
can export only a limited range of products
because of Northern protectionism and their lack
of cash to invest in diversification. Market
saturation ensues, reducing exporters' income to
a bare minimum while the North enjoys huge
savings. The IMF cannot seem to understand that
investing in ... [a] healthy, well-fed, literate
population ... is the most intelligent economic
choice a country can make.”
--  Susan George, A Fate Worse Than Debt, (New
York: Grove Weidenfeld, 1990), pp. 143, 187, 235
 World Bank

International Monetary Fund

World Trade Organization

 The World Bank is a vital source of financial and
technical assistance to developing countries around
the world. Their mission is to fight poverty with
passion and professionalism for lasting results and
to help people help themselves.
 It is not a bank in the common sense; it is made up
of 186 member countries.
 They provide low-interest loans, interest-free credits
and grants to developing countries.
 The World Bank, established in 1944, is
headquartered in Washington, D.C.
 The three pillars of the World Bank:
• Results
• Reform
• Resources
 Started in 1944 at the Bretton Woods
Conference.
 The IMF is an organization of 186
countries, working to foster global
monetary cooperation, secure financial
stability, facilitate international trade,
promote high employment and
sustainable economic growth, and
reduce poverty around the world.
 Creates structural adjustment programs
(SAP) in less developed nations across
the globe.
 The World Trade Organization (WTO) is the only
global international organization dealing with the
rules of trade between nations.
 Established on January 1, 1995 and is
headquartered Geneva, Switzerland
 It is made up of 153 countries
 Functions:
• Administering WTO trade agreements
• Forum for trade negotiations
• Handling trade disputes
• Monitoring national trade policies
• Technical assistance and training for developing
countries
• Cooperation with other international
organizations