ECON-2220 Chapter Notes - Chapter Franko 1: Cosmetology, Favela, Maquiladora

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Franko Chapter 1
Development in Latin America: Conceptualizing Economic Change in the Region
1. Stories
a. Juan Navarro, Uruguayan-born buyout king of Latin America
i. Exxe“ Group, equity buyout co”pany, one of the country’s “argest
privately-owned buildings
ii. Recent macro instability in Argentina has rocked the company;
bankruptcy and loan defaults are plaguing Navarro
iii. Transforms underperforming companies into success stories
b. Brazilian soccer superstar Ronaldo
i. One of the highest-paid players in soccer history
ii. Led Brazil to fifth World Cup title
iii. Born in a poor favela (slum) in Rio de Janeiro, he had to quit as a
young boy because he didn’t have the bus fare
c. Jessy Conteras, a cosmetology student
i. Doesn’t have ”oney for a co”puter in Peru
ii. Average income less than $300 a month
iii. Peruvians have hope and are signing on in droves through the
Peruvian Scientific Fund, a network begun iwth $7,000 in seed money
from the UN Development Fund and other cooperative arrangements
with universities, hospitals, and nongovernmental organizations
d. Judith Yanira Viera, eighteen year old from El Salvador
i. Worked in Taiwanese-owned Mandarin International maquiladora
factory where she made shirts for brands such as Gap and Eddie
Bauer under terrible working conditions for very little pay
e. Blasio and Claire Lehman, tobacco farmers in Brazil
i. Competition in the global tobacco market has soured thier dream
ii. Small farmers are forced to take bank loans to buy kits and must
pledge to sell their harvest to the companies that sold them the kit
iii. Police assist companies in stealing crops
iv. Illiteracy prevents farmers from mobilizing
f. These stories show that economically, Latin Americans range from the very
wealthy Juan Navarro to the desperately poor Judith Yanira Viera.
i. What kind of macroeconomic policies can address the complex
microeconomic structure of Latin America?
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ii. How have the pressures of globalization and the international market
transformed the varied lives of Latin Americans?
2. A conceptual map: what is economic development?
a. Characteristics of Development
i. While some countries in LA exhibit poor performance on indicators
of child malnutrition and child mortality, others perform extremely
well.
1. Honduras and Guatemala are the worst, with nearly 1 in 4
children malnourished
2. In Chile, however, only 1 percent of children suffer from
hunger
3. Bolivia, Guatemala, and Peru demonstrate tragic rates of
infant mortality, whereas Chile, Costa Rica, and Argentina
demonstrate strong records
ii. Throughout the region, the growth of private consumption has been
uneven
iii. There are about 13 times as many TVs in the U.S. as there are in
Guatemala and 25x more mobile phones in Canada than there are in
Nicaragua
iv. Characteristics
1. Access to technology (internet, mobile phones, etc.)
2. Child malnutrition
3. Infant mortality
4. Urbanization
5. Per capita rate of growth
6. GDP
7. Carbon dioxide emissions
8. Access to sanitation
9. Consumption spending
b. What do we mean by development?
i. The word underdeve“oped introduced in 1942 by Wi“fred Benson, a
member of the secretariat of the International Labor Organization
1. Tru”an popu“arized the ter” but didn’t c“ear“y define it
ii. Since Truman, the goal of development has been to undo the
hardships of underdevelopment
iii. Since the Cold War, the world has been divided into
1. Industrial market economies
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2. The co””unist second wor“d (transitiona“ econo”ies)
3. Rest of the g“obe or third world
iv. In common language, development describes a process in which the
potential of an organism is released to achieve its mature form
v. More sophisticated production techniques and a wider range of
electronic toys do not necessarily imply a better or happier society
vi. We don’t know which ”e”bers of society have access to the gains
of economic growth.
vii. More industrialization--particularly with the associated environmental
costs--does not necessarily mean an increase in wellbeing
viii. Economists find it easier to agree on what constitutes the alleviation
of poverty and meeting the basic needs of a population than on what
represents the achievement of wealth or the satisfaction of material
wants
ix. This text looks at development as a process of meeting the basic
human needs of a population and enhancing options for the allocation
of economic resources both today and in the future to increase the
choices citizens have in their daily lives. It pays particular attention to
how much is produced and for whom, and it addresses the
environmental sustainability of production for future generations.
c. Growth vs. Development
i. Development is far more than economic growth
ii. Growth is a process of gradual change, with all quantities such as
wealth, savings, and population increasing slowly and continuously.
Development is characterized as rapidly propelled by innovations.
iii. Another definition: Growth is the increase of income proportional to
the increase of population, and development is the process whereby
income increases more rapidly than population. In other words,
growth does not presuppose technical change, but development does.
iv. Development centrally engages the question of how technological
change takes place in an economy. A key element in development is
the management of technological change or how technology is used
to transform the economic structure.
v. Economic development is not simply driven by factor endowments or
the quantity of resources but by how land, labor, and capital are
combined in new ways to increase productivity and the choices
available to a population.
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