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Chapter 16

Some Critical Issues for the


Twenty-First Century

„ Key Concepts
The chapter is made up of three topics that illustrate growing global interdependence:
1. Global environmental problems: climate change, greenhouse gases, and ozone depletion.

2. The economic crisis in sub-Saharan Africa: a few success stories and continuing instability.

3. Globalization and international financial reform.

The text argues that the world economy is ever more integrated and interdependent. While the less-
developed countries have a long history of dependence on the developed countries, the developed
countries are also increasingly dependent on the developing countries for energy and other natural
resources, as well as markets for their exports.
The first major topic looks at two of the most pressing global environmental problems: global warming
and increased concentrations of greenhouse gases. Rainforest destruction is cited as a major problem
because the ability of the environment to absorb carbon dioxide is reduced. At the same time though, the
destruction of the rainforest must be seen as a choice for the short run, given current economic problems,
such as falling commodity prices, debt service demands and domestic economic stagnation. Several
arguments for sharing responsibility in helping to pay for rainforest preservation are advanced. The
various Earth Summits (Rio 1992, Kyoto 1997, Johannesburg 2002) are discussed, as is Agenda 21.

The second topic examines the two-decade-long economic decline of many countries in sub-Saharan
Africa. The major problems discussed are:
• The debt crisis in many of these countries, measured by per capita debt in relation to per capita GNP, is
by far the most serious in the world.
• Absolute poverty has been on the rise while per capita output and consumption have steadily declined
in many of these countries through the 1980s and 1990s.
• Population growth is the most rapid of any region in history.
• Inefficient government policies have contributed to the already serious problems of drought and
desertification, declining terms of trade, foreign capital withdrawal.
• AIDS.
• Cutbacks in social services, resulting in large part from the crisis, are threatening the chances for the
next generation to escape poverty.
The text also highlights a few cases of genuine progress made in Africa in the past few years with
respect to education, tropical diseases, democratic governance, and growth in exports and GDP.
However, most countries in this continent have a long, hard road ahead of them with respect to all
standard development indicators.
126 Todaro/Smith • Economic Development, Tenth Edition

The final topic of the chapter examines the globalization of trade and finance. The implications for long
term development are discussed. Proposals for reforming the international financial institutions are presented
and examined.

„ Lecture Suggestions
There is more than enough material to make the chapter the subject of several lectures, depending on
instructor preference and what has been covered to date. An alternative to waiting till the end of the course
to present these topics is to integrate some of them into other chapters. For example, global warming and
greenhouse gases can be discussed with Chapter 10, and the globalization of trade and finance can be
discussed with Chapter 14 and Chapter 15. It is certainly possible to skip one or more of the topics. There
is also a choice between briefly mentioning each topic and covering in depth one or more topics of your
choice.

The discussion of greenhouse gases and ozone depletion can be expanded by presenting more data on
emission levels, as well as information on possible solutions. You could discuss the phaseout of CFCs, for
example, and other types of market-based permit systems. Equity issues arise in terms of who is given the
right to pollute, as well as who bears the cost of cleanup. China’s extensive coal reserves make for an
interesting case study, in terms of tradeoffs between exploiting coal reserves and using a cleaner
alternative. The heated debate on ratifying the Kyoto treaty has been extensively covered by the media.

The section on the crisis in sub-Saharan Africa points out important problems, many of which may have
been addressed in previous chapters. If not, it is possible to examine some of these problems in depth.
Another option is to focus on one or two countries and to discuss, problems and possibilities in depth.
At this point in the class, students should be able to synthesize all of the information they have learned
throughout the course. A useful exercise is to ask them to critically evaluate the development performance
of one of these countries and/or make suggestions for what could be done differently.

„ Discussion Topics
• Debate efficiency versus equity issues in terms of how to solve global environmental problems.
Should the developing countries receive special consideration or treatment?
• Discuss the economic development impact of AIDS in Africa. Students can discuss measures
for prevention and treatment. There are a number of estimates of the economic cost of AIDS for
sub-Saharan Africa (in addition, of course, to the enormous personal cost).

„ Sample Questions
Short Answer
1. State one of the agreements of Agenda 21 of the Rio Summit and describe its implications for
development.
Answer: Development assistance for poverty alleviation and environmental health; research and
extension for environmentally sound agriculture; family planning resources and economic
opportunities for women, leading to reduced population growth; support for LDC
government environmental efforts; biodiversity funds; and R&D for non-carbon energy
sources.

2. Explain how the cost of rain forest preservation can be lowered for developing countries?
Answer: Targeted development assistance; improved efficiency of rainforest use; development of
alternative rain forest products; debt-for-nature swaps.
Chapter 16 Some Critical Issues for the Twenty-First Century 127

3. What is the relationship between land reform and rain forest preservation?
Answer: Settling agriculturally marginal rain forest lands is an easier political alternative to land
reform in latifundia/minifundia ownership patterns, but one with a high social price. Without
it, restrictions on land/forest use are likely to fail.

4. Evidence of global warming is controversial as is its connection to rain forest destruction. Therefore,
what is the case for a policy that affects developing countries’ decisions regarding environmental
preservation?
Answer: Risk aversion together with the catastrophic implications if it proves correct; plus lead
times needed to correct the problems.

5. “The 1980s was a lost decade for the absolutely poor.” Evaluate this famous statement.
Answer: Open-ended question.

6. “We have a long way to go in development, but we have already come very far.” Justify both halves
of this statement with reference to any statistics you remember (you may approximate).
Answer: Open-ended question.

7. Consider the various dimensions of the poor performance of sub-Saharan Africa compared with other
developing regions over the last two decades. Which of the following possible causes would you
single out as primary causes and which as symptoms, or secondary, proximate causes? In each case,
defend and substantiate your selection(s).
a. legacy of colonial period
b. war
c. commodity price declines
d. poor governance/corruption
e. low investment in human capital
f. poor macroeconomic policies
g. excessive state ownership of industry
h. poor business climate; harassment of entrepreneurs
i. neglect of agriculture
j. disincentives for exports
k. low incentives for foreign investment
l. debt crisis
m. low savings and investment in nonhuman capital
n. high population growth
o. environmental degradation and climate change
p. bad advice or conditionality of the IMF and World Bank
q. inequality of income or assets
r. underdeveloped institutions
Answer: Clearly you may wish to provide a smaller set of suggestions. You may wish to leave some
important ones off the list, and ask students what they think is missing. This is also a list
from which you may generate multiple choice questions. Note, grading would be flexible
for this question; its purpose is to test students’ general knowledge and reasoning ability in
economic development by the end of the course.
128 Todaro/Smith • Economic Development, Tenth Edition

„ Multiple Choice
1. Which of the following was/were not among the causes of sub-Saharan Africa’s decline in the 1980s?
a. Drought
b. Commodity price declines
c. Capital flight
d. Inefficient state owned enterprises
e. All of the above were among the causes.
Answer: E

2. Which of the following was/were among the causes of sub-Saharan Africa’s decline in the 1980s?
a. Flooding
b. Decline of Soviet influence
c. Rapid growth in Japan
d. Inefficient state-owned enterprises
e. All of the above were among the causes
f. None of the above.
Answer: D

3. The developing region in which per capita income, food production, and industry have declined
over an extended period is
a. sub-Saharan Africa.
b. East Asia.
c. Lain America.
d. South Asia.
e. all of the above.
f. none of the above.
Answer: A

4. Which of the following is/are among the agreements of Agenda 21 of the Rio Summit?
a. Development assistance for poverty alleviation
b. Research and extension for environmentally sound agriculture
c. Expanded family planning resources
d. Establishment of biodiversity funds
e. All of the above
f. None of the above
Answer: E

5. The “price of rain forest preservation” can be lowered for LDCs by


a. development of alternative rain forest products.
b. research on agriculture in rain forest soils.
c. encouraging rain forest settlement of the poor.
d. subsidies for activities like cattle raising.
e. all of the above.
f. none of the above.
Answer: A
Chapter 16 Some Critical Issues for the Twenty-First Century 129

6. Gases that trap heat within the earth’s atmosphere and can thus contribute to global warming are
known as ______ gases.
a. polluting
b. greenhouse
c. noxious
d. All of the above.
e. None of the above.
Answer: B

7. A production facility whose operations are distributed across countries to take advantage of price
differentials is known as
a. a multinational corporation.
b. a free trade area.
c. a global factory.
d. all of the above.
e. none of the above.
Answer: C

8. The economic transition refers to


a. transition from a less to a more-developed country.
b. transition from central planning to market economy.
c. countries that have some developed and some less-developed characteristics.
d. all of the above.
e. none of the above.
Answer: B

9. The first Earth Summit of 1992 was held in


a. Kyoto.
b. Rio de Janeiro.
c. Johannesburg.
d. Beijing.
Answer: B

10. By 2000, middle-income developing countries were responsible for about


a. one half of the emissions of greenhouse gases of those of developed countries.
b. two thirds of the emissions of greenhouse gases of those of developed countries.
c. about the same amount of emissions of greenhouse gases as those of developed countries.
d. more than the emissions of greenhouse gases of developed countries.
Answer: C
130 Todaro/Smith • Economic Development, Tenth Edition

11. Maintaining the rain forest is very important because of


a. its absorptive capacity for CO2 emissions.
b. maintaining agricultural production of countries dependent on the rain forest, such as Brazil.
c. ensuring a successful land reform policy.
d. all of the above.
Answer: A

12. Which of the following African countries has experienced higher school enrollments and lower
child mortality in the past few years?
a. Angola
b. Congo
c. Mozambique
d. None of the above
Answer: C