4.3 - Interventionist Strategy Flashcards
What does interventionist strategy involve?
Govt intervention
To correct market failure, inequality + poverty, influence trade patterns + investment
List some potential key roles of the state within an economy
Education Provision
Healthcare Provision
Infrastructure Investment
Public Goods Provision
Welfare Provision + Maintenance
Tax + Spending
Regulation + Legislation
What are the typical interventionist development strategies?
Develop Human Capital
Protectionism
Managed ER
Infrastructure Development
Joint Ventures
Buffer Stock Schemes
What is Human Capital?
Knowledge, skills + health that people accumulate over their lives
What are the most common means of developing human capital?
Improve nutrition + health
Classroom attendance
Primary + Secondary school investment
Improve working age population
Training investment
Cash transfers
How does a govt. seek to maintain a working age population?
Encourage skilled migrants
Curb Brain Drains
Qualification/Employment motives
What are the justifications for protectionism?
Protect Infant Industry
Tariffs provide tax revenue
Response to dumping
Self sufficiency
What is an infant industry?
New industry which experiences relative competitive difficulty with foreign rivals
What are the drawbacks of protectionism?
Raw material costs
Retaliation risk
Lost competition
Affect CPI + real incomes
Opportunity cost
Why might the central bank choose to depreciate a managed ER?
Balance of trade
Reduce deflation risk
Re-balance towards exports + investment
Sell foreign currency to reduce govt debt
Why might the central bank choose to appreciate a managed ER?
Reduce capital import prices
Curb demand pull inflation
(Imports become cheaper)
Why do many nations suffer insufficient infrastructure investment?
Up front financial commitment
Time taken to benefit
Savings gap
What are the general means of developing infrastructure?
Investment programmes
FDI
What is a joint venture?
Separate business entity created by 2+ parties
Involves shared ownership, returns + risk
Why are joint ventures beneficial?
Access new markets
Potential comparative advantage
