Chapter 10: Development Flashcards
How do actors impact development in a country?
Actors may disagree on policies and powerful groups may thwart development. Domestic institutions can either promote or slow development.
What are the common interests between the rich and poor?
Rich want markets to but their goods and rich countries may support policies that hurt poor countries.
Poor countries want more and better opportunities.
Less Developed Countries (LDCs)
Countries that lack material wealth, equitable distribution, and domestic investment. They need to import capital to develop economically.
Geographical factors to inequality
Climate and colonialism affect development–there is a wide variety. Resource curses mostly have negative effects (e.g., greed and high taxes)
Domestic factors to inequality
Governments can increase development by providing public goods (e.g. infrastructure).
International factors to inequality
- terms of trade
- agricultural subsidies
- decision-making in international organizations
- trade agreements
Import-substitution industrialization (IDI)
A set of policies that reduced imports and encouraged domestic manufacturing, often through trade barriers, subsidies to manufacturing, and state ownership of basic industries
LDC import substitution outline
- trade barriers to protect domestic manufacturers
- government incentives to draw investors into the modern industrial sector
- government provision of industrial services (e.g., electric power, finance, transport)
Export Oriented industrialization (EOI)
encourages manufacturers to produce to foreign consumers. Common in East Asian countries.
Why did many LDCs turn toward globalization in the 1990s?
A response to the debt crisis and the collapse of the USSR
Washington Consensus
- transformation towards an acceptance of market-oriented policies
- remove all trade barriers
- government must shrink by selling off its assets (privatization)
- liberalize banking sector
- cut spending
Trade liberalization
Removal of barriers to imports and exports to make national producers more competitive on world markets
Privatization
Selling-off of many government enterprises to private investors who would presumably run them more efficiently
Group of 77
Composed of developing countries who attempted to use the power of numbers to shift the economic order in favor of the developing world
Group of 77’s New International Economic Order proposals
- restricting the right of foreign investors in developing countries
- revising trade agreements
- increasing the influence of LDC governments in international economic institutions
Commodity cartel
Organizations of producers who cooperate to restrict the supply and raise the price of their products
Why is foreign aid unlikely to play a large role in overcoming underdevelopment?
- aid amounts are small
- need isn’t the only aid allocation criterion
- developing countries may not use aid for their economic development
- aid would not go very far in solving basic LDC problems
Who do international institutions favor?
Developed countries
What forces are the most important factor affecting economic development?
Domestic forces
Who plays a role in determining if a country can properly develop?
political institutions
