development: measuring->inequality Flashcards
micro loans
Small loan lent to entrepreneurs (interest rates may vary)
Benefits: Empower women, suffer most from poverty, spend their money more wisely (family/long-term goals), accountability (shared risks)
Challenges: High interest rates, why make them pay it back? Culture does not support women business, women have multiple responsibilities– more work for them, low economic growth in a country
Dambisa Moyo: criticism of dead aid
Just because some money is unaccounted for, should we through the whole system away?
Military budgets are $600 billion a year compared to $35 billion to Africa
Some Aid programs do work well -Measle mortality decreased by 90%
Are subprime loans really a better option?
Argument: Aid jeopardizes local business. But what if the local business can not produce high quality products (medicine, bednets)
difference b/w IMF and World Bank
Both: Formed in 1944, part of the UN system
- World Bank focus: development
- IMF focus: financial assistance/stability
criticisms of the World Bank
Ignores opinions of local communities and has displaced indigenous groups
It has struggled to fight corruption
Unclear what policies are the most effective for reducing poverty
Classification of “Developing” is contested.
IMF
Goal is to create worldwide economic stability
Member countries contribute to the IMF (similar to a credit union)
IMF services
Surveillance- reviews and monitors states to see the health of their economies
Technical assistance- support and train to help manage economies
Lending- provides funds to help manage their international obligations. This lending is given with specific IMF conditions known as Structural Adjustment Programs
structural adjustment programs
specific conditions for IMF loans:
Balance the budget
Remove state subsidies
Liberalize trade
Remove barriers to foreign investment
Cut government spending
criticisms of IMF
Fiscal austerity - does not promote public confidence in the economy
Trade liberalization, high interest rates and privatization - can have a large impact on the most vulnerable people
Fund conditions are out of touch
However, it is important to note that it is hard to tell if the IMF has made things worse. The IMF comes into action when countries are in crisis. Hard to measure the success when you can’t measure the alternative.
2 diff models for development
Neo-Liberalism ––Washington Consensus
State-Capitalism –– Beijing Model
neoliberalism
Milton Friedman
This theory became popular in the 80s & 90s and influenced economic policy of major IGOs
Believed free-market principles would better society
Governments encouraged to:
reduce deficit spending
limit subsidies
reform tax law to broaden the tax base
open up markets to trade by limiting protectionism
privatize state-run businesses
allow private property and back deregulation
criticisms of neoliberal approach
Income inequality- deregulation/ tax cuts & reduce safety nets create massive inequality within states
Deregulation- encourages financial risks can lead to financial crisis
Privatization- profit over public interest- higher cost and reduced accessibility of key industries
Environmental- economic growth and the expense of the planet
Globalization- leads to job loss in developed countries and job exploitation in developing countries
Erosion of Democracy- Corporations and wealthy individuals can gain disproportionate influence over politics through campaign finance and lobbying
state capitalism
A political system in which the state has the supreme control over both production and usage of capital and therbye utilize the market for political advantage.
It involves widespread influence of the government in the economy.
Means of production are government owned/controlled or severely regulated. Profits are not publicly distributed but instead invested into further production.
(China is the best example: the government controls and owns several industries: automotive, air travel ect..) Governments have a lot of power to intervene in the economy.
criticisms of state capitalism approach
Lack of efficiently- State controlled enterprise (SCE) may not have profit incentives
Corruption: Nepotism/mismanagement and embezzlement
Limited innovation
Lack of competition- low quality goods, fewer consumer choice and higher prices
Fiscal Budget- It’s expensive
Inequality- profits may not be distributed equitably. Wealth and opportunity are concentrated within the inner circles of political elite.
capability approach
Amartya Sen and Martha Nussbaum
Do not measure economic growth but the freedoms people have.
Opportunities to perform actions people wish to and be what they want to be.
Policy should be focused on ensuring a person’s well-being
Variables defining well-being:
Health, education, political freedoms
This approach led to the development of HDI
