ECON4 International Development Flashcards
Git Gud
Name 4 non-economic factors that influence growth and development
war, poor governance, disease, Geographical location
3 types of strategies to improve development
Market-based, interventionist, Other
Market-based strategies to improve development (6)
Privatisation, trade liberisation, promotion of FDI, Removal of subsidies, Floating exchange rate, Microfinance
How does Trade liberalisation improve development?
Allows countries to specialise meaning output increases. This increase in output could lead to improvement in living standards
How does Promotion of FDI improve development?
Can create employment opportunities as foreign capital seeks interest. This would be especially long term and sustainable growth
Pros of FDI (3)
Risk of investment taken by MNC not government, transfer of knowledge and skills, Multiplier
Cons of FDI (3)
Loses sovereignty, Repatriation of profits, Can be exploitative
How does Removal of Government subsidies improve development?
If subsidies were an example of government failure then removing them could stop price signals being distorted
How might removal of government subsidies harm development? (2)
Might not lead to green growth, and also might lead to primary product dependency as the economy may not diversify naturally
How does Floating exchange rate systems improve development?
Stops pricing inefficiencies and could cause a depreciation of the currency making it more internationally competitive
How does Microfinance schemes improve development(3)?
Involves small loans to individuals which boosts their income and boosts AD. Also it’s injection so their could be multiplier. Also helps them break away from aid and loan sharks with high interest
Why might microfinance be less succesful than it appears
Honesty on how the money was spent, people may lie to cover their back
What % of microfinance schemes were still running in Tamil Nadu, India?
less than 2%
How does privitisation improve development?
Free market bros argue that it gives incentive to produce efficiently which increases output. It also gives allocative efficiency because firms have to meet demands of market
Interventionist strategies to improve development (6)
Development of human capital, Protectionism, Managed exchange rates, developing infrastructure, joint venturing, buffer stocks
How does Development of human capital improve development (3C)?
Skills base of the economy improves - Increases productivity and technical ability - economy can move up from primary products to manufacturing
How does Protectionism improve development (2)?
Helps reduce a trade deficit, protect infant industries that are growing to become internationally competitive
How might protectionism actually hinder development (5)?
Could distort market - less allocative efficiency, consumer welfare loss along with less variety, lower incentive to reduce costs and become efficient for firms, tariffs are regressive and hurt those on low incomes, could lead to retaliation from other countries
How does Managed exchange rates improve development? (export side)
Stops exporters from being disadvantaged by fluctuations in the exchange rate as the government keeps it fluctuating around a fixed point
How does Infrastructure improve development?
Gives businesses lower unit costs and external economies of scale, improves quality of life because of reliable power and water, can boost employment if better transport
What % of gdp did China invest in infrastructure from 19??-20??
9% GDP in infrastructure from 1990-2010
How did investing in infrastructure help China
meant they climbed ahead of other emerging economies
How many chinese people benefited from the improvements in infrastructure from late 1990 to 2005
100 million chinese people
How does joint ventures improve development?
(multiple international companies working together on a scheme) allow international trade and transfer of technology. They also help small firms grow into new markets while spreading risks between multiple firms
What do buffer stocks tackle
Volatile prices
disadvantages of buffer stocks (4)
Prices may go one way (don’t work) - unsustainable, Large cost to taxpayer to set up, Difficult to do with perishables, Free riders (other countries)
What is import substitution
when protectionism is used to move consumption from imports to domestic products
Other strategies to improve development (6)
fairtrade, developing primary industries, debt relief, aid, tourism, industrialisation
Advantages of buffer stocks (2)
Prevents fall in revs that cause poverty, Consumers see more stability
What is the Lewis Model
Industrial workers provide more value and therefore get higher wages, therefore a key to development is to encourage industrialisation and the transfer of workers to the industrial economy.
Negatives of lewis model (4)
Profits may not be passed onto workers, Urban poverty, Government can waste resources on investment, Slums caused by influx
Advantages of Aid
fills savings, trade gaps can be targeted
positives of debt relief (4)
Reduces burden on small countries, Allows growth, Interest was larger than original loan, Previous government may have been corrupt
Negatives of debt relief (2)
moral hazard, eases pressure on govt to adopt good policies
Name 3 key development NGOS
IMF, World Bank, WTO
What does the imf do
Provides temporary relief in crisis, tied aid (aid based on promises for production)
What does world bank do
Promotes devlopment through different sub branches
