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Economics > Global – Strategies for G&D > Flashcards

Global – Strategies for G&D Flashcards

1
Q

List all the Strategies that can be used for G&D

A

1) International trade strategies
2) Diversification and social enterprise
3) Market-based policies
4) Interventionist policies
5) FDI and multinational corporations
6) Foreign aid
7) Multilateral development assistance
8) Institutional change

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2
Q

What International Trade Strategies can be used for G&D?

A
  • Import substitution
  • Export promotion
  • Economic integration
  • Trade liberalization
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3
Q

What is Import Substitution?

A

Trade strategy where a country begins to manufacture simple consumer goods for the domestic market to promote its domestic industry + application of trade barriers (tariffs/quotas) to protect domestic producers from foreign competition.

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4
Q

What are the Consequences of Import Substitution?

A
  • High levels of protection - allocative inefficiency
  • Overvalued exchange rates (import capital cheaply)
  • Too much government intervention
  • Neglect of agriculture
  • Balance of payments deteriorates (more debit)
  • Capital-intensive production
  • Increased unemployment (capital-intensive prod.)
  • Less efficiency (limited possibilities of growth)
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5
Q

What is Export Promotion?

A

Trade strategy where a country attempts to achieve economic growth by expanding exports. Implements the policies:
• Financial assistance to target key industries
• Large public investment into key areas
• Requirements to multinational corporations
• Exchange rate management

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6
Q

What Countries Successfully used Export Promotion?

A

Asian Tigers (China, Indonesia, Japan, Singapore, etc).

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7
Q

What are the Disadvantages of Export Promotion?

A
  • May become dependent on exports
  • Wages may be maintained low to favor production
  • Other countries may implement trade barriers.
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8
Q

How can Economic Integration benefit G&D?

A

Regional groupings allow countries to:
• Expand markets through economies of scale
• Diversify production and exports
• Increase FDI and domestic investment
• Competition is fair (countries at same level)
• Pursuit of joint policies (investment)

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9
Q

What are the Risks of Bilateral FTAs associated with G&D?

A

Bilateral FTAs usually occur between developed and developing countries, this conflicts with the first as:
• Must apply same trade barriers (low cuts)
• Compete with other countries which have and FTA
• Trade deficit (little exports and high imports)
• Weaker bargaining power in negotiations
• Weakens regional trade agreements

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10
Q

What is Diversification?

A

Reallocation of resources into new activities that broaden the range of goods and services produced.

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11
Q

How can Diversification benefit G&D?

A

Allows countries to achieve:
• Sustained increase in exports
• Development of technological capabilities and skills
• Reduced vulnerability to price volatility
• Use of domestic primary commodities

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12
Q

What is Social Enterprise?

A

Type of commercial organization that aims to achieve particular social goals to improve people’s well-being and promote social change.

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13
Q

How can Social Enterprises benefit G&D?

A
  • Focus on anti-poverty programmes
  • Operate in a broad variety of areas
  • High female participation rate
  • May provide microfinance
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14
Q

What types of Market-Based Policies can be used for G&D?

A

1) Trade liberalization
2) Privatization
3) Deregulation

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15
Q

What are the Disadvantages of Trade Liberalization?

A
  • Doesn’t consider trade protection by developed c.
  • Growing reliance on free market policies
  • Too little government intervention
  • Greater income inequality
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16
Q

What types of Interventionist Policies can be used for G&D?

A

1) Redistribution policies

2) Provision of merit goods

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17
Q

What are the types of Redistribution Policies?

A
  • Tax policies
  • Transfer payments
  • Minimum wages
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18
Q

How can Redistribution Policies benefit G&D?

A
  • Improve distribution of income (equity)
  • Improve welfare of disadvantaged individuals
  • Reduce poverty
  • Empowerment of women
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19
Q

How can Provision of Merit Goods benefit G&D?

A

Provision generates social benefits, specifically with provision in education, health and infrastructure.

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20
Q

What is Foreign Direct Investment (FDI)?

A

Investment by firms based in one country (home) in productive activities in another country (host) with control of at least 10%.

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21
Q

What is a Multinational Corporation (MNC)?

A

A firm that undertakes foreign direct investment.

22
Q

How can FDI benefit G&D?

A
  • Investment funds into host are credits to financial ac.
  • Supplement and improve technology + skills
  • Increase investment
  • Greater tax revenue
  • Help promote local industry (buy local product inputs)
  • Economic growth in host
23
Q

What are the Disadvantages of FDI?

A
  • Repatriation of profits = debit to financial ac. host
  • Corps may hire professionals from home
  • Have tax privileges as an incentive (less revenue)
  • May force local businesses out of market
  • Create unemployment (for above reasons)
  • Environmental damage
  • Promote inappropriate consumption (e.g. fast food)
  • May use gov resources for infrastructure
  • May use econ. and political power to influence gov
  • Competition in developing countries to host MNCs
24
Q

What is Foreign Aid?

A

The transfer of funds or goods and services to developing countries with the objective to bring improvements in economic, social and political areas.

25
Q

What Forms can Foreign Aid have?

A
  • Official development assistance (ODA)
  • Non-governmental organizations (NGO)
  • Debt relief
26
Q

What Two Characteristics must Foreign Aid have?

A

Must be 1) concessional 2) non-commercial

27
Q

Distinguish between Humanitarian and Development Aid

A

Humanitarian aid involves aid extended to regions affected by natural disasters or conflict (intended to save lives). Development aid involves financial support to help regions achieve G&D.

28
Q

What is Official Development Assistance (ODA)?

A

Foreign aid offered by countries or international organizations composed by a number of countries.

29
Q

What are Non-Governmental Organizations (NGOs)?

A

Non-profit organizations that provide a wide range of services with humanitarian functions.

30
Q

How can ODA benefit G&D?

A
  • Alleviate poverty
  • Makes resources available (health, ed, infrastructure)
  • Increases in C+I = increase in GDP (econ growth)
  • Achieves SDGs
  • Prevents the debt trap (through debt relief).
31
Q

What are the Disadvantages of ODA?

A
  • Tied aid (can only purchase products from donor)
  • Conditional aid (must accept conditions and projects)
  • Flow of aid is volatile (uncertainty for policies)
  • Uncoordinated donors = inefficiency
  • May substitute domestic resources
  • May not reach those most in need
  • May be associated with corruption (misuse of funds)
  • Funds aren’t enough.
32
Q

How can NGOs benefit G&D?

A
  • Anti-poverty initiatives = poverty alleviation
  • Work closely with project beneficiaries
  • Democratization (give political voice to the poor)
  • Offering expertise and advice
  • Propose innovative solutions
33
Q

What are the Disadvantages of NGOs?

A
  • Small size (unable to play a major role)
  • Growing of dependence on aid
  • Best qualified personnel is brought away from gov
  • May conflict with government policy
34
Q

What is Multilateral Development Assistance (MDA)?

A

Lending to developing countries on non-concessional terms (interest rates determined by market) by multilateral organizations.

35
Q

State Two Examples of MDA Organizations

A

1) World Bank

2) International Monetary Fund (IMF)

36
Q

How does the World Bank help Developing Countries?

A

Extends long-term loans to promote structural change and development. It divides between two sectors:
• International bank for reconstruction and dev.
• International development association
The first lends non-concessional loans to middle-income countries, the second gives concessional loans to low-income countries.

37
Q

What are the Disadvantages of the World Bank?

A
  • Social and environmental disturbance (via projects)
  • Rich countries have higher voting power in the org
  • Criticized to not give enough funds for poverty all.
  • Excessive use of market-based supply-side policies
38
Q

What is the International Monetary Fund (IMF)?

A

Multilateral financial institution established with the World Bank with the purpose of lending to countries experiencing balance of payment deficit under fixed exchange rates.

39
Q

How does the IMF help Developing Countries?

A

The IMF provides loans along with a package of policies that must be complied, these can include:
• Contractionary monetary or fiscal policy
• Currency devaluation or depreciation
• Cuts in real wages
• Liberalization policies

40
Q

What are Liberalization Policies?

A

Eliminating or reducing controls on prices, interest rates, imports and foreign exchange, to promote a free market and free trade enviornment.

41
Q

What are the Disadvantages of the IMF?

A
  • Rich countries have higher voting power in the org
  • Excessive interference in domestic economy
  • Conditional lending (forced to accept conditions)
  • Stabilization policies are damaging (e.g. wage cuts)
  • Past countries have suffered worsening conditions
42
Q

What does Institutional Change consist of?

A

1) Improved access to banking
2) Increasing women empowerment
3) Reduce corruption
4) Establish property and land rights

43
Q

What Two Strategies can be Applied to Improve Access to Banking?

A

1) Microfinancing

2) Mobile banking

44
Q

What is Microfinance?

A

Refers to credit in small amounts to people who do not have access to it due to lack of collateral (poverty).
+ Also called Microcredit

45
Q

What are the Disadvantages of Microfinance?

A
  • May become substitutes to poverty policies
  • Growth of informal sector
  • Loans are given to unskilled people = no profit
  • Interest rates are too high (repayment is hard)
46
Q

What is Mobile Banking?

A

Involves the use of mobile devices to recieve or send money and pay bills.

47
Q

What are the Disadvantages of Mobile Banking?

A
  • Network problems cause delays
  • The cost of the service is expensive
  • Inability of older people to read (vulnerable to fraud)
48
Q

How can Women Empowerment benefit Developing Countries?

A
  • Improvements in child health and mortality rate
  • Improvements in educational attainment of children
  • Quality of human resources
  • Lower fertility rates/birth rates
49
Q

What Strategies can be used to Reduce Corruption?

A
  • Supervision by agencies/public of financial progress
  • Reform institutions of tax admin
  • Merit-based hiring
  • Cooperate with other countries
50
Q

How can Secure Land Rights benefit Developing Countries?

A
  • Contribute to food security
  • Lower rates of deforestation
  • Preserve biodiversity and food cultures
  • Contribute to gender equality (rights to women)
  • Poverty reduction
51
Q

What are the Disadvantages of Market-Oriented Policies?

A
  • Cannot deal with market failure
  • Cannot improve institutions
  • Insufficient credit for poor people
  • Loss in protection of workers = inequality
  • Does not redistribute income (more poverty)
  • Does not empower women
  • May lead to growth of informal market
  • Withdrawal of gov. provision hinders G&D
52
Q

What are the Disadvantages of Interventionist Policies?

A
  • Opportunity cost and budget deficit/debt
  • Excessive bureaucracy and intervention (inefficient)
  • Elite groups exert political pressure
  • Corruption
  • Poor governance

Economics (18 decks)

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