Interventionist Based Strategies Flashcards
What is human capital?
Collective skills. Knowledge, abilities and experiences possessed by individuals in a population or workforce
Ways governments of developing countries can improve human capital
- investment in education
- skills development programmes
- healthcare initiatives
- educational courses
- infrastructure improvements
Advantages of humans capital development
- boosts productivity via greater skills etc
- helps reduce unemployment
- increases entrepreneurship
- increases innovation
- encourages fdi
- greater economic efficiency
What is protectionism?
Controls on imported goods eg: tariffs, quotas to promote import substitution
Advantages of protectionism
- promotes diversification and industrialisation
- allows domestic industries to grow and gain EOS
Disadvantages of protectionism
- net welfare loss from tariffs/quotas
- using expert subsidies can be costly
- less specialisation and lower output
- other may retaliate = lead to a trade war
- lack of competition
What are managed exchange rates?
Gov sets a central rate for its currency and intervenes by buying/ selling foreign exchange markets and/or adjust interest rates to keep exchange rate at its fixed level
Examples Infrastructure development
- roads
-railways - airports
- power supplies
Advantages of infrastructure development
- improves labour mobility boosting productivity
- increases efficiency of supply chains
- cuts transport costs
- increase AD
- increase economic growth
- increase employment
- improves communication
Disadvantages of infrastructure development
- high opportunity costs/ costs to gov
- potential gov failure/ corruption
- may be in more debt if funded by loans etc
What are joint ventures?
Association of two or more businesses for the purpose of engaging in a specific enterprise for profit
Advantages of joint ventures with foreign companies
- access to tech and expertise
- access to international markets and distribution networks
- opportunities for knowledge transfer and skill development
- enhanced credibility
Disadvantages of joint ventures with foreign companies
- communication may not be great
- potential for conflicts in decision making
- work and resources might be distributed properly
- loss of control and autonomy
What are buffer stock schemes?
Maximum- minimum price ‘hybrid’ policy designed to reduce the volatility of market prices where prices are unstable
Problems with buffer stock schemes?
- natal set up costs are high
- not suitable for perishable goods
- storage costs are often very high
- admin costs are high
- need good harvest to start with to build up stock
