Interventionist Strategies Flashcards
What are the interventionist strategies (6)
Development of human capital
Protectionism
Managed exchange rates
Infrastructure development
Promoting joint ventures with global companies
Buffer stock schemes
What developing in human capital
Investing in education and capital
Problems with high birth rate (3)
Increased dependency ratio
More babies to feed, clothe, educate etc
Increased pressure on social infrastructure (schools, hospitals, housing etc)
What is increased dependency ratio
More non-productive members of the population dependent on the earnings of the productive members of the population
Developed vs developing = Uganda vs UK (3++)
Birth rate = 47 births/1000 VS 10 births/1000
HIV/AIDS prevelance = 5.4% VS 0.2%
LIfe expectancy = 53 VS 79
Possible policies to increase human capital (4)
Education programmes
Family planning clinics
Use women within workforce
Disincentive to have kids
Why better to have women in workforce (2)
GDP negatively effected if underused
Better educated mother = better educated children
What is protectionism (2)
Trying to protect an economy from the full impact of free trade
Governments try to replace imported goods with domestically produced ones
What protectionism (6)
Tariff
VER
Technical standards
PPP
Quota
Export subsidy
Asian tiger economies (2++)
Believed that by integrating with the global trading system = their domestic industries would be forced to become dynamically efficient and develop specialisation
They argue protected domestic producers have no incentive to reduce costs or improve products
Asian tiger where + what
China
17% of growth
Why restrict trade = protectionism (5)
BoP equilibrium
Fear of structural unemployment
Comparative advantage
Potential loss of gov revenue
Dumping = predatory pricing
What is outward looking strategies (2)
Not all countries go through the import substitution stage
Many countries seek export-led growth from the outset but are willing to accept imports
What outward looking governments (3++)
Favour an open economy which involves:
Dismantling of protective tariff barriers
Removal of obstacles to mobility of labour
Openness to MNC inward investment
Benefits of outward looking (3)
New sources of investment
Access to global markets
Economies of scale
Problems with outward looking
Domestic economy = reduced demand
Managed exchange rates what (2++)
Know their currency will only fluctuate within a narrow band against the currencies of their major trading partners = firms can order ahead with confidence = removes uncertainty
Governments will devalue their currencies to help their exporters to compete = China pegged
Advantages of fixed echnage rates (3)
Gov fixes high exchange rate for imports of essential imports = cheaper for consumers
Gov fixes a low rate for imports of luxury items = makes it more expensive for consumers
Gov fixes an even lower rate for exports = helps domestic firms compete in global export mark
Disadvantages of ER (2)
Difficult to set the right ER
Invitation for corruption
What infrastructure development
Gov to be the principal builder of facilities like ports, roads, schools and hospitals
Who builds the infrastructure depends on what (3)
Profits
Private sector won’t invest in schools or roads = free rider issue
If there’s positive externalities = social benefit = governments will finance
Problems with infrastructure development
With no profit motive = costs will be kept to a minimum and building might be of poor quality
Example of infrastructure development (4+)
After the collapse of global trade due to the Global Financial Crisis of 2007- 08
China’s infrastructure investment reached nearly 50% of GDP
One project = US$16bn Jiaozhou Bay Bridge = world’s longest cross-sea bridge, stretching nearly 26 miles
Gre GDP 17.5%
Uk examples of infrastructure development (2)
HS2
RACC = schools are crumbling
What - joint ventures with MNC
One way that governments can reduce the risk of being exploited by Multi-National Corporations = force them to form joint ventures with domestic companies
How does JV work (3++)
Local partner will provide some finance + land for the JV in a development zone set up by the government
Foreign partner provides the expertise and will import the specialist equipment from overseas
Overtime local employees will gain skills to run the plant themselves without the need for expensive staff
Benefit of JV (2)
Only a portion of the profits will be repatriated out of the host country
Reduce the flow of currency out of the country = helping BoP
Example of JV with MNC (3+)
Liquid gas plan in angola
Owned by Chevron (36.4%)
The Angolan state-owned oil company owns 22.8% (ONLY)
Buffer stock
Ask Mrs Tod
We didn’t go through in lesson properly so notes in book are shit and slides are confusing ?
