interventionist strategies, development

Question 1

what are interventionist strategies

Answer 1

d

Question 2

1- Development of human capital

Answer 2

This would provide workers with skills and training and thus help them to be more efficient and improve productivity.
Businesses struggle to expand where there are skills shortages and it also limits innovation.

Human capital could be developed through schools or vocational training, whether this be apprenticeships or simply classes provided for business people.

Higher skills would allow the country to develop from the primary sector to a manufacturing sector, overcoming primary product dependency.
Better education also improves quality of life.

Question 3

example of human capital

Answer 3

India’s improved education system is often cited as one of the main contributors to its economic development. Much of the progress, especially in higher education and scientific research, has been credited to various public institutions.

Question 4

evaluation of developing human capital

Answer 4

time lag

brain drain

Question 5

2- protectionism

Answer 5

Protectionism allows domestic industries to grow by keeping foreign goods out and protects them from strong competition.
They can use a policy of import substitution, where they deliberately attempt to replace imported goods with domestically produced goods by adopting protectionist measures.

This will create jobs in the short run and will allow the industry to develop, perhaps to the extent where the barriers can be removed, and the industry can compete globally.

Question 6

example of protectionism

Answer 6

Trade-weighted average import tariff rate of Ethiopia = 14%, India = 15%
In order to protect industries and raise government revenue

Question 7

evaluation of protectionism

Answer 7

it means countries lose out from the benefits of specialisation and comparative advantage and could cause inefficiency, since domestic producers suffer from a lack of competition. Other countries are likely to retaliate.

Question 8

3- managed exchange rate

Answer 8

The currency could be fixed against a number of different exchange rates.
Can introduce high exchange rates for the import of essential products and lower exchange rates for others. This will mean that the price within the country is low, which helps to reduce poverty if the goods are consumer goods and encourages investment if they are capital goods.
A lower exchange rate for other imports will mean that the price of these goods within the country is higher, discouraging their import and encouraging consumers to buy from domestic producers.

Question 9

example of managed exchange rate

Answer 9

Ethiopia has a managed exchange rate, pegged to USD, as USD appreciated, so too has Ethiopia’s currency, leading to low prices in the country, helping to reduce poverty and encourage investments.

Question 10

evaluation of managed exchange rate

Answer 10

they often fail to work in practice; black markets in foreign exchange develop which can destabilise the system and corruption becomes an issue when government officials buy currency at one exchange rate and sell it for profit at another.

Question 11

4- infrastructure development

Answer 11

Infrastructure is essential for development; a country needs roads, airports, schools, hospitals, railways, etc.
it reduces transaction costs and trade costs, improving competitiveness, also makes country more attractive for FDI
direct investment in infrastructure creates production facilities and stimulates economic activities

Question 12

example of infrastructure development

Answer 12

India plans to spend US$ 1.4 trillion on infrastructure during 2019-23 to have a sustainable development of the country

Question 13

evaluation of infrastructure development

Answer 13

Infrastructure tends to suffer from the free-rider problem and has very high capital costs, making it unlikely the private sector will develop it.
government may not have the funds to provide the infrastructure and it is argued that they may be inefficient. Infrastructure projects are often associated with bribery and corruption, cause environmental damage and may be poorly built and maintained.

Question 14

5- Promoting joint ventures with global companies

Answer 14

One way to reduce the exploitation of countries as a result of FDI would be to set up a joint venture.
The government may insist that firms setting up production plants in their country find a local partner to create a jointly owned company with. This will help to keep some of the profits generated within the country , which can be used in investment, leading the development and growth.

Question 15

example of joint venture with global companies

Answer 15

Tata Starbucks Pvt.Ltd is a joint venture company with Starbucks in India, Starbucks entered the India market through a partnership with Tata Global Beverages in 2012.

Question 16

joint venture with global companies evaluation

Answer 16

Participating companies in a joint venture share control over the project, but work activities and use of resources relating to the completion of the joint venture are not always divided equally.
Can create clash of culture, a lack of cooperation due to this disadvantage can cause an agreement to unravel before any benefits become achievable

Question 17

6- buffer stock scheme

Answer 17

This is where the government imposes both a maximum and minimum price for
goods, buying up stocks when there is excess supply and selling them off when
there is excess demand.
It is used on commodities, where the prices are volatile.

Question 18

how do buffer stocks promote development

Answer 18

Beneficial because it stabilises prices and thus encourages investment since producers can
plan for the long term. It also prevents sharp falls in prices, meaning that producers
are kept from falling into absolute poverty, and prevents sharp rises in prices,
meaning that consumers are able to afford the good. It can solve some of the issues
relating to primary product dependency.

Question 19

buffer stock schemes examples

Answer 19

The Ivory Coast and Ghana implemented a buffer stock scheme for cocoa in 2017 due to low prices

Question 20

buffer stock schemes evaluation

Answer 20

minimum prices may be set too high, encouraging producers to become inefficient. They will produce as much as they like and know they will be able to sell it anyway, meaning that supply is high and the government has to continually buy up the stocks.
If the scheme is operating at a loss, the taxpayer feels the burden and government finances are worsened.
it requires stocks to go up and down ; if they keep rising, then the scheme will run out of money and if they keep falling, the scheme will run out of stocks. They require huge start-up costs , as well as administration costs and problems of storage.