Strategies Influencing Growth and Development Flashcards
Market orientated
Market-based policies limit the intervention of the government and allow the free market to eliminate imbalances.
Interventionalist
Interventionist policies rely on the government intervening in the market.
Trade liberalisation (Market-Oriented Strategies)
Trade liberalization refers to the reduction or removal of barriers to international trade, such as tariffs, quotas, and trade restrictions.
- Encourages competition -> world GDP can be increased -> living standards increase
- Increases access to foreign markets
Promotion of FDI (Market-Oriented Strategies)
FDI involves foreign entities investing in a country’s economy, typically by establishing businesses or acquiring assets.
- brings in capital, technology, and expertise.
- Creates employment and stimulates economic growth
Removal of Government Subsidies (Market-Oriented Strategies)
Removing or reducing government subsidies can lead to a more efficient allocation of resources in the economy.
- Provides a natural mechanism for trade balance adjustments.
- Reduces the need for government intervention in currency markets.
- for example the government could be subsidising. An industry which is falling or has few prospects
Microfinance Schemes (both)
Microfinance involves providing small loans and financial services to low-income individuals and businesses
- gets rid of high interest loans from the poor, protects from loan sharks > 95% of microfinance cohorts are women
- Empowers individuals and promotes entrepreneurship.
- Alleviates poverty and fosters economic development
- possible multiplier effect
- However, there could be dishonesty on where the money was spent, in parts of India, less than 2% of micro-enterprises were still operating
Privatization (Market-Oriented Strategies)
Privatization involves transferring state-owned enterprises to private ownership and management.
- Increases efficiency and competitiveness.
- Generates revenue for the government.
Development of Human Capital (Interventionist Strategies)
Investment in education, training, and healthcare to enhance the skills and well-being of the workforce.
- businesses struggle to expand when there a skill shortages
- Improves productivity and innovation.
- Reduces poverty and inequality.
Protectionism (Interventionist Strategies)
Protectionist policies include tariffs, quotas, and trade barriers designed to protect domestic industries.
- Shields domestic industries from foreign competition.
- Preserves jobs
- However, protectionism can distort the market, loss of consumer welfare. Consumers face higher prices and less variety, firms have no incentive to lower their costs of production
- However, also damaging to those on lower incomes
Managed Exchange Rates (Interventionist Strategies)
Governments intervene in currency markets to influence the exchange rate.
- Provides stability for international trade.
- Helps prevent currency crises.
Infrastructure Development (Interventionist Strategies)
Investment in transportation, communication, and public facilities.
- e.g. Indias poor irrigation system, leads to higher food prices, hurting the poorest communities
- Enhances economic productivity.
- Attracts private investment.
- However opportunity cost
Promoting Joint Ventures with Global Companies (Interventionist Strategies)
Encouraging partnerships between local and foreign firms to leverage technology and expertise.
- Access to global markets and technology.
- Transfer of knowledge and skills.
Buffer Stock Schemes (Interventionist Strategies)
Governments maintain stockpiles of certain commodities to stabilize prices.
- Governments buy up harvest during surpluses and then sell the goods onto the market.
- Prevents price fluctuations and ensures food security.
- Protects farmers and consumers.
- However, historically not been successful
- _However, governments may not have the financial resources to buy up the stock, moreover storage is difficult and expensive since agricultural goods do not last long, administrative costs.
Industrialization: The Lewis Model
The Lewis Model describes a process where surplus labour from the primary sector (agriculture) moves to the industrial sector, driving economic growth.
- Suggests that countries dependent on agriculture moves to more productive and profitable manufacturing
- agriculture has a very low marginal productivity.
- surplus labour moving to industrial production has a very low opportunity cost
- Industrialisation is more profitable
- Creates jobs and raises living standards.
-However not easy for labour in the agricultural sector to move to the manufacturing sector
Development of Tourism
Developing tourist attractions and infrastructure to attract international visitors
- Can help to diversify the economy and makes the country more attractive to FDI
- Generates foreign exchange earnings.
- Creates employment opportunities.
- However, can be risky and expensive and locals could feel stigmatised by tourism, especially if they cannot afford the luxuries that the tourists have. Also environmental damage
