Strategies influencing growth & development 4.3.3

Question 1

rostow’s model

Answer 1

5 main stages
trad society based on agriculture, increase in capital for agriculture + mining, increased industrialisation and then diversified industry and higher levels of technology leading to mass consumption with strong service sector and high output levels

Question 2

market orientated strategies

Answer 2

trade liberalisation
promotion of FDI 
removal of gov subsidies
floating exchange rate system
microfinance scheme
privatisation

Question 3

trade liberalisation

Answer 3

export led growth
domestic industries are forced to become more efficient when removing trade barriers, resources are allocated to their best use where the country has the comparitive advantage

Question 4

promotion of FDI

Answer 4

investment by one private sector company in one country into another private sector company in another country
if the investment fails, the country doesn’t owe them money

Question 5

removal of gov subsidies

Answer 5

subsidies on essential/agriculture to increase output and investment
poorly targeted, essentials subsidised helps everyone, economic theory suggests cash payments for the poor
can lead to inefficiency
opportunity cost + high debt
corruption issues (venezuela subsidised fuel gets smuggled)

Question 6

floating exchange rate system

Answer 6

market forces determine the currency, gov doesn’t intervene

makes currency volatile

Question 7

microfinance schemes

Answer 7

gives poor households permanent access to financial services (loans etc) from MFI (microfinancing institutions) delivering small loans ‘opportunity’
group lending, implicit guarantee of access to future loans if present ones are repaid so borrowers can invest in businesses
usually targets those less likely to receive loans (women)

Question 8

evaluate privatisation

Answer 8

ends corruption within a firm owned by the state, increases comp,selling off a loss making firm improves gov finances
if a firm is privatised as a monopoly there’ll be no competition and it can be associated with corruption as officials may sell the firm at a price below market price to their friends

Question 9

evaluate microfinance schemes

Answer 9

south africa- became a method of financing consumption spending so they may not be able to repay it so they sell off family assets or borrow from friends which increases the informal economy

Question 10

interventionist strategies

Answer 10

develop human capital
protectionism
managed exchange rate system
infrastructure
joint ventures with global companies
buffer stock schemes

Question 11

interventionist strategies

Answer 11

develop human capital
protectionism
managed exchange rate system
infrastructure
joint ventures with global companies
buffer stock schemes

Question 12

protectionism

Answer 12

import substitution
creates jobs
lose out from benefits of specialisation and comparative advantage, inefficiency

Question 13

import substitution

Answer 13

deliberately replacing imports with domestic goods through protectionism

Question 14

managed exchange rate

Answer 14

fixed against other exchange rates

Question 15

how would fixing currency against a high exchange rate for essentials effect trade

Answer 15

price within the country of the essentials is low which reduces poverty

Question 16

how would fixing currency against a high exchange rate for essentials effect trade

Answer 16

price within the country of the essentials is low which reduces poverty
don’t work in practice, leads to black markets +corruption (gov officials buy a currency at one exchange rate and sell it for profit at another)
however, a single exchange rate reduces volatility

Question 17

infrastructure

Answer 17

suffers from free rider problem so the gov should provide them
gov may not have the funds can involve bribery & corruption &environmental damage

Question 18

infrastructure

Answer 18

suffers from free rider problem so the gov should provide them
gov may not have the funds can involve bribery & corruption &environmental damage

Question 19

joint ventures with global companies

Answer 19

gov may want firms setting up production plants to partner with a local firm & create a jointly owned company to keep some profits generated within the country

Question 20

buffer stock schemes

Answer 20

gov imposes both max & min prices for goods, buy up stocks when there’s excess supply, sell off with excess demand
money raised from selling stocks is then used to buy the next set (self financing)

Question 21

evaluate buffer stock schemes

Answer 21

used on commodities as their prices are volatile,stabilises price encouraging investment
requires stocks to go up and down (if it keeps rising they’ll go out of money if falls they run out of stocks)
start up + administration costs
storage, other countries may take advantage (free riders) global prices are kept stable
price setting is hard

Question 22

other strategies

Answer 22

industrialisation
tourism
develop primary industries
fairtrade schemes
aid
IMF
NGOs
debt relief
world bank

Question 23

industrialisation

Answer 23

lewis model assumes developing countries have dual economies-trad agricultural sector (low wages+productivity) + modern industrial sector which attracts workers from rural areas with higher pay, labour productivity is low in agricultural so workers leaving has no impact on output

Question 24

tourism

Answer 24

income elastic so as global economy grows, demand for industry increases too vice versa in a recession
source of foreign currency-fills currency gap
investment from transnational hotel companies
jobs created (laborious)
tax revenue from higher incomes

Question 25

develop primary industries

Answer 25

funds from it mean you can diversify but prices=volatile

corruption

Question 26

fairtrade schemes

Answer 26

trading partnership for equity in international trade, agreements on buying a guaranteed amount of produce over some time at a price above market price so child labour isn’t used, it’s sustainable

Question 27

aid

Answer 27

voluntary transfers/ loans
tier aid (conditions attached like commitment to buy from donor country)
bilateral (directly from one to another)
multilateral (given to international org who distributes it to other countries)
concessional loans (given n low/no interest rates)
reduces absolute poverty, fills savings & currency gap

Question 28

IMF

Answer 28

provides loans to help countries when there are international exchange rate crises & insists on reforms for the country eg reducing imports so the exchange rate system works well

Question 29

NGOs

Answer 29

offer direct assistance eg oxfam
acts as pressure groups to make gov adopt more prodevelopment strategies
they can’t solve it alone and may be anti-capitalist

Question 30

debt relief

Answer 30

many countries suffer from high interest payments which limits growth, so it’s reasonable for it to be written off
moral hazard if all poor countries expect it

Question 31

world bank

Answer 31

aims to bring about long term development & reduce poverty providing interest free loans etc

Question 32

evaluate aid

Answer 32

dependency culture

money doesn’t always go where it’s meant to