Week 4 - Big Push

Question 1

What were the key ideas, strategies and policies of the Big Push according to Nurkse?

Answer 1

“industrial policy” and “infant industry protection” to promote investment into “increasing returns activities”

Question 2

When did the Big Push happen?

Answer 2

1945-1970s

Question 3

What were the key ideas, strategies and policies of the Big Push according to Hirschman?

Answer 3

import substitution industrialisation (ISI) and backward and forward linkages

Question 4

What were the key ideas, strategies and policies of the Big Push according to Arthur Lewis?

Answer 4

mobilisation of “surplus labour” from agriculture for labour intensive manufacturing

Question 5

What were the key ideas, strategies and policies of the Big Push according to Singer and Prebisch?

Answer 5

“unequal trade” and problem of “primary commodity exports”

Question 6

Who took on the major role in the Big Push?

Answer 6

major role for the state to shape markets

Question 7

What brought industrial policy back on the policy agenda today?

Answer 7

new debates throughout OECD after 2007-2008 financial crisis and again coming out of the pandemic
China’s successful deployment of industrial policy

Question 8

What are the three historic trends that led to the Big Push?

Answer 8

nationalist aspirations for development
East-West confrontation for “hearts and minds”
classical liberalism and Neo-classical economics were under fire

Question 9

One of the three historic trends that led to the Big Push is the nationalist aspirations for development, what did this involve?

Answer 9

nationalist movements in Asia, Middle East and Africa, pushing for decolonisation and independence as a means to develop
“catching up” in Latin America with considerable autonomy in interwar years
Bandung Conference of Asian and African countries 1955 to the Non-Aligned Movement and the New International Economic Order at UNI General Assembly 1974

Question 10

One of the three historic trends that led to the Big Push is the East-West confrontation for “hearts and minds”, what did this involve?

Answer 10

US and USSR each tried to win over leaders in developing worlds
Chinese Revolution won in 1949, which led to own path to development and appeal to colonial peoples
India stood between the West and Communist world
US military response to radical nationalist movements took precedence over backing redistributive forms (land reform) and political transformations they would require (Vietnam war, coups in developing countries like Guatemala, Belgian Congo, Indonesia)

Question 11

One of the three historic trends that led to the Big Push is classical liberalism and Neo-classical economics were under fire, what did this involve?

Answer 11

the Great Depression and ruse if fascism
Keynesian “revolution in liberalism” from the 1930s (orthodox economic dealt with “special case” of economy with full employment, unemployment of people and resources meant different reasoning was needed, planning during WWII was successful)

Question 12

What were four big ideas of post-war development?

Answer 12

“Big Push” for industrialisation
transform the relationship between agriculture and manufacturing
invest in manufacturing with attention to “forward and backward” linkages
overcome unequal arms of trade between poor and rich countries

Question 13

What is a debate within the “Big Push” regarding growth?

Answer 13

balanced growth (simultaneous investing in many lines of manufacturing, Nurkse) vs unbalanced growth (one thing at a time, promote forward and backward linkages, Hirschmam)

Question 14

What is a debate within the “Big Push” regarding financing?

Answer 14

finance domestically (keep TNCs at bay as tend to establish enclaves and repatriate profits, how and when to transition from ISI to production for export) vs attract foreign aid and FDI (rely on TNCs as source of technology transfer, how and when to transition from ISI to production for export)

Question 15

One of the big ideas of post-war development is industrialisation, what does this involve?

Answer 15

industrial policy
“infant industry” protection in manufacturing sector
planning, as long-term view is needed
direct finance (including aid and foreign investment) to productive sectors
need for a “big push”, which requires “critical mass of investment” and “balanced growth”
depart from price signals (as they are slow and short-term and do not capture externalities)
import-substitution industrialisation

Question 16

What are policy moves to promote industrialisation?

Answer 16

tariffs to protect infant industries
control foreign exchange to use for priority investment
overvalue currency to discourage primary exports and favour production for domestic market
state control of finance
incentives/compulsion on foreign firms to invest in priority sectors
subsidies to private firms in priority sectors
state directly established firms where private sector found it too risky, or where private sector was absent

Question 17

What is Lewis’ Two Sector Model?

Answer 17

1) traditional rural subsistence “surplus labour”
2) high productivity modern urban industrial sector, absorbs labour from rural areas

Question 18

What is the unlimited supply of labour (Lewis)?

Answer 18

disguised unemployment in rural areas, e.g. West Indies, Egypt and India’s government needed to invest in manufacturing to absorb this labour, where there were no private investors to do the job
labour shortage due to abundant land, e.g. Ghana’s government needed to invest in raising agricultural productivity to release labour for manufacturing without driving up wages, which would discourage investment in manufacturing
match the state intervention with the specific market failure

Question 19

What happens to the wage rate as surplus labour is absorbed?

Answer 19

wage rate rises as surplus labour is absorbed (has been happening in China over past 20 years)

Question 20

One of the big ideas of post-war development is “forward and backward” linkages (Hirschman), what does this involve?

Answer 20

new industry with eye on both
backward linkages which promote production of inputs for the industry
forward linkages which utilise its outputs in new activities (harder)
substitute imports with goods produced at home

Question 21

One of the big ideas of post-war development is overcome unequal terms of trade, what do Singer and Prebisch say about this?

Answer 21

critique of dependence on export of primary commodities (terms of trade unfavourable)
differences in gains from technological improvement (industrialised countries were consumers of primary commodities and producers of manufactured articles, underdeveloped countries were consumers of manufacturers and producers of raw materials)

Question 22

What did Prebisch say in his 1949 ECLA Manifesto?

Answer 22

developing countries face declining terms of trade, leading to unequal development
workers in industrial countries capture all gains from productivity improvement
dual economy (modern and traditional)

Question 23

What does ECLA stand for?

Answer 23

Economic Commission for Latin America

Question 24

What did the ECLA say on the role of the “smart state”?

Answer 24

not against agriculture, trade, or private sector
reduce technological disparity
promote high return investments (e.g. steel)
implement exchange controls
endorse “healthy protectionism”
attract FDI
boost savings and investment
wage policy to boost demand (as per Keynes)

Question 25

What was ECLA’s blind spot?

Answer 25

backing away from redistributive agrarian reform even though in favour, as it was politically sensitive issue

Question 26

What was land redistributions role in the “Big Push”?

Answer 26

gave way to exclusive focus on raising agricultural productivity while bringing social justice and changing the balance of power
increase rural incomes by investing in education and health and creating demand for manufactured goods
could remove speculation on and accumulation of land as a strategy by elites (could free them to invest in risky but higher return activities in manufacturing)
could increase political and social power of small farmers and reduce or eliminate rural elite’s political power
land reform was seen as politically unacceptable

Question 27

What was Latin America’s experience with industrialisation?

Answer 27

Brazil had great advance in 1950s and 1960s (early ISI, heavy industries, developmentalist ideology, succumbed to political crisis)
most of Latin America was different, half-hearted (no move from consumer to producer goods, improved consumption but not production, finishing touches on imported products, TNCs often the main beneficiaries)

Question 28

What was India’s experience with industrialisation?

Answer 28

national planning boards, industrial development corporations, input-output analysis, growth models, built heavy industry
did not work well

Question 29

Why did India’s industrialisation experience not work well?

Answer 29

bureaucrats were generalists
federalism undermined central state
propertied groups stayed in power
business families were more powerful than state
domestic market constraint meant no land reform
protected industries were inefficient as they were not subjected to competition

Question 30

Why did Africa’s experience with industrialisation?

Answer 30

from very low starting point and concentrated in just a few countries
neoliberal structural adjustment abandoned industrialisation in 1980s, onward
SSA was “out of phase” with global industrialisation possiblities

Question 31

Why was SSA’s experience with industrialisation?

Answer 31

1914-1945 was era of possible ISI but lacked independent state to work with local businesses, finance for industrialisation and trade regime
1945-1970 was era of deliberate import substitution but lacked sovereignty (until 1960), economic processes to produce what rich countries wanted and alliance between state, TNC’s and national capital
1973-1982 was debt financed growth but had no industrial products to export, did not get FDI nor foreign loans for industry and borrowing after 1979 oil shocks was for balance of payment cover

Question 32

What is a criticism against the “Big Push” from a political spectrum? (Bauer)

Answer 32

denying price mechanism, as they are inefficient
overestimating capacity of state
suppressing entrepreneurship
biased against agriculture, which hurts exports
over-reliance on aid
scared away FDI

Question 33

What is a criticism against the “Big Push” from neoclassical economists? (Krueger)

Answer 33

trade controls costly
resources used up in “rent seeking”
high cost of using quantitative controls because of increased competition to secure rents
false premises about unequal trade, efficacy of the state, peasant producers, etc.
no means to identify dynamic externalities
overvalued exchange rate taxed (/wrecked) agriculture and subsidised capital goods imports

Question 34

What is a criticism against the “Big Push” from dependency theory?

Answer 34

overly optimistic view of “mutual benefit” in industrialisation of third world
Europe actually “underdeveloped” Africa
thesis on unequal trade did not go far enough
need radical rupture from the rich capitalist countries

Question 35

What is Hirschman’s ‘self-critique’ of the “Big Push”?

Answer 35

doubts about mutual benefits
provided justification for authoritarian governments (worried how dictators exploited the ideas to justify their seizure of power)

Question 36

What does Arthur Lewis say about surplus labour?

Answer 36

surplus labour moving to manufacturing without decreasing productivity in agriculture and wages in agriculture increase as there is less supply of labour

Question 37

What is the centre and periphery?

Answer 37

centre is industrialised nations which produce and export manufactured goods
periphery is developing countries which primarily export raw materials and agricultural products

Question 38

What does the centre and periphery trade pattern create?

Answer 38

unequal economic relationships, where the centre benefited more than the periphery (Prebisch)

Question 39

What does dependency theory say?

Answer 39

global capitalism perpetuates the underdevelopment of peripheral nations while benefiting the core nations
focus on external factors, like colonial legacy and unequal trade relationships, rather than internal factors, like governance and policies

Question 40

What did the Bretton Woods conference in 1944 lead to?

Answer 40

led to the creation of the IMF and the World Bank, providing international institutional support for economic development

Question 41

When did the concept of economic development gain prominence?

Answer 41

gained prominence after World War II, with the aim of increasing per capita real income in underdeveloped countries

Question 42

What did development efforts initially focus on?

Answer 42

initially heavily focused on capital accumulation, particularly through foreign aid to bridge the gap between domestic savings and investment needs in underdeveloped countries

Question 43

In the initial development efforts, what role did foreign aid play?

Answer 43

was emphasised in development, with estimates suggesting that most developing nations would require significant external capital to support growth targets

Question 44

What were the structuralist economics opinions in initial development efforts?

Answer 44

challenged the dominant neoclassical economic theories (particularly in Latin America)
argued that development challenges in underdeveloped regions streamed from structural issues, not just capital deficits

Question 45

Where did early development economists come from?

Answer 45

many were from developed countries, and there was a growing realisation that economic theories and policies from advanced nations did not always apply to the specific needs to developing countries

Question 46

What were the mid-20th century actions that were a key role in shaping development agendas?

Answer 46

nationalist movements and the dissolution of colonial empires, particularly in newly independent countries in Asia, Africa, and Latin America

Question 47

During initial development efforts, what did emphasis shift towards?

Answer 47

emphasis shifted towards national development planning, with governments in developing countries assuming a large role in directing economic growth through public investment and industrialisation

Question 48

During initial development efforts, what became a key strategy in developing countries?

Answer 48

import substitution industrialisation, particularly in Latin America, as a means to reduce dependency on foreign imports and promote domestic industries (a trade and economic policy that advocates replacing foreign imports with domestic production)

Question 49

What was seen as vital for sustained economic growth in initial development efforts?

Answer 49

need for technical and administrative capacity, along with foreign aid and technology transfer, was seen as vital for achieving this in underdeveloped regions

Question 50

During development economics in the 1950s, what was the preliminary answer for the limitations of the manufacturing sector?

Answer 50

the productivity of the farmers whose marketable surplus will exchange for manufactures

Question 51

What is Pareto optimality?

Answer 51

the state at which resources in a given system are optimise in a way that one dimension cannot improve without a second worsening

Question 52

What are strategies for supporting industrialisation (development economics in the 1950s)?

Answer 52

export more agricultural commodities, develop a self-sufficient economy emphasising the home market, to support manufacturers

Question 53

What were arguments against the agricultural export strategy (development economics in the 1950s)?

Answer 53

the terms of trade argument, which was in two parts (historical and theoretical)
the dependency argument

Question 54

What was the terms of trade argument against the agricultural export strategy (development economics in the 1950s)?

Answer 54

historical argument (since the commodity terms of trade have had a long-term bias against agriculture primary production should be avoided)
theoretical argument (if primary producers develop their exports faster than the industrial countries demand then the terms of trade must against them)

Question 55

What were the dependency arguments against the agricultural export strategy (development economics in the 1950s)?

Answer 55

it perpetuates underdevelopment by creating a cycle where peripheral countries remain dependent on foreign markets and unable to build the necessary industries for self-sustained growth

Question 56

What were the 1950s development efforts focused on?

Answer 56

characterised by a strong focus on industrialisation as the engine of development (economists debated the optimal size of the industrial sector and how to best finance modernisation efforts and there was a widespread belief that structural transformation, particularly the shift from agriculture to industry, was necessary for sustained economic growth)

Question 57

What was a major debate in the 1950s for type of industrialisation?

Answer 57

whether developing countries should pursue capital-intensive or labour-intensive industrialisation

Question 58

What is the Mahalanobis model?

Answer 58

advocated for capital-intensive investments in heavy industry to accelerate growth (adopted in India)

Question 59

What were the neoclassical approaches in the 1950s?

Answer 59

many economists leaned towards this, using shadow price analysis to determine the best allocation of resources and questioning whether capital-intensive strategies would be feasible or efficient in low-income countries

Question 60

What is a shadow price?

Answer 60

how much more profit you would get by increasing the amount go that resource by one unit

Question 61

What was one of the central dilemmas of development economics in the 1950s?

Answer 61

balancing consumption and growth
question was whether developing countries should prioritise investment in capital goods, potentially reducing consumption in the short term, to boost future economic growth (shaped policy recommendations)

Question 62

What role did social services and human development play in the 1950s development efforts?

Answer 62

economists began to recognise that investments in heath and social welfare (healthcare, pensions, unemployment benefits could directly enhance labour productivity and the quality of life, that laid the groundwork for later ideas around human development as a core aspect of economic progress)

Question 63

What did the 1950s show about education?

Answer 63

the 1950s established the foundational understanding of education as critical to development with the recognition that education contributed directly to economic output

Question 64

What did economists argue about the role of foreign aid and the “Big Push”?

Answer 64

key question in the 1950s was why LDCs needed foreign aid when hsitrocially developed countries had industrialised without it
economists argued that it could provide the necessary capital to initiate the “big push” in LDCs, overcoming issues like the low-level equilibrium, so aid was seen as a catalyst for industrialisation and modernisation

Question 65

What is low-level equilibrium?

Answer 65

economies remain stuck at low levels of income due to insufficient investment

Question 66

What was the criteria for distributing foreign aid in the 1950s?

Answer 66

debates on the allocation centred around the absorptive capacity of recipient countries, their social and economic policy performance, and the need to prioritise aid based on poverty levels (concern about whether aid would be efficiently utilised or whether it would lead to dependency and inefficiency)

Question 67

What was the argument on agriculture and export diversification in the 1950s?

Answer 67

economists argued that declining commodity prices would undermine the development prospects of countries dependent on agricultural exports, meaning diversification into manufacturing and other sectors was encouraged to reduce dependence on volatile agricultural markets

Question 68

What was the role of Multinational Corporations (MNCs) in the 1950s?

Answer 68

were seen as critical players in the development process, as they brought technology, capital and access to global markets, especially by facilitating the export of manufactured goods from developing countries
there were concerns about the dominance of foreign firms and the potential for exploitation of local resources and labour

Question 69

What is the two-gap model?

Answer 69

extra saving cannot be converted into imports of capital goods and is therefore frustrated

Question 70

What is structural inflation?

Answer 70

the marginal propensity to import exceeds the marginal propensity to export

Question 71

When must there be balanced growth for production?

Answer 71

if imports and exports cannot be increased, production must follow a balanced growth path (would be facilitated by issuing indicative plans and by small countries joining customs unions within which large scale industries might be operated more efficiently)

Question 72

What is ISI?

Answer 72

a way of achieving economic growth by protecting local industries and decreasing reliance on external goods (high tariffs, subsidies by governments)

Question 73

What did ISI require?

Answer 73

required importing initial capital goods (e.g. machines) and then substituting imports with own industries

Question 74

What did Hirschman think ISI could be financed by?

Answer 74

foreign investment (, however inviting in TNCs led to few spillovers)

Question 75

What was a big issue under ISI?

Answer 75

financing, as other way would be taxing elite

Question 76

Why was moving away from ISI difficult?

Answer 76

elites wanted to protect infant industries which they often controlled (elites worked closely with government)

Question 77

What are the critiques of ISI?

Answer 77

overemphasis on protectionism (lack of competition)
failed to create strong linkages between industries (structural imbalances with fragmented industrial sector)
neglect for agriculture and rural development (serves interests of urban elite, unequal outcomes)
still reliant on expensive imports of capital goods and technology from advanced countries
only enhanced the dependency cycle between core and peripheral countries
agriculture remained the backbone of many developing countries, yet agricultural exports failed to generate sufficient foreign exchange
underestimated the deeper structural constraints imposed by global capitalism and the dependency relationship
initially worked but often led to inefficiencies, where economies became “stuck” (difficulty of entering export markets)

Question 78

What does industry linkages mean?

Answer 78

investment in one sector can create demand in another (positive spillover effects)

Question 79

What does the dual-sector model encourage? (Lewis)

Answer 79

shift resources and labour from low-productivity sector (agriculture) to high-productivity sectors like manufacturing and industry (wages rise in agriculture and industry gets promoted without a drop in agricultural productivity)

Question 80

Why was there much surplus labour in agriculture in the 1950s?

Answer 80

many people worked on subsistence levels in agriculture and seasonal

Question 81

Why are the terms of trade considered unequal?

Answer 81

terms of trade agreements are not favourable to the developing countries (developing countries export cheap raw materials, whereas industrialised countries export more expensive, manufactured goods)
over time, manufactured products become more expensive in relation to agricultural products (eventually you need more agricultural products to get the same manufactured products)
primary commodity products are not stable
leads to increasing between country inequalities

Question 82

What is the comparative advantage trap?

Answer 82

where developing countries become dependent on exporting primary good in which it has a traditional advantage (limits economic diversification, and prevents the country from investing in other industries)

Question 83

What does dependency theory state?

Answer 83

global capitalism created unequal relationships between “core” and “periphery” countries (core countries exploit the periphery for raw materials and labour while supplying high-value manufactured goods creating dependency as periphery countries are unable to industrialise or diversify and remain vulnerable to external factors)

Question 84

What do dependency theorists advocate for?

Answer 84

reduced reliance on foreign capital and a focus on self-sustained development (e.g. through ISI)

Question 85

How does population growth impact savings?

Answer 85

reduces savings as extremely expensive in terms of infrastructure

Question 86

What were the key factors of the post-World War II period?

Answer 86

decolonisation movement (reduce reliance on former colonial powers)
geopolitical concerns (fear of former colonies falling under communism influence)
establishment of International Institutions (to promote global cooperation and economic growth)
all industries destroyed (WWI, WWII, Great Depression)

Question 87

Why did post-World War II ‘development economists’ place emphasis on industrialisation?

Answer 87

seen as most effective way to generate economic growth and improve quality of life
increase productivity, foster innovation and create economies of scale
upper value of value chain (do not want to be exporting primary exports)
“depressed areas” were believed to suffer from a lack of industrial development (push from western-based international institutions, e.g. UN promoted industrial policy)

Question 88

What was the historical emphasis on government intervention driven by?

Answer 88

driven by concerns over market failures and the need for the state to address perceived structural rigidities in developing countries

Question 89

From 1950s to 1970s, what did strategies often include?

Answer 89

often included import-substitution industrialisation, state ownership of key industries, and extensive regulation to control economic activities (led to significant inefficiencies)

Question 90

What were market failures thought to result from?

Answer 90

were thought to result from “structural rigidities” (lack of responsiveness to price signals)

Question 91

What is structuralism?