Week 6: Economic Development Flashcards
What was the main motivation behind the attention to growth and economic development?
- eradication of global poverty
- a reduction in inequalities in living standards
- a lessening in global differences of power and influence
How did economic development start?
- Began with the Industrial Revolution
- linkages between industrialization and military power increased the drive for modernization
- until WW2: a country’s industrialization was seen solely as a national objective
- post-war era: economic growth became an international issue; economic development became a significant feature of the
international system - Economic development as an indisputable right of the people living in poverty
Definition of Development:
It is both a process and a condition. A process means that attention is given to how a society may transform itself to achieve self-sustaining economic growth. A condition is the one in which individuals are more aware of new technologies, and are encouraged to take advantage of their possibilities
Definition of Economic growth
- Developed in Western Europe
- exported almost exclusively to territories settled by Europeans
- After the fall of communism in Eastern Europe, post-soviet countries started the economic growth but were not developing countries
Role of the World Bank in Economic development?
- First multilateral development agency
- three main roles: provides loans to countries; develops international norms; and
resolves disputes - Policy prescriptions in support of the liberal economic order
What are the theoretical perspectives on growth and development?
- Internal vs external factors for the future of a society to achieve development
- State vs market in promoting the development
What is the Internal causation theory?
- A society fails to develop because it can’t keep up with the relevant demand of the market
- Solution is also to be found at the domestic level
What is the modernization theory?
▪ Evolutionary perspective on social change
▪ argument: underdeveloped societies can develop if they adopt similar
attitudes and social structures to the developed world
FAILURES:
- addressing external structural constraints
- omitting a crucial set of considerations
What is the External Causation theory?
A society fails to develop because of external factors that constrain its efforts to develop
Example: Dependency theory
What is the Dependency theory?
A socio-economic theory that argues that the economic development of wealthy nations is achieved at the expense of poorer nations, positing that the global economic system is structured in a way that benefits developed (core) countries while perpetuating the dependency and underdevelopment of developing (peripheral) countries through exploitative trade, investment, and financial practices.
What is the Neoliberal school?
- In the ‘State vs Market in promoting development’ debate it aligns with liberal views.
- Emphasizes export-oriented industrialization policies.
- Market discipline.
- Export-led growth.
- Governments should only promote free trade.
Ex. newly industrialized countries such as the four Asian tigers: Hong Kong, Singapore, South Korea, and Taiwan
What is the Developmental State School?
- In the ‘State vs Market in promoting development’ debate it aligns with economic nationalist views
- State intervention through good policy instruments
- An authoritarian model of the state
- They find newly industrialized countries succeeded as a result of a strong state
How was development seen in 1947-81?
Development was understood as a project requiring a strong and active government. This period saw significant economic recovery and robust growth, particularly among advanced industrial nations.
Governments pursued a balance between non-intervention in markets and guided control.
However, growth in the Western world weakened by 1971 with the collapse of the Bretton Woods system and eventually declined further following the oil crisis of 1973–74.
What was the Keynesian post-war compromise?
The post-war Keynesian compromise aimed to balance supply and demand for goods, encourage consumption, promote domestic industries, and provide citizens with social welfare as a safety net.
How was Development and national capitalism between 1947–81 in developing countries?
Domestic policies largely focused on import substitution. However, economic growth was limited, as these economies relied heavily on exporting primary goods.
- ‘terms of trade’ argument: Influential theory in the developing world. The relative prices at which a country’s exports are exchanged for imports, where an improvement in the terms of trade means that a country can buy more imports for a given quantity of exports, while a deterioration means it can buy less
It affects a country’s economic welfare and balance of payments
When more capital is leaving the country than is entering the country, then the TOT will be less than 100%. When the TOT is greater than 100%, the country is accumulating more capital from exports than it is spending on imports.
What was the Mexican debt crisis?
Highlighted vulnerabilities in the global financial system,
highlighted the dependency of developing countries on external financing, and
emphasized the significant role of international financial institutions in managing and resolving debt crises.
Development in 1982-2015
o Neoliberal policy of structural adjustments (SAPs)
o SAPs – curtailment of the role of the state in the economy, a bias towards the
export sector, and a desire for free markets
o Shift from ISI to EOI (Washington Consensus)
o Increased conditionality by the WB and IMF
o Greater role of NGOs in development
What is the North-south conflict?
- The North-South Dialogue refers to the process through which the developing and newly independent nations of the “third world,” predominantly in Asia, Africa, and Latin America, engaged the industrialized countries of North America and Western Europe in negotiations over changes to the international economic system during the 1970s.
- After World War II, many nations of Latin America became increasingly frustrated with U.S. trade and tariff policies. At the same time, nationalist movements in Asia and Africa helped lead to widespread decolonization.
Historical Perspective of the North-South conflict
1950s - wanted to see an increase in economic aid and a shift from a liberal international economic order
As a response: UNCTAD (United Nations Conference on Trade and Development) in 1964 to provide additional financial resources and openness to exports
1970s - debate on the New International Order
1980s - Third World fragmentation/coalitions
- Prompted by the debt crises
- Successes of the NICs
- Global reconstruction: the rise of BRICS
What is BRICS?
- Brazil, Russia, India, China, South Africa
- The BRICS nations are considered a geopolitical rival to the G7 bloc of leading advanced economies (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States)
- New members: Saudi Arabia, Iran, Ethiopia, Egypt, Argentina and the United Arab Emirates
What is the Single European Market (SEM)?
- involved the removal of physical, technical, and fiscal barriers to trade within the EU
- reinforced market competition
- boosted the pressure on labor
- influenced the competitive capacity of the European market in general
What is Import substitution industrialization?
- Used by nations that seek to decrease their dependence on developed countries and fostering economic self-sufficiency
- Aims to promote domestic industrialization by substituting imported manufactured goods with domestically produced ones through protectionist policies such as tariffs, quotas, and subsidies.
What is Export substitution industrialization?
- An economic policy adopted by many developing countries during the mid-20th century
- Focusing on promoting domestic industries that could produce goods for export markets
- Measures such as tariff protection, subsidies, and government intervention to stimulate the growth of export-oriented industries, aiming to diversify the economy, earn foreign exchange, and achieve sustainable economic growth
