Week 7 (Regime types and economic development)

Question 1

How can we measure development?

Answer 1

• Macroeconomic indicators (eg GDP per capita, % of pop below poverty line) - these are the most common
• Less tangible measures of human capital (levels of health + education; literacy rate, life expectancy, infant mortality, etc.)
• Inequality (Gini index, measures of racial/gender inequality)
• Environmental sustainability
• Rights
• Happiness (eg Bhutan’s “gross national happiness”) - but how to measure happiness?

Some measures of development cluster (go together; vary in same direction), but others share a negative correlation (eg. growth in GDP per capita can go together with greater inequality and poorer environmental sustainability)

Question 2

How does democracy relate to economic development?

Answer 2

• There is a positive correlation between income and democracy. Rich democracies do not undergo democratic breakdown.
• However, some authoritarian regimes also perform well economically.

Overall, scholars generally agree that democracy is a sufficient condition for development, but not a necessary one.

Question 3

What are three main factors that are argued to contribute to development?

Answer 3

• Geography
• Culture
• Institutions

Question 4

How does geography contribute to economic development?

Answer 4

Some areas have built-in geographical advantages, eg. climates that are good for agriculture; natural resources (minerals, crops, cattle); access to trade routes, seas and rivers.

• Unfavourable geography -> lack of development -> authoritarianism
• Favourable geography -> strong development -> democracy OR authoritarianism

EVIDENCE:
* Countries closer to Equator tend to have lower GDPs.
* HOWEVER, Latin America and sub-Saharan Africa are at similar latitudes, yet Latin America is more developed and economically stronger.

Question 5

How do cultural factors contribute to economic development?

Answer 5

It is posited that certain belief systems and religions promote values and behaviours (such as thriftiness, work ethic, creativity) -> greater productivity and innovation -> economic development.

Ex: Max Weber posited that Protestantism promoted certain values that were conducive to the development of capitalism.

EVIDENCE:
* The Asian countries of Singapore, Japan & South Korea are economically much stronger than Afghanistan, Zimbabwe, Haiti & the DRC. (All 7 countries are at similar distances from the Equator.) Therefore shared values -> economic development?
* HOWEVER, the cultural theory is limited. See N/S Korea (North was actually more industrialised before WW2), or E/W Germany.

Question 6

What are institutions and how do they contribute to economic development?

Answer 6

Institutions are the ‘rules of the game’, the constraints that govern societies.

• Rational institutionalism - outcomes are a result of the response of rational individuals to the cost/benefit analysis created by institutions
• Historical institutionalism - long-term outlook with a greater emphasis on role of collective actors, not just individual ones

Types of institutions:
* Economic institutions (property rights)
* Political institutions (system of govt, separation of powers)

• Formal institutions (codified in a constitution)
• Informal institutions (conventions, social norms)

see also Acemoglu and Robinson on inclusive and extractive institutions.

Question 7

What do Acemoglu and Robinson say about inclusive and extractive institutions?

Answer 7

Inclusive institutions:
* Distribute power broadly, encouraging competition
* Provide public goods and a safe legal environment (property rights, contracts, etc.)
* Encourage accountability, economic growth, and provision of public goods

Extractive institutions:
* Concentrate power in hands of a few, limiting opposition
* Therefore, no incentive to provide public goods
* Conducive to corruption, poverty and economic stagnation

Perhaps, rather than democracy -> development, it is democracy -> inclusive economic institutions -> development

Question 8

What is development?

Answer 8

The process by which a population’s wellbeing and standard of living improves over time

Question 9

Is the market or the state more instrumental in development?

Answer 9

• The market - individual economic freedom -> economic growth
• The state - unique ability to coordinate and plan on large scale

State model more popular post-WW2. See also China.

Market model more popular since 1980s. Bretton Woods loans to developing countries made conditional on the adoption of neoliberalism. However this has caused inequality and unemployment in many countries.