Economic Development Lecture Source Sean Erhlich Professor of Intro to International Relations Florida Book Source World Politics Interests Interactions Institutions Second Edition State University Rich and Poor Countries in the World Economy o What does it mean to be rich developed We measure their wealth by GDP which is the sum total of economic activity in a given region per capita Economically developed could mean o Living in a secure economy o Good quality of life longevity health o Clean running water access to conveniences o Industrialization and modernization and development With Ebola originating in Africa and malaria originating in South America tropical climates are evidently becoming breeding grounds for disease This is not good for economic development Industrialized nations are richer and more powerful than the LDCs and can usually get their way in bilateral and multilateral negotiations The Causes of Underdevelopment o Accidents of geography or history Tropical climate Land locked or far from markets Late developers left behind Legacy of colonialism Colonialism in general is not good or the best for an economy o Domestic factors Investment in infrastructure economic and human Incentive to invest is lowered when you have at your disposal something to sell on the world market to make a profit Quick money that goes into the leader s pocket Property rights Corruption If a person doesn t have incentive to invest in a property physical intellectual then they have no incentive to protect or take care of it and therefore innovate develop Political corruption can often weaken the structure of policy rights o International Factors Legacy of colonialism Colonialism institutionalized a relationship in which the interests of the colonies were secondary to those of the mother country For example colonial policy commonly directed colonial trade toward the mother country restricted manufacturing in the colonies and gave trading privileges to the colonial power o This approach was not beneficial o May have been highly detrimental Structure of international systems keeps poor countries poor Dependency Theory ECLA For the most part this theory has been discredited Terms of trade are against primary commodity producers Raw materials are often what is sold from developing countries WTO IMF and other IOs biased against poor countries Domestic Economic Policy Models o Import Substitution Industrialization ISI Inward focused development designed to create domestic market for industrial goods Industrial subsidies o Leads to states owning these industries o Long term goal Your industry will develop so that it can compete State ownership and large public sector Problems of ISI o Export Oriented Industrialization EOI Trying to develop industry to sell on the world market from the beginning Outward focused development based on that principle Subsidies to encourage specialization to sell to foreign consumers Undervalued currency Engaged in international trade but try to protect domestic market Successes of EOI South Korea and Taiwan but this is a replicable strategy o Washington Consensus An array of policy recommendations generally advocated by developed country economists and policy makers starting in the 1980s including trade liberalization privatization openness to foreign investment and restrictive monetary and fiscal policies Essentially this represented the shift from economic nationalism to economic openness Variation on EOI focused on neo liberal policies Free trade Privatization The selling off of many government enterprises to private investors who would presumably run them more efficiently Liberalization of regulations The removal of barriers to imports and exports in an attempt to make national producers more competitive on world markets Small gov size o Infrastructure A very important policy that governments can undertake to boost development through the provision of public goods that contribute to economic growth and prosperity Physical Infrastructure Social infrastructure o Roads railroads airports utilities ports o Public health and sanitation education urban planning International Economic Policy Models o The NIEO and the Group of 77 o Group of 77 1964 o NIEO 1970s A coalition of developing countries in the UN Currently over 130 members Attempts to use the power of numbers in the world political arena to reform the economic order in favor of the developing world Its purpose was to renegotiate the bargain that had constituted the international economic order so that it would be more in line with the economic needs of poor developing nations Proposals included Curtailing rights of foreign investors in developing countries Revising trade agreements to favor the products of the developing world Enhancing the influence of LDC governments in international economic organizations An attempt to rework policies o Resource cartels OPEC increased wealth in oil economies Did it increase development Is it replicable No many countries have tried to ban together but no one product has a leverage on the world market overall Foreign Aid Money given to poor countries from rich countries o The amounts of aid are quite small and are unlikely to grow o Total foreign assistance has been about 100 billion a year but that only averages about 20 per person in LDCs o Rich nations have set targets of 0 7 o Humanitarian aid is not controversial because if you have money you give it and o Developmental aid on the other hand is more controversial as it involves politics it really is that simple and can get more complicated
View Full Document
Unlocking...