AP Comparative Government Unit 5 Notes: Economic Development and Policy

Economic liberalization

A shift away from heavy state control toward greater reliance on markets, typically by reducing barriers to private business activity and cross-border exchange; a political choice that creates winners and losers and requires new forms of regulation.

Privatization

Selling state-owned enterprises (SOEs) or other state assets to private owners as part of liberalization.

Deregulation

Reducing government rules on prices, hiring, competition, or investment to increase market flexibility.

Trade liberalization

Lowering tariffs and quotas (and other barriers) to allow more imports and exports, increasing exposure to international competition.

Capital account liberalization

Making it easier for money to enter or leave a country (e.g., portfolio investment flows and repatriation of profits).

Trade policy

Government decisions that shape imports and exports; politically important because it creates predictable conflicts over who gains and who loses from trade.

Sectoral conflict (trade)

Political conflict between economic sectors, where export-oriented industries often favor openness while import-competing industries often demand protection.

Regional conflict (trade)

Conflict between regions that experience trade differently (e.g., manufacturing regions facing job loss vs. port/finance regions benefiting from openness).

Class conflict (trade)

Conflict where consumers may benefit from cheaper imports while certain workers face wage pressure, unemployment, or insecurity from import competition.

Legitimacy problem (distributional politics)

The challenge governments face when reforms raise overall wealth but concentrate gains and create visible losses, potentially destabilizing political support.

Tariffs

Taxes on imported goods used to protect domestic producers and/or raise government revenue.

Quotas

Limits on the quantity of imports allowed into a country, used to protect domestic industries.

Subsidies

Government financial support to domestic firms, often to improve competitiveness or protect jobs.

Non-tariff barriers

Regulations or requirements (e.g., standards, licensing rules) that function like trade barriers without being tariffs or quotas.

Import-substitution industrialization (ISI)

A development strategy that protects domestic producers from foreign competition to build local industry; politically appealing but can create inefficiency and corruption if protection becomes permanent.

Export-oriented industrialization

A strategy focused on producing for global markets by integrating into global supply chains and often attracting foreign investment; can spur growth but increases exposure to external demand shocks.

Economic development

Improvements in material well-being and quality of life (income, health, education, security), broader than simple increases in output.

Economic growth

An increase in total economic output (e.g., rising GDP), which does not necessarily imply broader improvements in living standards.

GDP per capita

Average economic output or income per person; useful for comparisons but can hide inequality and distributional outcomes.

Purchasing power parity (PPP)

An adjustment to income/output measures that accounts for cost-of-living differences to improve cross-country comparisons.

Human Development Index (HDI)

A composite measure combining income, education, and health to capture quality of life more directly than GDP alone.

Gini coefficient

A common measure of income inequality, where higher values indicate greater inequality.

Horizontal inequality

Economic gaps between identity groups (ethnic, religious, linguistic), often politically sensitive because they can align with exclusion and conflict.

Globalization

Increasing interconnectedness through flows of goods, services, money, people, information, and ideas; creates external pressures/opportunities that interact with domestic institutions.

Supranational organization

An international organization where member states delegate some authority to a higher-level institution whose decisions are binding on members in at least some issue areas (e.g., the EU).