THEME 3 - ECONOMIC CRISIS AND DEVELOPMENT STRATERGIES

economic growth

long term expansion of an economy’s total real output of goods and services over time

extensive growth

growth achieved by increasing the quantity of inputs

intensive growth

growth achieved by increasing productivity and efficiency of existing inputs

slowdown/activity reversal

a growth declaration that hurts employment or output growth

recession

atleast 2 consecutive quarters (6 months) of negative real GDP growth

financial crisis

severe disruption in banking or asset markets, causeing credit dry ups, bank panics and balance sheet collapses

asset bubbles

the prices of an asset rise far above intrinsic economic value, driven by speculation and cheap credit

2008 US housing bubble

the 2008 US housing bubble was driven by low interest rates and subprime mortgage lending. when default rates rose, the house prices collapsed which triggered a global banking crash

export promotion

builds industries aimed at selling to foreign global markets

export promotion mechanism

state incentivizes domestic manufacturing targeted specifically at global consumer markets

export promotion benefits

drives international competitiveness, builds foreign currency reverses and taps into global demand

export promotion risks

high vulnerability to foreign economic downturns, exchange rate swings and foreign trade protectionism

import substitution

produce goods locally to replace reliance on foreign imports

import substitution mechanism

state uses high trade barriers to protect young local industries while producing goods domestically that were previously imported

import substitution benefits

reduces external dependency and insulates the domestic economy

import substitution risks

lack of global competition often breeds domestic inefficiency, high consumer prices and poor quality control

industrialising industries (upstream/downstream integration)

invest heavily in core upstream infrastructure to spur downstream output

industrialising industries mechanics

massive state led investment into heavy upstream industries to fuel downstream industries

upstream industries

energy grid, steel mills, basic chemicals

downstream industries

auto assembly, consumer manufacturing, construction

the multiplier chain

upstream infrastructure → spurs downstream factories → creates factory jobs → raises wages and purchasing power → builds domestic consumer market