lecture 16 International Development II

Comprehensive review flashcards covering International Development II (Lecture 16), including global GDP disparities, development strategies (ISI and EOI), the Four Asian Tigers, international institutional reforms (NAM and G77), OPEC and commodity cartels, and foreign aid dynamics.

What fundamental inquiry forms the core of the International Political Economy (IPE) study of development?

The examination of why some nations achieve high levels of wealth and industrialization while others remain trapped in persistent poverty.

How do international development datasets measure national wealth disparities using per capita GDP?

They calculate the total market value of final goods and services produced within a nation divided by its midyear population, typically expressed in current U.S. dollars ($\text{US}\\$) or adjusted for purchasing power parity (PPP).

Which nations recorded the lowest per capita GDP levels globally according to the lecture's low-income data?

South Sudan (\\$313), Yemen (\\$415), and Burundi (\\$486).

Which nations recorded the highest per capita GDP figures globally according to the lecture's high-income data?

Liechtenstein (\\$231,713), Luxembourg (\\$146,818), and Ireland (\\$129,132), followed by Switzerland and the United States (\\$89,599).

What three domestic-level obstacles can severely impede a nation's economic development?

Adverse geographic conditions, distortive or ineffective government policies, and weak or corrupt domestic institutions.

How can geographical factors act as domestic barriers to economic development?

Tropical climates harbor endemic diseases and poor agricultural soil, while landlocked terrain and mountainous borders drastically increase shipping costs and isolate economies from global trade routes.

In what ways do weak domestic institutions hinder long-term economic growth?

They fail to enforce contracts, defend property rights, or maintain the rule of law, generating pervasive uncertainty that discourages domestic entrepreneurship and foreign investment.

What three international-level obstacles can constrain the economic progress of developing states?

The historical legacy of colonialism, structural disadvantages in the global trade system, and institutional bias within international governing bodies.

How did historical colonialism create enduring structural barriers to economic development?

Colonial powers designed extractive economic institutions to siphon raw resources, imposed arbitrary borders that exacerbated domestic ethnic conflicts, and neglected investments in local human capital or infrastructure.

Why can the structure of international trade pose a systematic obstacle for primary commodity exporters?

Developing nations face volatile raw material prices and declining terms of trade, wherein primary agricultural and mineral exports lose purchasing power relative to high-value manufactured imports.

What systemic critique is directed at international institutions like the IMF, World Bank, and WTO regarding developing states?

Advanced industrialized nations hold disproportionate voting power and agenda-setting leverage, establishing economic policies and conditionality that frequently disadvantage Less Developed Countries (LDCs).

What three distinct development strategies have Less Developed Countries (LDCs) historically pursued to overcome economic underdevelopment?

Import Substituting Industrialization (ISI), Export-Oriented Industrialization (EOI), and the formation of commodity cartels.

Import Substituting Industrialization (ISI)

A state-led development model aimed at building domestic manufacturing capacity by replacing imported foreign manufactured products with locally manufactured goods behind protective barriers.

What core theoretical premise prompted developing countries to adopt Import Substituting Industrialization (ISI) beginning in the $1930\\text{s}$?

The belief that participation in the open global trading system inherently disadvantages Less Developed Countries by locking them into low-value raw material production.

What primary trade policy tools were utilized to implement Import Substituting Industrialization (ISI)?

High protective tariffs, strict import quotas, and restrictive licensing designed to shelter emerging domestic manufacturing firms from foreign competition.

What domestic financial mechanisms did governments provide to support domestic industries under ISI?

Targeted corporate tax credits, direct cash subsidies, low-interest state loans, and the direct government provision or ownership of key industrial utilities like power, steel, and transport.

Which prominent countries in Latin America and Asia extensively implemented Import Substituting Industrialization (ISI)?

Brazil, Mexico, Argentina, Chile, and India.

Why did government protection under ISI lead to widespread economic inefficiency among domestic manufacturing firms?

Insulated from foreign competition in captive domestic markets, protected monopolistic firms lacked competitive incentives to reduce operating costs, adopt modern technologies, or raise product quality.

How did Import Substituting Industrialization (ISI) contribute to severe sovereign debt and foreign exchange crises?

Because ISI penalized and neglected export sectors, countries failed to generate foreign currency earnings necessary to purchase required foreign capital machinery and service external sovereign debt.

What socioeconomic consequences did the pro-industrial bias of ISI have on the domestic agricultural sector?

Governments artificially suppressed crop prices to supply cheap food to urban industrial centers, effectively taxing agricultural producers and impoverishing broad segments of rural farmers.

Why did ISI policies frequently generate chronic fiscal deficits and runaway domestic inflation?

Financing unprofitable state-owned industrial enterprises and underwriting large corporate subsidies depleted public treasuries, compelling central banks to print money to finance deficits.

Export-Oriented Industrialization (EOI)

A trade-focused development model in which states incentivize domestic manufacturing enterprises to produce competitive manufactured goods targeted specifically for advanced foreign consumer markets.

During which decade and in which geographic region did Export-Oriented Industrialization (EOI) primarily originate?

During the $1960\\text{s}$ among dynamic economies across East Asia.

Which economies are known collectively as the 'Four Asian Tigers' for their rapid industrialization under EOI?

South Korea, Taiwan, Singapore, and Hong Kong.

How did EOI governments utilize exchange rate policy to stimulate foreign demand for their manufactured exports?

They deliberately devalued or maintained an undervalued domestic currency, which made their manufactured goods cheaper and more competitively priced in overseas markets.

What fiscal and financial incentives did East Asian states provide to export-focused manufacturers under EOI?

Special corporate tax exemptions, duty-free rebates on imported industrial inputs needed for export production, and state-subsidized bank loans directed to export industries.

How dramatically did South Korea's export volume surge under EOI between $1970$ and $1979$?

National exports expanded nearly fortyfold, jumping from \\text{US}\\$385\\text{ million} in $1970$ to \\text{US}\\$15\\text{ billion} in $1979$.

How did Singapore's economic trajectory compare to developed economies by $2017$ according to Penn World Table data?

Singapore's purchasing-power parity (PPP) GDP per person surpassed that of Japan and rose well above $125\\%$ of the United States level.

What broader policy paradigm shift did the dramatic success of the East Asian Tigers trigger throughout the developing world?

Developing nations widely abandoned inward-looking protectionist policies in favor of export promotion, trade liberalization, and active integration into global supply chains.

The Washington Consensus

A standardized package of pro-market neoliberal policy prescriptions promoted by the IMF, World Bank, and U.S. Treasury, required as conditional criteria for developing states seeking emergency structural adjustment loans.

What four core economic reforms constitute the foundation of the Washington Consensus?

Trade liberalization, privatization of state-owned enterprises, fiscal discipline to reduce government spending, and openness to foreign direct investment (FDI).

Trade Liberalization

The removal or dismantling of government-imposed barriers to the international exchange of goods, specifically lowering tariffs, eliminating import quotas, and reducing non-tariff restrictions.

Privatization

The transfer of ownership, control, or management of government-owned assets, enterprises, and public services into the private commercial sector.

The Non-Aligned Movement (NAM)

A diplomatic coalition formed by developing states during the Cold War to pursue autonomous political paths without formally allying with either the Western (U.S.) or Eastern (Soviet) power blocs.

When was the Non-Aligned Movement (NAM) formally initiated, and what were its primary founding principles?

Initiated in $1961$, it established principles of Cold War non-alignment, mutual respect for sovereignty, periodic summit consultations, and opposition to imperialism, colonialism, and military intervention.

Group of 77 (G-77)

A permanent coalition of developing nations established within the United Nations in $1964$ (which has since expanded to $135$ states) to advocate for collective economic interests and counter institutional bias in the global economy.

New International Economic Order (NIEO)

A reform agenda advanced by the Group of $77$ in the $1970\\text{s}$ that advocated restructuring the global economic order to afford developing states greater sovereignty, favorable trade terms, and financial representation.

What three major systemic changes did the New International Economic Order (NIEO) demand?

Restricting the rights and regulatory protections of multinational corporations operating in LDCs, renegotiating trade rules to favor LDC exports, and increasing developing nations' voting power within international financial bodies.

Commodity Cartel

An association or formal agreement among sovereign producing states designed to coordinate supply restrictions, limit global production quotas, and artificially elevate the market price of their exported commodities.

Organization of the Petroleum Exporting Countries (OPEC)

A permanent intergovernmental commodity cartel founded in $1960$ by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela to coordinate petroleum policies and stabilize international oil markets.

What major geopolitical and economic shock did OPEC demonstrate to global energy markets in $1973$?

OPEC coordinated an oil embargo that dramatically restricted international supply, resulting in a quadrupling of world crude oil prices.

Why did other primary commodity cartels (such as copper, coffee, and bananas) fail to achieve the sustained pricing power of OPEC?

Unlike oil, alternative synthetic or natural substitutes were readily available, production was dispersed across numerous non-member states, and members faced intense incentives to cheat on assigned quotas.

What structural market conditions uniquely enabled OPEC to maintain pricing discipline and cartel cohesion?

A small group of core producers controlled the vast majority of global export capacity, crude oil exhibited highly inelastic short-run demand without viable substitutes, and core Middle Eastern members shared strong cultural and political bonds.

Why do development economists often question whether foreign aid can effectively alleviate poverty in Less Developed Countries?

Total aid flows are relatively negligible compared to recipient GDPs, donor states frequently allocate assistance based on strategic or military alliances rather than poverty reduction, and funds risk political diversion by recipient governments.

What misconception regarding U.S. foreign aid expenditure was revealed by the Kaiser Family Foundation $2012$ survey?

The American public estimated on average that foreign aid accounted for $27\\%$ of the U.S. federal budget, whereas the actual expenditure constituted only approximately $1\\%$.