Economic Development

Views on development

traditionally focus is on economics, especially GDP

  • “modernization theory “: expectation that traditional economies and societies pass through statges, from traditional towards modern

  • transition requires becoming more industrialized, urban, with economies designed to follow the US european model (liberal economic model)

  • modern conception usually is broader, including rights and freedoms and individual security

Alternatives to GDP for measuring development

  • human development index, GINI index, social outcomes like health and literacy

Sustainable development

  • shifting from GDP as focus of development. focus on individual well being

  • pro-poor development strategies (microlending, remittances, cash transfer)

  • income/health/education are each ends and means of development

  • from bringing development in, to strengthening endogenous work

Development, domestic and global challenge

  • states have sovereign autonomy to choose their own economic systems and policies

  • but also, they are part of a global economy and multilateral insitutions that infleunce their choices

  • domestic economic policy has international interconnectivity, we will talk about: trade policies, foreign investment, development assistance

Trade and protectionism

  • free trade: exchange of goods and services across international borders without barriers like quantity limits, and price adjustments (taxes)

  • protectionism: reducing imports of goods, or making them cost more by adding a tax

  • comparative advantage: premise that countries should produce and export what they can make the most money on, and import the rest

alternative to free trade model: import substitution

  • focus on self-reliance, break dependency

  • produce it, don’t import it

  • protects domestic products from international competition

  • tariffs and other trade barriers

  • government subsidies to support domestic products

  • tends to produce short term growth of “infant industries” and job promotion, but long term, this strategy stalled when domestic market was saturated. still couldn’t compete globally, debt crises arose.

Foreign direct investment

  • foreign firms making goods/services in another country (buying or building factories for example)

  • a liberal economic strategy for development because of allowing global flow economic actors and investment across borders (government not interfering in global economy)

liberal economic model for development (washington consesnsus)

  • strategies for development:

  • free trade (comparative advantage model)

  • privatization and small governemnt

  • foreign direct investment

  • focus on GDP growth

  • promoted through foreign policy of countries that prefer economic liberalism (such as the united states), and global institutions

export-led growth model

  • governments who practice strong state guidance of the economy (mercantilism) but also engage in global trade

  • grow economy through selling products to foreign markets, aggressive industrial policy aimed at certain industries

  • government subsidizes a select industry and protects it from foreign competition, in order to export it

  • focus is on high export balance of trade

  • requires a state with high capacity and autonomy