Ch 31 -Strategies to promote economic growth and economic development
Trade strategies used to achieve economic growth and development:
- Import substitution:
- Advantages:
- ISI protects jobs in domestic market, protects the local culture and social habits
- Protects the economy from the power and bad influence
Disadvantages:
- ISI may only protect jobs in the short run. In the long run, economic growth may be lower in economy and the lack of growth may lead to a lack of job creation
- ISI may lead to inefficiency in domestic industries
- ISI may lead to high rates of inflation due to domestic aggregate supply constraints
Export promotion:
- Outward oriented growth strategy based on openness and increased international trade
Economic integration:
- Developing countries have been involved in many preferential access schemes and regional free-trade agreements
Market based policies impact economic growth and development:
- Trade liberalisation: removal of trade barriers that block the free trade of goods and services between countries
- Privatisation: sale of public government-owned firms to the private sector
- Deregulation: governments have placed many regulations on the operations of businesses which increases cost of production and reducing output in the economy
Social enterprises and economic development:
Social enterprises: are organisations that have specific social objects as their primary goal
When externalities in the free market result in less efficiency private benefits/costs which are not equal to social benefit/costs
May be non-profit, profit is a secondary goal
These enterprises promote economic development by overcoming local and global issued
How can institutional change impact economic growth?
- Improved access to the banking system
- Microfinance: a financial service that is geared specifically to the poor
- Example: Mobile phone banking
Increasing women’s empowerment
- Empowerment is the process by which women gain power and control over their own lives and have the ability to make strategic changes/choices
Reducing corruption
- Reform institutions
- Build professional civil service
Promote secure property rights and land tenure rights
How can transfer payments impact economic development:
- Conditional cash transfers (CCT): are transfer payments targeting low income people
- Aim to reduce poverty by making welfare programs conditional upon the actions of the person receiving the money
- CCT’s do not create jobs, but they permit children more access to healthcare and education
Role of minimum wage in promoting economic development:
- Establishment of minimum wage can be a valuable tool to reduce poverty and inequality
- Minimum wage is not livable wage. Development strategy would be to increase minimum wage
Merit goods: provide many external benefit
Development aid: is given by governments and nonprofit organisations to alleviate systemic poverty and promote the social, environmental or political development in recipient countries
Humanitarian aid: is given to save lives and alleviate suffering in response to emergencies such as natural or human made cruises
Non-governmental organisations: have a major role in promoting economic growth and economic development
- Some NGOs promote economic development by aiding humanitarian and sustainable development