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Lecture

South Korea EOI.docx

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Department
Political Science
Course
POLI 243
Professor
Mark Brawley
Semester
Winter

Description
South Korea EOI Trade and Economic Development Despite similar starting points in 1945, several countries have attained different results Similar branching points, different trajectories East Asian countries were quite successful Latin American Countries struggled Difference in how they thought about trade in development strategy Trade policy played an important role The Popular Trade Strategy The popular strategy after WWII Import-Substitution Industrialization (ISI) Old mercantilist thinking and you need to break it Break through industrialization Stop importing manufacturing goods, start subsidizing with local production Did not have an industry yet Protectionism: Protect the infant industries Tariff Barriers, block imports from coming in Based o historical experience (during WWI+WWII) Industries in Britain and France are converted to wartime production Making trucks for the army instead of trucks for the world market Exports are not going to be there That’s why they HAVE to start local production and to invest in their own structure Industry on the warring party focus on the war patterns and not on consumer production But the war will end, so tariff barriers can protect local industries In case Britain wants to sell cars back to Argentina, local industries will be protected ISI widely adopted after WWII Linked to nationalism, security concerns India: don’t want the same relationship with Britain when they were a colony Problems with ISI May work in the short run but hard to sustain Some countries will stick to ISI because they can justify it as working Others will abandon ISI because it is not exactly producing the benefits  Shortages develop, causing bottlenecks in production Raising price of steel in domestic market to encourage firms to produce more Steel is an important immediate good Not going to import steel, but there aren’t enough steel producers to satisfy the wants of all the firms Even IF YOU produce enough, the high cost inputs would create a high market price for goods Arbitrage, buy high sell low, would be severely violated Profits are not always reinvested Steel manufacturers are guaranteed a profit The logic would be to reinvest it but these firms are not government owned and private What to do with the profit  whatever the owners of the firms want to do It could be reinvested to expand the operation of the firms, to update capital but there are no pressures to do this because the tariff barriers are there Home Markets cannot always support production Steel production is a large operation Not enough to go around in South America, large market, large population South Korea, smaller population, smaller market Does not earn foreign exchange You need to earn the foreign currency to buy their exports Do not have the hard currency to buy it Need to go into debt and borrow EOI (Rival Trade Strategy) Industrialized by selling goods abroad Can make money by producing goods to sell to rich countries Not for local markets but for the world market Have to be competitive Emphasis is on exports Economies of scale  Competitiveness means you have to have a large market Only way So
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