POLI 354 Lecture Notes - Lecture 19: Washington Consensus, Poverty Trap, Dependency Theory
13 May 2018
School
Department
Course
Professor
The$political$economy$of$aid$
$
!""#$"%&$'()$*%)+%),$%-.%(&$%&$'()$*%)+%/""#$"%(0+#)%!123%%
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D$$*%(/*%)+%(A+/*%7+A$&)@%)&(7%A"%(/*%/"%(%<(")$%+:%?+8$@%
-,@%*+%*+8+&"%9/A$%(/*E%!86$8)/A$"%6(8%0$%7$&A$&"$;%$F)&(6)%7+'/6/$"%:&+?%),$%GHI"%<,/6,%?(@%8+)%
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$
Table&of&contents&
- Two$orlds$of$development$&
- Aid$and$development$&
- Who$gets$aid&
&
Recap&
- -,@%/"%/)%"+%/8$::$6)/A$;%6+#8)&/$"%),()%$8)$&%(%7&+9&(?%9&+<%"'+<$&%),(8%),+"$%<,+%*+8C)&
- J::$6)%+8%*$A$'+7?$8)%/"%#8*$&<,$'?/89%/:%8+)%8$9()/A$%&
- IMF:&
o Negative$impact$on$economic$growth$&
o Leading$countries$can$weaken$conditionality$and$its$enforcement$&
§ K$+7+'/)/6"%6+?$"%/8%),$%?/**'$%&
o IMF$intervention$are$more$(economically)$efficient$when$crises$are$severe.&
§ -,$8%(&$%",(&$,+'*$&"%?+&$%'/5$'@%)+%9/A$%%#7%),$%9$+;")&()$9/6%/8)$&$")"E%
<,$8%),$&$%/"%(%),&$()%)+%),$%9'+0('L%:/8(86/('%"@")$?&
o Evidence$that$conditionality$is$adjusted$to$domestic$politics$of$borrowers&
§ G(0+#&%'(<"%$F(?7'$"&
&
Two&worlds&of&development&
- Unequal$challenges&
- Larger$and$emerging$markets$(.M!INO&
o Benefit$from$globalization$+A$&%),$%7(")%=P%@$(&"&
o Use$international$institutions$'$(*/89%6+#8)&/$"%/8%"/98/89%Q4R"S%(''%T+/8$*%),$%-4US%
,(A$%",(&$"%/8%!12%(8*%-.&
o See$a$power$shift$in$their$favour$/8%)&(*$%,("%",/:)$*%)+%),$?%&
- Smaller$and$poorer$nations$R:&/6(S%"+?$%+:%R"/(%(8*%G()/8%R?$&/6(&
o Remain$dependent$on$aid&
o Face$large$political$challenges$<$(5%/8")/)#)/+8"S%:(6$%7+'/)/6('%/8")(0/'/)@;%('/$8()$*%
/8%/8)$&8()/+8('%/8")/)#)/+8%&
&
Aid&patterns&
- G$(")%*$A$'+7$*%A"%$?$&9/89%?(&5$)";%&
- &
Two&words&continued&
- Co-existence$of$two$worlds-&
o Brazil$as”$belindia”&
§ N,+<"%@+#%,+<%#8$V#('%0&(W/'%/"&
§ Poor,$large$india$and$small$,$rich$Belgium&
o China$and$India&
§ Diverse$regional$living$standards,$growth$etc&
- Example:$china$&
o 1+")'@%'/?/)$*%)+%(%"?(''%&$9/+8%+:%6,/8(;%"+#),%$(")%7(&)%+:%),$%6+#8)&@%&
&
Inequality&within&china&
&
- G(&9$%6,#85%+:%KHQ%/8%),$%$(")%(8*%"+#),%$(")%7(&);%
?+")%+:%),$%2H/%9+$"%),$&$%(8*%"+%(%'+)%+:%),$%$F7+&)"%
6+?$%:&+?%),$&$&
- M$9/+8%/"%'$""%),(8%XPY%+:%),$%7+7#'()/+8%&
&
&
&
IPE&related&questions&
- What$are$the$external/internal$causes$of$poverty$inequality?&
o 4,$+&/$"%+:%*$A$'+7?$8)%&
- Does$foreign$aid$help$or$hurt?&
&
Views&on&development&&
- External$emphasis&
o Foreign$conditions$matter!&
o Crucial$conditions&
§ Trade/production$structures&
§ Financial$regimes&
§ Globalization&
- Internal$emphasis$–$$8*+9$8+#"%A(&/(0'$";%/?7+&)(86$%+:%7+'/6/$"%(8*%/8")/)#)/+8"%&
- R6$?+9'#;%/8%+&*$&%)+%*$A$'+7%@+#%8$$*%9++*%/8")/)#)/+8"%&
o Domestic$conditions$matter&
o Crucial$conditions:$&
§ Policies&
§ Institutions$&
&
History&of&thinking&&
- Swing$in$dominant$view$of$development:&
o 1950:$Modernization$theory$(internal)&
o 1960/70:$Dependency$theory$(external)&
o 1980/90s:$Neoliberalism/Washington$consensus$(internal)&
o late$1990s:$globalization,$contagion,$crisis$(external)&
o 2000:$new$institutionalism$(internal)$&
&
Modernization&theory&
- Lipset$(1959);$Rostow$(1960)&
- Endogenous$process:&
o Take$off$à$industrialization$à$urbanization$à$education$à$development$and$
democracy&
o R77'/$"%)+%*$A$'+7$*%6+#8)&/$"%A$&@%<$'';%,+<%),$%Z[%?+*$&8/W$*%&
- Recommendation:&
o Catch$up$via$imitation$–$*$A$'+7/89%6+#8)&/$"%",+#'*%:+''+<%),$%"(?$%7(),%),()%),$%
*$A$'+7$*%J#&+7$(8%(8*%8+&),;R?$&/6(8%6+#8)&/$"%",+#'*%:+''+<$*&
o Accelerate$by$trade,$FDI$and$foreign$aid&
&
Dependency&theory&
- Cardoso/$Faletto$(1979)/$O’Donnell$(1973)&
- Core-periphery$exploitation$–$*$A$'+7$*%6+#8)&/$"%6+#'*%*$A$'+7%0$6(#"$%),$@%$F7'+/)$*%
),$%*$A$'+7/89%6+#8)&@&
- External$constraints$–$dependent$development-$Authoritarianism$(#"$%),$%&$9/?$"%)+%
$F7'+/)%(8*%9$)%),/89"%+#)%+:%),$%*$A$'+7/89%6+#8)&/$"O&
o Declining$price$of$primary$commodities$–$&$('%7&/6$%+:%6+??+*/)/$"%*$6&$("$"%+A$&%
)/?$;%,(&*%:+&%),$%6+#8)&/$"%)+%6()6,%#7%0$6(#"$%),$@%&$'@%+8%7&/?(&@%6+??+*/)@%
$F7+&)"%(%'+)3&
o No$transfer$of$technology&
o International$division$of$labour&
- Recommendations:&
o Protection$&
o Import$substitutions&
o Third$world$solidarity&
&
Neoliberal&model&
- Williamson$(1989)&
- Internal$problems:&
o Policy$failures&
o Interventionism$à$()&(*$O$imbalances$à$stagnation/crisis&
o M$*#6$%),$%&+'$%+:%9+A$&8?$8)%&
- Recommendations&
o Policy$discipline&
o Macroeconomic$adjustment$&
o Liberalization/$privatization/deregulation&
o -I%/"%8+)%),$%"#66$"":#'%")+&@%+:%*$A$'+7?$8)%&
&
Institutionalism&and&governance&&
- Robinson$(2012);$Kaufman$$(1999)&
- Internal$structures&
o No$property$rights&
o Low$quality$of$institutions$à$policy$failures$à$market$failures&
o U86$%@+#%6+&&$6)%),$%$8*+9$8/$)@%7&+0'$?%</),%!\;%"$$%),()%V#('/)@%+:%/8")/)#)/+8"%
)&#?7"%(8@%+),$&%A(&/(0'$"%),()%(::$6)%*$A$'+7?$8)%&
- Recommendations&
o Institutional$reforms&
o Transparency$and$‘good$governance’&
§ 4+%,(A$%$6+8+?/6%*$A$'+7?$8);%/8")/)#)/+8"%8$$*%)+%?$*/()$%),$%?(&5$)%&
&
IPE&related&questions&&
- What$are$the$external/internal$causes$of$poverty$inequality?&
- Does$foreign$aid$help$or$hurt?&
Document Summary
Issues related to the wb are related to issues about imf. Talk about cooperation through foreign aid- cooperation between 2 countries- donor and recipient. Transfer mof money- goven for development and donor don"t ask for anything in return". Need aid to avoid poverty trap vs aid is a waste of money. Incentives can be perverse- extract policies from the ldcs which may not be in line with the needs of the countries. Why is it so ineffective- countries that enter a program grow slower than those who don"t. Effect on development is underwhelming if not negative. Imf: negative impact on economic growth, leading countries can weaken conditionality and its enforcement. Imf intervention are more (economically) efficient when crises are severe. When are shareholders more likely to give up the geo-strategic interests? when there is a threat to the global; financial system: evidence that conditionality is adjusted to domestic politics of borrowers.
