ELI vs. ISI the Case of East Asia
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Lecture Week 10 November 15, 2010
GOVERNMENT SUCCESS IN DEVELOPMENT – “The Case of East Asia”
•Discussing role of the state in generating development
Q. What generates development and economic growth? Why here and not there?
STATE vs. MARKET:-
•The market view of humans: Humans have a natural propensity to truck and
barter –Adam Smith
•Britain’s vision: driven by the profit motive…this comes naturally to
•Development is them driven by entrepreneurs who are driven by profit
•The market is suppose to work through “the unseen hand” mechanism i.e.
Supply and Demand
•Supply will always rise or fall to meet demand
•Demand regulates production, demand drives the market
•Industrial revolution in Britain provides the idea of how the World works, it
was the place of development in the modern world
I.The market is independent of state intervention
II.The State intervenes in the market
The State Intervenes:-
•To secure private property – (land, later;enclosures)
•To secure intellectual property – (inventors, venture capitalists)
•To ensure a supple of capital – (banks)
Britain is an example of market driven development, with minimal state interventions:
minimal coordination allowing the market to develop.
•Development comes about by decisions the states make
•The market is a result of violent state decisions and opposition from
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•Interest rates, Exchange rate regulations are examples
STATE LED DEVELOPMENT
IS the market state led? OR SHOULD IT be independent of state intervention?
•RIGHT> who are driven by profit say the market should be regulated
•LEFT> believe market should be guided by the state who has the peoples best in
STRUCTURAL APPROACH:- (State & Structure)
•China’s great leap forward
•German industry under Bismarck e.g. of command economy
•Soviet 5 Year Plan
•Japanese MITI and Plan national economy
Q. What does the State do, and How?
•The state provides investment, planning, sets exchange rates, interest rates,
tarrifs. None of this is natural. It is all set up by the state.
•Absence of an external market works to the advantage of early developers
•Late developers don’t have to go through all stages of development because
technologies, inventions already exist for purchase
• Developmental states refer to those who are already ahead i.e. Germany,
France, Singapore, Taiwan, more contemporary developers
WHY BRITAIN DEVELOPED BEFORE FRANCE?
oThe preeminent low population growth in France
oLow agricultural growth, no enclosures created by the government
oNo agricultural surplus created or other
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