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POL201Y1-Nov 15,2012.docx

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Political Science
Sophia Moreau

POL201Y1: Nov. 15, 2010 Government Success in Development: The Case of East Asia  Role of the state in generating development  What generates economic development and industrial growth, why does it happen in some places and not others, what accounts for the difference o This is answered through the perspective of the market and the state  The Market o The market refers to the basic nature of human beings o Adam Smith: People have a natural propensity to truck and barter  This is the case in the development of Britain o The human propensity to truck and barter is triggered by the profit motive, a natural characteristics of humans o This is put forth by independent entrepreneurs and the problems of the market are solved by the market themselves (when there is a need for a well, private entrepreneurs invest because they see profit) o The mechanism of the market is to work through ‘the unseen hand’ aka the law of supply and demand o Supply will always follow demand so you will never have too much or too little (law) st  Therefore the market is run by demand (refer to 1 part of Heilbroner)  The case of the industrial revolution in Britain provides a case study for development and modernity and supply and demand of the market  It important to not overstate the independence of the market from state invention, even in the case of British industrial revolution o State created basic clause to limit market o State Intervention in the Industrial revolution of Britain was done to achieve:  Securing private property  Secure intellectual property (patent system can help inventors make profits)  Ensuring a supply of capital (aka banks @ the time financed privately for people to take out loans) o The state does not have its own development agenda but rather creates minimal conditions that allow a market to develop  Development comes about as a result of decisions made by the state, there is nothing natural about selling labour, exchange, property use, profiteering, etc  The state produces the profit motive and truck and barter; and often does this among the protests of the people…through finance capital, etc  During the economic recession the question became whether the government should let large wall street businesses go bankrupt (lazzaire faire with the market) or do bailouts (gov’t interventions)  Right vs. Left  How much autonomy does the market actually have and how much should it have POL201Y1: Nov. 15, 2010  Structural Approach  State lead development ex: China’s ‘Great Leap Forward’  German industrialization under Bismarck  Soviet 5 year Plans  Japan MITI and Plan rational economy  Singapore o In all cases the state decides to industrialize, provides capital and resources, provides management, protects infant industry, capture the markets, sets prices and the state intervenes in all aspects of supply and demand which are supposed to be naturally done by the market o Early industries let things happen by the unseen hand, have no initial competition o Late industries had an advantage because they were able to burrow already developed technology but it’s very hard to compete in the world market than older and more efficient and cheaper industries  EX: Germany and France found it hard to compete against Britain which already captured the market  Why Britain developed before France 1. Natural Difference (no surplus of food, no labour force because of low population, no coal, less rivers than Britain) 2. Political and Social Differences (France has regional segregation which had its own market, no unified market, not enough capital to finance big capital like iron and steel industries, little social mobility in comparison to Britain, people were still feudal lords) 3. More State intervention in France (the railroads were financed by the state, and therefore did not come out of the market ) 4. Also more state protection in France (to protect industries such as textiles from Britain…same as import substitution)  Germany: Bigger problem than France because it’s not a state it’s made up of smaller principalities, many internal tolls, no unified market, no agricultural revolution, little social mobility and labour force  1934: industrial revolution started in Germany (80 years after industrial revolution in Britain)  Germany does have coal and iron but government subsidized railway  Developmental States: Germany and France (following an old model…prototypes for contemporary developmental states)  Contemporary developmental states: East Asia (also referred to as late late developer) o Singapore: one of their obstacles
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