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Lecture 8

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University of Toronto St. George
Political Science
Robert Brym

Lecture 8 - Success in Development (the case of east Asia) October 29 , 2013 What generates industrialization and economic growth? Why does it happen in some places and not in others? What accounts for different outcomes in different parts of the world? - The market o Drives the market because of the nature of human beings o Need for agricultural foundation o Driven by the profit motive (accumulate wealth) o Development is driven by private people who invest because they expect they will make a profit o Works through the invisible hand of the market (Adam smith) the law of supply and demand  Supply will rise and fall to meet demand  Supply follows demand o Be careful not to overstate the degree to which the market is independent to state intervention o State intervention  To secure private property  To secure intellectual property  To ensure a supply of capital o The state does not drive the market but creates background - Structure (state and political institutions) o Nothing natural about the market (exchange for profit, labour, completion) o The market is the result of self-conscious and often violent intervention of the government and resistance of the people o No invisible hand o Something that is created on purpose by the government coercive forces 08/09 – do we let the market deal with it or let the state intervene (the global financial crisis) - Market o Let the companies go bankrupt o State cannot intervene to rescue companies that will go bankrupt - General agreement that state should intervene minimally - 08 how much state intervention is required in the market - Explicit – the difference between ideologies of market intervention by the government/state - Left – markets should be guided regulated (think the state is guided by the public interest) (market driven by the profit want market to be driven by something/someone who has the public interest in minf) Lecture 8 - Success in Development (the case of east Asia) October 29 , 2013 Structural Approach - China’s great leap forward - German industrialization under Bismarck - Soviet Five year plans - Japanese MITI and plan ration economy - Singapore Structural Approach - State sets prices, protect enfant industries, intervenes at every step to do what the market is supposed to accomplish naturally - Difference of timing between structural and market approach o Later developer (disadvantage – face greater competition) (France and Germany) - Developmental states (take lead in development) - State intervene to produce market and development France - Early developmental state - Natural difference between Britain and France o Small population and low population growth (no agricultural revolution, small labour force) (Britain had large population and large population growth) - Social and political o France regional segregated markets (small – isn’t trade all throughout the country) (wasn’t capital to finance projects) (less social mobility) - Much more state involvement o By financing o By securing/protecting market Germany - First had to consolidate the state - Small regional markets and internal tolls - No agricultural revolution - Little social mobility - Small labour force - Eventually consolidate by abolishing internal taxation - Also had coal and iron (rail road was planned and financed by the government unlike Britain and more like France) Singapore - Obstacles o No resources Lecture 8 - Success in Development (the case of east Asia) October 29 , 2013 o Small domestic market/small population o High tariffs from |Malaysia against Singaporean go
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